Methods of economic valuation - with a focus on marine ecosystems

Rolf WillmannFAO Fisheries and Aquaculture Department

Main referencesNunes P.A.L.D., Ding,H., Markandy.2008. The economic valuation of marine ecosystems – lessons from the Millenium Ecosystem Assessment. Presented at conference on economic valuation of coastal and marine ecosystems, Bodrum, 22-25 October 2008.World Bank. 2008. Valuation of Marine Ecosystem Services: Gap Analysis. Environment Department. Washington, DC: World Bank.World Bank. 2008. Environment Matters.De Young, C. Charles, A., Hjort,A. 2008. Human dimensions of the ecosystem approach to fisheries: an overview of context, concepts, tools and methods, FAO Fisheries Technical Pepr No 489.Department for Environment, Food and Rural Affairs, UK, 2007. An introductory guide to valuing ecosystem services.UNEP-WCMC. 2011. Marine and coastal ecosystem services: valuation methods and their practical application.World Bank and FAO. 2009. The Sunken Billions. The Economic Justification for Fisheries Reform. Agricultural and Rural Development Department. The World Bank. Washington. DC. United Nations Statistics Division and FAO. 2004. Integrated Environmental and Economic Accounting for Fisheries. White Paper Handbook.Wikipedia

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Contents

Framework to evaluate natural resources and ecosystems with focus on marine resources

Methods to assess the value of ecosystems to human well-being as well as examples from marine ecosystems to illustrate the different concepts and methods

System of integrated economic and environmental accounting as a means to keep a continuous record of the use and status of environmental resources of society

Critical valuation issues (scientific understanding of ecosystems; variability and thresholds; income and wealth distribution)

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Some basics

• The use (and mis-use) of ecosystems is governed by human behaviour expressed in individual and societal choices.

Choices are reflected in the allocation of scarce resources in response to individual and societal preferences and needs.

There are different means through which coordination in the allocation and use of scarce resources can be achieved (i.e. price mechanism; regulatory and incentive policies that ideally are based on best scientific analyses and democratic decision-making processes)

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Features of natural resources (adapted from Nunes)

Typically resources are materials or other assets that are used and/or transformed to produce benefit.

Resources have three main characteristics: utility, limited availability, and potential for depletion or consumption.

From a human perspective, a natural resource is anything obtained from the environment to satisfy human needs and wants => distinguish renewable and non-renewable resources

Concepts of competition, sustainability, conservation and stewardship are linked to natural resources and their management => distinguish flows and stocks

Natural resources have typically common-pool or public goods characteristics that cause the market-mechanism to perform poorly or not at all.

Natural resources that have public (or global) goods characteristics are also referred to as environmental resources

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Categories of goods => consequences for management

Excludable Non-excludable

RivalrousPrivate goodsfood, clothing, cars, personal electronics

Common goods (Common-pool resources)fish stocks, timber, coal

Non-rivalrousClub goodscinemas, private parks, satellite television

Public goodsfree-to-air television, air, national defense

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Africa’s marine ecosystems(Source: WB Environment Matters)

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Macro-economic contribution of marine ecosystems – example Zanzibar (Source: World Bank. Environment Matters )

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Relative values of marine ecosystem services

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Components of total economic value

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Total value of a fisheries ecosystem (Source: Taken from Human Dimension of EAF)

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Steps in Valuation

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Economic valuation methods(Source: UNEP-WCMC)

Economic valuation methods

Marineecosystem goods

and services

Market priced benefits

Un-market priced benefits

Fisheries products

CO2 Recreation Nonuse valuesEco-tourism

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Provisioning services

Regulatingservices

Culturalservices

Market priceanalysis

Cost Assessments

Applicability of different valuation methods

Contingent valuation methods

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Economic consequences of coral reef degradation (Source WB Environment Matters)

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Economic valuation of a fishery – estimating resource rent

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Changes in productivity in global marine fisheries

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Estimated resource rent loss, 1974-2007 (Source: WB&FAO)

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Estimating the asset value of a natural resource: projecting future resource rent (Source: UNSD & FAO)

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Framework for Integrated Environmental & Economic Accounts for Fisheries (SEEAF) (Source: UNSD & FAO)

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The influence of income and wealth distribution

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Moving forward

Improve understanding of the consequences of human actions on natural resources and ecosystems and their ability to provide goods and services

Expand efforts to assess the impacts on human welfare of changes in natural resources and ecosystems

Link better understanding of impacts and values to:

• Everyday decisions of individuals, firms and communities

• Societal policy and management decisions

Failing to make sound decisions the economic, social and cultural costs will be huge.