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The Economic and Business Case for Conserving Biodiversity
Joshua Bishop WWF Australia
The Economic and Business Case for Conserving Biodiversity
Joshua Bishop
TEEB
Outline
• TEEB overview
• What is biodiversity worth?
• Why should business care?
• What can business do?
• Case study
Potsdam Initiative – Biological Diversity 2010
“In a global study we will initiate the process of analysing
the global economic benefit of biological diversity,
the costs of the loss of biodiversity and
the failure to take protective measures
versus the costs of effective conservation.”
http://www.bmu.de/files/pdfs/allgemein/application/pdf/ potsdam_initiative_en.pdf
Who asked for TEEB?
Who was involved in TEEB? • Study Leader: Pavan Sukhdev (ex-MD Deutsche Bank)
• Advisory Board: 14 international scientific & policy leaders
• Administration: United Nations Environment Programme
• Scientific coordination: UFZ, Leipzig
• Over 500 individual editors, authors and reviewers
• Financial donors and other institutional partners:
What did TEEB deliver?
Final Synthesis Report October 2010
Business July 2010
Local & Regional Policy-Makers September 2010
National & International Policy-Makers November 2009
Ecological & Economic Foundations October 2010
Interim Report May 2008
Climate Issues Update September 2009
Outline
• TEEB overview
• What is biodiversity worth?
• Why should business care?
• What can business do?
• Case study
UN Convention on Biological Diversity defines “biodiversity”
• Variety of species
! plants, animals and microorganisms
• Genetic differences within each species
! e.g., varieties of crops and breeds of livestock
• Variety of ecosystems
! e.g., deserts, forests, wetlands, mountains, lakes,
rivers, and agricultural landscapes
Millennium Ecosystem Assessment focused on ecosystem services
• Tropical forests store about 1/4 of all terrestrial carbon – 547 gigatonnes (Gt)
• Tropical forest capture carbon continuously – up to 4.8 Gt CO2 every year, compared to total
emissions p.a. of ~33 Gt
• Slowing or halting deforestation is an excellent investment – Reducing deforestation by 50% would deliver net
benefits of US$ 3.7 trillion (NPV), just counting the avoided damage costs of climate change
10
Example: Tropical forests and climate
Sources: Trumper et al. (2009), Lewis & White (2009), Eliasch (2008)
Example: Shrimp farms versus mangroves
Source: Barbier (2007)
US$/ha in 1996
$584ha Forest prod. $987ha Fisheries
$10,821ha Storm protection
Net public costs of restoration after 5 years
0
10000
Private profits
5000
$584ha $1220ha
$9,632ha
$584ha
- $9,318ha
$12,392ha
Private profits (less subsidies)
Public benefits
Subsidies - $8,412ha
All values in NPV over 9 yrs (1996-2004) at 10% discount rate
18/04/2012 12 Source: Gundimeda and Sukhdev, D1 TEEB
Indonesia India Brazil
21%
79%
16%
84%
10%
90%
25%
75%
47%
53% 89%
11%
99 million 352 million 20 million Ecosystem services dependency
Ecosystem services
Who is affected by biodiversity loss?
Ecosystem services as percent of classical GDP
Ecosystem services as percent of “GDP of the Poor”
Outline
• TEEB overview
• What is biodiversity worth?
• Why should business care?
• What can business do?
• Case study
Business impacts on ecosystem services
! US$12.2 billion estimated ecological cost of deforestation in China (1950-88)
! 60% of this cost is attributed to logging
! 64% of logging was for construction and materials sectors
! External costs = 178% of the market price of timber (1998)
-
10
20
30
40
50
60
70
80
90
100
110
Market Price of Timber
External Cost
Cos
t (U
S$/m
3 19
98)
Flooding damage in 1998 Property loss from flooding pre - 1998 Loss of river transport capacity Reservoir and lake sedimentation Desertification
Reduced lumber output
Loss of plant nutrients
Lost water runoff
Reduced precipitation
Source: TEEB for Business, 2010 (Annex 2.1).
• Value of insect pollination to food crops: €153 billion in 2005 = 10% of VA in the agriculture sector (Gallai et al. 2008)
• Example: Michigan USA blueberry crop worth US$ 124 million/year; totally reliant on pollination by bees at cost of about US$ 1.5 million/year (renting hives)
Business dependence on ecosystem services
• Example: Wild pollinators increase coffee yields by 20% on farms within 1 km of forest in Costa Rica (Ricketts et al. 2004)
• Pollination services to agriculture are threatened by ‘colony collapse disorder’ mainly affecting domesticated bees
Source: Syngenta for TEEB
Consumer demand for ‘green’ products and services
• Global sales of organic food and drink = US$ 60 billion in 2009
• Sales of certified ‘sustainable’ forest products increased four-fold between 2005 and 2007
• The global market for eco-labeled fish products grew by over 50% from 2008 to 2009, to a retail value of US$ 1.5 billion
Source: McKinsey & Company (July 2010) “Global Survey results: The next environmental issue for business” Based on 1,576 responses from executives representing the full range of regions, industries, tenures, and functional specialties.
Result: growing business concern about biodiversity
Outline
• TEEB overview
• What is biodiversity worth?
• Why should business care?
• What can business do?
• Case study
What can business do?
Some ideas from TEEB…
1. Set ambitious biodiversity targets
2. Measure, value and report your footprint
3. Use and improve tools for biodiversity management
4. Build biodiversity business
5. Support market-friendly environmental policy
1. Set ambitious targets ! BC Hydro: “long-term goal of no net incremental environmental impact.”
! Coca Cola: “Our goal is to safely return to communities and nature an amount of water equivalent to what we use in all of our beverages and their production.”
! Danone Group: “Attain carbon neutrality for the major Danone brands, including Evian, by the end of 2011.”
! Marks & Spencer: “Our goal is to become carbon neutral by 2012 in our UK and Republic of Ireland operations.”
! Rio Tinto: “Our goal is to have a ‘net positive impact’ on biodiversity.”
! Sony: “strives to achieve a zero environmental footprint throughout the lifecycle of our products and business activities.”
! Unilever: “Today we source 10% of our agricultural raw materials sustainably. By 2012 we will source 30%; by 2015 50%; and by 2020 100%.”
! Walmart: “Committed … to permanently conserve at least one acre of priority wildlife habitat for every developed acre.”
Top 100 companiesAnnual reports
Top 100 companiesSustainability reports
Don't produce sustainability report
No mention of biodiversity or ecosystems
Passing mention of biodiversity or ecosystems
Discuss approach to reduce impact on biodiversity
Identify biodiversity as a key strategic issue
Don't produce sustainability report
No mention of biodiversity or ecosystems
Passing mention of biodiversity or ecosystems
Discuss approach to reduce impact on biodiversity
Identify biodiversity as a key strategic issue
82%
12%
4% 2%
42%
23%
15%
9% 11%
Source: PwC input to TEEB Report for Business
2. Measure, value & report
2 (continued) – How to measure?
Climate change: CO2e
• Coverage by PAs of important habitats • Area of forest under sustainable mgmt. • International IAS policy adoption • National IAS policy adoption • ODA in support of CBD • LPI for utilized vertebrates • RLI for food & medicinal species • RLI for traded bird species
Business needs indicators for: • site, product, group level • processes & performance • internal & external reporting
Biodiversity and ecosystems:1
• Living Planet Index (LPI) • Wild Bird / Waterbird indices • IUCN Red List Index (RLI) • Marine Trophic Index • Forest / Mangrove / Seagrass extent • Coral reef condition (cover) • Water Quality Index • Ecological Footprint • Nitrogen deposition rate • Number of Alien Species (in Europe) • Exploitation of fish stocks • Climatic Impact Indicator (on birds) • Protected Area extent
1/ Adapted from: Butchart et al. (2010 ) “Global Biodiversity: Indicators of Recent Declines” Science Express (29 April)
2 (continued) – How to value?
www.wbcsd.org/web/cev.htm
WBCSD Guide to Corporate Ecosystem Valuation – shows how to use valuation methods to: • Save costs
• Reduce taxes
• Capture new revenue streams
• Assess liability & compensation
• and more…
2 (continued) – How to report?
• Water reporting by SAB Miller
• Target: increase water productivity by 25% by 2015
• Potential savings: 20 billion litres of water/year
3. Use & improve business tools
• Integrated Biodiversity Assessment Tool – http://www.biodiversityinfo.org/ibat/ – GIS database for site-level risk assessment – Based on World Database of Protected Areas, World Biodiversity Database, IUCN Red
List of Threatened Species
• Business and Biodiversity Offsets Program – http://www.forest-trends.org/biodiversityoffsetprogram/ – Guidance on designing and implementing biodiversity offsets to ensure “no net loss” – Led by Forest Trends, Wildlife Conservation Society and Conservation International
• Certification and labelling – http://www.isealalliance.org/ – Global hub for social and environmental standards – Members represent fair trade, forest stewardship, organic agriculture, fisheries, etc.
4. Build “biodiversity business”
Greening existing business • Agriculture • Biodiversity mgmt services • Cosmetics • Extractive industries • Finance • Fisheries • Forestry • Garments • Handicrafts • Pharmaceuticals • Retail • Tourism
New products & markets • Bio-carbon & REDD-plus • Water quality trading • Biodiversity banking
5. Support business-friendly policy
• Reform of harmful subsidies
• Tax credits and other incentives
• Voluntary certification and eco-labelling
• Payments for Ecosystem Services
• Environmental responsibility and liability
• Environmental trading schemes
• Public access to information
Outline
• TEEB overview
• What is biodiversity worth?
• Why should business care?
• What can business do?
• Case study
Case study of Rio Tinto: mining, biodiversity offsets and “NPI”
! “Our goal is to have a ‘net positive impact’ on biodiversity” (Rio Tinto 2004)
Biodiversity offsets: A key tool for achieving net positive impact (NPI)
“Biodiversity offsets are measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development after appropriate prevention and mitigation measures have been taken. The goal of biodiversity offsets is to achieve no net loss and preferably a net gain of biodiversity on the ground with respect to species composition, habitat structure, ecosystem function and people’s use and cultural values associated with biodiversity.”
• Madagascar: QMM mine environmental action includes the protection of 60,000 ha of lowland humid rainforest adjacent to the mining lease
• Case study assessed economic benefits and costs of continued deforestation (estimated 1-2% p.a.) versus conserving the Tsitongambarika forest (TGK)
Valuing biodiversity offsets in practice: NPI in Madagascar (Olsen et al. 2011)
Source: Asity Madagascar, 2009
NPV of conservation: US$ 17.3 million The case of Rio Tinto and the Tsitongambarika Forest in Madagascar 25
Figure 2 Present values of costs and benefits associated with conservation of TGK (5% discount rate, 30-yr horizon, 1% deforestation)
The results may be compared to, and are consistent with, PV estimates from similar studies in Madagascar:
The value of conserving the Ranomafana-Andringitra-Pic d’Ivohibe Corridor (Hockley and Razafindralambo, 2007) has been estimated at over US$330 million (US$ at 2006 values) based on a 5% discount rate and 60-year time horizon. It is difficult to identify what area is covered by the Hockley and Razafindralambo study, but it is probably around 360,000 ha. If this study also adopts a 60-year time horizon, the PV of the conservation of TGK is US$16.3 million. Adjusting for size, the Hockley and Razafindralambo estimate is roughly three times that of this study.The conservation of the Masaola National Park (230,000 ha) was valued at US$526 million (local benefits), -US$264 million (national benefits) and US$645 million (global benefits) based on a 3% discount rate and 30-year time horizon (Kremen et al., 2000). Only the global estimates are comparable between the studies. If this analysis adopts the same assumptions, the global benefit is estimated to be US$21.3 million. Adjusting for size, the Kremen et al. (2000) estimate is roughly five times the estimate of this study. This is
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
Carbon storage
Water supply
Soil conservation
Biodiversity
Foregone agric income
Recurrent costs
Investment costs
707,3252,511,463
9,763,951
2,939,205
270,642 198,842
26,839,291
Pres
ent
valu
e U
S$/T
GK
Costs and ecosystem benefitsNote: Present values of costs and benefits associated with conservation of TGK (at 5% discount rate, 30-yr horizon, assuming 1% p.a. deforestation)
Benefits: Costs:
Source: Olsen et al. (2011)
Payments for ecosystem services (PES) The case of Rio Tinto and the Tsitongambarika Forest in Madagascar 25
Figure 2 Present values of costs and benefits associated with conservation of TGK (5% discount rate, 30-yr horizon, 1% deforestation)
The results may be compared to, and are consistent with, PV estimates from similar studies in Madagascar:
The value of conserving the Ranomafana-Andringitra-Pic d’Ivohibe Corridor (Hockley and Razafindralambo, 2007) has been estimated at over US$330 million (US$ at 2006 values) based on a 5% discount rate and 60-year time horizon. It is difficult to identify what area is covered by the Hockley and Razafindralambo study, but it is probably around 360,000 ha. If this study also adopts a 60-year time horizon, the PV of the conservation of TGK is US$16.3 million. Adjusting for size, the Hockley and Razafindralambo estimate is roughly three times that of this study.The conservation of the Masaola National Park (230,000 ha) was valued at US$526 million (local benefits), -US$264 million (national benefits) and US$645 million (global benefits) based on a 3% discount rate and 30-year time horizon (Kremen et al., 2000). Only the global estimates are comparable between the studies. If this analysis adopts the same assumptions, the global benefit is estimated to be US$21.3 million. Adjusting for size, the Kremen et al. (2000) estimate is roughly five times the estimate of this study. This is
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
Carbon storage
Water supply
Soil conservation
Biodiversity
Foregone agric income
Recurrent costs
Investment costs
707,3252,511,463
9,763,951
2,939,205
270,642 198,842
26,839,291
Pres
ent
valu
e U
S$/T
GK
Costs and ecosystem benefits
Costs: Benefits:
$ $ $ $ $
$ $ $
Source: Olsen et al. (2011)
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