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«The Economic and Social Aspects of Biodiversity Benefits and Costs of Biodiversity in Ireland REPORT PREPARED BY: CRAIG BULLOCK, OPTIMIZE CONSULTANTS ...»

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F o re s t r y Forestry has more often been addressed by environmental economic studies. Some of the main schools of environmental economics are in the US, Canada and Scandinavia where large areas of forest abound. However, another rationale for the interest in quantifying forestry’s welfare benefit is that foresters have difficulty demonstrating rural social benefits that are comparable to agriculture and instead seek to justify state supports on the basis of non-market benefits. While chapter 4.2 did demonstrate that forests make a modest positive contribution to biodiversity, these benefits would be less visible to the Irish public than for farmland given the dominance of commercial softwood forestry and the relatively small area that is planted. Nevertheless, as many forests are open to recreation, the benefits have a higher use value component than does private farmland.

The Forestry chapter listed estimates of the non-market benefits of forestry. These include the studies by CAMAR (ni Dhubhain et al., 1994) and Coillte/Irish Sports Council (2005) which focused largely on recreation benefits and local expenditure. The study by Clinch (1999) gave greater attention to non-use values by which he arrived at an estimated benefit stream of 21 million per annum.

Bacon and Associates (2004) provide the most recent estimate of non-market benefits at 88 million per annum, including carbon sequestration. However, they note that some past forestry practices have probably reduced welfare due to negative landscape and water quality impacts.

Bacon and Associates refer to a UK study by Garrod and Willis (1997) in which the public indicated a willingness-to-pay of up to 56.4 pence per household for each additional 1% unit of new forestry grown to a “desired biodiversity standard”. Taking the average benefit respective to the type of planting now being encouraged by the Forest Service, Bacon and Associates arrive at a respective value of 42.5 cent per household for Ireland. On this basis, the biodiversity value of the proposed national forestry expansion programme would be 1.6 million per year. However, the existing forestry estate was not planted to the same biodiversity guidelines and, despite its larger area, biodiversity could only be valued at 5.6 million per year more than the next likely alternative land use of agriculture under REPS.

8.3.2 Wa t e r Given its importance to human consumption and recreation as well as biodiversity, it can be expected that clean water makes a highly valuable contribution to human welfare. As discussed in Chapter 4.4, this purity depends to a large extent on a functioning biodiversity. The report Economic Evaluation of Water Supply and Waste Water Projects produced by DKN, Aquavarra and the ESRI (2004) for the Department of the Environment undertook a thorough review of various benefit estimation studies that could be relevant to Ireland. Drawing on the review of twelve studies from Southeast England by Green and Tunstall (1991), as referenced in the Environment Agency (England & Wales) report Benefits Assessment Guidance for Water Quality and Water Resources Schemes (2003), DKN et al. arrive at the following table of the value of water quality changes based on informal water-based recreation.

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Source: Environment Agency Guidance, Part 2 Table 2.9, from Green and Tunstall (1991) The above categories of water quality are roughly equivalent to the categories A, B, C and D as

published by the EPA as below:

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Source: DKN Economic Consultants, Aquavarra, ESRI (2004) We have added euro values at 2007 prices to Table 8.3. However, this is only as a rough guide.

Accurate transfer of foreign valuations to Ireland (value transfer) is awkward in that it requires assumptions about Irish preferences for water quality and reliable data on the numbers of people involved in water-based recreation. On the one hand, public access to rivers is more limited in Ireland than in England. On the other, there are many more lakes (approx. 6,000). The Marine Institute estimates that 190,000 people undertake active water-based recreation each year.

However, the numbers visiting lakes for more casual purposes, such as for walks, is certainly many times this number. For each of these users, wildlife sightings and other evidence of high biodiversity would be one of the attractions.

Hynes and Hanley (2006) provide one of the few Irish studies on water-based recreation, in this case for whitewater kayaking. They report an average consumer surplus gain of up to 14.50 per visit from a 25% improvement in water quality, but note that the estimate varies widely depending on the analytical method used.

Values for active water-based recreation are inevitably high due to direct association between the activity and the resource. Angling, in particular, has a dependence on biodiversity given its reliance on an aquatic food web. The study by DKN et al. provides the following data for angling benefits, again referring to data in the Environment Agency Guidance, itself based on UK studies by Green and Willis (1996) and the Foundation for Water Research (1996).

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Source: Guidance Part 2 Table 3.14. Green and Willis (1996) in FWR (1996) Unfortunately, there have been few Irish angling studies to date despite the close relationship between environmental quality and catch. However, Curtis (2002) has undertaken a survey of domestic salmon anglers by which he estimated consumer surplus benefits of between 62 and 185 in excess of travel costs, implying a total willingness-to-pay of 247 per trip. Salmon angling is a premium activity in Ireland. Relevant willingness-to-pay values quoted in the Environment Agency Guidance are only 28.20 per trip, in this case for significant improvements to existing salmon fisheries rather than for the consumer surplus per visit. DKN add that such improvements in water quality would provide additional benefits through new angling activity and estimate that existing anglers will extend their trip by 1.5 days on average in response.

Passive use benefits are more difficult to define. High values have been reported for well-known wetland locations of high biodiversity value. For example, a willingness-to-pay of £77 million per year was reported to protect the Norfolk Broads from saline flooding (Bateman & Langford, 1997).

For more familiar locations, some of the benefits of water quality are capitalised in the value of adjacent properties. For example, lake or riverside properties in Leitrim and Roscommon typically attract premia of 25% (pers comm.), although these prices rely more on aesthetic benefits than biodiversity per se. The aforementioned REPS study by Campbell et al. (2006) does demonstrate a high willingness-to-pay for policies that protect water quality at a national level.

The Environment Agency’s Guidance also provides evidence of passive use values. Table 8.4 lists those that have particular relevance to biodiversity and, potentially, to drinking water. A study by Georgiou et al. (2005) indicates the value of changes in levels of [any one of] ammonia, dissolved oxygen (DO) and biological oxygen demand (BOD), all of which are important to biodiversity.

Equivalent EPA categories are again provided by DKN et al. (2004). Similar figures have been constructed by Willis and Garrod (1996).

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8.4 T H R E AT S Just as biodiversity is threatened by adverse agricultural or forestry changes or water quality impacts, so too is human welfare to the extent that this depends on biodiversity. For some activities, such as angling or birdwatching, the impact is direct. For others, the benefits are indirect in that the principal benefits are realised as physical recreation, enjoyment of landscape or consumption of quality food and drinking water. In the anthropological terms through which the natural environment is valued by economics, the value of biodiversity in any one location depends on the degree to which that biodiversity can be substituted by high biodiversity in other locations.

It also depends on the relative proportion of active users and passive users and the size of the population catchment. Values are likely to be higher the more unique the environment or species.

Consequently, the Serengeti, the Amazon or the Great Barrier Reef would be valued on a global scale and existence values dominate use values. Values are also likely to be higher the greater the likelihood of irreversible change or catastrophic loss.

Ireland’s peatlands may not match the drama of the Serengeti, but they do represent examples of rare ecosystems. Some peatlands are protected largely through funding from the Dutch public whose own peatlands are now virtually extinct. This relationship is repeated for all natural environments. It is a fundamental rule of economics that, as a resource becomes more scarce, so its value will increase. In addition, average incomes are rising and recreation, including countryside and water-based recreation, is income elastic with demand increasing over time. It is to be hoped that this rising participation will also lead to greater awareness of biodiversity loss with the result that a greater value is placed on its protection.

8.5 CO S T O F P R OT E C T I ON National policies that aim to protect biodiversity are likely to attract public approval and be valued in economic terms. The relationship between a quality environment and quality of life is tacitly realised by policy makers in terms of actions to protect the rural environment, to maximise forest amenity and to sustain a functioning aquatic ecosystems. In some cases, biodiversity is an external benefit or complementary objective to other political priorities such as maintaining a rural population, offsetting global warming or ensuring clean water supplies. In any event, the overall objective should be to maximise the public benefits.

Policies such as REPS are expensive. Hence, the interest of policy makers in commissioning studies that help to demonstrate the resulting public benefits. The budget for REPS is more than the 150 million estimated by Campbell et al., and has now risen to 280 million. However, there are additional biodiversity and social benefits that were not considered by the survey and which certainly exceed the difference. For each 100 of forest income, the state makes transfers of 123 to the sector (Bacon and Associates, 2004). The biodiversity benefits of much of this forestry are modest, but here again there are complementary benefits such as security of timber supply, employment, rural development and carbon sequestration.

The requirements of the Water Framework Directive have been most onerous in terms of public expenditure. However, much of this expenditure, particularly in waste water treatment, has been in response to past underinvestment in essential environmental infrastructure. 1.5 billion was spent on waste water treatment under the last National Development Plan (2002-06). Around 4.3 billion is intended for all water infrastructure expenditure under the new NDP, very little of which will now be provided through the EU Structural Fund. Although much of this money will be invested in end-of-pipe wastewater treatment, River Basin Management Districts have been established with the objective to ensure at least “good water status” for ground and surface waters and associated ecosystems by 2015. This will necessitate improved protection at catchment level, particularly protection of surface waters and aquifers and controls on diffuse pollution.

REFERENCES Bacon and Associates (2004) A Review and Appraisal of Ireland’s Forestry Development Strategy.

Wexford. In association with Deloitte.

Bateman, I, and Langford, I. (1997), Non-users' willingness to pay for a National Park: an application and critique of the contingent valuation method, Regional Studies, 31,(6) pp. 571-582.

Bullock, C.H. (2004), Measuring the Value of Urban Green Space: A Choice Experiment Approach.

PhD National University of Ireland, Dublin.

Campbell, D., Hutchinson,W.G. & Scarpa, R. (2006a) Quantifying the Landscape Benefits arising from the Rural Environmental Protection Scheme: results from a public survey. Tearmann, Irish Journal of Agri-environmental Research, 5, pp 1-12.

Campbell, D., Hutchinson,W.G. & Scarpa, R. (2006b) Lexicographic decision-making rules in Discrete Choice Experiments: Implications on individual-specific willingness to pay estimates. Paper presented at 3rd World Congress of Environmental and Resource Economists.

Christie, M., Hanley, N.,Warren, J., Murphy, K.,Wright, R. and Hyde,T. (2006) Valuing the Diversity of Biodiversity, Ecological Economics, 58, pp304-317.

Costanza, R., d’Arge, R., de Groot., Farber, S., Grasso., M., Hannon, B., Limburg, K., Naeem, S., O’Neill, R.V., Paruelo, J., Raskin, R.G., Sutton, P., van den Belt, M. (1998) The Value of the World’s Ecosystem Services and Natural Capital, Ecological Economics, 25, pp3-15.

Curtis, I.A. (2004) Valuing Ecosystem Goods and Services: A new approach using a surrogate market and the combination of a multiple criteria analysis and a Delphi panel to assign weights to attributes. Ecological Economics, 50, pp163-194.

Fromm, O. (2000) Ecological Structure and Functions of Biodiversity as Elements of its Total Economic Value, Environmental and Resource Economics, 16, pp303-328.

Garrod G. D. and Willis, K.G. (1991) The Hedonic Price Method and the Valuation of Countryside Characteristics, Countryside Change Unit Working Paper 14, University of Newcastle upon Tyne.

Garrod, G. and Willis, K. (1997) The Non-use Benefits of Enhancing Forest Bio-diversity: A Contingent Ranking Study. Ecological Economics, 21, pp25-61.

Georgiou, S., Bateman, I. J. and Langford, I. H. (2005). Cost-Benefit Analysis of Improved Bathing Water Quality in the United Kingdom as a result of a Revision of the European Bathing Water Directive Wa t e r Resources Management, 2005, pp. 270-89 Green and Tunstall, (1991) The Evaluation of River Water Quality Improvements by the Contingent Valuation Method, Applied Economics, 23, pp. 1135-1146.

Hanley, N., Macmillan, D.C.,Wright, R.E., Bullock, C.H., Simpson, I.A., Parsisson, D. and Crabtree, B.

(1999) Contingent Valuation versus Choice Experiments: Estimating the Benefits of Environmentally Sensitive Areas in Scotland, Journal of Agricultural Economics, 49, 1, pp1-15.

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