«The Economic and Social Aspects of Biodiversity Benefits and Costs of Biodiversity in Ireland REPORT PREPARED BY: CRAIG BULLOCK, OPTIMIZE CONSULTANTS ...»
Social relations, aesthetic values, sensual, spiritual Recreation and tourism S u p p o rt i n g s e r v i c e s Primary production Nutrient cycling Soil formation While biodiversity is a public good, it commonly has the characteristic of an open access resource such that many of the benefits are realised as private benefits, whereas the associated costs are shared social or public costs. For example, clean water may be needed by a factory, but that same factory’s pollution reduces the quality of water for people and other factories downstream.
However, it does not necessarily follow that human activity is inevitably bad for biodiversity. In some cases, biodiversity can be enhanced by human activity. Extensive farming provides a diversity of practices and associated landscapes that, in turn, favour biodiversity (Tscharntke et al., 2005).
Indeed, there is concern that the virtual abandonment of some farming areas has reduced biodiversity (Rensburg & Mill, 2006).
However, the net situation that we currently face is one in which biodiversity is being degraded.
Where the costs and benefits are not shared equally by the same individuals, as is typical where goods have both private and public attributes, there is the prospect that one decision-maker will trade-off biodiversity loss in return for benefits, for example, higher short-run productivity, without considering the full extent of the future costs or the costs for others. Incomplete information, together with the geographical separation of beneficiaries and losers, raises the possibility of adverse outcomes due to market failure. These impacts are often barely perceptible to begin with as they are gradual or cumulative. The full costs may only be realised after long periods of time or by future generations.
1.3 VA LU AT I ON O F B I O D I V E R S I T Y In 1995, a team of ecologists and economists estimated the value of biodiversity to the global economy as being in the region of $US33 trillion annually (Costanza et al, 1995). However, not only does this figure, by its authors’ admission, represent a minimal estimate of the value, but knowing that the human race ultimately depends on a functioning ecosystem does not help much with the choice of policies to protect it. Better, therefore, to focus on the value of an additional unit of biodiversity, or the cost of the loss of a unit of biodiversity. The value of the marginal product of biodiversity demonstrates the contribution of the ecosystem to the incremental production of goods, services and human welfare at any one point of time. This information places policy-makers in a better position to judge what trade-offs are necessary between the costs and benefits of policies needed to protect biodiversity (Dickie, 2006).
As things stand, there are many decisions that have biodiversity impacts, but which do not consider the full costs, including those that affect the wider public. Many of these social and economic benefits and costs, be they public or private, can potentially be quantified. Where biodiversity contributes to primary production, its value can be demonstrated in terms of the price of final products such as food or raw materials. Contributions to human utility are also an economic benefit that can be quantified using methods such as stated or revealed preference to demonstrate monetary estimates of these values. Such valuation ensures that impacts to social welfare are treated equally with other financial considerations.
Stated or Re vealed Pre f e rence Methods Stated preference relies on survey approaches through which people provide estimates of their willingness-to-pay (or willingness-to-accept) for the protection of biodiversity where this can be shown to contribute directly or indirectly to their quality of life. Instances would be the association with outdoor recreation, or other indirect uses or even non-uses such as a pure appreciation of wildlife or biodiversity. Revealed preference achieves the same objective where this utility can be demonstrated through associated market mechanisms. Examples here would be where property prices capture proximity to an attractive natural landscape, or the costs of travel to a recreational area with high biodiversity.
P roduction Function Ap p ro a ch In the production function approach, biodiversity forms an input to an economic process. This requires some detective work to attribute that proportion of the value of product which is contributed by ecosystem services. For instance, although a single type of crop or tree might have value as food or timber, its growth depends on a variety of ecosystem services performed by various species. Similarly, ecosystem services will enhance forage production on a farm and this will contribute to the weight gain of grazing animals and a higher final price.
Cost-based Ap p ro a ch e s Cost-based approaches do not provide estimates of utility, but rather provide a demonstration of
the value of biodiversity through a surrogate product. For example:
- ‘Replacement cost’ examines the amount that would need to be spent to replace the ecosystem services that are provided by biodiversity. Examples could include hand pollination or the use of fertilizers or pesticides.
- ‘Damage avoided’ looks at the cost of adverse outcomes which could arise in the absence of a functioning ecosystem. This approach could be used to quantify the external costs of activities which ignore or damage biodiversity of which the health impacts of pesticides would be one example.
- ‘Preventive expenditure’ is related to the above in that it calculates how much would need to be spent to avoid such costs. One example that follows on from the above would be the additional water purification needed to remove pesticide residue.
Methods adopted In this report, the production function method is used most regularly, albeit rather crudely given the range of ecosystem services which must be considered here. Ideally, it would be necessary to attribute that component of value which is contributed by biodiversity. It is also necessary to avoid double-counting or over-estimating the costs that are truly attributable to biodiversity. For example, the above examples of the replacement cost posed by the purchase costs of pesticides can be added to the social costs of their potentially adverse health impacts as an instance of the cost of lost ecosystem services. However, the costs cannot simply be added to that of the preventative expenditure which must be made on water purification that might remove toxic pesticide residue.
Valuation, of any kind, is not straightforward. Production function or cost-based methods are challenged by the limited scientific understanding of ecosystem functions, including in areas that are highly important to primary production such as soils and the oceans. Imperfect information also applies to the use of stated preference tools based on surveys in that most people have a very limited understanding of biodiversity even where they do value its outcomes. In this case, it could be better to establish people’s willingness-to-pay for the protection of particular key species or landscapes, and then to use these values as a demonstration of the value of the biodiversity on which these species or landscapes depend.
Economic valuation can also never be more that partial. Although we can artificially raise shortterm productivity or substitute for some loss of biodiversity, productive activities, such as agriculture, are ultimately dependent on biodiversity. The value of biodiversity is therefore essentially equivalent to the total value of the output from agriculture, forestry or fisheries. For a benefit-cost approach to have meaning, it is more practical to focus on marginal values as described above. It is also practical and illustrative to refer to a handful of species which have been identified as being critical to economic activity. To demonstrate the importance of protecting biodiversity, it may also be persuasive to choose those species which are endangered. Indeed, this threat to individual species may have arisen because their value has hitherto not been appreciated or accounted for in economic terms.
Where a limited number of example species are used, it is important to remember that these species, in turn, do not exist in isolation but depend on a functioning ecosystem. Bees, for example, do not survive just by pollinating agricultural crops. Rather, they depend on a range of wild plants which, themselves, occupy particular habitat niches or depend on other insects, birds or mammals for their reproduction and dispersion. It is this classic beautiful complexity of nature which can never be quantified entirely.
1.4 S T RU C T U R E O F T H E R E P O RT The report is structured as follows. Following this introduction, a synopsis is given of international and European policy on biodiversity. The chapter discusses the political background and motivations for biodiversity protection and the extent to which these policy initiatives are being applied in Ireland.
The following chapters examine the role of biodiversity and of ecosystem systems in our key
economic and social sectors, namely:
- water quality
- roads and infrastructure
- social welfare and quality of life
The sub-chapters are broadly organised into sections that examine:
- the relationship between the sector and biodiversity
- relevant species and their function
- ecosystem services
- economic and social values
- threats to biodiversity, and
- costs of protection.
The structure is not exactly repeated for each topic as the relationship between biodiversity and activity within each sector inevitably varies, including the role played by ecosystem services.
A summary of the benefits of biodiversity is then provided, together with a broad comparison of the costs in terms of both current and possible policy and the economic implications of failing to protect biodiversity. For the reasons discussed above, this chapter cannot aspire to be a costbenefit analysis. Rather, it discusses what measures have been introduced by individual government departments to protect biodiversity. It examines the extent to which government departments are conscious of the social value of biodiversity, or whether this consciousness is simply a response to international agreements and European Directives.
This core section of the report is followed by a short chapter on the impact of climate change.
Climate change is likely to have a serious impact on biodiversity. Between 30%-50% of species have been identified to be at risk from the changes in climate predicted for this century (CEC, 2007).
Furthermore, our capacity to adapt to climate change and to deal with its implications will be strengthened by the presence of a healthy level of biodiversity.
Finally, we bring this information together in a concluding chapter that also contains recommendations for government action on biodiversity.
REFERENCES Carson, R. (1962) Silent Spring, Houghton Miflin.
Costanza, R., Sutherland, J., Daly, H., Goodland, R. & Norgaard, R. (1997).The Value of the World’s Ecosystem Services and Natural Capital.
Dickie, M.S. (2006) Benefits of Biodiversity Conservation. Paper prepared for England Biodiversity Strategy Economics and Funding Group.
Kettunen, M. & ten Brink, P. (2006) Value of Biodiversity – Documenting EU Examples where Biodiversity Loss has led to the loss of Ecosystem Services. Final Report for the European Commission, Institute for European Environmental Policy (IEEP), Brussels. 131pp.
van Rensburg,T.M. van & Mill, G.A. Biodiversity Conservation in Managed Landscapes. In Lovett, J. & Ockwell, D. A Handbook of Environmental Management, Edward Elgar, Gloucester. (forthcoming 2008).
Vitsouek, P.M. & Hooper, D.U. (1993) Biological Diversity and Terrestrial Ecosystem Biogeochemistry. In Schultz, E-D. and Mooney, H.A. (eds) Biodiversity and Ecosystem Function.
Wilson, O.E. (1993) Butterfly Conservation quoted in Morris & Winter
2.1 I N T R O D U C T I ON – THE GLO BA L CON T E X T The range of individual policies and policy drivers connected to biodiversity in Ireland is extensive, while their history, relationships, implementation and enforcement issues are complex. The majority of these instruments are directly relevant and of great significance to social and economic concerns on this island, but a full discussion of these aspects would form a large volume of text on its own.
Rather than discuss each of these in detail, this section provides a general overview of the overriding international and national policy context within which biodiversity conservation must be considered. It gives specific consideration to policy drivers of relevance to the Irish economy and society, and highlights some major linkages with current socio-economic issues in Ireland.
2.1.1 D e ve lo p m e n t o f m o d e r n b i o d i ve rs i t y p o l i c i e s Today’s policy framework for environmental protection dates back to the beginnings of the green movement in the mid-1960s. Politically, modern nature conservation policies in Ireland and elsewhere have roots in a number of international summits and treaties of the early 1970s (e.g. the 1972 United Nations Conference on the Human Environment). In the 1980s, the establishment of the UN World Commission on Environment and Development focused global political attention on the connection between environmental quality and economic growth. The concept of Sustainable Development is now firmly fixed into almost all national and international objectives relating to economic and social progress. The phrase itself has, perhaps, been somewhat over used in recent years and it is frequently applied to discussions outside of the socio-economic-environmental context. In the framework of the current report, the definition stated in the 1987 report of the
World Commission (“Our Common Future”), is worth repeating:
“Sustainable development is development which meets the needs of the present without compromising the ability of future generations to meet their own needs”.