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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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A further sizeable benefit is realised in terms of the contribution of pollination to clover, a forage crop and an alternative to nitrogen fertilizer. The value of clover to grassland farming is currently modest at around 29 million per year. The benefit can be substituted by the replacement of clover by other grasses supported with fertilizer inputs. On the other hand, the heavy reliance on fertilizers is ultimately unsustainable. Consequently, the value of clover, and therefore the value of its pollination, could become many times greater now that policy is beginning to encourage a shift away from excessive reliance on fertilizers. The external costs of nitrate pollution are significant and partly demonstrated by the amount that the Government is willing to spend on nitrate regulations under the Nitrates Directive.

Pollination is also of immense value to the preservation of Ireland’s countryside. Only a fraction of the indirect value in terms of people’s willingness-to-pay to protect this wider countryside is reflected in the Campbell at al. study of REPS. Firstly, only a minority of farms are signed up to REPS. Secondly, wild flora and hedgerows provide food and habitat to other species (e.g. pest predators) that are, on balance, beneficial to agricultural production. Ignorance of these benefits compared with more tangible benefit of the alternative of larger field size, means that many farmers are (in economic terms) free-riding on the external benefits of others who retain these features on their land.

Overall, the value of pollination is likely to be many times the 52 million per annum that was currently attributed to agriculture in Chapter 3. If nitrate regulations force two-thirds of grassland farms to consider clover, or if the oilseed area expands in response to biofuel demand, the value could rise to 220 million per annum. There is, though, no policy to protect pollinating insects except peripherally through the various measures contained in REPS. Therefore, there is no policy cost against which benefits can be compared. Despite this, the pollination service provided by wild bees is at significant risk from a variety of sources such as habitat loss, disease and pollution.

Soil biota A functioning soil biota is critical to the break down of dead vegetation and to nutrient cycling.

Although Ireland has a predominantly grassland system, this service is still of immense value to grass production, particularly in terms of nitrogen provision. A provisional estimate based on the impact of earthworms alone to livestock output would suggest that this contribution is worth 723 million per year. Were the contribution of all micro-organisms involved in nitrogen cycle to be included, this figure would surely be far higher. As with clover, this ecosystem service could be partly replaced by artificial fertilizer, albeit at the cost of a possible doubling of the current annual level of fertilizer purchases to 500 million. However, this would still fail to provide the continuous supply of nitrogen required by plants. Neither would such artificial intervention be able to replace the benefits that earthworms supply to soil structure or to expanding the area of available grass through the rapid disposal of animal waste. Consequently, it is not unreasonable to attribute a value to earthworms of around 1 billion per year.

The other significant value of earthworms is in their capacity to break down slurry. Through this service, earthworms are vital to a reduction in the external costs of eutrophication and the contamination of ground water. If the spreading of slurry is discouraged in the near future, this benefit would reduce. However, earthworms will continue to be important to any expansion of the area of clover intended to substitute for the nitrogen currently supplied through slurry spreading.

There is no figure for Ireland of the consumer surplus associated with the elimination of diffuse pollution of nitrates and phosphates from agriculture. However, if the figures estimated by Hartridge and Pearce (2001) for the UK are adjusted for Ireland’s relative population, the external cost of nitrate pollution would be between 60 and 120 million per year. The external costs of phosphate run-off would likely be greater, although phosphates are more successfully reduced by environmentally sensitive farming and through plant growth than by transformation within the soil biota.

There is no public policy aimed at protecting the soil biota other than indirectly through the nutrient management measure in REPS. The most relevant policy is that the new Nitrate Regulations, the implementation cost of which will commence at 39 million per year. The budget provides an indicator of the value of biodiversity protection in that the regulations deal with the avoidance of pollution rather than the maintenance of soil fertility.

As with pollination, there is no policy to protect soil biodiversity per se. It could also be argued that, unlike bees, earthworms are not at risk and that a cost-benefit analysis is irrelevant. Although earthworms are a keystone species, the high level of species redundancy within the soil means that the ecosystem services or some species could possibly be replaced by others. However, this view is complacent. Earthworm populations are threatened by non-native species which do not have the virtue of performing the same ecosystem services. Ploughing and chemical inputs are also threats to healthy populations of earthworms. Neither do we understand enough about the soil biota to know how it is likely to respond to such exogenous shocks as future climate change. We do know, however, that the soil biota is the second biggest store of carbon after the oceans and that any change could have significant knock-on effects for agricultural productivity and climate. In such circumstances, it is as well to be cautious. A precautionary approach carries the lowest risks.

P e s t c o n t ro l Predators and parasitoids are highly important to crop production. Integrated pest management promises potentially huge benefits in tropical countries in particular. The benefits in Ireland are again, as for pollination and soils, somewhat diminished by the prevalence of grassland systems.

Nevertheless, they are still significant. There is potential for environmentally sensitive farming to supply some savings on the approximate 3.3 million spent each year on insecticides together with associated savings in terms of health and ecosystem damage. These latter benefits are tentatively estimated as being 1 million per year. Benefits in terms of crop, biodiversity and health losses avoided through existing baseline predation are likely to be higher. These are conservatively estimated at 20 million per annum.

The public benefits are largely restricted to the avoidance of health risks together with the value placed on a functioning ecosystem. Both risks have diminished in Ireland as pesticide formulations have improved. They were significant in the past before the damage caused by DDT was fully realised. However, any increased need for pesticides due to the collapse of natural control would lead to a reappearance of external costs. Invariably, pesticides are highly toxic and measures to protect public health typically attract very high willingness-to-pay.

The population of natural predators and parasitoids is at risk from habitat loss, pollution and exogenous shocks. It is not inconceivable that pest populations could increase in response to climate change. These useful species have no specific policy protection, although agri-environmental measures such as REPS do help to protect habitat and reduce pollution. Ideally, it is farmers themselves who should weigh up the private costs and benefits of limiting pesticide applications and leaving suitable habitats uncultivated. Public intervention should be limited to ensuring that insecticide prices cover external costs.

Summary of benefits of selected ecosystem services to agriculture and policy costs

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11.2.2 F o re s t r y Through the supply of nitrogen and other nutrients, the soil biota provides many of the same benefits for forestry as for agriculture. Given a total forest cover of 6.9 million hectares, annual cuts would be of the order of 138,000 hectares assuming an average rotation of 50 years. If biodiversity were to provide a similar contribution as for agriculture, the ecosystem service of earthworms could be worth in the order of 50 million per annum assuming a gross timber income per hectare of 16,000. However, this estimate could be rather academic in that this ecosystem service does not appear to be threatened in that same way as it is by intensive farming. On the other hand, both climate change and non-native species could be as much a threat to forest earthworms as they are to those on farmland.

Probably of more relevance to forests are the benefits and costs of measures to protect biodiversity. Bacon and Associates (2004) estimate the biodiversity benefits to public utility of the proposed forestry expansion programme could be 1.6 million per year, but that the industrial nature of the existing forestry estate means that it contributes only 5.4 million per year. Any passive use value, equivalent to those revealed in surveys of people’s willingness to pay for agrienvironmental measures, would be additional to this.

Private (grower) costs can be represented by the opportunity cost of the retention of mature trees.

A genuine opportunity cost does arise in terms of the 15% area that is set aside although, in practice, this might only involve 5-10% of the area given that many such areas are selected because they are inherently not very productive or cannot be planted (overhead power lines, etc).

For Coillte, the State Forestry company, the annual opportunity cost of this set aside could be 16 million based on the size of the Coillte forest estate. The figure is, though, rather hypothetical in that very little new public planting is occurring at present. Of more relevance is that Coillte perceive a greater benefit from the improved accessibility to markets provided by FSC certification.

In either case, the cost of biodiversity measures borne by forestry companies is covered by the public grant available. Forestry grants have traditionally been provided as a rural development measure, rather than for environmental purposes. However, the difference in premia available for native hardwoods compared with softwoods, together with the area planted, does provide an indication of the environmental benefits as they are perceived by policy makers. This net cost would be around 12 million per year. In addition, there is the budget for the new Forest Environmental Protection Scheme (FEPS). Taking an average of the grants and premia available would result in a budget of 15 million over five years for the pilot FEPS scheme target of 2,700 hectares.

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11.2.3 M ari n e Of all economic and social sectors addressed in this report, it is the marine sector which has the most direct relationship with biodiversity in that fish species are harvested without any artificial inputs that contribute to productivity. In a sense it is self evident that the availability of commercial fish populations depends on the biodiversity of the marine ecosystem. However, it is only very recently, through studies such as that by Worm et al. (2006), that the character of this relationship has begun to be revealed. There is still remarkably little that we understand about the detail of these relationships, including, for example, species interactions or the role of deep water coral reefs.

We do now know that high levels of biodiversity are critical to the recovery of fish stocks. We also know that the marine ecosystem provides an essential, if often over-looked, function in assimilating huge volumes of waste from polluted rivers and coastal cities.

In Ireland, the wild fisheries sector is worth 180 million a year in terms of the quayside value of fish. Despite the shift to lower value pelagic species, the value of the catch has increased slightly in real terms over the last ten years. However, the value of exports of fish and fish products has increased significantly. The latter increase reflects a combination of higher value processing and the effect of supply and demand in the context of falling EU stocks. While the latter could mean that the same value increase may not have occurred had European stocks been sustainably managed, it is still true that Ireland is failing to realise the true potential value of its fish stocks under a sustainable system.

To an extent, aquaculture has the capacity to compensate for the decline in commercial species.

Aquaculture in Ireland is now worth 85 million per year. The sector is growing, but has so far failed to realise its potential due to market conditions. However, aquaculture also depends on ecosystem systems, for the provision of fish food, for the natural control of parasites and for the assimilation of waste from farms.

As regards marine policy, this continues to be dominated by the needs of the fishing industry, although the extractive sectors, principally oil and gas, are of growing relevance. It is difficult to find anything positive to say about the manner in which fish stocks have been managed. The Marine Institute has argued that 75% of commercial species are outside of safe biological limits. The inshore fishing sector is a fraction of its former self, while the vast majority of ports have ceased to land significant quantities of fish with consequent loss of traditional sources of employment. Large sums of public money have been spent on the modernization of vessels, but there are still too many vessels chasing too few fish. The largest quantities are caught by a handful of individual vessels which land a proportion of their catch abroad. Under-reporting, illegal catches and discards have been significant problems.

In terms of biodiversity, the populations of most demersal species and several pelagic species have declined significantly and are subject to quota. Slow recovery deep-sea species were briefly plundered in the early years of the century and catches are now controlled. By-catch continues to be a problem. Marine Special Areas of Conservation (SAC) have been identified, but are not yet operational.

Some of the public expenditure on vessel modernization and fisheries protection has benefited biodiversity, but this benefit has been a minor and indirect motivation. The proposed new round of decommissioning, at a projected cost of 45 million would have a more direct biodiversity benefit.

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