1 Economic valuation of biodiversity in a policy context: problems and best practice Dr Mike Christie Institute of Rural Sciences University of Wales Aberystwyth Paper presented to the EEA workshop on ‘Biodiversity and Economics’ 5 October 2006

2 Overview TEV and TSV TEV and TSV Methods Methods Case study: valuing biodiversity in the UK Case study: valuing biodiversity in the UK Problems Problems Best practice Best practice Future research needs Future research needs

3 Total Economic Value & Total Systems Value Source: Bateman and Adger (2001)

4 Valuation methods Market prices: Market prices: Observed market value; productivity approaches; cost-based methods (replacement costs). Observed market value; productivity approaches; cost-based methods (replacement costs). Revealed preference: Revealed preference: Travel cost; Hedonic pricing. Travel cost; Hedonic pricing. Stated preference: Stated preference: Contingent valuation; Choice experiments Contingent valuation; Choice experiments SP-RP approaches: SP-RP approaches: Contingent behaviour; RUM TCM Contingent behaviour; RUM TCM

5 Case study: Valuing biodiversity on UK farmland Methods: Choice experiments, contingent valuation, valuation workshops & benefits transfer. Methods: Choice experiments, contingent valuation, valuation workshops & benefits transfer. Sample: 800 residents – Cambridgeshire and Northumberland. Sample: 800 residents – Cambridgeshire and Northumberland. Innovative features: Innovative features: Use ecologists to help define biodiversity attributes + generate scenarios; Use ecologists to help define biodiversity attributes + generate scenarios; 20 minute PowerPoint presentation to inform public. 20 minute PowerPoint presentation to inform public.

6 How do ecologist view biodiversity? BIODIVERSITY CONCEPTS ECOLOGICAL CONCEPTS ANTHROPOCENTRIC CONCEPTS Keystone species Umbrella species Flagship species Ecosystem function Ecosystem Health Endangered species Rare species Charismatic species Cuteness Familiar species Locally important species Habitat (species interactions) Ecosystem processes Rare, unfamiliar species of wildlife Familiar species of wildlife

7 Choice experiment attributes and levels Familiar species of wildlife Familiar species of wildlife Continued decline (SQ) Continued decline (SQ) Rare Rare Rare and Common Rare and Common Rare, unfamiliar species of wildlife Rare, unfamiliar species of wildlife Continued decline (SQ) Continued decline (SQ) Slow down decline Slow down decline Recover to stable populations Recover to stable populations Habitat (species interactions) Habitat (species interactions) Continued decline (SQ) Continued decline (SQ) Restoration Restoration Creation Creation Ecosystem services Ecosystem services Continued decline (SQ) Continued decline (SQ) With human impact With human impact All services All services Tax (7 levels) Tax (7 levels)

8 Example of choice task POLICYOPTIONAPOLICYOPTIONB DO NOTHING (Biodiversity degradation will continue) Familiar species of wildlife Rare familiar species protected Continued decline in the populations of familiar species Rare, unfamiliar species of wildlife Recovery of rare species to non- threatened status Continued decline in the populations of rare, unfamiliar species Habitat (species interaction) Habitat restoration Wildlife habitats will continue to be degraded and lost Ecosystem process Continued decline in the functioning of ecosystem processes Only ecosystem services that have a direct impact on humans, e.g. flood defence are restored. Continued decline in the functioning of ecosystem processes Annual tax increase You will pay an extra £80.00 tax annually over a 5 year period You will pay an extra £20.00 tax annually over a 5 year period Your tax bill will not be increased

9 Research conclusions Is there evidence that people value biodiversity? Is there evidence that people value biodiversity? Only 15% of CE respondent chose ‘Do nothing’ Only 15% of CE respondent chose ‘Do nothing’ What aspects of biodiversity do people most value? What aspects of biodiversity do people most value? CE provides evidence that people care about: CE provides evidence that people care about: Common and rare familiar species, Common and rare familiar species, Rare unfamiliar species (but not a ‘slow down in decline’), Rare unfamiliar species (but not a ‘slow down in decline’), Habitat restoration and re-creation, Habitat restoration and re-creation, Ecosystem services which have direct impact on humans (but not those which do not affect humans) Ecosystem services which have direct impact on humans (but not those which do not affect humans) People care about biodiversity, but are largely indifferent about how biodiversity outcomes are achieved! People care about biodiversity, but are largely indifferent about how biodiversity outcomes are achieved!

10 Research conclusions Is it possible to value complex goods such as biodiversity? Is it possible to value complex goods such as biodiversity? Yes, but is challenging Yes, but is challenging Requires careful design (expert reviews, public FG) and information presentation Requires careful design (expert reviews, public FG) and information presentation The way experts and the public view biodiversity is different, therefore need to ‘translate’ expert views for study. The way experts and the public view biodiversity is different, therefore need to ‘translate’ expert views for study.

11 Problems for biodiversity valuation Ecologists don’t fully understand the complexities of biodiversity / ecosystems; Ecologists don’t fully understand the complexities of biodiversity / ecosystems; Poor public understanding of biodiversity concepts; Poor public understanding of biodiversity concepts; ‘Constructed’ preferences ‘Constructed’ preferences Public versus expert preferences Public versus expert preferences

12 Problems for biodiversity valuation Aggregation: Aggregation: Distance decay; Distance decay; Double counting; Double counting; Passive use values. Passive use values. Cost Cost Good studies require significant resources Good studies require significant resources Benefits transfer? Benefits transfer?

13 Best practice Incorporate sound ecological knowledge into design; Incorporate sound ecological knowledge into design; Extensive piloting to ensure biodiversity descriptions are meaningfully to public; Extensive piloting to ensure biodiversity descriptions are meaningfully to public; Respondents need to be fully informed and reflective – requires adequate funding; Respondents need to be fully informed and reflective – requires adequate funding; Use of workshops to help validate results; Use of workshops to help validate results; Explore heterogeneity of values; Explore heterogeneity of values;

14 Future research needs Aspects of biodiversity requiring more attention Aspects of biodiversity requiring more attention Total systems values Total systems values Social, cultural values Social, cultural values Infrastructure ‘glue’ values Infrastructure ‘glue’ values Scope / scarcity / extinction (irreversibility) issues Scope / scarcity / extinction (irreversibility) issues Passive use values Passive use values Biodiversity components: Biodiversity components: protected areas-, farmland-, urban- biodiversity protected areas-, farmland-, urban- biodiversity Landscape level Landscape level Genetic level Genetic level Aggregation issues Aggregation issues Benefits transfer Benefits transfer