1. Biodiversity and Changes in the Ecosystems: Consequences to Sustainable Development Hamdallh Zedan Conference on Environmental Economics and Sustainable Development Alexandria, 25 October 2007

2. Today’s presentation
Biological diversity underpins ecosystem services needed for human well-being
Achieving the MDGs requires awareness of the importance of biological diversity for food security and nutrition, human health and ecosystem resilience
Economic analysis of biodiversity
Strategies for making valuation relevant for decision-making

3. Global Environmental Changes
Climate change
Loss of biological diversity
Land degradation and desertification
Deforestation and forest degradation
Depletion of stratospheric ozone
Pollution of fresh and marine waters
Accumulation of persistent organic pollutants

5. Responsibility and Impacts of Global Changes
Differ among countries and people
The rich contribute disproportionately
The poor and disadvantaged are the most vulnerable
Poverty and inequity exacerbate global changes

6. Biodiversity loss and changes in the
ecosystems are the most serious
but the less felt or appreciated

7. What is ‘biodiversity’?

8. The Web of Life Biodiversity is the variety of all life forms: the
different plants, animals and microorganisms, their
genes and the ecosystems of which they are a part.
It covers the terrestrial, marine and other aquatic
environments.
It is not static, but constantly changing. A concept
that emphasizes the interrelatedness of the biological
world.

9. This variability can be considered at four
levels:
Genetic (i.e. genes, nucleotides, chromosomes, individuals);
Species (i.e. kingdom, phyla, families, subspecies, species, populations);
Ecosystem (i.e. bioregions, landscapes, habitats); and,
Functional (i.e. ecosystem robustness, resilience, goods and services).

10. Direct Causes/Drivers of Change (Human Induced Actions)
Land-use changes (degradation and fragmentation of ecosystems)
Introductions/removal of species (e.g. invasive alien species)
External inputs (e.g. fertilizer use, pest control, pollution, irrigation)
Harvest and resource consumption (over exploitation, unsustainable production and consumption)
Technology adaptation
Climate change (additional stress)
Natural causes (e.g. floods, droughts, volcanoes, evolution)

11. Indirect Drivers of Biodiversity Loss
Economic (e.g. globalization, trade, market and policy frameworks)
Demographic (e.g. population growth and density)
Socio-political (e.g. governance, institutional and legal frameworks)
Cultural and religious (e.g. choices about what and how much to consume)
Science and technology

12. What economics has to say about biodiversity
The overriding goal of economics is to deliver
choice solutions that make society better off. As
the creation of value makes society better off,
three questions ought to be addressed:
Why is biodiversity valuable?
How can the value of biodiversity be estimated? and,
How can the value of biodiversity be delivered to society?

14. Importance of biodiversity: Ecosystem Goods and Services
Provisioning
Goods produced or provided by ecosystems
food
fresh water
fuel wood
fiber
bio-chemicals
genetic resources
Regulating
Benefits obtained from regulation of ecosystem processes
climate control
disease control
flood control
waste detoxification and decomposition
drought moderation
Cultural
Non-material benefits obtained from ecosystems
spiritual
recreational
aesthetic
inspirational
educational
communal
symbolic
Supporting
Services that maintain the conditions for life on earth.
Soil formation
Nutrient cycling
Pollination and seed dispersal

15. Biodiversity Contribution to World Economy
40% of the world economy is derived directly from biodiversity.
aggregated annual value of ecosystem services worldwide: US$ 18 trillion to US$ 61 trillion ( similar to figures resulting from all goods and services produced by people).

16. Diverse ecosystems are more productive than non-diverse ones, because any group of species can never fully exploit all potential niches. Since human economic productivity is largely reliant on Earth's ecosystems, adequate bioproductivity needs to be maintained.
Natural innovation found in biological organisms rivals all known technologies derived through synthetic means.
A single human genome has some three billion bits of information but the human species also has many variations.

17. There are many millions of species of life on the planet each with valuable information. Many chemical formulae and forty-five percent of all drugs have bio-origin.
Services and economic commodities that biodiversity supplies to humankind are essential for sustainable development and achievement of the Millennium Development Goals (MDGs).

18. The Millennium Development Goals
Goal 1 - Eradicate extreme poverty and hunger
Goal 2 - Achieve universal primary education
Goal 3 - Promote gender equality and empower women
Goal 4 - Reduce child mortality
Goal 5 - Improve maternal health
Goal 6 - Combat HIV/AIDS, malaria, and other diseases
Goal 7 - Ensure environmental sustainability
Goal 8 - Develop a global partnership for development

19. Ecosystem Services and the MDGs
Goal 1 - Eradicate extreme poverty and hunger
Goal 2 - Achieve universal primary education
Goal 3 - Promote gender equality and empower women
Goal 4 - Reduce child mortality
Goal 5 - Improve maternal health
Goal 6 - Combat HIV/AIDS, malaria, and other diseases
Goal 7 - Ensure environmental sustainability
Goal 8 - Develop a global partnership for development

20. Millennium Development Goal 1
Goal 1: Eradicate extreme poverty and hunger
Target 2 : Halve, between 1990 and 2015, the proportions of people who suffer from hunger
Achieving this target has important consequences for the drivers of biodiversity loss

21. Increased food production will mean a larger ecological footprint.
Dietary trends can produce health problems
Conservation and sustainable use of biodiversity will reduce the ecological footprint from increased food production and provide access to diversity of food stuffs
800 Million are hungry
Deaths from cardiovascular diseases - 17 million
171 million suffer from diabetes globally
300 million people clinically obese worldwide

22. Contribution of Biodiversity to nutrition and resilience
Genetic Diversity
Species Diversity
Ecosystem Diversity
Ensures resilience
Basis for nutritional diversity
Important for nutritional diversity
Biodiversity provides range of foods
Important for sound agricultural management
Maintains soil fertility
Helps increase agricultural productivity

23. Biodiversity provides high variety of food: crops, livestock, forestry, and fish are important food source of human species. However, the number of species have been domesticated and cultivated are small if comparing with the number of species existing.
Food supply: 30,000 species are edible. Of these, 7,000 are cultivated or collected for food
Wild species and varieties can supply genes for improving domesticated species by improving their yield, disease resistance, tolerance and vigor; this can increase the profit of farming.
Genetic traits from wild crop varieties introduced into domestic agricultural crops (in USA): US$8 billion per year
Total seed-sector activities worldwide: US$45 billion per year

24. Ecosystem Services and Human Health
Fresh water
Medicinal plants/ resources
Control of infectious disease
Food
Timber, fuel and fiber
Waste management

25. Millennium Development Goals 4, 5 and 6
Goal 4 - Reduce child mortality
Goal 5 - Improve maternal health
Goal 6 - Combat HIV/AIDS, malaria, and other diseases
Biodiversity supports the ecosystem services which enable these goals to be met

26. The Importance of Biodiversity for Medicine
60% of world population relies on plants for primary healthcare
80% of population in developing countries
rely on traditional medicines
25% of prescriptions in United States contain plant extracts or active principles from plants
More than 50% of the top prescription drugs in the U.S. are compounds derived from, or are based on compounds derived from, natural sources

27. A wide variety of plants, animals and fungi are used as medicine
A wide variety of plants, animals and fungi are used as medicine. Wild plant species have been used for medicinal purposes since before the beginning of recorded history.
Source of medicine (health care): 20,000 species are used in traditional medicine for about 2.5 billion people; 5,000 species are potential source of commercial drugs
Over 60% of world population depends on plant medicines for their primary health care. For example, quinine from the cinchona tree has been used to treat malaria, digitalis from the foxglove plant treats chronic heart trouble, and morphine from the poppy plant gives pain relief.

28. Global market for herbal drugs: US$47 billion in 2000
Sales of prescription drugs containing ingredients from wild plants (in USA): US$15 billion in 1990
According to the National Cancer Institute, over 70 % of the promising anti-cancer drugs come from plants in the tropical rainforests. It is estimated that of the 250,000 known plant species, only 5,000 have been researched for possible medical applications. Ethno-pharmacy is the branch of science that investigates traditional medicines.

29. Animals may also play a role, in particular in research
Animals may also play a role, in particular in research. In traditional remedies, animals are extenively used as drugs. Many animals also medicate themselves. Zoopharmacognosy is the study of how animals use plants, insects and other inorganic materials in self-medicatation.

30. Drugs derived from plants and microbes
119 chemical compounds, derived from 90 plant species are important drugs currently in use
Quinine
Artemisinin
Morphine
Paclitaxel (Taxol©)
Salicin (Aspirin)

31. Microbially derived agents are also important
Penicillins and other β-lactam antibiotics
Aminoglycosides
Tetracyclines
Anthracyclines
There is no question that the templates for most drugs are in the natural world.

32. Biodiversity and Control of Infectious Diseases
Change to diversity of habitat elements, such as degradation, deforestation may change epidemiology
Yellow fever, malaria
Reduction of overall species diversity can lead to an increase in vector-based disease (dilution effect is reduced)
West Nile encephalitis, Lyme disease
Climate change may expand the range of vector-based diseases
Malaria, dengue
Pollution, including nitrogen loading
Eutrophication may lead to River blindness

33. Using control species is often more environmentally friendly compared with using pesticides. The control species can be used to protect the crops against pests and weeds. The economic loss due to the loss of crops/food can be reduced with the use of the control species.
Also, the population of disease vectors (for example, mosquitoes) and the invasive species can be controlled; thus, the economic loss led by the invasive species and vectors can be reduced. Damages worldwide from invasive species was estimated at more than US$ 1.4 trillion per year.

34. Millennium Development Goal 8
Biodiversity and environmental sustainability
Services that maintain the conditions for life on earth:
> Soil formation
> Nutrient cycling
> Pollination and
seed dispersal
Benefits obtained from regulation of ecosystem processes:
> Climate control
> Disease control
> Flood control
> Waste detoxification
and decomposition
> Drought moderation

35. Ecosystem Products and Services
Estimated Value (US Dollars)
Economic activity generated by the 350 million visitors to U.S. national parks, wildlife refuges and other public lands through expenditures on fishing, hiking, hunting, whale watching and wildlife photography
More than 400,000 jobs and
28 billion per year
Commercial and sport fishing revenue lost because of destruction of U.S. estuaries between 1954 and 1978
More than $200 million
Value of flood control services provided by marsh-lands near the Charles River in Boston, Massachusetts
$72,000 per acre of marshland

36. Why measuring biodiversity in monetary terms?
>Many of the goods and services provided by
biodiversity and ecosystems are crucial, but not always
measurable in monetary terms.
>Many of these goods and services are not traded in
the market place and so do not have an obvious price
or commercial value.
>If unpriced values are not included in the decision-
making process, the final decision may favor outcomes
which do have a commercial value.
>Hence decision makers may not have full awareness
of the consequences for biodiversity conservation.

37. Despite these facts, biodiversity is lost at unprecedented rate
Some 100 to 150 species become extinct everyday
Some 20,000 to 100,000 species become extinct every year (natural extinction rate 2-10 species/year)
One breed of livestock dies out every week
More than 31,000 plant animal species are threatened with extinction
Some 75 % of the genetic diversity found in agricultural crops have been lost over the last century
Of 6300 animal breeds, 1350 are endangered or already extinct
Forests and ecosystems are being destroyed at the rate of over 10 million hectares every year
If current destruction rate in forests and coral reefs is maintained, 50% of plant and animal species will be gone by the end of the 21st century

38. Current extinction rates are as much as 1,000 times background rates
20% of worlds coral reefs were lost in last several decades
35% of mangrove area has been lost

39. We don’t know what is lost: number of species on Earth
Recent estimate: 7 to 20 million
Good working estimate: 13 to 14 million
Scientifically described species: 1.8 to 2.1 million
Less well-studied groups: bacteria, fungi, arthropods and nematodes
Poorly known groups: species living in marine ecosystems and beneath the ground

40. Reasons for Concern Decline in ecosystem services
Required for human-well-being
Impact on the poorest
May prevent attaining the MDGs
Loss of resilience
Can exacerbate shocks & produce surprises
Loss of unique species & habitats

41. Impact of Global Warming
It was estimated that one third of the earth’s species could disappear by 2050 if the current rate of global warming continues.

42. Maintaining Biodiversity
Maintaining biodiversity requires more than just protecting wildlife and their habitats in nature conservation reserves. It is also about the sustainable use and management of all natural resources and safeguarding the life-support systems on earth.
Society needs mechanisms for determining the appropriate trade-off between biodiversity protection and the human activities that create value for people but result in biodiversity loss.
Economics offers some techniques to help in this decision-making process. However, the full potential of these techniques is yet to be realized.

43. Economic Analysis of Biodiversity
Economic analysis of biodiversity requires an understanding of the connections between the choices people make, the resultant changes and the subsequent changes in the wellbeing of people.
At the core of the interrelationships between people and biodiversity is the ecological system in which the state and scale of biological resources are intrinsically linked to biodiversity.

44. Human/Biodiversity interrelationships

45. This is particularly evident in a dynamic analysis of the interrelationship through the notion of resilience. This is because, in general, the greater the biodiversity, the greater is the resilience of the ecological system. Hence, with greater biodiversity, society has better ‘insurance’ against the impacts of a future adverse event.
Valuation methods have mostly concentrated on species and habitat protection. There is little recognition of the complex relationship between biodiversity and the scale of the biological resource

46. Hence, the values reported are not estimates of biodiversity per se, but rather of the species/ ecosystem being studied. Very few studies have targeted the value of ecosystem resilience as the specific result of biodiversity protection activities.
Unless the ecological system is understood, the role of economics is very limited. For instance, to use the production function approach to assess the value of soil biota we need to understand the links between farm management practices, soil biota and the productivity of the soil.

47. When markets fail Decisions about biodiversity management are
complicated by the fact that various types of market
failure are associated with natural resources and the
environment.
Market failures occur when markets do not reflect
the full social costs or benefits of a good. Factors
that cause market failures related to biodiversity
protection include:
many ecosystems provide services that are public goods; they may be enjoyed by any number of people without affecting other peoples’ enjoyment.

48. many ecosystem services are affected by externalities (the side effects of human actions; for example, if a stream is polluted by runoff from agricultural land, the people downstream experience a negative externality. Externalities can also be positive, e.g. the crop pollination services performed by wild bees).
property rights related to ecosystems and their services are often not clearly defined.

49. An example of an externality is the cost of salinity arising from vegetation clearance. The repair bill for salinity and water logging due to removal of the vegetation that regulated groundwater flow (another ecosystem service) is one of the most expensive ones facing Australia at the moment. Estimates of the size of the repair bill vary from $20 - $65 billion over 10 years, depending on what aspects of salinity are included. If these externalities had been factored into the original decisions to clear vegetation, a costly repair bill may have been avoided.

50. Proper ecosystem valuation can help resource managers deal with the effects of market failures by measuring their costs to society in terms of lost benefits.  The costs to society can then be imposed, in various ways, on those who are responsible, or can be used to determine the viability of actions to reduce or eliminate environmental impacts.

51. key strategies for making valuation studies more relevant and timely for decision makers
Greater policy application: Decision-makers can increase their understanding of the range of values that biodiversity offers and the techniques used to estimate them through greater exposure to the use of valuation techniques
Better science: We need to improve our scientific understanding of the impacts of human activities on biodiversity.
Better communication: Improved general awareness of what biodiversity and biodiversity valuation can offer society.

52. Role of developed countries
Take the lead in adopting positive policy approaches towards sustainable consumption and production.
Take a fresh look at their policies on foreign aid, trade and debt relief.
Make available additional financial resources and technologies essential for developing countries to break the vicious cycle of poverty and environmental degradation.

53. Role of developing countries
Create conditions whereby stakeholders, in particular, local communities, assume greater responsibility over the management of biological resources and benefit from their utilization.
Give serious consideration to the effects of misuse of resources in defeating the purpose of well-intended sustainable development policies.

54. Thank you

55. Whilst biodiversity value estimation has struggled to achieve a higher policy profile, the economic analysis of delivering biodiversity values to society has progressed rapidly in the last decade. This has been achieved through the development of policy tools that provide incentives for people to provide biodiversity values.

56. The predominant mechanism for delivering public goods – including biodiversity – has been government provision. In the case of biodiversity this was achieved through the creation of a network of parks and nature reserves. However, in recognition that such a ‘patchwork’ approach would not provide functional biodiversity protection (resilience), more policy emphasis has been put on biodiversity protection on privately owned land. Economists have provided assistance in this endeavour by bringing to the fore a suite of policy measures broadly known as ‘market based instruments’.

57. These measures involve the use of financial incentives to promote biodiversity protection. They include the payment of targeted subsidies, the levying of taxes on biodiversity destructive practices and the introduction of trading and banking schemes in which property rights to biodiversity are created and then bought and sold amongst people who can supply biodiversity (for example, land owners) and those who want biodiversity (for example, society, as represented by their government, conservation clubs, and developers who want to use biodiversity in their development activities).

58. The implication of market failure is that there is a potential role for government in filling the gap left by market forces. However, governments should only step in if it can be demonstrated that the benefits of intervention exceed the costs. In other words, the actions of government must be justified with reference to an improvement in human wellbeing. This is because a net benefit from government action cannot be presumed simply because of market failure. There is always the prospect of ‘government failure’ arising because of inadequacies in the bureaucratic/political processes involved in designing and implementing such action.
What this means is that without government intervention to protect biodiversity, insufficient protection can be expected.

59. Valuation techniques
Market based techniques
Revealed preference techniques
Stated preference techniques

60. Examples Impacts of Alien Invasive Species
The invasive sea lamprey collapsed lake trout and other native great Lake fisheries.
Introduction of the Nile perch to lake Victoria, as a prey for local fishermen, ate up all other fish they used to catch.
Invasive brown tree snakes have wiped out native forest birds, bats and reptiles to extinction in Guam.
Damages worldwide from invasive species was estimated at more than US$ 1.4 trillion per year.

61. Ecotourism
Biodiversity is a source of economical wealth for many regions of the world, such as many nature reserves, parks and forests, where wildlife and plants are sources of beauty and joy for many people.
Ecotourism, in particular, is a growing outdoor recreational activity. In 1988, it is estimated that million people took part in ecotourism. The majority of species have yet to be evaluated for their current or future economic importance