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The Economics of Ecosystems and Biodiversity

(TEEB)London, 5th May

Pavan SukhdevStudy Leader, TEEB, &

Director, UNEP Green Economy Initiative

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How Serious is the Problem Globally ?

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Level of Biodiversity in the World in 2000(OECD baseline, Globio-3 model, “MSA’ indicator)

Remaining MSA in %

Source: Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium.

4Source: Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium.

Level of Biodiversity in the World in 2050“Business as Usual” Scenario of the future

Remaining MSA in %

MSA loss from 72% to 61% Natural Areas decline by 7.5 Million Sq. Km.

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What were our key conclusions from Phase I ?

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TEEB – Interim ReportThree Key Messages

Economic Size & Welfare Impact of Losses is huge

Strong link withPoverty & risk ofMDG’s failure

Discount ratesare ethical choices

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The problem

$$$Money : today‘s Yardstick

Photo: C.Neßhöver, UFZ

Nature‘s Interactions with Humanity

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Losses in ‘Present Value’ terms… (COPI study, May 2008, TEEB)

A : 50-year impact of inaction or ‘business as usual’

B : Natural Capital impact

Welfare losses equivalent to 7 % of GDP, horizon 2050

Natural Capital Lost : AnnuallyEUR 1.35 x 1012 to 3.10 x 1012

(@ 4% (@ 1%

Discount Rate) Discount Rate)

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How Serious is the Problem Globally ?

…in Economic & Human Terms ?

10Source: Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium. Original source: Pauly

Open Access & Perverse Subsidies are key drivers of the loss of fisheries

Half of wild marine fisheries are fully exploited, with a further quarter already over-exploited

at risk : $ 80-100 billion income from the sector

at risk : est. 27 million jobs

but most important of all…..

at risk : Health … over a billion rely on fish as their main or sole source of animal protein, especially in developing countries.

TEEB : Global Loss of Fisheries… Human Welfare Impact

We are fishing down the food web to ever smaller species…

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Ecosystem Losses & Links to MDG’sHaiti Example : MDG # 1, 4, 5, 8…

HAITI

DOMINICANREPUBLIC

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The Discounting Issue…

… A Question of Ethics ?

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Three Hidden Stories of “Discounting” Revealed

Cash flow 50 years in the

future

Annual discount

rate

Present value of the future cash

flow

1,000,000 4% 140,713

1,000,000 2% 371,528

1,000,000 1% 608,039

1,000,000 0% 1,000,000

1. Declining Growth Paths in per-capita flow of nature’s services …. imply that discount rates should be negative

2. Marginal Utility of $1 to the Rich vs Poor …. is too different to merit the same discounting treatment

3. Inter-generational Equity…….following current norms means valuing nature’s utility to your grandchild at one-seventh of your own

Most of the 29 valuation studies in our meta-study of forest valuationsuse discount rates between 3%-5%

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How does one capture the value of nature ?

What can we do NOW ?

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TEEB – Interim Report“From Economics to Policies”

Rethink todays subsidies to meet tomorrow’s priorities

Reward unrecognized benefits, penalize Uncaptured costs

Share the benefits ofconservation

Measure what we Manage !

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TEEB – Interim Report“From Economics to Policies”

Rethink todays subsidies to meet tomorrow’s priorities

Reward unrecognized benefits, penalize Uncaptured costs

Share the benefits ofconservation

Measure what we Manage !

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TEEB “Interim Report” ExamplesRewarding Unrecognized Benefits

Costa Rican PES : Payments for Environmental Services are virtually a national strategy for forest and biodiversity conservation and sustainable development Panama Canal : Insurance firms and shipping companies are financing a 25-year project to reforest the water catchment of the canal to restore freshwater flow to its locks… the fear of loss due to closures of the Canal had been making shipping insurance premiums mount

Guyana : A Private Equity firm recently bought the rights to environmental services from a 370,000 hectare rainforest reserve in Guyana anticipating that its services (water storage, biodiversity maintenance, rainfall regulation, etc) will gain value. Revenues will be shared 80% with the local community.

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Q : What will TEEB Phase II be about ?

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1-Word Summary of TEEB Phase II

“Mainstreaming”

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TEEB – Final ReportSep 2009, June 2010

ConsumerOwnership

Business Risks & Opportunities

Decision Supportfor Administrators

Policy Evaluation for Policy-Makers

Science & EconomicsFoundations, Policy Costs, & Costs of Inaction

18.04.23 UNEP ETB21

Can “PA Conservation” be an “Opportunity” ?

Measures

Sectors

Revenues (USD Bio)

Capital Employed (USD Bio)

People Employed

Automobiles4 $ 1,882 Bio $2,217 Bio 4.4 Mio

Steel4 $ 530 Bio $ 588 Bio 4.5 Mio

IT Services & Software4

$ 942 Bio $ 179 Bio 5.7 Mio

Protected Area Conservation

$ 4,500 Bio1 $ 125,000 Bio2 1.5 Mio3

1. Balmford et al, 2002, “Economic Reasons for Conserving Wild Nature”, Science 297, estimates Protected Areas could produce goods and services valued at between $ 4,400 billion - $ 5,200 billion per annum

2. Natural Capital : Present Value (PV) of a constant service annuity of $ 5,000 billion per annum, discounted @ 4% per annum3. Estimate of the number employed directly in the maintenance, protection, and oversight of Protected Areas globally 4. Global Business Sector estimates from Global Markets Centre (“GMC”), Deutsche Bank

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Challenge : Evaluate ECUADOR’S Conservation Proposal ( Yasuni Preserved, Oil stays in ground) ?

Yasuni National Park –the most biodiversewilderness on Earth

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TEEB D1 Challenge (cont’d) ECUADORYASUNI National Park / ITT Oilfield Proposal

• Ecuador commits not to exploit 20% of it’s proven oil reserves (846 million barrels), (ITT oil fields, within the Yasuní National Park.

• Ecuador’s Opportunity Cost : ( @ US$ 75 WTI) is an NPV of US$11.6 billion.

• World’s CO2 Storage : 407 million Mt CO2; @ market (EU-ETS), US$28.85/ Mt, US$11.7 billion.

• Global benefit : Social Cost of CO2 far exceeds market price …

• Ecuador’s benefit : National energy policy, social upliftment, Protected Area Network maintenance ..now ….

• ECUADOR shows a way… Does the world have the will ?

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The Process for TEEB Phase II

Inputs from Science and Economics experts through the Call for Evidence,

participation in Working Groups, etc

D0

En

d-U

ser

Ou

trea

ch

2008 2009

2010

Continuous involvement of End-User Groups

D4

D3

D2

D1

Val‘n Framework, Methodologies, Cost Analyses

TEEB for Policy-Makers

TEEB for Consumers

TEEB for Business

TEEB for Administrators

Carsten Neßhöver, Heidi Wittmer & Christoph Schröter-Schlaack, UFZ

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Thank You !