importance of economics for wwf south...
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Living Planet Conference 2012
Erinvale Estate Hotel, Somerset West
Importance of Economics for WWF South Africa Manisha Gulati
WWF SA Energy Economist
Economics relates to every aspect of our daily lives
• Economics is about much more than money, inflation, and supply & demand.
• Economics is about choice & the impact of these choices on the structure and
behaviour of society
• Economics is about decision making in everyday life
o Households: what goods and services to buy
o Firms: what goods and services to produce, how to produce them and in what
quantities
o Governments: investment, spending, trade, etc.
• Economics is about the allocation of scarce resources among alternative desirable
ends
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Economics is a science
• Characteristics of a “science” require
rigor, consistency, and mathematics
• Economics displays all these
characteristics
• Economics as a field is a science in
that all claims about reality must
ultimately be rooted in empiricism, and
models & paradigms must be falsifiable
& eventually tested against reality
• Like science, in the long-run economic
paradigms and methodologies are
judged by their ability to explain the
real world.
• Economics is interrelated with the
study of business, law, accounting,
politics, sociology, history, land and
property management,
engineering….the list is endless!
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
It fits easily in a scientific world And explains what we observe in reality
• Science can identify options and innovations that are now or could become
technologically feasible
• Economics can assess possible consequences of actions for the production,
consumption, and incomes of groups of people, regions, and countries
• Economics is often the ultimate arbiter of policy choices, because it seems to offer
something the other sciences do not: a framework capable of valuing the
consequences of different choices with a single metric
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
The reality is that economics triggered the Arab Spring…The other factors just followed
Tunisia – where it all started
• 2010 drought in Russia forced suspension grain exports
• 3 months later, a man set himself on fire in Tunisia over rising bread prices
Egypt – which took it to another level
• Since the days of Gamal Abdel Nasser, Egypt has had subsidized bread
• Population growth then surging grain prices in 2000s
• Rapidly rising oil use but amount extracted each year declining
• Cross-subsidies from oil to bread no longer affordable; food imports put more pressure
• First protests in Tahrir square
Arab Spring – lessons from economics
• Long term economic failure in a model of development that is financed through
external windfalls & rests on inefficient forms of intervention & redistribution
• Economies based only on oil, aid & remittances; no alternate revenue streams & no
private sector development
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Can WWF SA afford to ignore economics?The answer lies in what we do & how…
What does WWF do?
• Secure the integrity of SA’s ecological assets
• Ensure ecosystem services underpin social & economic well being
• Build climate resilience
What is WWF’s role in the above?
• Serving as an informed and independent voice in policy debates
• Identifying, articulating, & evaluating current policy issues, proposals & programs
• Transforming ideas & emerging problems into policy issues
• Providing a constructive forum for the exchange of ideas & information between key
stakeholders in the policy formulation process
• Challenging the conventional wisdom and business as usual
How does WWF fulfill its role?
• Research, Analysis, Advocacy, Outreach
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Rhino ConservationIs it possible
without
Economics?
Importance of Economics
Living Planet Conference 2012 16 November 2012
Enforcement may be a necessary but not sufficient condition for conservation
Existing conventional law enforcement measures may not be the best
way to address the problem of rhino poaching, even if they are
intensified
Intensified enforcement may be counterproductive, as it may simply
drive up the black market price of rhino horn… raising the incentives
for poaching
Economics may provide important insights
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Economic principles may have some relevance to rhino conservation
Trade-offs: Value of live rhinos vs value of dead rhinos
Allocation of scare resources: Rhinos compete with
humans & other species for scarce resources: territory,
food & water
Supply & Demand: How much resources at which end?
Can cost effectiveness of demand reduction approach be
assessed? Is it easier to assess potential net benefits &
results of supply side interventions?
Property rights: Rights to benefit from resources such
as rhinos & obligations to pay the costs can play a critical
role in determining how humans manage & use them
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Rhino poaching is driven by economic forcesUnderstanding risks, rewards & incentives can be key
� Poaching takes place when the expected return
from poaching is greater than the expected return
from the best alternative activity
� Potential to reduce poaching by managing returns
or costs
� Intensified enforcement can provide higher returns,
thereby incentivizing poaching
� Reduce incentives for poachers, if not remove
them altogether
� Appropriately structured legal horn trading regime
may reduce incentives, reduce price of horn &
generate resources to reinvest in conservation
Economics of Poaching
Expected Returns Costs
• Price of rhino horn• Return from
alternative activities
• Direct costs• Risks (detection,
capture, punishment)
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Conserving Ecosystems The role of
Economics
The importance of Economics
Living Planet Conference 2012 16 November 2012
Degradation of ecosystems can be explained through economics
Most ecosystems are public goods associated with the
problems of open access & overuse
Willingness to pay for ecosystem services is generally
not captured because of a lack of markets in these
services
Ecosystems are destroyed because market signals –
subsidies, taxation, pricing and state regulation, land
tenure & use rights – make it a logical & profitable thing to
do
Failure to account for the full economic values of
ecosystems & biodiversity has been a significant factor in
their continuing loss & degradation
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Conservation depends on how we define the problem…Economics can help
Ecology & economic interface: Goods vs Service,
Externalities vs Inputs affecting flow of goods & services
Allocation of finite ecosystem: Between economic
production & production of life sustaining ecosystem
goods & services
Economic value of ecosystems: Direct use, In-direct
use, non-use
Distribution of ecosystem resources: Who is entitled to
ownership of ecosystem goods and services?
Distribution of ecosystem goods and services: Among
different beneficiary groups spatially & over time periods
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Conservation efforts will depend on the good or service being assessed & the beneficiary…
Value of agro-ecosystems goods & services
Value of wetlands goods & services
Tables are illustrative not exhaustive
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
… As will the level and nature of measures, incentives & impacts...making economics an important factor
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Water Conservation
New York City’s Options
Pay land-owners in Catskill mountains to improve farm
management techniques & prevent run-off waste & nutrients into water
bodies
Build new water treatment facilities
• Costs: US$ 1 bn & US$ 1.5 billion
• Impact: Increase in water bills by 9%
• Costs
o Capital - US$ 6 bn to US$ 8 bn
o O&M US$ 300 mn to US$ 500 mn per annum
• Impact: Doubling of water bills
Source: TEEB (2010)
Low Carbon Economic DevelopmentIts about
Economics
The importance of Economics
Living Planet Conference 2012 16 November 2012
If it weren’t for the economics of green technologies, we wouldn’t be having this discussion
Climate change poses risks to humanity: costs & impacts
It costs to mitigate these risks - In some form or another,
whatever policies are put in place, someone, somewhere &
at sometime, will have to pay for those policies
Mitigation provides benefits to future generations by
avoiding dangerous levels of climate change. We pay the
price now, but the benefit comes later
Need to develop policies that would promote the necessary
mitigation but at the lowest or most efficient overall cost to
the community
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
And if you still believe science alone has promoted action against climate change, have you wondered…
How until the Stern Report, climate change was seen as an environmental issue...
Then it became a mainstream issue.
Why did this happen?
The Stern report turned climate change from being an environmental and moral issue
into an economic issue
� Risks from climate change estimated at an average 5-10% loss in global GDP, with
poor countries suffering costs in excess of 10% of GDP
� Costs of mitigation of around 1% of GDP
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
To conclude, WWF’s work cannot ignore the ‘Economics’
• WWF cannot expect stakeholders to support the fabulous causesthat WWF represents - just because there is a fabulous causeo The cause has to make economic sense to them
• If WWF goes to stakeholders with a moral imperative, there will beappeasemento If WWF wants action, WWF must go with an economic answer
to an economic problem
• The causes WWF represents are profoundly economic.o There is just the need to remind stakeholders of that economic
reality over & over againo And for that WWF cannot do without economics
Importance of Economics for WWF SA
Living Planet Conference 2012 16 November 2012
Thank youwww.panda.org
© 2010, WWF. All photographs used in this presentation are copyright protected and courtesy of the WWF-Canon Global Photo Network and the respective photographers.
Importance of Economics for WWF SA