What is biodiversity:

Def. U.N. 1992 Convention on Biological Diversity:The variability among living organisms from

all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems.

Three levels; eco-systems, among species, within species.

04/19/23 Environmental Economics – International Issues: Biodiversity by Mads Greaker

What happens to biodiversity?

A synthesis of different sources suggests (OECD 2002, Pearce 1998, Barbier, Burgess and Folke 1995):The number of species presently living in the biosphere is not known; 1.75 million different species are describedRegarding estimates of the total number the consensus appears to be in the region of 12,5 – 13,5 million species2,6 species can disappear each year without diversity lossDocumented species loss since 1600 is 2,8/year However, species-area relationships in tropical forests suggest >1000 species loss per year (very low end!)Current rate of extinction is comparable to those extinctions that took place during the so-called periods of evolutionary crisis (65 mill. & 250 mill. years ago)

Two key terms:

Ecosystem function Refers to the processes going on in eco-

systems; photosynthesis, nitrogen take-up, energy production and conservation

Relationship with biodiversity ambiguous (Tilman and Downing, 1994, in Heal, 2001, positive relationship)

Ecosystem resilience refers to ability to restore function after stress e.g. ”green revolution” lead to increased output, but

higher variability (Anderson and Hazell, 1989 in OECD 2001)

higher biodiversity -> higher resilience

The economic value of biodiversity:

T o ta l e co n om ic va lu e (T E V )

U se va lue- v ie w in g w ild a n im a ls

O p tio n va lue E x iste nce va lue

D ire c t va lue

R e n ew a b le re sou rces(e co sys te m fu nc tio n)

- f ish ing- fa rm ing

In su ra n ce(e co syste m res ile n ce)

In d ire c t va lue

In s tru m e n ta l va lue"w e ll-b e in g"p re fe re nces

Are TEV captured in markets?Activity Type of value

Institutional requirement

Ecotourism Use value Local property rights

Sustainable forestry Renewable resourceProperty rights/Low discount rates

Bioprospecting Option valuesLocal property rights/ intellectual property rights

Carbon storage Renovation serviceInternational agreement on climate change

Ecosystem resiliencePure public good; non-rival and non-excludable

International agreement on bio-conservation

Answer: Deforest!

Deforestation app. 0,8 % per annum (FAO, 1993) Ecotourism: Option and existence values are not appropriated, local property rights often not implementedSustainable forestry: open access exploitation -> nutrient mining (Barbier, Burgess and Folke, 1994)Bioprospecting: Pharmaceutical companies’ willingness to pay for conservation seems to be greatly overstated (Simpson, Sedjo and Reid, J. of Political Economy, 1996)Market cannot capture the indirect services like; the insurance value of ecosystem resilience, watershed protection, scientific information etc.Lack of international agreements (U.N. Convention on biodiversity insufficient)

Causes of bio-diversity loss:

Single species are driven to extinction one by one due to an open-access regime or high discount rates (Pearce, 1998)More and more of the base resource, land, being converted to non-conservation usesMarket failures; alternative uses of land appears to be much more profitable than conserving biodiversityInstitutional failures; ill-defined property rights, subsidies to non-conservation activitiesPolicy intervention is needed!

Biodiversity and sustainable development

Mechanisms generating uncertainty are not well understood i.e. ecosystem resilienceHence, comparison of benefits and costs very difficult!Need for introducing safe minimum standardsRandall and Farmer (1995) ...endangered species, subspecies, undisturbed amenities and ecosystems are preserved intact unless the cost of doing so are intolerably high.Shifts the burden of proof

A tale of Easter Island

Supported a great palm forest approximately 37 000 years oldFirst Polynesians arrived ca. 400 A.D. (estimated to be about 40)Forrest essential: nesting place for birds (food), provided canoes for fishing/tools/fire wood etc.Population wealthy; ample time to other activities like carving and statues1722, first contact with EuropeansThere was a poor population of about 3000There were no forest leftHowever, there were a big amount of enormous statues (= 270 tons)

Resource and population dynamics

Open-access regimeMyopic decision making; cost of harvest = gain from harvestCriteria for sustainable forestry not in useThe higher volume of standing trees, the less costly harvesting

Population growth increases with forest harvestingThe more people, the higher the harvestUsing your wealth instead of the return on your wealthOver-shooting (”Dutch disease”)

Is Easter Island relevant for us?

Brander and Taylor employ a Malthusian Population Dynamics, today different? Further, open-access resource, better institutions today?On Easter Island, 5% decrease in forest over a typical lifetime (40 years)The 40-60 year mature time exceed life expectancyHowever, current deforestation rate is 32% per 40 yearsThe major environmental problems exceed our life expectancy

Conclusions:

There is a question of how much can be done by improving local institutionsEcosystem resilience is hard conceptualize in economic termsMeasures of existence- and option values are controversialMoral values are not included in TEVOn the other hand, safe minimum standards also has its problems;

Where to put the SMS – easier with species than with eco-systems?

The need for SMS may be exaggerated SMS seems to place a disproportionate high burden on

developing countriesNeed for international agreement with measurable targets – not just intentions