Externalities and biodiversity valuation’ pot

2 " April-June 2002Letter from the NBRU of Cambodia 3 Second quarter in a nutshell 4 Editorial Conservation dividends 7 Special Reports An overview of valuation techniques: Advantages an

Readers’ Corner

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ASEAN Biodiversity

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and Wildlife Nature Center,

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P.O Box 1614 QC CPO, Philippines

ASEAN Regional Centre for

Biodiversity Conservation (ARCBC)

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Disclaimer: Views or opinions expressed

herein do not necessarily represent any official

view of the European Union, the Association of

Southeast Asian Nations (ASEAN) Secretariat,

or the Department of Environment and Natural

Resources The authors are responsible for any

data or information presented in their articles.

Dear Co-Directors, Let me thank you for the very informa- tive and diverse ASEAN Biodiversity maga- zine Vol 1 No 4, October to December

2001 issue, which you sent me.

In behalf of the Foundation for the Philippine Environment, I would like to extend my gratitude for

including us in your mailing list.

This special issue

is so significant sidering the very suc- cessful 3D modelling activity in Pu Mat, Vietnam, which I was

con-a pcon-art of Agcon-ain, my thanks to ARCBC, particularly to Mr Giacomo Rambaldi The lessons from the training are so applicable to what we are advo- cating in the Philippines for biodiversity conservation as a foundation for sustain- able development.

We hope to receive regular copies of your newsmagazine and other related materials in the future.

Fernando Ramirez Area Coordinator - Luzon Convenor, Operations Group Foundation for the Philippine Environment

!!!

Dear Co-Directors,

It is my great pleasure to acknowledge that I have received copies of ASEAN Biodiversity The articles are so useful, interesting and informative that I can’t express my appreciation in language I wish ASEAN Biodiversity a long and wide circulation.

Professor Md Mustafizur Rahman Dept of Crop Botany

Bangladesh Agricultural University Mymensingh, Bangladesh

!!!

Dear Co-Directors,

I recently received a copy of Vol 1 (1&2) of your magazine ASEAN Biodiversity This is an excellent and most useful publication.

Stephen J Richards Vertebrate Department South Australian Museum North Terrace

Adelaide, S.A 5000 Australia

!!!

Dear Co-directors The issue of ASEAN Biodiversity Vol.

1 No 3 titled “A Burning Issue“ was useful

in highlighting the problem of forest fires and smoke pollution in the region, but rather disappointing in that hard data on the impact of forest fires on biodiversity was lacking Also, case studies on suc- cessful community fire management were lacking.

In the Upper Nan Watershed ment Project in North Thailand, the forest area burnt has been reduced from 23% in

Manage-1998 to less than 2% in each of the last

4 years due to a successful cooperative Royal Forest Department – Community Fire Management Programme, with Dan- ish assistance The area covers 1007 km 2 and includes a population of 20,000 in the watershed in 45 villages located in two National Forest Reserves Also the time of burning on agricultural fields has been delayed from mid-February to late March resulting in a shorter period of smoke and haze pollution.

The process for effective fire ment is simple, and similar for all com- munity-based natural resource manage- ment issues The process requires facili- tators working at the community level:

manage-1 Baseline data collection on the causes of fires, time of burning, areas burnt, conflicts caused and the present community rules and regu- lations.

2 Training and awareness on the vironmental damage from uncon- trolled fires, and the use of facilita- tors to bring leaders of neighbouring villages together to solve conflicts over damages caused by fires and other Natural Resource Management (NRM) issues.

en-3 After two or three meetings, the lage leaders recognised the need to form networks (in the Nan Water- shed Management Project – the for- mation of Village Watershed Net- works) The networks agree on com- munity boundaries for responsibility for improved NRM, and the strength- ening of the existing rules and regu- lations on NRM.

vil-4 The institutionalization of the works through the local administra- tion (Tambon and District), and rec- ognition of the network rules The strength of the process is that it

net-is simple and based on the exnet-isting munity NRM rules that, in most cases, are weak or cannot be enforced The process can minimise the burning of forest areas within two years.

com-Peter Hoare Project Coordinator Upper Nan Watershed Management Project, Nan, Thailand Email: phoare@loxinfo.co.th

ContentsVol 2, No 2 " April-June 2002

Letter from the NBRU of Cambodia 3

Second quarter in a nutshell 4

Editorial

Conservation dividends 7

Special Reports

An overview of valuation techniques:

Advantages and limitations 8

Economic valuation of the Leuser

Ecosystem in Sumatra 17

Ways to estimate the value of forest

How markets alter the effectiveness of

enforcement, payments and agricultural

projects near protected areas 25

A profile of the protected area

New species discovered in

Vietnam hosts the world’s most endangered primates 38 Three Black-faced spoonbills

“rediscovered” on the Philippine

New bird species discovered

Celebrating Earth Day 2002 40

International Day for Biological Diversity

Focusing on forests 42

World Environment Day

Give Earth a chance 43

Letter from the NBRU of Cambodia

Cambodia officially joined the ASEAN Regional

Centre for Biodiversity Conservation (ARCBC) in early

2002, and is currently trying to catch up with the

accomplishments of the other ASEAN member

coun-tries participating in ARCBC We do appreciate the

opportunity given to us to expand our networking,

research, database, and training efforts in

biodiversity conservation

In May 2002, ARCBC conducted a thematic

work-shop in the Philippines on the economic valuation

of biodiversity One of the presentations

empha-sized that economic valuation could become a

powerful management tool and when used

along-side social, scientific and spiritual studies of

biodiversity, could present a convincing argument

for conservation As such, I am pleased that the

June 2002 issue of ASEAN Biodiversity focuses on

resource valuation and revenue-sharing mechanisms

This will provide various stakeholders a betterappreciation of the economic importance of thebiodiversity of the ASEAN region

I encourage all our readers to get copies ofASEAN Biodiversity so that more people will get aclearer understanding of the urgency of protectingand conserving our biological resources

Kol VathanaDeputy Director andNBRU Coordinator-CambodiaDepartment of Nature Conservationand Protection

Ministry of EnvironmentKingdom of Cambodia

Second quarter in a nutshell

June 5 – Several of the world’s foremost ocean agencies, including the United Nations Environment Programme (UNEP), have created an Internet-based Oceans Atlas

reverse the decline and promote the sustainable development of oceans The Atlas provides users with continuously updated data on the state of the world’s oceans, maps, development trends and threats to human health from the deteriorating marine environment It is designed to be an encyclopaedic resource and the world’s foremost information clearinghouse and online forum for experts in ocean issues To reach broader audiences, a CD- ROM and other media will supplement the website June 3-15 – European Union ministers and ambassadors ratified the Kyoto climate treaty at a United Nations ceremony, handing in papers from their respective nations The ratification means that national legislatures had approved the pact, aimed at cutting polluting emissions of greenhouse gases, blamed for rising global temperatures Participants included Ireland, the Netherlands, Spain, Sweden, Germany, Denmark, Austria, Belgium, Britain, Finland, France, Greece, Italy, Luxembourg and Portugal Margot Wallstrom, the European Commissioner for the Environment, represented the European Commission May 27 – The IUCN/SSC Asian Elephant Specialist Group met to draw up an action plan for elephant conservation in all of the 13 range states, following continued pressure from deforestation, hunting and major changes in land use The conference will focus on major issues facing the Asian elephant in the wild, including their virtual extinction in Vietnam, widespread land conversion on the Indonesian island of Sumatra and also

materials and sustainable economic development at the local level, and provision of funding for cooperation projects with the world community.

June 6 – Australia and the Republic of Korea announced plans to work together to protect birds that migrate between the two countries The East Asian-Australasian Flyway extends from the Arctic through Asia to Australia and New Zealand Birds fly through this route twice a year from north to south and back, travelling up to 25,000

km per year Millions of wading birds, like the Eastern Curlew make this journey, stopping at wetlands in Korea and Australia along the way.

Australia already has bilateral migratory bird protection agreements with Japan and the Peoples’ Republic of China.

June 5 – The World Wide Fund for Nature (WWF) celebrated the signing of the Tri-national Wetlands Initiative, a historic interna- tional wetlands conservation agreement between Australia, Indonesia and Papua New Guinea The Initiative is a commitment to work together

to achieve sustainable management of 3 million ha

of tropical wetlands identified

as global priorities for conservation and contained within existing protected areas

- Kakadu National Park (Australia), Wasur National Park (Indonesia) and Tonda Wildlife Management Area (Papua New Guinea) The agreement will greatly improve the management of these parks, and encourage the creation of other protected areas Conservation benefits include cooperative action on common threats and the protection of numerous endangered species and millions of migratory waders and waterfowl.

WWF’s Living Waters Campaign has recognized this major contribution to wetland conservation as a

“Gift to the Earth”.

neighbouring West Bengal state of India a strong shield against sea storms.

June 11 – Environment ministers from Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam signed a pact to help each other tackle the land and forest fires that have periodically blighted the region’s agriculture and tourist industries with choking clouds of smoke Smoke and haze caused by massive forest fires in 1997 and

1998 cost regional mies US$9 billion, mainly in agriculture, transport, and tourism Each country will cooperate in developing and implementing measures to prevent fires and provide early warning systems Under the agreement, ASEAN countries would allow fire- fighting and search-and-rescue personnel and equipment to transit through their territo- ries This is the first regional arrangement in the world to collectively tackle land and forest fires and its resultant transboundary haze pollution.

econo-June 7 – The Philippines joined Brazil, China, Colombia, Costa Rica, Ecuador, India, Indonesia, Kenya, Mexico, Peru, South Africa, and Venezuela in the Group of Like-Minded Megadiversity Countries for the Conservation and Sustainable Use of Biological Diversity during the 4th Preparatory Commit- tee Meeting for the World Summit on Sustainable Development in Bali, Indonesia The group represents almost 70% of the planet’s biological diversity and around 45% of the world’s population Member- ship in the group will allow partners to promote and conserve their country’s rich biodiversity through the development of joint projects

in making inventories of its resources, investment in the use of endogenous technolo- gies that support the conservation of genetic

June 26 – A rare green

turtle, about 60 cm wide

and weighing more than 70

kg, reappeared after 40

years and laid eggs on

Koh Samui in Thailand.

Guards would be deployed a

week before hatching in

August to prevent more theft.

Killing sea turtles and taking

away their eggs is illegal in

Thailand, punishable by up to

four years in jail and/or a

fine of 40,000 baht Green

turtles have all but gone from

Koh Samui but are often

seen laying eggs in Malaysia

and Indonesia.

June 26 – The Philippines’

Department of Environment

and Natural Resources

(DENR) Secretary Heherson T.

Alvarez asked University of

the Philippines (UP) President

Francisco Nemenzo to help

save the UP Arboretum,

one of the last remaining

forests within Metro

Manila Located in Quezon

City, the Arboretum is home

to trees, shrubs and

herba-ceous plants that are

cultivated for scientific and

global warming, depleting

biodiversity and rising fears

of natural disasters,

Bangladesh recently

launched a drive to put

at least 20% of the

country under forests The

20% forest cover is needed

by 2015 to offset the

impact of global warming

and shield the country from

frequent storms coming from

the Bay of Bengal Forests

now cover only 9% of the

country’s land Sundarban,

the country’s biggest

mangrove forest and a

World Heritage Site, is

facing decay as thousands

of trees suffered a “top

dying” disease without

remedy The Sundarban is

home to Royal Bengal tigers

and hundreds of other

wildlife species and provides

Bangladesh and

the potential for conservation

efforts in the largely

un-studied forests of Myanmar.

May 23 – The “Greening

the World Summit on

Sustainable Development”

initiative was launched in

Johannesburg, South Africa to

ensure that the World Summit

is hosted in a way that

and encourage the efficient

use of water and energy, the

initiative will ease the burden

the quality of the environment

in poor and rural

communi-ties over the long term.

More information can be

obtained from

May 20 – Over 1,100

delegates from 130 countries

attended the World

Ecotourism Summit in

Quebec to ensure that

ecotourism follows a

sustainable path The summit,

an initiative of the World

Tourism Organization and the

United Nations Environment

Programme, was realized in

partnership with Tourisme

Québec and the Canadian

Tourism Commission.

Participants were expected to

define the content and limits

of the term ecotourism itself,

so as to prevent its abuse

and the dilution of its

meaning; develop

interna-tional standards for

ecotourism by translating

principles and guidelines such

as the World Tourism

Organization’s Global Code

of Ethics, the UNEP Principles

for Sustainable Tourism and the Convention on Biological Diversity’s Guidelines for Sustainable Tourism in Vulnerable Ecosystems; create

an international accreditation body for ecotourism and sustainable tourism as well as determine measures to ensure that local people benefit from ecotourism.

May 16 – The Philippines’

Department of ment and Natural Resources (DENR) pre- sented the results of the Philippine Biodiversity Conservation Priorities Project (PBCPP), which identified, assessed, and prioritized specific geographi- cal areas for biodiversity conservation Spearheaded by the DENR’s Protected Areas and Wildlife Bureau (PAWB), Conservation International (CI), and the University of the Philippines (UP), the project had the participation of some

Environ-300 local and international scientists from more than

100 institutions and identified

170 terrestrial and inland water priority areas and 26 marine priority areas The project also set the much- needed direction for the Philippine conservation community as a whole, and provided geographical information on areas that need urgent attention.

Outputs included two-sided coloured maps, a CD-ROM database and a report that provides additional informa- tion on the priority areas.

May 15 – China announced plans to spend several hundred billion yuan in the next 10 years to protect forests and plant green belts to combat blinding sandstorms, illegal logging, and rapid soil erosion.

Recurring sandstorms have been blamed in part on overgrazing, over-harvesting

of timber, forest clearance for cropland and rampant overuse of water resources.

China has earmarked 10 billion yuan (US$1.21 billion)

a year for natural forest protection efforts formally launched in 2000, one of six key forestry programs to be underway by the end of

2002 A seeding program to

convert cropland to woods would raise forest and grass cover in China by 5% The resulting green belts could reduce wind speeds by 30 to 50% and cut sand and dust

by 99% over barren land.

May 14 – Bangladesh and India will work together under a United Nations plan to protect the ecosystem and biodiversity

of Sundarban, the world’s biggest mangrove forest shared by the two countries.

UNESCO declared the Sundarban a world heritage site in 1997, and the U.N.

Development Programme has funded projects to save it from degradation Nearly two-thirds of the 9,630- square-km Sundarban lies in Bangladesh and the rest in India, stretching along the Bay of Bengal Sundarban, which is home to the endangered royal Bengal tigers and a number of other unique species such as the Sundari tree, is currently facing a number of threats including illegal poaching, the felling of trees, and dwindling freshwater flow.

May 8 – Australia and UNESCO signed a formal Memorandum of Under- standing on World Heritage issues in the Asia-Pacific Since the region is under-represented

on the World Heritage List and a number of countries in the region have only recently joined the World Heritage Convention, the Memoran- dum will help Australia and UNESCO work together in partnership with regional nations in promoting the Convention and managing cultural and natural values in this heritage-rich part of the

planet Pacific Island tries have places of out- standing heritage value, but only one site, East Rennell Island in the Solomon Islands, has been nominated and included on the World Heritage list East Rennell is the largest example on Earth

coun-of a raised atoll It also has the largest freshwater lake,

Te Nggano, in the Pacific, a unique habitat for many species of plants, birds and animals that are found nowhere else on Earth April 25 – The British Antarctic Survey announced that armies of barnacles, mollusks, sea worms, and other marine organisms are travelling on discarded plastic and other human- made rubbish and invading Antarctica and tropical islands, threatening native species The findings are based on a 10-year study

of human litter washed ashore on 30 remote islands around the globe Regulations forbidding the dumping of waste from ships has begun

to make a difference, but more needs to be done because once an invading organism gets into an area, it

is impossible to remove it Studies will be expanded to include other islands, such as the Andamans, L’Ile

Amsterdam, Bermuda, Chagos, Cocos/Christmas and Trinidad.

April 19 – Peter Ng, director

of a museum on biodiversity

at the National University of Singapore, announced that Singapore’s only unique wild animals – the Cream- coloured Giant Squirrel and the Banded Leaf Monkey – face extinction due to urbanisation and shrinking forests Less than 20 Banded Leaf Monkeys and no more than four squirrels still live in what is left of the tiny island nation’s forests Their likely extinction will mean the end

of the last animal sub-species found only in Singapore The government is currently working with local groups to study and protect the animals But with only 3% of the island set aside for parks, efforts to breed the animals

in captivity and reintroduce

Charlevoix Biosphere Reserve,

Québec

Photo courtesy of World Ecotourism Summit

Photo courtesy of UNESCO East Rennell Island World Heritage Site

them to the forests are likely

predatory animal that

resembles a mix between a

stick insect and a preying

mantis This first discovery

of a new insect order since

1915 brings the total

number of insect orders to

31 The existence of a living

population was discovered

on Brandberg Mountain in

western Namibia Brandberg

is a 120-million year old

massif, isolated from other

mountains by hundreds of

miles of barren sand.

April 17 – IUCN’s World

Commission on Protected

Areas (WCPA) announced the

availability of key guidelines

for protected areas in East

Asia, namely: Guidelines for

Tourism in Parks and

Protected Areas of East Asia;

Guidelines for the

Implemen-tation of an Exchange

Programme for Protected

Areas in East Asia;

Guide-lines for Financing Protected

Areas in East Asia; and the

Directory of Protected Areas

in East Asia – People,

Organisations and Places.

These are the results of

projects initially outlined in

the “Regional Action Plan for

Protected Areas in East Asia”

(1996) and completed with

the support of the Nature

Conservation Bureau of

Japan.

April 15 – Indonesia is

planning to impose a

permanent ban on log

exports to protect its

dwindling tropical forests In

October 2001, the ministers

of industry and trade and

forestry issued a joint decree

putting in place a temporary

ban on exports of logs for

wood chips, which expired in April Indonesia’s rainforests have been over-logged for years.

April 12 - The Exploration Company ( www.theexploration

the Wide Ranging World Map, featuring ecological and cultural details never before shown in a world wall map.

The map replaces elevation with the rendition of terrain (deserts, forests, savanna) In addition to displaying all countries, active border disputes and key cities, the map notes cultural regions (Kashmir, Scotland, Transylvania) and prominent indigenous nations (Kurds, Palestinians, Inuit) The map also indicates population density and areas where natural vegetation has been replaced with cropland, along with marine pollution, radioactive contamination, and destroyed rainforests.

April 12 – Delegates at the Conference of the Parties to the Convention on Biological Diversity discussed the Global Strategy for Plant Conservation, and agreed

on targets to guide and monitor the progress of its implementation Sustainable use, capacity building, education and awareness, increased networking, and community involvement are vital elements of the Strategy.

April 10 – Long-term studies

by the Wildlife Conservation Society (WCS) show that uncontrolled hunting and trade form the greatest threats to wildlife and wild lands in Asia Current patterns of hunting and wildlife trade could drive wildlife to extinction It adds that over half the prime protected areas in tropical Asia have already lost at least one large mammal due

to hunting Economically valuable species such as Sumatran and Javan rhinos and Siamese crocodiles are specifically targeted and are nearly extinct across Indochina WCS recommen- dations include renewal of government commitment to the Convention on Interna- tional Trade in Endangered

Species (CITES); restriction or elimination of commercial wildlife trade across the region and strengthening of government capacity to protect wildlife in protected areas and forest reserves.

April 8 – Nepal’s ment of National Parks and Wildlife Conservation (DNPWC) revealed that 39 endangered one-horned rhinoceros have been found dead, most due to poaching, during the past 12 months in Royal Chitwan National Park One-horned rhinos are critically endan- gered around the world and slightly more than 1,800 one-horned rhinos presently survive in the wild Listed as

Depart-a UNESCO World HeritDepart-age Site, Royal Chitwan National Park in the Terai, the southern plains of the Kingdom of Nepal, is home to 529 one- horned rhinos, according to a rhino census in 1999 Their numbers are up from a census conducted in 1994, which put the rhino popula- tion in the park at 466.

April 5 – The Banbai tribal people of New South Wales have made a decision to manage and conserve their Wattleridge traditional land for the protection and conservation

of its natural and cultural values, making it the area’s first indigenous protected area (IPA) Wattleridge includes 480 hectares of botanically unique bushland on outcropping

granite country Not logged for 30 years, it is the last unprotected remnant in the New England region The IPA

is also home to at least 15 flora species and 12 rare and/or endangered fauna species, including the glossy black cockatoo, the masked owl and the spotted-tailed quoll.

April 5 – Over 150 participants convened in The Hague for the 16th session

of the Global Biodiversity Forum (GBF) to tackle key biodiversity issues prior to the 6th meeting of the Conference of the Parties to the Convention on Biological Diversity, and in the run-up to the World Summit on Sustainable Development The GBF focused on business, communication and liveli- hoods since these are the underpinnings of both the sustainability and biodiversity debates Key issues are: Managing Forest Ecosystems for Sustainable Livelihoods; Biodiversity Plans for Business; and Mainstreaming Biodiversity – the Role of Communication, Education and Public Awareness April 4 – In a bid to alleviate increasing pressures

on various ecosystems, IUCN’s Commission on Ecosystem Management (CEM) provides expert guidance on integrated ecosystem approaches to the management of natural and modified ecosystems From 2002 to

2004 CEM will establish baseline information on state- of-the-art restoration methods

in different ecosystem types such as forests, arid lands, mangroves and coral reefs Indicators will be identified as the first step to assessing the status of ecosystems and defining categories of ecosystem threats CEM will also focus on assessing and promoting practical applica- tions of the Convention on Biological Diversity’s 12 principles that encourage a participatory and pragmatic approach to managing ecosystems to meet the livelihood requirements of people while conserving biological diversity #

Brandberg MassifPhoto courtesy of National Museum of Namibia

Rhino in Royal Chitwan National Park

Photo courtesy of Richard Grassy

Photo courtesy of Margaret Turton Spotted-tail quoll in New South Wales

there-to look at the likely environmentaland social impacts of planned policychanges Thereafter, the real impacts

of policy change need to be tored

moni-In this issue, the articles featured

in the Special Reports section werepresented during the Third ResearchConference on the “Economic Valu-ation of Biodiversity”, which wassponsored and conducted by theASEAN Regional Centre forBiodiversity Conservation (ARCBC)

in June 2002

Arguing that valuing biodiversity

is a key policy interest, the papersstressed that the economic valua-tion of biodiversity is a powerful toolfor management, and a convinc-ing argument for conservation es-pecially when used alongside so-cial, scientific and spiritual studies

on biodiversity Although there aresome who insist that putting a highvalue on biodiversity would not al-ways guarantee its conservation, thecorrect incentives and mechanisms

to capture the resource valuesshould be put in place Without suchincentives, value estimates wouldonly represent values on paper thatwould have limited impact on thedecision-making process or none atall

Notwithstanding its weaknesses,the economic approach facilitatescomparisons in a world where re-sources are limited and choices have

to be made.#

One of the most important

reasons for loss of

biodiversity, is that

con-servation and sustainable use of

natural resources is generally not

a viable financial option, and this

is because of a combination of

market and policy failures Put

simply, natural resources are

un-der-valued because no account is

taken of the time it takes to

pro-duce the next harvest, nor any costs

involved in managing lands for

future harvests, nor the

environ-mental and social costs associated

with loss of products Internalising

these costs, so that parties trading

in a particular product pay a

larger part of these costs, is a

central element in dealing with the

“externalities” that are driving

biodiversity loss

A number of approaches have

been taken to address these

exter-nalities, and these can be thought of

in terms of incentive measures to

support conservation and

sustain-able use of natural resources First,

and probably the most important

incentive in many areas is to remove

perverse incentives – policies,

sub-sidies and low commodity prices

which make it profitable to exploit

natural resources without concern for

long-term outcomes

Thereafter policy incentives that

can be implemented to contribute

directly to improving the

manage-ment of biodiversity can be divided

into four categories:

i trade liberalisation and

property rights – which can

encourage greater benefits

to local stewards of natural

resources, thereby providing

an incentive for them to

engage in sustainable

pro-duction systems

ii standards, regulations andrestrictions – these are stan-dard institutional instrumentsused to set maximum accept-able levels of resource deple-tion, for example by restrict-ing harvest off-takes

iii fees and environmentalcharges – these can be used

to recover costs of ing or replacing natural re-sources, and include timbertaxes, fishing licenses, andpark entrance fees

maintain-iv public financing and mental funds – financial in-centives can be offered tothose who harvest in ways thatreduce natural resourcelosses

environ-However, none of these tives will be effective without well-regulated markets, nor will theywork without strong political com-mitment to ensure that policy incen-tives are appropriate and imple-mented Furthermore, giving values

incen-to biodiversity values that are term and intangible poses manyproblems

long-Glyn Davies is the Conservation Programme Director of the Zoological Society of London.

An overview of valuation techniques:

Advantages and limitations

#By Camille Bann

1 This anthropocentric view of biological

resources is much more convenient for

economic analysis compared to

alternative value paradigms such as

‘intrinsic values’ (values in themselves

and, nominally, unrelated to human

use) Intrinsic values are relevant to

conservation decisions, but they generally

cannot be measured (Pearce and Moran,

1994).

Introduction

Valuing biodiversity is of key

policy interest Economic

val-ues of non-marketed goods

can draw attention to the economic

importance of biodiversity in a

country’s development prospects,

and can provide guidance for

imple-menting appropriate conservation

mechanisms (other uses are outlined

in Box 1) However, estimating the

monetary worth of biodiversity is

per-haps the most challenging area of

environmental resource valuation

Fundamental to any discussion

of the value of biodiversity is an

understanding of what precisely the

object of value is It is necessary to

distinguish between biological

re-sources and biological diversity A

biological resource is a given

ex-ample of a gene, species or

eco-system Biological diversity refers to

the variability of biological resources.

Biodiversity is the ‘variety of life’

whereas biological resources are the

manifestation or embodiment of that

variety (OECD, 2002)

Because diversity valuation

re-quires some idea of willingness to

pay (WTP) for the range of species

and habitats, it is hard to use the

term ‘biodiversity’ as the object of

valuation In reality what economic

studies normally measure is the

economic value of ‘biological

re-sources’ rather than biodiversity

it-self Biological resource is a more

anthropocentric term for biota such

as forest and components of

biodiversity that maintain current or

potential human uses1.There are other reasons why it isdifficult to put a monetary estimate

on biodiversity There is a lack ofconsensus on the total number ofliving species (i.e., baseline measure-ments for biodiversity), rate ofbiodiversity loss, and biodiversityindicators fundamental to the valu-ation process (see Box 2) There isalso a lack of knowledge of the truevalue and extent of current andpotential future uses of biodiversity

Criticisms of Economic tion and Cost Benefit Analysis (CBA)

Evalua-include:

• Distributional Equity - tional concerns are rarely in-corporated into the economicevaluation framework despitethe fact that they are often ofparamount concern, especially

Distribu-in poor countries

• Discounting and Future eration - Discounting does notsatisfactorily deal with signifi-cant environmental costs andbenefits occurring in the future(although these concerns can

Gen-be dealt with by other means)

• Raise public and political awareness of the importance of biodiversity.

• Set conservation priorities given a limited budget.

• Facilitate land use decisions.

• Guide legal proceedings for determining damages where an agent is held liable for biodiversity loss.

• Limit or ban trade in endangered species.

• Prevent new invasions.

• Revise national income accounts.

• Design capture mechanisms (e.g., market creation, economic instruments, international transfers).

• Revise investment decisions (e.g., infrastructure development) that might otherwise ignore the impacts on biodiversity.

Source: OECD, 2002

Box 1 Uses of Economic Valuation and Biodiversity Conservation

Measurement of biodiversity is very complex because diversity is multi-dimensional There are fundamental definitional problems relating to species and ecosystems For example, discrete cut-off points for determining boundaries between species (Gaston and Spicer, 1998) or ecosystems is still subject to research and discussion Even if this issue was resolved, the inventory task is monumental given the staggering number of microorganisms present at any location The task is even more unmanageable at that genetic level Furthermore, science has only a limited idea of the genetic dissimilarity between species.

Notions of species richness, evenness and distance are the most used expressions of diversity 1 Clarification of these measures has important implications for conservation policy Solow et al 1993 show that if the objective is to conserve diversity, an understanding of species distance is very important Solow presents an example using the pairwise distance between cranes and their extinction probabilities The conservation of the most endangered species does not in fact maximise diversity The reason for this is that the genetic distance between the endangered species and

at least one of the ‘safe’ species is small Minimising the probability of the number of species lost

is not the same as minimising the value of lost biodiversity In practice conservation resources are largely allocated to ‘exotic’ species conservation (e.g., giant pandas and tigers) without any real consideration of the diversity issue This focus might be because the difference between biological diversity and biological resources is unrecognised, or because conservation policy responds

to the high values attached to scarce species Nonetheless, if the stated aim is to conserve diversity, those policies may not be soundly based.

Source: OECD, 2002

Box 2 Biodiversity Indicators and Policy Assessment

• Intrinsic vs Instrumental Value

- There are different

philo-sophical viewpoints on ‘value’

CBA is founded on the

instru-mentalist view, whereas it is

argued that the ‘true’ notion of

biodiversity value is intrinsic

• Relative vs Absolute Value

-CBA embodies the

economist’s notion that value

is relative, i.e., the value of

something is always relative to

something else Critics argue

that biodiversity has absolute

value in itself, and hence it

cannot be measured relative

to other things

• Incremental vs Total Values

-CBA values discrete changes

in the stock of biodiversity It

is argued that CBA might

judge each small loss of

biodiversity as being justified,

while overlooking the fact that

each small change contributes

to the risk that the total stock

will be lost (Norton, 1988)

Despite these drawbacks there is

considerable scope for at least

se-curing minimum values for

biologi-cal diversity through the use of

approaches focused on the market

values of the sustainable uses of

biodiversity (e.g., ecotourism, and

the collection of medicinal plants and

other non-timber forest products

[NTFP]) Measuring these direct use

values of biodiversity conservation is

extremely important since biodiversity

will be more prone to loss when these

are not appreciated Furthermore,

estimates of direct use values

pro-vide an important benchmark for

other, less easily quantified, uses

While most of these other uses are

still associated with some particular

current or future use (such as

bioprospecting or amenity), the

uncertainty associated with valuing

these goods and services is often

orders of magnitude greater than the

uncertainty associated with the

simple direct (but often untraded)

uses The availability of such baseline

information is necessary, for

ex-ample, to estimate ‘option values’

for future uses Also, the baselineinformation allows setting of man-agement and research priorities

(Huber et al, 1997).

An Overview of ValuationTechniques2

A range of techniques is able for the estimation of biologicalresource values (see Box 3) A com-prehensive valuation would capturethe Total Economic Value (TEV) ofthe resource (i.e., use and non-usevalues) Different valuation ap-proaches are applicable to the dif-ferent components of TEV Directuse values are relatively straightfor-ward to measure, and usually in-volve the market value of produc-tion gains Since environmental func-tions are rarely exchanged in mar-kets, measurement of indirect usevalues typically entails more com-plex techniques such as the change

avail-in productivity approach, travel costmethod, and hedonic pricingmethod Non-use values can only

be defined from surveys of people’spreference about their WTP (e.g.,Contingent Valuation) Non-usevalues tend to be important in cer-tain contexts, notably when the good

in question has few substitutes Sincemany biological resources are bydefinition unique, their non-use value

is likely to be significant

Valuation approaches can bebroadly categorised according tomarket values, revealed preferenceapproaches and stated preferencesapproaches (OECD, 2002)3 Valua-tion approaches based on marketvalues rely on the availability ofmarket price and quantity informa-tion to derive total values Revealedpreference valuation techniques seek

to determine preferences for theenvironment from actual, observedmarket based information Often,when no market price exists for anenvironmental good or service,peoples’ preferences for the envi-

ronment can be ‘revealed’ indirectly

by examining their behaviour in

markets that are linked to the

envi-ronment Some goods and servicesare complements to environmentalquality, while others are proxies,surrogates or substitutes for it There-fore, by examining the prices paid

in environment-related markets,peoples’ environmental preferencescan be uncovered (Pearce andMoran, 1994) An advantage ofthese techniques is that they rely onactual choices rather than on thecreation of a hypothetical market touncover the value of the environmen-

Approaches Based on Market Values

• Observed Market Value and the Related Goods Approach –market prices for environmental goods and services can be combined with quantity information to derive estimates of value The related goods approach uses information on the relationship between a marketed and non-marketed good or service to estimate the value of the non-marketed good (e.g., barter exchange approach, direct substitute approach, indirect substitute approach).

• The Productivity Approach – uses market prices to value environmental services in situations where environmental damage or improvement shows up in changes in the quantity or price of marketed inputs or outputs.

• Cost-Based Methods – use some estimate of the costs of providing or replacing a good or service to approximate its benefit (e.g., opportunity cost, indirect opportunity cost, restoration cost, replacement cost, relocation cost, preventive expenditure) Cost-based methods are second best techniques and must be used with caution.

value of a related, non-marketed commodity (e.g., travel cost method, hedonic pricing method).

willingness to pay for non-marketed environmental values (e.g contingent valuation method).

Box 3 Categories of Valuation Techniques

2 This paper provides a non-technical overview of valuation techniques For a detailed account on methodologies, see Freeman, 1994; Johansson, 1994.

3 Many authors categorise valuation techniques differently.

tal good or service in question as

stated preference approaches do

The correct measure of value is an

individual’s maximum WTP to

pre-vent environmental damage or

realise an environmental benefit

(represented by the area under the

demand curve) Economic values

comprise both the price paid in

markets and the consumer surplus

that users obtain Consumer surplus

indicates the excess of what the

consumer would have been willing

to pay over what he or she actually

had to pay This concept is

particu-larly important when estimating the

benefits of environmental goods and

services that have a low, or no market

price In such cases, the entire area

under the demand curve represents

the benefit of the good To estimate

economic value, we therefore need

to be able to derive the demand

curve Valuation approaches based

on market values do not allow us to

do this and so will always

underes-timate the true value of the resource

Valuation Approaches

The following section provides a

brief description of the individual

valuation approaches For each

tech-nique a Table is provided summarising

its advantages and limitations, and its

application to biodiversity valuation is

outlined In reality, decisions on what

valuation approach to use will depend

on the nature of the study plus the

availability of resources (funds, time

and expertise)

Approaches Based

on Market Values

There are three valuation

ap-proaches based on market values:

• Observed market value and

related goods approach

• Productivity approach

• Cost based methods

includ-ing replacement cost

Approaches using market prices

offer the most pragmatic route to

the monetisation of environmental

use values Therefore, economic

values such as they exist in market

values should be recorded andreported Such information will con-tribute to priority setting

Observed Market prices

Where market prices exist theycan be combined with quantity in-formation to estimate the value of aresource The use of market prices

is undoubtedly the most ward of the valuation approachesand provides a relatively cheap andquick estimate of value However,few studies report theoretically cor-rect estimates due to data constraints

straightfor-Strictly speaking efficient pricesshould be used, i.e., they shouldaccount for any distortions such asexternalities, taxes and subsidies

Values used should be net of duction costs They should also bebased on optimal harvesting levels,and account for seasonal changes

pro-in production and prices Marketanalysis may also be necessary tounderstand the likely effects of marketexpansion, shifts in demand and in-ternational price fluctuations

Related Goods Approach

The related goods approachconsists of three similar valuationtechniques: barter exchange, directsubstitute, and indirect substituteapproach These relatively simple,intuitive approaches are often usefulfor estimating products in develop-ing countries that are largely used

by rural communities for subsistencepurposes or traded informally Theseapproaches are based on the factthat often a non-marketed good orservice is related to a marketed good

or service By using informationabout this relationship and the price

of the marketed product, the analystmay be able to infer the value of thenon-marketed product For ex-ample, the direct substitute approachbases the value of a non-marketedgood such as fuelwood, on the price

of its closest marketed substitute (e.g.,charcoal) and the rates of exchangebetween them

ex-The Production Function Approach

The production function approach

is a common economic technique,which relates output to different lev-els of inputs of the so-called factors

of production (land, labour, capital,raw materials) It is often thought of

as the most straightforward way tovaluing the environment4

More formally, the productionfunction for a single output may begiven by:

y = F (X, Z)

4 Variously called the change in tion approach, the input-output or dose response approach All involve an attempt to relate the incremental output

produc-of a marketed good or service to a measurable change in the quality and quantity of a natural resource.

Advantages Issues / Limitations

Relatively simple Market values tend to reflect actual use and

hence ignore non-use values.

High intuitive appeal Does not capture consumer surplus.

Likely to require the undertaking of market surveys and direct use surveys (However such surveys are simpler and less costly to conduct than those required by more sophisticated approaches).

Large data requirements may be necessary to estimate theoretically correct values.

Table 1 Observed Market Prices and Related Goods Approach – Advantages and Limitations

where X is a set of inputs (e.g.,

land, capital) and Z is the input of

the un-priced environmental

re-source Let us assume that we can

measure output y that has a market

price If prices of inputs X are not

expected to change when supply of

the environmental resource (Z)

changes, then the economic value

of the change in the supply of Z is

the value of the production change

associated with the change in Z at

constant inputs of the other factors

(X) (Pearce and Moran, 1994)5

For example, assume that an

ecological function of a tropical forest

is support for downstream fisheries

by ensuring a regular flow of clean

water to spawning grounds for fish

and nurseries for fry The forest area

in the watershed (S) may therefore

have a direct influence on the catch

of some fish species dependant on

the area, Q, which is independent

from the standard inputs of

commer-cial fishery, Xi Xk Including forest

watershed area as a determinant of

fish catch may therefore ‘capture’

some element of the economic

con-tribution of this ecological support

function (Barbier 1992)

Q = F(Xi Xk, S)

The approach is most

appropri-ate where: the environmental change

directly causes an increase or

de-crease in the output of a good (or

service) which is marketed; the effect

is clear and can be observed, ortested empirically; and, marketsfunction well, so that price is a goodindicator of economic value (OECD,1995)

Specifying the physical effect of

a change in environmental quality,and the resulting impact of thephysical effect on the economicactivities can be difficult and dataintensive in practice These functionsmay be estimated or derived fromexisting literature, but ideally expertscientific studies are required

Where environmental change has

a sizeable effect on markets, a morecomplex view needs to be taken ofthe market structure, elasticities, andsupply and demand responses

Consumer and producer behaviourneeds to be introduced into theanalysis as behaviour may alter inresponse to changes in the environ-ment In addition, the impacts ofmarket conditions and regulatorypolicies affecting production deci-sions need to be taken into account

Unless these factors are accountedfor, the production function approachmay produce unreliable information

Application to Biodiversity Valuation

The production function proach has strong intuitive and prac-tical appeal and has been usedfrequently in developing regions toestimate the indirect functions ofecosystems For example, the im-pact of deforestation on soil erosionand water production and quality,and the impact of the loss of man-grove area on fish productivity

ap-Cost-Based Valuation

Cost-based valuation techniquesassess the costs of different measuresthat would ensure the maintenance

of the benefits provided by theenvironmental good or service be-ing valued These cost estimates arethen used as proxies for the non-market environmental benefit inquestion Cost-based valuationapproaches include: opportunitycost-based approaches; ap-proaches that measure environmen-tal values by examining the costs ofreproducing the original level of ben-efits (e.g., the replacement, restora-tion and relocation cost methods);and, the preventative expenditure ap-proach, which examines the up frontpayments made to prevent environ-mental degradation.6

A practical difficulty is ensuringthat the cost of maintenance willprovide a benefit equivalent to thebenefit of the original good Apotential cause of overestimationoccurs if the benefits of maintenance

do not exceed the costs of tenance If this is the case, then theinvestment is not a profitable use ofeconomic resources and the cost ofmaintenance activities may belarger than the WTP for the originalenvironmental benefits7 Con-versely, if the benefits generated bythe maintenance activity exceed that

main-of the original environmental efits, then the costs of maintenanceactivity may surpass the WTP for the

ben-Advantages Issues / Limitations

Strong intuitive and practical

appeal, therefore popular with

policy/decision makers.

Table 2 Production Function Approach – Advantages and Limitations

Specifying biophysical relationship can be complex and/or data intensive.

Market values tend to reflect actual use and hence ignore non-use values.

Does not capture consumer surplus.

Market prices need to be corrected for market and policy distortions.

Where the environmental change has a sizeable impact

on the market, a more complex view of market structure

is necessary.

5 This approach can also be applied to

output which is not marketed but where

an actual market exists for similar

substitutes or goods.

6 The preventative expenditure approach is also referred to as the ‘defensive expenditure approach‘ ‘mitigation approach’ or ‘avertive behaviour approach’ There are two different approaches to this type of analysis and only one of them is truly a cost-based valuation technique If estimates of what people are willing to pay to prevent damage to the environment or them- selves are elicited through the use of constructed markets, or by the examina- tion of past events in similar circum- stances through the use of revealed preferences exhibited through actual or

surrogate markets, first based estimates

of value will be derived.

7 In certain cases, such as estimating the costs of relocating communities affected

by land use changes, satisfying this condition may not be critical Concerns over equity (ensuring just compensation) may override any economic criteria being placed on the cost of relocation.

original environmental benefits.

Further, because they bear no

re-lation to demand or WTP for

en-vironmental goods and services,

cost estimates fail to reflect

con-sumer surplus (and may also

un-derestimate producer surplus) thus

tending to underestimate

environ-mental values

The replacement cost method has

recently been used to estimate the

values of ecosystem services

(Costanza et al 1997; Pimentel et al

1997 and Ehrlich and Ehrlich 1996)

However, the Costanza et al study is

criticised on theoretical grounds (see

Pearce, 1998) It is argued that the

replacement cost is only valid if three

conditions are met (Bockstael et al

[2000]):

1) the human-engineered system

provides functions that are

equivalent in quality and

magnitude to the natural

func-tion;

2) the human-engineered

solu-tion is the least cost alternative

way of performing the

func-tion; and,

3) the individuals in aggregate

would be willing to incur these

costs if the natural function

were no longer available

These conditions are rarely

achieved hence use of replacement

costs is rarely accurate

Due to the inaccuracies inherent

in cost-based valuation approaches,

they are generally regarded as

second best valuation techniques.

However, they can be extremely

useful when there are limitations on

the time and resources for detailed

research or when data sets are so

questionable as to reduce the

ad-vantages of using more exact butcostly techniques

Application to Biodiversity Valuation

Despite their theoretical ings, such approaches are widelyused The replacement or restora-tion cost is, for example, used tovalue various ecosystem services and

shortcom-is implicit in the ‘public trust’ doctrine

in the USA as it relates to certainnatural resource damage costs

Revealed Preference ApproachesRevealed preference methodsinclude traditional travel cost mod-els of recreational use, random util-ity models, hedonic models, andaverting behaviour models Thesemethods rely on a surrogate marketthat provides a ‘behavioural trail’ toidentify the environmental value ofinterest They may be considered

‘true’ valuation approaches in thesense that they facilitate estimation

of demand curves and hence sumer surplus Generally, theseapproaches are favoured over statedpreference approaches by manyeconomists and policy makers be-cause these values are revealed inreal, rather than hypothetical, mar-kets However, they are limited in thesense that they are unable to ac-count for non-use values and havelarge data requirements

con-Travel Cost Method

With the travel cost method(TCM), it is assumed that travel costs

to a site can be regarded as a proxyfor the value of the non-market asset

The TCM is commonly applied torecreational areas and nationalparks Two perspectives are possible

Simple travel cost models attempt to

estimate the number of trips visited

to a site or sites over some period

of time, perhaps a season Randomutility models consider the specificdecision of whether to visit a recre-ational site, and if so, which one(see Freeman, 1994)

The TCM is applicable when:the study site is accessible for atleast part of the time; there is nodirect charge or entry fee for thegood or service in question, orwhere such charges are very low;and, where people spend a sig-nificant time, or incur other costs,

to travel to the site

The TCM techniques have proved considerably since the ear-liest studies were carried out but anumber of reservations as to its useremain Of particular concern is thelarge amount of data required,which is expensive to collect andprocess Furthermore difficulties withestimation and data analysis remain.The method is likely to work best whenapplied to the valuation of a singlesite, its characteristics and those ofother sites remaining constant Themethod has limited use for valuinganything other than parks and char-ismatic species that can provoketravel behaviour The most credibleapplications to date have involvednational parks, recreational sites andinternational travel behaviour whenvisiting wildlife parks and reserves(Tobais and Mendelsohn, 1991;Maille and Mendelsohn 1993;Hanley and Ruffell 1993)

im-Application to Biodiversity

Where feasible, TCM is tant when evaluating the demandfor recreational facilities The infor-mation derived from a TCM studycan be used to: set appropriate en-trance fees to national parks andreserve areas; allocate national rec-reation and conservation budgetsbetween different sites; and informland use decisions – for examplewhether it is worth preserving a sitefor recreational use or a rival landuse

impor-Advantages Issues / Limitations

Table 3 Cost Based Valuation – Advantages and Limitations

Considered to be second best techniques as they are likely to be inaccurate because they use costs as a measure of ‘benefit’.

Market values tend to reflect actual use and hence ignore non-use values.

Does not capture consumer surplus.

A practical approach where

resources (time, data,

money) are lacking.

Less data intensive and time

consuming than the more

sophisticated approaches.

Hedonic Pricing Method

The Hedonic Price Method

(HPM) is another revealed value

technique that relies on market prices

(typically property prices or wages)

to embody the value of the

envi-ronmental attribute (or job risk) of

interest The property value

ap-proach, for example, is based on

the assumption that the value of land

is related to the stream of benefits

derived from it The value of a

house, for example, is affected by

many variables including size,

con-struction, location and the quality

of the environment (air quality and

noise pollution) With sufficient data

on property values, it is in theory

possible to tease out the value of

the environmental feature holding

other things constant In other words,the value is revealed from within thevalue of the property The method

is data demanding and there arefew applications available in thepublished literature

Application to Biodiversity Valuation

The application of HPM tobiodiversity is extremely limited Fewbiodiversity-related attributes arelikely to show up systematically inthe complementary market prices -the WTP for housing in most cases,and even when they do, accuratedata to describe them is rarely avail-able to undertake robust analysis.Studies relating to the value offorestry, shoreline and landscapehave relied on these attributes beingsignificant in local property markets(e.g., Garrod and Willis 1992)

A closely related application isthe valuation of plant genetic re-sources for agriculture – e.g., plantbreeding and crop improvement(Evenson 1990; Gollin and Evenson1998) The steps for conducting thisresearch are similar to its analogue

in the housing sector although thedata requirements are just as oner-ous In this context the ‘external’value of interest is a naturally occur-ring material germplasm or genetictrait, which is an attribute of anoriginal crop landrace prior to cropimprovement The original rawmaterial or trait is ultimately oneattribute of a final product If thecontribution of that trait can be iso-lated from the other productionfactors, then its resource value can

be estimated The steps necessaryfor undertaking such an analysis aresummarised in Box 4

Clearly this methodology hasimportant implications for the is-sues of benefit sharing and intel-

Table 4 Travel Cost Method – Advantages and Limitations

General

The method has limited use for valuing anything other than parks and charismatic species that can provoke travel behaviour.

Does not account for users, off-site benefits and use values.

non-Theoretical

Time Costs – determining the value to be attached to travel time.

Dealing with multi-purpose visits.

How to deal with substitute sites.

Treatment of utility or dis-utility from travelling.

Truncation or sample selection bias in dealing with site visitors, and neglecting non-visitors.

Difficulties with the estimation and data analysis techniques.

Provides estimate of demand

curve therefore possible to

estimate consumer surplus.

Where feasible, can provide

estimates of value of parks and

recreational facilities.

Advantages Issues / Limitations

Table 5 Hedonic Pricing – Advantages and Limitations

It relies on the assumption of a freely functioning and efficient property market.

Huge data requirements.

The approach only reflects impacts to the extent that individuals are aware of them.

A number of statistical problems may hinder its feasibility.

It is essentially an ex post valuation and does not

capture non-use value.

The hedonic approach is

founded upon a sound

economic theory base and is

capable of producing valid

estimates of economic

benefits.

Advantages Issues / Limitations

Gollin and Evenson (1998) show how the HPM can be applied to the analysis of the productivity of alternative categories of rice germplasm in India The key steps are:

• For a crop – e.g., rice, divide gains in output into gains from yield and gains from increased area under cultivation.

• Disaggregate rice yield gains into gains attributable to varietal improvement, other technological advances and other sources of change.

• Assume varietal improvement is dependent on stocks of advanced crossing material from different sources and other research resources.

• Stocks of advanced material depend on the existence of traditional landraces and wild species.

• Link productivity to original germplasm, its origins and ownership.

• Note finally that the data requirements are onerous In short detailed information is required

on the productivity of all factor inputs in all the above stages.

Box 4 Estimating the Contribution of germplasm of original landraces to Rice Productivity

lectual property rights In theory,

the methodology offers the

poten-tial for the identification of key

germplasm contributions to crop

development by countries and

communities within countries It can

therefore serve as a basis for

es-timating returns to indigenous

com-munities as part of a benefit

shar-ing agreement In practice, data

sources will prevent identification

of inputs for many crops

This approach can also help to

determine the value added at each

production stage by informal and

formal breeding inputs that have led

the crop to its current status This is

particularly important information for

the CGIAR8 group when

informa-tion on the returns to publicly funded

research is at issue

Stated Preference Approaches

Stated preference techniques (SP)

refer here to any

questionnaire-based technique that seeks to

dis-cover individuals’ preferences The

most well-known approach under this

category is Contingent Valuation

Method (CVM)9 although Choice

Modelling (CM) is becoming

in-creasingly popular10

The CVM uses survey techniques

to ask people directly what their

environmental preferences are It is

therefore a form of market research,

where the ‘product’ in question is a

change in environment quality A

hypothetical market is constructed

and consumers are asked what they

would be WTP for a hypothetical

environmental improvement or to

prevent a deterioration, or what they

would be willing to accept (WTA) in

compensation to tolerate a loss A

hypothetical market is taken to

in-clude not just the good itself (an

improved view, better water quality,

etc), but also the institutional context

in which it would be provided, and

the way in which it would be financed

Answers to questionnaires are

in-tended to simulate the behaviour of

individuals in the market place A

great deal of care needs to be taken

to ensure that questionnaires mimicthe relevant features of the marketplace, and that potential biases inresponses are controlled

The SP techniques become essary when the WTP information that

nec-is needed cannot be inferred frommarkets They are then extremelyapplicable to the valuation of pub-lic goods for which no markets exist

CVM is technically applicable to allcircumstances and is the only prac-tical method for uncovering existencevalue (e.g., preservation of rarespecies, biodiversity for its own sake)that generally does not pass throughmarkets and do not have substitutes

or complements that pass throughmarkets.11

Choice Modelling involves a ing or ranking of options each ofwhich contains a varying set ofcharacteristics (e.g., a forest can bedescribed in terms of species diver-sity, age structure and recreationalfacilities), including a money price

rat-or cost Respondents are not askedany WTP questions Rather the will-ingness to pay is inferred from the

stated choices (Louviere et al, 2000),

CM differs from CVM in that itsolicits rankings or ratings rather than

monetary values Arguably, this canreduce protest votes since peoplemay find it easier to rank or ratealternatives without having to directlythink in money terms However thisdepends on the amount of back-ground information provided in what

is already (for the respondent) acognitively burdensome task Atpresent there is no strong reason tochoose one of these technique inpreference to the other

Application to Biodiversity

Contingent valuation has beenused extensively in the valuation ofbiological resources including rareand endangered species, habitatsand landscapes

CVM is likely to be most reliablefor valuing environmental gains,particularly when familiar goods areconsidered, such as local recre-ational amenities The most reliablestudies (i.e those that have passedthe most stringent validity tests andavoided severe ‘embedding’whereby values are not sensitive tothe quantity of the good being of-fered) are those valuing high profilespecies or elements that are familiar

to respondents In other cases, theneed to provide information to elicitreliable values is a limit both to CVand other attribute-based choicemodels

There is a small body of studiestesting the applicability of CM tobiological resources It is arguedthat the constrained attribute de-sign requirement makes CM evenmore limiting than CVM Moreover,the selection and representation ofthese attributes and their levelssimply adds to the design prob-lems already associated with hy-

8 Consultative Group on International Agricultural Research.

9 See OECD, 1995; Bann, 1998; Mitchell and Carson, 1989 for more details on methodology

10 Choice modelling approaches include choice experiments, contingent ranking, contingent rating and paired compari- sons.

-11 Other valuation techniques are not aimed at capturing non-use values.

While it may be possible to infer estimates of existence values from market behaviour - such as donations

to philanthropic pursuits - it is almost impossible to separate out use and existence values revealed in such markets.

Table 6 Stated Preferences – Advantages and Limitations

SP methods require carefully designed survey and sampling procedures and the employment of sophisticated data analysis (econometric modelling) Obtaining reliable information therefore requires a substantial investment of time and resources, which makes SP techniques very expensive.

An important feature of SP methods is that they can help reveal values that are not revealed using other methods In particular SP can uncover non-use values.

Advantages Issues / Limitations

pothetical surveys A strong

advan-tage of the CM over CVM is that

it can reveal something about the

sum of the parts of a resource rather

than the total value In many

cir-cumstances, the policy question to

be answered by a valuation study

concerns the improvement of a

specific attribute

Benefits Transfer

A final valuation technique is

known as benefits transfer, which

could be based on any of the

valu-ation techniques described above

Benefits transfer (BT) involves

‘trans-ferring’ economic benefit estimates

from a site where a study has

al-ready been done (the ‘study site’) to

the site of policy interest (the ‘policy

site’) If BT is a valid procedure, then

the need for ‘primary’ studies is

greatly reduced However, the

‘in-terim’ consensus, based on ongoing

research, appears to be that BT is

unreliable (Brower, 1988; Bateman

et al, 1999a) Results tend to differ

by up to 75% if outliers are excluded,

and by up to 450% if they are

in-cluded This margin of error may beacceptable for some project andpolicy applications, and uncertainty

of the final results can be dealt withthrough sensitivity analysis

Benefits transfer is most priate when: funds, time, or person-nel are insufficient to undertake asatisfactory new study; the study site

appro-is similar to the policy site; the appro-issues(e.g., proposed policy change, ornature of the project) are similar inthe two cases; and, the originalvaluation procedures are theoreti-cally sound (OECD, 1995) These

‘borrowed’ unit values can sent ‘order of magnitude’ estimatesfor the environmental goods andservices of interest However, primarydata collection and analysis may beunavoidable for large projects,projects with potentially large (andirreversible) consequences, or forparticularly complicated or politicallysensitive projects

repre-The benefits value could havebeen measured using any one ofthe techniques summarised in Box

3 In benefits transfer, it is possible

Camille Bann is a consultant on environmental economics based at London, United Kingdom,

email: CABann@aol.com

References Bann, C 1998 ‘An Economic Analysis of Tropical Forest Land Use Option: A Manual for Researchers’, The Economy and Environment Program for Southeast Asia (EEPSEA), April,

1998 Singapore.

Barbier, E 1992 ‘Valuing mental Functions: Tropical Wetlands’ LEEC Discussion Paper 92-04.

Environ-London Environmental Economic Centre / IIED.

Bateman, I., Nishikawa, N and R Brouwer, 1999 ‘Benefits Transfer in Theory and Practice: A Review’, Faculty

of Environmental Sciences, University of

East Anglia, mimeo.

Bockstael, N Freeman, M., Kopp, R., Portney, P Smith, V 2000 ‘On Measuring Economic Values for

Nature’ Environmental Science and Technology, 34, 1384-1389.

Brouwer, R and Spannincks, F.

1999 ‘The Validity of Environmental Benefits Transfer: Further Empirical

12 Meta-analysis explains the variations in

WTP taken from a number of studies This should enable better transfer of values since we can find out what WTP depends on In the meta-analysis case, whole functions, based on the collected studies, are transferred rather than average values.

Table 7 Benefit Transfer – Advantages and Limitations

Reliability? How can the transferred values be validated?

The literature that tests for validity of benefits transfer is a long way from supporting such procedures Therefore, at present there appears to be no substitute for high quality original studies.

Avoids the cost/time of

engaging in ‘primary studies’

Advantages Issues / Limitations

to transfer an average WTP estimatefrom one study site, or to transfer aWTP function from the study andapply it to the policy site, or to trans-fer WTP estimates from meta-analy-sis.12

If values are transferred justed’ the credibility of the policysite estimates are questionable.Possible differences that should beaccounted for include: differences inbaseline conditions and/or themagnitude of the economic impact(i.e., change from baseline), varia-tions in study methodology, research-ers judgement in the selection ofsample size, socio-economic char-acteristics of the relevant population,determinants of WTP, differences inmarket conditions applying to thesites (e.g variations in the availabil-ity of substitutes), and econometricspecifications.#

‘unad-Testing’ Environmental and Resource

Economics, 14, 95-117.

Costanza, R., R D’Arge, R de

Groot, S Farber, M Grasso, B.

Hannon, K Limburg, S Naeem,

R O’Neill, J Paruelo, R Raskin, P.

Sutton and M van den Belt 1997.

‘The Value of the World’s Ecosystem

Services and Natural Capital’, Nature,

387, May 15 1997, 253-260.

Ehrlich P., and A Ehrlich, 1996 ‘A

Betrayal of Science and Reason’.

Island Press, Washington D.C 1996.

Evenson R.E., 1990 ‘Genetic

Resources: Measuring Economic Value’.

In: Vincent, J., Crawford, E and Hoehn

(eds.) Valuing Environmental Benefits in

Developing Countries, Michigan State

University, East Lansing.

Freeman, A.M 1994 ‘The

Measure-ment of EnvironMeasure-mental and Resource

Values Theory and Methods’.

Resources for the Future, Washington

DC.

Garrod, G and K Willis, 1992.

‘The Environmental Economic Impact of

Woodland: a Two Stage Hedonic Price

Model of the Amenity Value of Forestry

in Britain’, Applied Economics 24.

715-28.

Gaston, K and J Spicer, 1998,

‘‘‘‘‘Biodiversity: An Introduction’ Oxford:

Blackwell Science.

Environmental trainers, managers, researchers, policy makers, and other

interested individuals and organisations can now access the Training

Resources Database (TRD) developed by the ASEAN Regional Centre for

Biodiversity Conservation (ARCBC)

The Training Resources Database is a web-based repository of training

materials such as manuals, guidebooks, and visual aids It aims to provide

a widely recognized and consulted source of training advice and information

on biodiversity conservation mostly in the ASEAN region Materials have

been sourced from a variety of organisations and experts, primarily from

the ASEAN region, conducting significant work in environmental protection

all over the world

The database provides a search engine that allows users to look for specific

material by entering keyword(s), its “title” or “author” Users can also

narrow down their search by selecting geographic coverage, subject and

taxonomic area through dropdown menus Descriptions, abstracts and

other bibliographic information can be viewed by looking at the Full Detail

Display Links for ordering, requesting or downloading copies of these

materials are also provided

To access the database, visit ARCBC’s website at http://www.arcbc.org.ph

For comments and suggestions, contact: webmaster@arcbc.org.ph

Looking for a key document on

biodiversity-related training?

ARCBC Training Resource Database

Hanley, N D and R.J Ruffell, (1993) ‘The Contingent Valuation of Forest Characteristics: Two Experi-

ments’ Journal of Agricultural ics 44 pp218-229.

Econom-Huber, R., Ruitenbeek, J and Putterman, D 1997 ‘Marine Biodiversity Valuation: Internal Research Note Supplementing Interim Report’

The World Bank Research Committee Project No 681-04, Washington.

Johansson, P 1994 ‘The Economic Theory and Measurement of Environ- mental Benefits’ Cambridge University Press.

Louviere, J., Hensher, D and Swit,

J 2000 ‘Stated Choice Methods:

Analysis and Application’ Cambridge:

Cambridge University Press.

Maille, P and R Mendelsohn (1993) ‘Valuing Ecotourism in Mada-

gascar’ Journal of Environmental Management, 38, 213-218.

Mitchell, R and Carson, R 1989.

‘Using Surveys to value Public Goods:

The Contingent Valuation Method’.

Resources for the Future Washington DC.

OECD, 1995 ‘The Economic Appraisal

of Environmental Projects and Policies;

A Practical Guide’.

OECD, 2002 ‘Handbook of Biodiversity Valuation: A Guide for

Policy Makers’ OECD, Paris.

Pearce, D.W., and Moran, D 1994.

‘The Economic Value of Biodiversity’.

In Association with The Biodiversity Programme of IUCN Earthscan Publications Ltd, London.

Pearce D.W and Pearce, G.T.

2001 ‘The Value of Forest Ecosystems: A Report to the Secretariat Convention of Biological Diversity’ University College London.

Pearce, D.W 1988 ‘Auditing the Earth’ Environment, 23, 25-28 Pimentel, D., C Wilson, C.

McCullum, C Huang, P Dwen,.

J Flack, Q Tran, T.B Cliff Saltman, (1997) ‘Economic and Environmental Benefits of Biodiversity’ BioScience 47(11):747-757.

Purvis, A and A Hector, 2000.

‘Getting the Measure of Biodiversity’.

Tobais, D and Mendelsohn, R.

1991 ‘Valuing Ecotourism in a Tropical Rain Forest Reserve’, Ambio, 20(2), April, 9102.

Economic valuation of the

Leuser Ecosystem in Sumatra

Despite its formally protected

status, the Leuser Ecosystem

is under severe threat of

deforestation due to the economic

crisis in Indonesia Not only is this

believed to have severe

ecologi-cal consequences, but the loecologi-cal

economy is also expected to be

structurally damaged The decline

of several crucial ecological

func-tions of the rainforest may have

serious consequences for

numer-ous economic activities in and

around the Leuser Ecosystem

Mainly, this study aims to determine

the Total Economic Value (TEV) of

the Leuser Ecosystem and evaluate

the consequences of deforestation

for its main stakeholders.1

What is economic valuation?

The road towards sustainable

development involves better

inte-gration of environmental

consid-erations into economic

decision-making, in particular through the

use of economic techniques for theappraisal of projects and policies

A method central to this effort is

‘economic valuation’ In this study,economic valuation is used as themain analytical tool to comparethe advantages and disadvantages

of certain scenarios in the LeuserEcosystem Nowadays, mosteconomists agree that the value ofnatural resources depends not only

on the market prices of its directuses, but also on all other func-tions of the natural resources thatgenerate value in its broadestsense This is reflected in the con-cept of the so-called TEV

In determining the TEV of atropical rainforest, a distinction isoften made between direct usevalues, indirect use values andnon-use values The first relates tothe values derived from direct use

or interaction with a rainforest’s sources and services; the secondstems from the indirect support andprotection provided to economicactivity and property by therainforests’ natural functions, orregulatory ‘environmental’ services

re-A typical example of a direct usevalue of rainforest ecosystems is theprovision of wood for housing or

cooking The classic example of

an indirect use value as it relates

to rainforest ecosystems is the waterretention function provided by for-ests to support downstream agri-cultural areas Non-use values,among others, refers to anindividual’s willingness to pay(WTP) to secure the continued ex-istence of, for instance, an endan-gered wildlife species, without everactually seeing it in the wild (a

‘use’) The classic example here isthe contributions people make toactions that aim to preserve char-ismatic mega-fauna such as thetiger or the panda If an individual

is willing to pay $400 for ing biodiversity in some rainforestarea without any present or futureuse in mind (source of food, lei-sure hunting, wildlife viewing, etc.),then this is his or her non-use value

preserv-A common way to determineuse and non-use values is to pur-sue the sequence of underlyingprocesses, starting with the cause

of an impact, on to the physicalimpact and ending with the socialand economic effects The ap-proach in this study proceeds in aseries of methodological steps.Figure 1 provides an example of

#By Pieter van Beukering, Herman Cesar and Marco Janssen

Figure 1 Overall approach applied to the agricultural sector

1 The lack of reliable data in combination

with the need for quantification and

monetisation of the main effects forced

us to adopt rather compromising

assumptions Therefore, these results

should be considered as indicative, but

not as authoritative if it comes to actual

investment decisions in the Leuser

Ecosystem.

Reduced pest control and pollination Reduction in water:

floods and drought Increased erosion

Impact on ecological function and service

Reduction of forest cover

Increase use fertilizer and

pesticides (in kg)

Increase in crop

damage (in kg)

Physical impact of change in fucntions

Agriculture (in US$)

Deforestation

Overall impact of economic effects

Socio-how the economic value derived

from the Leuser Ecosystem by the

agricultural sector is calculated

First, ecological consequences are

estimated in terms of, for example,

changes in water retention, erosion,

and pest control Next, these

changes in the ecological services

are translated into the physical

impact for the agricultural sector

For example, the reduction of

humus availability due to erosion

may cause a decline in the overall

agricultural output Also, the

re-duced natural pest-control by birds

and animals may cause an

in-creased need for fertiliser and

pesticides Subsequently, these

changes in the physical

perfor-mance of the agricultural sector

may cause a decline in the crop

yield as well as an increase in the

costs of production This in turn can

be translated into a change in the

economic value of the Leuser

Eco-system for the agricultural sector

Economic valuation has been

applied to evaluate the TEV of the

Leuser Ecosystem under two

pos-sible future scenarios: (1) the

‘con-servation’ scenario, implying that

protection of the rainforest is strictly

enforced and thus logging will be

excluded as an economic activity;

and (2) the ‘deforestation’

sce-nario, implying a continuation of

the current trend of clear cutting

The current level and the change

of a large number of benefits have

been determined These benefits

include: water supply; fisheries;

flood and drought prevention;

agriculture and plantations;

hydro-electricity; tourism; biodiversity;

carbon sequestration; fire

preven-tion; non-timber forest products;

and timber

What is the TEV

of the Leuser Ecosystem?

Deforestation may be

consid-ered an easy way to generate

fast cash In the long term,

how-ever, the negative consequences

will dominate This is shown in

Figure 2, which highlights the TEV

in the two scenarios over time Inthe deforestation scenario, amplerevenues are generated in the firstseven years After the year 2006,revenues decline The conservationscenario shows a steady increase

in annual benefits throughout the30-year period By the year 2030,the annual benefits in the conser-vation scenario outweigh those ofthe deforestation scenario by afactor of 2

By aggregating the annualgains over the 30-year period, theoverall TEV has been determined

The accumulated TEV at a zero count rate of a deforested Leuser(US$ 16.9 billion) and of a con-served Leuser (US$ 22.3 billion)differs in US$ 5.4 billion Thisamount can be considered as thebenefit of conservation (or the costs

numer-of Table 1 for the two scenarios.The main contributors to the TEVFigure 2 Net gains over time of Leuser National Park for the two scenarios.

Economic Value of conservation

(in million US$) (in million US$) (in million US$) (proportion)

Net Benefits of conservation

Table 1 Distribution of TEV among goods and services provided by the Leuser Ecosystem over the period 2000-2030.

0 100 200 300 400 500 600 700 800 900 1,000

Net Annual Gains

Deforestation

Conservation

are water supply, flood prevention,

tourism and agriculture Not

sur-prisingly, timber revenues play an

important role in the deforestation

scenario

Figure 3 looks at the net

ben-efits in more detail Except for

tim-ber and agriculture, the value of

all benefits is higher in a scenario

of conservation Therefore, these

categories are presented as

ben-efits of conservation while timber

and agriculture are presented as

the (opportunity) costs of

conser-vation The third column of Table

1 also shows this difference

be-tween the TEV of conservation and

deforestation The total

aggre-gated benefits amount to US$ 8.5

billion and the costs of

conserva-tion, US$ 3.1 billion The main

categories that gain from

conser-vation are water supply, flood

prevention, tourism and

biodiversity At the cost side of

con-servation, timber and agriculture

are approximately of the same size

On balance, the local economy

gains US$5.4 billion from

conser-vation over a 30-year period

Who wins and who loses?

Besides the overall economic

value of the Leuser Ecosystem, it isimportant to be aware of the dis-tribution of the TEV of deforesta-tion and conservation among thedifferent stakeholders Five groups

of stakeholders have been fied in this study: (1) local commu-nities; (2) local government; (3)elite logging and plantation indus-try; (4) national government; and(5) international community The

identi-distribution of the economic valueamong the stakeholders is pre-sented in Table 2 Contrary topopular belief, the local commu-nity is at present by far the mainbeneficiary of the Leuser Ecosys-tem In the conservation scenario,they receive 57% of the benefits.These benefits mainly result fromthe support of water supply, pre-vention of floods, tourism, fisher-ies and agriculture Similarly, thelocal government is a major ben-eficiary of the Leuser Ecosystem.Compared to the distribution inthe deforestation scenario, onlythe plantation and logging indus-try sees its economic value derivedfrom the Leuser Ecosystem declin-ing as a result of conservation This

is shown in the last column ofTable 2

The net benefits shown in thelast column of Table 2 are the sum

of benefits and costs (see Table3) For example, by conserving theLeuser Ecosystem, the local popu-lation will gain benefits in the form

of prevented flood damage andsufficient water supply but at thesame time they will experience the(opportunity) costs of not beingable to collect the timber or clear

Figure 3 Net Benefits over time of Leuser National Park for the two scenarios distributed

over the various categories.

Benefits of Conservation Costs of Conservation Net Benefits

Table 3 Distribution of the costs and benefits among stakeholders over the period 2000-2030 (in million US$)

Local community 12,750 57% 8,923 53% 3,827 Local government 4,168 19% 3,065 18% 1,104 Elite industry 2,086 9 % 3,093 18% -1,007 National government 1,192 5 % 910 5 % 282 International community 2,102 9 % 884 5 % 1,218

TEV Conservation TEV Deforestation Net Benefits

Table 2 Distribution of the TEV among stakeholders over the period 2000-2030 (in million US$)

Net Benefit of Conservation

the land for additional agriculture.

For the local communities,

how-ever, conservation results in a

positive net benefit of US$3.8

billion Therefore, local

communi-ties gain 57% of the benefits of

conservation If logging takes place

in the forest, the plantation and

logging industry receives 83% of

the gains In conclusion,

defores-tation harms the majority of the

population (i.e local communities)

at the cost of the welfare of the rich

minority (i.e plantation and

log-ging industry) The opposite is true

for conservation

How is the value of the Leuser

Ecosystem geographically

distributed?

Each regency that forms part of

the Leuser Ecosystem has very

dif-ferent characteristics

Geographi-cally, they vary in the structure of

the land (e.g mountainous,

low-land), the type of land use

(pri-mary forest, secondary forest), and

precipitation (amount and intensity

of rain fall) Economically and

so-cially, differences may be in terms

of population characteristics (size,

density, income), economic

struc-ture (industry, agriculstruc-ture, public

sector), and infrastructure (roads,

bridges, houses) Therefore, theTEV derived from the Leuser Eco-system is also likely to vary amongthe regencies

Figure 4 presents the tion of the overall TEV of the LeuserEcosystem across the 11 regencies

distribu-Among others, the shares depend

on the size of the economy and thedependency on the Leuser Ecosys-tem All the regencies are shown tobenefit from the conservation ofthe Leuser Ecosystem Aceh Singkiland Aceh Timur take the smallestpart of the pie, mainly due to thesmall size of their economies Incontrast, Langkat and DeliSardang generate high TEV fromthe Leuser Ecosystem The regen-cies in North Sumatra are leastaffected by the negative impacts

of deforestation

What are the main lessons ofeconomic valuation of theLeuser Ecosystem?

Economic valuation has proved

to be a strong and useful tool inanalysing welfare changes for thedifferent scenarios in the LeuserEcosystem Several lessons can belearned from the analysis:

• Conservation prevents age and loss of income of

dam-US$ 8.5 billion while estation generates US$ 3.1billion of revenues in thecoming 30 years;

defor-• Conservation spreads thebenefits of Leuser equallyamong the Kabupaten andthus prevents further conflict,while deforestation widensthe income gap between theKabupaten and may be anadditional source of discord.This dependency may form

a strong incentive for the gencies to develop and en-force a common plan;

re-• Conservation promotes cial and economic equity be-cause it mainly supports thepoor majority of society whiledeforestation widens the gapbetween the rich and the poor.The above results should beconsidered as tentative outcomes

so-of the economic valuation in thecontext of the management of theLeuser Ecosystem The work in thefield of economic valuation of theLeuser Ecosystem goes on Meth-ods will be improved and converted

to more user-friendly software toencourage application of eco-nomic valuation by local experts

As data collection continues, theuncertainties surrounding the analy-sis decline Also the spatial appli-cation of economic valuation bylinking with methods of Geo-graphic Information Systems (GIS)will be investigated Finally,additional scenarios will be simu-lated For example, by focusing onthe cost-benefit conditions of

‘projects’ rather than the efit situation of the Leuser Ecosys-tem ‘as a whole’, the concept ofeconomic valuation can be usedmore effectively as a communica-tive tool.#

cost-ben-Figure 4 Distribution of the TEV of Leuser Ecosystem among the regencies over the period

2000-2030.

Pieter van Beukering is connected with the Institute for Environmental Studies (IVM), Vrije Universiteit, Boelelaan 1115, 1018 VR Amsterdam, the Netherlands; email

beukering@ivm.vu.nl

Total Economic Value

Aceh Timur Aceh Singkil

Langkat Karo Diari

Conservation Deforestation

Forests in the ASEAN region serve

many functions:

• Production of timber and wood

• Production of non-timber

prod-ucts (fungi, medicinal plants,

fruits, honey, game, etc.)

• Ecotourism and potential

earn-ings

• Drinking water

• Irrigation uses of water

• Industrial uses of water

• Trapping air pollution

While timber values are well

known and generally drive decisions

concerning the use of forests, the other

functions are very important but

generally under-appreciated In

to-tal, the values of these goods and

services are very high In many cases

it can be shown that the benefits from

indirect services and non-timber uses

or products far exceed the value for

timber alone Documenting these

values can be a powerful lever in

pressing for conservation rather than

logging such forests

Conservationists are generally not

well equipped to undertake these

types of calculations but the

non-economist can take the steps below

to help gauge the scale of value of

such services

Sustainable production of

non-timber products

Estimates can be made of the

maximum sustained yield of a variety

of forest products and these products

can be converted into monetary

equivalents Where these products

enter a real marketplace and aretraded, actual prices can be used inthe calculations Where these prod-ucts do not enter the open market butare collected for home use or in caseswhere the actual prices paid aresubsidised or unrealistic, it is legiti-mate to use the cost of the cheapestavailable replacement

For instance, a village may usemedicines collected from the forest,but if these were not freely availablethe village would have had to buycommercial medicines We can thenuse the figure of what these medi-cines would have cost

It is better to use calculated mum sustained yield rather than theactual levels harvested as levels may

maxi-be unsustainable or may maxi-be waybelow maximum sustained yield rep-resenting potential or unrealisedvalues

Using GIS to determinethe effect of forest cover

in protecting soils andaffecting hydrology

The Geographic Information tem (GIS) can be used to construct amodel of a catchment’s function Thefollowing data layers should becollected and introduced into such amodel:

Sys-• Altitudes giving both elevationmodel and slope model

• Vegetation cover (from Landsatimagery) supplemented withlanduse map and groundtruthing

• Measurements and tions of vegetation in study plots

descrip-• Soil erosion estimates based

on silt traps under forest orsampled areas where reduc-tion of soil surface could bemeasured against orchard trees

of known ages

• Monthly figures for rainfall andriver flow at the mouth of thecatchment

From these covers and the derived figures for water-holdingcapacity and erosion proneness ofdifferent soils under different condi-tions, a model can be made forestimating levels of erosion over thewhole catchment Operators canmanipulate the model to predict whatchanges will occur For instance if thescrub were allowed to mature intoforest, what effect would this have onwater-holding capacity and on ero-sion levels? Equally, one can ask whatwould happen if the remaining goodforests were cut and reverted to scrub

field-or if mfield-ore land was opened up ffield-oragriculture

The model should be based onstandard methods for evaluatingforest hydrology (Hewlett,1982) andthe universal soil erosion formula,based on the relative rates of erosionmeasured in the field In the absence

of field data, one can use figuresdrawn from comparable land stud-ies The figures in Table 1 are therelative erosion rates under equiva-lent slope and soil-type categories butunder different types of vegetationcover in tropical moist conditions.Figures are shown in relation to ero-sion rates under bare cultivated soil:

Ways to estimate the

value of forest catchments

#By John R MacKinnon

Such a model can generate

fig-ures for the reduction of soil erosion

with consequent loss of natural fertiliser

and the improved water holding

ability of lands under forest

com-pared to cleared or cultivated areas

These figures can be converted into

$/ha/year equivalents based on the

replacement costs of fertiliser and

topsoil plus estimates on the

dam-age to downstream infrastructure or

dredging costs of the excess sediment

The figures of water-holding

ca-pacity can be used in estimating the

values of flood control and, in the

dry season, water supply and

in-creased hydropower generation (see

Figure 1)

Although a proportion of rainfall

is returned directly to the atmosphere

through transpiration and

evapora-tion, the level of such losses is not much

different between primary forest,

sec-ondary forest, intensive agriculture,

irrigated fields or bare soil It is much

reduced on panned soils Trying to

evaluate these losses is complex and

can generally be ignored

Calculating contribution to

hydropower efficiency and

water supply

Hydropower stations are designed

to run at full efficiency near to the

mean river flow They lose efficiency

when there is too much water Some

turbines have to be closed down for

safety or because of physical

obstruc-tions, and sluices are opened to allow

flood water to wash away built up

silt, etc The efficiency declines very

sharply if there is not enough water

to turn the turbines The graph in

Figure 1 shows the relationship

be-tween river flow and power

genera-tion efficiency for a typical large-scaledam We can calculate the actualaverage efficiency of a given dam

by comparing monthly meanwaterflow rates and seeing the rela-tive efficiency of that rate In the case

of dams with seasonal rainfall tern, the average efficiency is usuallybetween 60-70%

pat-The contribution to this powergeneration efficiency can be calcu-lated by examining the improvement

in river flow caused by the vegetation

‘sponge’

Figure 2 shows the difference inmonthly riverflow pattern and rainfallpattern expressed as percentages ofannual total Without a vegetation/

soil sponge, rainfall would go straightinto the river system and the riverflowpattern would be the same as rain-fall We can see the riverflow being

‘improved’ in two ways In early mer as rain wets the land, much ofthe water is held back and theriverflow lags behind rainfall Whenthe land is totally saturated, it canhold no more water and riverflowand rainfall curves become similar

sum-However, when rainfall drops in the

autumn, the water stored in the

‘sponge’ continues to be released.Thus riverflow exceeds rainfallthroughout the dry season when water

is most precious Had riverflow sembled rainfall, the potential forhydropower efficiency would havebeen only 60%, but using the riverflowfigures it is 67%, an improvement of12% The more seasonal the rainfall,the greater this contribution becomes

re-We can then claim that this centage of the total value of hydro-power production is a direct result ofimproved watershed function due toforest cover We can also calculatehow it could be further improved byincreasing forest cover through re-forestation

per-Remember that the same waterflows through many dams and irri-gation systems on its downstreamtravels and all these benefits can beadded to the total value of the indi-vidual catchment It is only necessary

to determine what proportion of thetotal waterflow of each station origi-nates from the particular catchmentunder calculation

In cases where the price of tricity is subsidised or unrealistic, wecan compare with more regionalfigures, or use the cost of providingthe equivalent power required by thecheapest alternate means

elec-It is even possible to claim an

add-on value When local cheap ity hydropower is provided, it allowsother underutilised resources such asmanpower and raw materials to be

electric-Bare cultivated soil 1.0 Mixed garden, multi-storey 0.1

Non-vegetated, badlands 0.95 Shifting cultivation 0.4

Irrigated rice 0.01 Rubber plantation 0.6

Upland crops unspecified 0.7 Tea plantation 0.35

Upland rice 0.5 Natural forest, high litter 0.001

Sugarcane 0.2 Natural forest, low litter 0.005

Bananas 0.6 Clear-fell production forest 0.5

Coffee with groundcover 0.2 Selective-logging forest 0.2

Table 1 Erodibility classes under differing land cover (FAO,1981).

Figure 1 Hydropower efficiency in relation to riverflow of Gezhouba Dam, Hubei

0 10 20 30 40 50 60 70 80 90 100

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40

Percentage Efficiency of Hydropower Generation

Percentage Monthly Riverflow of Total Annual Flow

converted into high value products.

Thus the total contribution to the region

may be much higher than the price

of electricity alone

Another way to estimate the

per-centage improvement of

hydrologi-cal function is to compare the flow

characters of different rivers or river

branches with varying degrees of

forest cover but similar rainfall

pat-terns Figure 3 shows the results of

plotting dry season river flow against

forest cover in 16 Sichuan branches

of the Yangtze river

In terms of hydropower efficiency,

these figures translate to an increase

of between 10%-20% generation

ef-ficiency if a catchment is well

for-ested In terms of supplying water to

downstream water users, the

contri-bution would be probably far higher

than this Water only gets valuable

when it is in short supply, although for

practical purposes the price of water

is levelled out across the year

We can use the actual price of

water to industrial and commercial

water users as a price for this value

In many countries however, the prices

paid for water are unrealistic or are

subsidized Waterflow is accepted as

a gift of nature and no fee is charged

for it In such cases, we should try to

calculate the ‘willingness to pay’

dur-ing periods of water shortage This

may involve interviewing local water

users or using figures from similar

eco-nomic regions where water use is

charged at a more realistic level

Calculating Value

of Flood Reduction

Destructive floods occur almostannually in many parts of the re-gion We can make a rough calcu-lation of the contribution of thecatchment’s natural vegetation inlimiting floods by calculating howmuch water is held by the forestsponge at times of flooding Unlessthis water is held in the land at thistime, it would have been added tothe flood water downstream We cantranslate the volume of water held

in the catchment when fully saturatedinto the equivalent extra area of landthat would have been flooded to agiven mean depth (e.g one metre)

We can multiply this by a figure forthe mean economic losses felt whenagricultural land becomes flooded

to a depth of one metre

The crudest component in thiscalculation is the estimate for eco-nomic losses during floods Thesefigures are relative to standards ofliving Officially broadcast figures aresometimes rather low for reasons ofpolitics and generally reflect only loss

of crop production Damage tohouses, dykes, paddy systems, loss

of aerobic soil organisms, loss ofhuman life, suffering of exposedhomeless people sleeping on dykes,extra labour needs to repair dam-aged fields and replant lost crops arerarely included in such figures andare simply absorbed by the localpeople as part of the hardships of

life In countries where everything isinsured and where claims for lossesare made, figures tend to be inflated.During the 1998 floods, results

of a questionnaire survey of 2,541farming households in the middlereaches of Yangtze valley showed that87% of households was affected andsuffered average losses of $1,330per household Similar calculationswould need to be undertaken indifferent countries and regions toobtain suitable working figures fordamage

Calculating the value of carbonfixation function

It is relatively easy to estimate thetotal fixation of carbon per hectare

of forest and consequent mass ofoxygen released into the atmosphere

It is more difficult to translate thesefigures into real values

Using the cheapest industrial cost

of converting C02 into carbon andoxygen provides unrealistically highvalues for this function In addition, thebenefits of the function are spread allover the globe and not just felt locally.The easiest thing to do is to usefigures from other people’s studiesand, meanwhile, hope that betterstudies will calculate a fairer andmore acceptable figure for use inestimating this service Many studiesuse the figure of Frankenhauser(1994) of US$ 20 marginal cost perton of carbon released into the at-mosphere

Figure 2 Relationship of forest cover and dry season riverflow of

Yangtze Sub-Catchments in Sichuan

Figure 3 Dry season riverflow against forest cover in 16 Sichuan branches of the Yangtze River.

Dec Jan Feb Mar Apr M a y Jun Jul Aug Sep Oct Nov Dec 0

2 4 6 8 10 12 14 16

riverflow rainfall

Estimating the value for genepool

conservation

If nature were a registered

com-pany with patents on all biological

products, we would be paying

roy-alties for all uses of both wild and

domesticated species This would be

considered a fair and normal

prac-tice that is affordable It is the way

the rest of the global economy works

We do indeed have to make

consid-erable economic investments to

pre-serve biodiversity and the source of

all our genetic resources It is only fair

that we should apply a similar sort of

virtual royalty in estimating service

functions Normal commercial

roy-alty rates vary but a figure of 3% is

not unreasonable

In the case where a particular

catchment contains species of known

value or use such as wild relatives of

key crops, we can make the claim for

high royalty values In most cases,

however, we lack the details and can

only apply the most general estimates

Try applying a 3% royalty on all

agricultural, plantation, fishery and

animal husbandry production of the

region and dividing the royalty

val-ues evenly over the remaining

natu-ral habitat

Calculating tourism values of

forests and wild places

Ecotourism is one of the fastest

growing economic sectors worldwide

As human population, longevity and

leisure time rises and the number of

unspoiled wild destinations decreases,

this brings about an ever-increasing

value

Even if the site under question is

Dr John R MacKinnon is the European Co-Director of the ASEAN Regional Centre for Biodiversity Conservation (ARCBC).

References Biodiversity Working Group of

CCICED 2001 Use of natural vegetation in restoring China’s degraded environment (in Chinese) Beijing.

Constanza, R., R d’Arge, R Groot, S Farber, M Grasso, B Hannon, K Limburg, S Naeem, R.V O’Neill, J Paruelo, R.G Raskin, P Sutton and M Belt.

1997 The value of the world’s ecosystem services and natural capital.

Nature 387, 253-260.

Frankenhauser, S 1994 Evaluating the Social Costs of Greenhouse Gas Emmissions Working Paper GEC 941 cSerge University of London.

Hewlett, J.D 1982 Principles of

forest hydrology University of Georgia

Press, Athens, Georgia, USA.

Zhongwei Guo, Xiangming Xiao &

Li Dianmo 2000 An Assessment of ecosystem services: Water flow regulation and hydroelectric power

production Ecological Applications, 10(3): 925-936.

already well developed for tourismand earns considerable income, it islikely that using current prices andreturns will greatly underestimate thisvalue It is probably better to makefairly long-term projections of tour-ism revenues and remember thattourism brings far more money intothe regional economy than actuallyfalls at the final destination site Thebig money is in international andlong-distance transport, hotels, meals,etc and not in entrance fees to forestparks Most studies of the ‘willingness

to pay’ type reveal that a largeproportion of visitors would be will-ing to pay much higher entrance fees

if they had to The noble desire oflocal authorities to keep entrance feesdown or even allow free access towild areas for educational and rec-reational purposes should be re-garded as a type of subsidy

People visit a region because ofits overall pleasant environment -clean waterways, clean air and finescenery They may not set foot in theforest at all but the contributing value

of good forests should be included

Again the easiest way to estimatesuch values accruing to an individualcatchment would be to estimate over-all touristic revenues expected in theregion and divided evenly over thenatural and cultural sites in that re-gion, depending on where the focus

of tourist attention may be (naturalversus cultural or a balance of both)

Conclusion

More conducted analyses of thistype can be very useful in influencinglocal decision makers Table 2 shows

the results of a small case study thatrevealed that the indirect values offorest and water catchment were farmore valuable than the timber rev-enues The study was important inpersuading local authorities to pre-serve forests and not clear them forconversion to orange orchards asoriginally planned A wider review ofbenefits helped to persuade theChinese Government to ban logging

in the entire Yangtze and Yellow Rivervalleys Results of studies conductedafter the floods in Thailand persuadedthe Thai Government to ban thelogging of natural forests

Several countries have tried toestimate the total value of allbiodiversity and biodiversity servicesand have been surprised to reachfigures that are equal to their entireGDP The provocative global figure

of biodiversity service values

calcu-lated by Constanza et al 1997 is $

12 trillion (with 38% accounted for

by forests) This figure is also proximately equal to all globalGDP.#

ap-Direct economic values 196.4 Indirect economic values 588.0

Global benefit 1056.4 Soil protection 291.5

Silt detained 7.8

Total accounted value 1840.8 Organic material 6.7

N,P,K Fertility 267.7

Table 2 Economic values of products and services, Xingshan county, Hubei Province,

China (in RMB million).

How markets alter the effectiveness of enforcement, payments and agricultural

projects near protected areas

#By Heidi J Albers and Jeffrey Muller

Introduction

Protected Area Managers

(PAMs) in developing

coun-tries are mandated by their

governments to conserve and

pre-serve the natural resources within a

protected area (PA) Rarely, however,

do they have the support of the

people living near the PA unless there

are projects or policies aimed at

com-pensating these people (Tisdell,

1995; Wells and Brandon, 1992)

When a PA is established, these

people often incur losses given their

traditional reliance on resources

within the PA, such as fuelwood and

foods Conflicts between PAMs and

local people abound in many

coun-tries due to the clash of desired use

and preservation of PA resources To

conserve PA resources, PAMs

de-velop management plans that volve discouraging extraction bylocal people PAMs may or may notface requirements or desires toaddress the welfare losses imposed

in-on local people by their policies

Both historically and currently,PAMs enforce their mandate bypatrolling the PA and, punishingviolators In the past, PAMs have beenrelatively successful in conservingresources with these enforcementpolicies (Bruner, Gullison, Rice, andFonseca, 2001), but the resultingconflict with local people and thesubsequent political ramificationshave led the PAMs and other con-servationists to search for othermethods to conserve PAs In the1980s, various forms of integratedconservation and development

projects (ICDPs) were suggested toincrease PA conservation while im-proving local welfare (Wells andBrandon, 1992) With the failure ofmany of these projects, conserva-tionists have recently argued forconservation payments to ruralpeople in exchange for their com-mitment to conserve resources(Ferraro and Simpson, 2000)

We examine the incentives forconservation and the impact onwelfare of three of the most com-mon policy options: enforcement,agricultural development projects,and conservation payments Howhouseholds respond to any particu-lar policy depends critically upon theirability to interact with labor andresource markets Accordingly, thePAM’s best management plan dif-

fers across settings that have or do

not have markets In some cases,

the management plans may include

a group of policies, with some

geared toward reducing extraction

and others aimed at compensating

local people for their reduced

ex-traction

Decisions

The PAMs seek to maximise

con-servation of the PA’s natural resources

while neighbouring households

ex-tract these natural resources either

for their own consumption or for sale,

depending on market conditions

Labor market conditions may

con-strain neighbouring households to

their own labor supply Such

con-straints affect how households react

to conservation policies and should

be considered when the PAMs

choose which policies to implement

within their management plans

Rural areas of developing

coun-tries, such as agricultural villages

neighbouring remote PAs, often lack

markets For example, resource

markets, such as those for fuelwood,

will not exist if the transaction costs

of getting resource products to

dis-tant markets outweigh the benefits.1

Villages without resource markets

must rely on subsistence production

for resource products such as

fuelwood Similarly, if a village’s

laborers are particularly similar in

their skills and have similar

technol-ogy, or if a village contains few

landless people and its remoteness

discourages in-migration, a focus on

subsistence agricultural activities will

discourage active labor markets

(Binswanger and McIntire, 1987;

Binswanger and Rosenzweig, 1986)

Villages near PAs often meet the

classic criteria for missing labor

markets: they are far removed from

employment centers, consist largely

of agricultural households, and have

a history of land abundance and a

small, landless population.2

Be-cause remote villages with missing

markets abound in developing

coun-tries, PAMs should consider the role

of the market setting when ing their management plan

To create a framework for ing at household decisions, wedefined three market settings In thecomplete markets case, the house-hold has access to labour and re-source markets These householdscan buy or sell labour and extractedresources with ease In the missinglabour market setting, the householdcannot buy or sell labour, and in themissing resource market setting, thehousehold cannot buy or sell ex-tracted resource products Thesethree scenarios represent extremecases, with some real-world situa-tions, such as households facinglarge transaction costs to interact withmarkets, falling in between thesesettings

look-How Households Decide How Much to Extract in Different Market Settings

Our framework for looking athousehold decisions relies on agroup of economic models known

as agricultural household models Inthese models, a household makesdecisions about how much time tospend on various agricultural activi-ties in order to maximise their wel-fare: a household allocates a fixedamount of time for agricultural pro-duction, off-farm labour, resourceextraction from a protected area,and leisure.3 The household’s wel-

fare is a function of the amount ofagricultural products and extractedresource they consume as well asthe amount of leisure time they have

In a complete market setting, thehousehold can move its labouracross activities until they get thesame benefit from each use of time

In economic parlance, the hold gets the highest welfare byequating the benefit it receives from

house-a mhouse-arginhouse-al hour spent in ehouse-ach house-tivity Missing markets decrease theflexibility in the household’s time al-location decision For example, whenthe market for fuelwood is missing,households are constrained to ex-tract the same amount of wood thatthey use Similarly, when the labormarket is missing, households can-not hire nor sell labor In both cases,households cannot set the marginalbenefits of activities equal to eachother because they face other con-straints caused by the missing mar-kets

ac-1 In a given village, markets may exist for some but not all resources For example, villagers may not interact with fuelwood markets because the high transport costs of this bulky item will not

be covered by the price The same villager, however, may interact with a market for tropical birds because lower transport costs and high prices make market interaction profitable.

2 Protected areas are often created in remote areas with low population densities and high land abundance per person.

3 For a well-developed economic model and analysis, see Muller (2000) and Muller and Albers (2002).

The PAM’s Decision

In the stylized framework

consid-ered here, the PAM’s goal is to

minimise the amount of extraction,

and the resource degradation it can

cause, in the protected area The

PAM may or may not consider the

impact of their decisions on local

households The PAM considered

here has a fixed budget and can

use a mix of agricultural

develop-ment projects, enforcedevelop-ment, and

conservation payments to achieve his

or her goal

Impact of Each Policy on

Extrac-tion Decision

Enforcement

In our decision framework,

households respond to increased

enforcement by reducing extraction

because the expected benefits of

extracting decrease as the chance

of being caught increases In the

complete market setting, these

house-holds can buy the resource on the

market and can redirect time

for-merly spent on extraction to

agricul-ture or to leisure Although people

can easily adjust and substitute other

activities in this setting, the reduced

access to resources decreases the

household’s welfare

In a missing labour market,

households would expect to get less

from extraction when enforcement is

increased but would not be able to

adjust their activities as in the case

with complete markets The

house-holds do not have the option of

selling the time formerly spent on

extraction and so they may not

re-duce their extraction by as much In

our decision framework, the

in-creased enforcement can, in extreme

cases, lead to enough of a decline

in welfare that households need to

do more agriculture and extract

more resources from the PA The

households’ lack of flexibility in their

choice of what to do with their time

reduces the effectiveness of the PAM’s

enforcement policy and may even

lead to more extraction

In the missing resource market

setting, households expect to bringhome fewer benefits from extractionwhen enforcement is higher but,again, they cannot react by reduc-ing extraction as much as in thecomplete markets setting In thissetting, the household’s welfare re-lies on the extracted resource but thehousehold cannot buy the resource

in a market The household, then,reduces extraction and allocates thattime to other activities but does notreduce extraction by as much as theywould if they could buy the resource

Again, the PAM’s enforcement policy

is less effective in the missing source market setting but reducesboth extraction and welfare

re-Conservation Payments

One fairly new policy is for PAMs

to pay households if little extractionoccurs in the household’s “assigned”

section of the PA In our framework,

if households are caught extractingfrom the PA, they do not receive thepayment However, as in the enforce-ment case above, the household iscaught breaking the contract onlysome fraction of the time In thecomplete market setting, conserva-tion payments have the desired ef-fect of reducing extraction andthereby conserving resources House-holds can turn to the market to buythe resource and can reallocate theirextraction time to agricultural labour

or leisure Because households canuse the payment to buy the desiredamount of the resource from themarket and have more time forincome-generating activities or forleisure, conservation payments wouldincrease rural welfare

In the missing labour market ting, the conservation payment in-creases the expected cost of extrac-tion, which makes extraction lessdesirable and the household reallo-cates time to agriculture and leisure

set-As with the enforcement policy, thisreduction in extraction is lower than

it would be if the household couldsell its labour on the labour marketbut, because the payment makes the

household better off, the householdchooses more leisure and less ex-traction than in the enforcement case.Conservation payments do less todecrease extraction in the missinglabour market setting than they do

in complete markets, but they reduceextraction and increase welfare

In the missing resource marketsetting, a conservation paymentagain provides an incentive for thehousehold to reduce labour allo-cated to extraction (although not by

as much as in the complete marketsetting) The added income from thepayment, however, creates an in-creased demand both for leisure andthe resources, and the household canonly meet that resource demandthrough increased extraction be-cause the household cannot buy theresource In some situations in ourdecision framework—such as wherethis demand increase is large andthe probability of being detected andthus not receiving the payment islow—payments may actually in-crease extraction Those situationsmay be rare in practice but thereduction in extraction associatedwith conservation payments is cer-tainly lower in the missing resourcemarket setting than in the completemarket setting Household welfareincreases in response to conserva-tion payments

Agricultural Development Projects

In our framework, agricultural velopment projects are any project

de-or policy that increases the tivity of agriculture, such as providingfertilizer, equipment, irrigation, or newhigh-yielding crops In the completemarket case, projects that increase theproductivity of agriculture have noeffect on the amount of resourcesextracted The household will notreallocate time away from resourceextraction and toward agriculturallabour in response to these policiesbut will instead buy more, or sell less,labour on the labour market Suchprojects, while welfare-increasing,have no conservation effect

produc-In the missing labour market

set-ting, however, such projects increase

the marginal productivity of labour

in agriculture, which increases

house-hold demand for agricultural labour

Because the labour market is

miss-ing, the household cannot buy the

additional labour and therefore

re-allocates labour from extraction to

agriculture This is a common

mo-tivation behind including agricultural

development in ICDPs, but it requires

the labour market to be missing to

be effective Because the project

cre-ates more income, households also

increase leisure by further reducing

their time in extraction In addition,

these projects increase rural welfare

In the missing resource market

setting, as in the complete market

case, these projects do not

encour-age a shift of labour from extraction

to agriculture because the household

can hire labour on the market to take

advantage of the increased

agricul-tural productivity Furthermore, these

projects increase income and thus

the demand for the resource, which,

with the resource market missing, can

only be met through increased

ex-traction Although the projects

in-crease rural welfare, with a missing

resource market, agricultural

devel-opment projects cause more

extrac-tion and less conservaextrac-tion

Overall

The household’s response tothese three policies depends on themarket setting because the availabil-ity of markets determines the extent

to which households can adjust theamount of time they put into differ-ent activities Both enforcement andpayment policies are less effective inthe missing market cases Agricul-tural development projects are onlyeffective as a conservation policywhen labor markets are missing Inthat setting, agricultural developmentprojects can work as “conservation

by distraction” by pulling labouraway from extraction activities andinto agricultural activities

Discussion

In determining the best ment plan to maximise PA conserva-tion, the PAM should consider thereaction of local people to eachpolicy in addition to considering thepolicy’s cost In that decision, the PAMmust recognize that local people re-act differently to policies in variousmarket settings Reactions are affectednot only by whether a market is miss-ing but also which market is missing

manage-In other words, the market setting termines the cost effectiveness of in-dividual policies and the make-up ofthe best management plan

de-When either market is missing,the PAM should recognize that en-forcement is less effective than in thecomplete market setting Missingmarkets also reduce the effectiveness

of conservation incentives created bypayments In our decision frame-work, the market setting also deter-mines whether agricultural develop-ment projects increase, decrease, orhave no effect on conservation inneighbouring PAs Only in the miss-ing labour market case do agricul-tural development projects encour-age conservation, because labourreallocation forms an explicit link toconservation behavior If a PAM fails

to consider the market setting, his orher policies will be less effective thandesired and can even backfire.The analysis here demonstratesthat the market setting (whethercomplete markets, missing labourmarket, or missing resource market)plays a major role in determiningthe best management plan for a PA

in a developing country The geneity of market settings across theworld, and even within one country,implies that no single policy orportfolio of policies will prove besteverywhere Even within one pro-tected area, the heterogeneity ofmarkets among villages will deter-mine whether that area’s PAM must

Heidi J Albers works for Resources for the Future ( Albers@rff.org) while Jeffrey Muller is with the World Bank References

Binswanger, Hans P and Mark R Rosenzweig (1986) “Behavioral and Material Determinants of Production

Relationships in Agriculture.” Journal of Development Studies 2222 22(3):503-9 April.

Binswanger, Hans P and John McIntire (1987) “Behavioral and Material Determinants of Production Relationships in Land-abundant Tropical

Agriculture.” Economic Development and Cultural Change 3636 36(1):73-99 October.

Bruner, Aaron G., Raymond E Gullison, Richard E Rice, and Gustavo A.B da Fonseca 2001.

“Effectiveness of Parks in Protecting

Tropical Biodiversity.” Science vol 291

(5): 125-128.

Ferraro, Paul and R David Simpson (2000) “The Cost-Effective- ness of Conservation Payments.” RFF Discussion Paper 00-31 July 26 pp Muller, Jeffrey 2000 Managing Protected Areas in Developing Coun- tries Ph.D Dissertation Department of Economics, Stanford University 199 pp Muller, Jeffrey and Heidi J Albers.

2002 “Enforcement, Payments, and Development Projects Near Protected Areas: How the Market Setting Determines What Works Where.” In review.

Tisdell, C A 1995 Issues in Biodiversity Conservation including the

Role of Local Communities mental Conservation 2222 22 (3):216-222, 228.

Environ-Wells, M P., K.E Brandon, K E.

and L Hannah.1992 People and Parks: Linking Protected Area Manage- ment with Local Communities Washing-

ton, D.C.: World Bank, WWF, and USAID: 99 pp.

tailor the management plan to

spe-cific villages or apply the same

policies to the entire area Whether

at the macro level of countrywide

policy or at the micro level of a

specific PA, the market setting

deter-mines the best mix of enforcement,

agricultural development, and

pay-ment policies

Many PAMs recognize that

pro-moting conservation and limiting

extraction in PAs places a burden of

lost resource access on local

house-holds In these cases, PAMs have

looked for policies that increase

conservation and rural welfare

Agricultural development

programmes and payment policies

have been described as “win-win”

policies that encourage both

con-servation and the maintenance of or

increase in rural welfare However,

conservation payments may not

in-duce conservation in a village that

has a missing resource market, and

agricultural development projects

decrease extraction only in villages

that lack labour markets Because

both policies increase welfare in every

market setting, it may be more

fruit-ful to consider their contribution to

welfare in the context of a

manage-ment plan consisting of a portfolio

of policies rather than considering

their contribution to conservation

alone

Using this broader definition of

a management plan, the PAMshould make two interrelated deci-sions regarding policies that mostcost effectively reduce extraction in

a given market setting, and policiesthat most cost effectively compen-sate local people for that reducedextraction The resulting manage-ment plan can include a mix ofpolicies aimed at conservation andpolicies aimed at compensation Thediscussion here indicates that such aportfolio of policies is likely to in-clude conservation payments tocompensate for losses caused byenforcement and, in the missinglabour market setting, to includeagricultural development projects asboth compensation and conserva-tion tools

Whenever enforcement is theprimary tool in resource preserva-tion, this framework “predicts” con-flict between local people and PAMsbecause enforcement always inflictswelfare losses on local people Ouranalysis suggests that because pureagricultural development projectsonly reinforce explicit links to con-servation actions in settings withmissing labour markets and have noeffect or, worse, a negative effect onconservation in other market settings,they will not lead to conservationacross many settings For the newer

conservation payment programmes,this framework predicts they will notprove as effective in creating con-servation in areas with missingmarkets, particularly those that aremissing resource markets The analy-sis also suggests that implementingpayments and agricultural develop-ment projects as compensationmechanisms rather than pure con-servation mechanisms can maintainwelfare and thereby diffuse some ofthe conflict between local people andprotected area managers.#

A profile of the protected

area system of Singapore

#By Sahlee C Bugna

General information

The Republic of Singapore is

lo-cated off the southern tip of

the Malay Peninsula and is

composed of one major and more

than 50 adjacent islands, with a total

area of 648 km2 The main island

is separated from Malaysia by the

narrow Johor Strait on the north, and

from Indonesia’s Riau Archipelago

by the Singapore Strait on the south

The country has no prominent relief

features, although the centre of the

island has a series of low hills of

granite and igneous rocks, the

high-est of which is Bukit Timah at 176

metres In the west and southwest of

the island is a series of low ridges

formed from sedimentary rocks The

coastline is mostly flat and muddy

although 5,400 ha of this have now

been covered by extensive landfill

Numerous short streams, including

the Singapore River, drain the island

(FAO, 2001)

Before the British

coloniza-tion in 1819, most of the island

was covered with 82% lowland

evergreen dipterocarp

rainforest, 13% mangrove and

5% freshwater swamp By 1890,

about 90% of the vegetation

had already been cleared

Singapore is currently largely

urban in character, although

some natural rainforest can be

found in the Bukit Timah

Na-ture Reserve and the adjacent

Central Catchment Area If

Singapore had retained its

natural vegetation, the country

should have scored high in terms

of biological richness

Unfortu-nately, the loss of natural

habi-tat also meant the

disappear-ance of most of the country’s

wildlife Bird fauna is recorded

at 295 species, and only two

mammals and three birds listed inthe IUCN red lists occur in Singapore

There are also no known EndemicBird Areas in the country(MacKinnon, 1997)

Since Singapore has very littlenatural resources, most of its envi-ronmental problems are character-istic of a highly urbanised city Theseinclude pollution from industriali-sation, urbanisation and the protec-tion of nature areas (Tan, 1998)

Major threats to protected areas arethe possibility of degazettement;

increasing recreational use, and thesmall size of the reserves, whichincreases edge effects, isolation andextinction (MacKinnon, 1997)

The protected area system

Legal frameworkForest protection in Singaporebegan in the 1840s, when thegovernment “absolutely prohibitedthe further destruction of forests on

the summits of hills” Forest reserves,first established in 1882 when theForest Department was created, weremeant to supply timber and fire-wood, prevent soil erosion, protectwater supply, and improve the cli-mate In 1936, however, all existingreserves, except for Bukit Timah andparts of the mangroves at Pandanand Kranji, were revoked andregazetted in 1939

In the years that followed, anumber of laws were passed estab-lishing protected areas for variouspurposes Nature reserves were cre-ated through the 1951 Nature Re-serves Act Bird sanctuaries wereestablished through the 1981 Birds(Sanctuaries) Order, which waspassed pursuant to the Wild Animalsand Birds Act The Parks and TreesAct of 1985 provided for publicparks and the formation of the of-fice of the Commissioner of Parksand Recreation The National ParksAct of 1990 repealed the Nature Re-serves Act, made provision for na-tional parks and nature reserves, andestablished the National Parks Board(MacKinnon, 1997)

In 1971, the government proved the Concept Plan, whichbroadly outlines land use policies andaims to make Singapore a TropicalCity of Excellence (FAO, 2001) Thesewere then translated into detailedproposals for local areas calledDevelopment Guide Plans (DGPs),the implementation of which is coor-dinated by the Master Plan Commit-tee (MPC) composed of all publicauthorities in Singapore The basic

ap-The Summit Path One of the Many Detours from the Main Path

Convention on Biological Diversity – 1995 Convention on International Trade in Endangered Species of Wild Fauna and Flora – 1986

Ratification of Agreements Related to Biodiversity Conservation: