Natural Capital: Counting it in by Alice Joan G. Ferrer
- 1. Natural Capital: Counting It In Alice Joan G. Ferrer University of the Philippines Visayas PPI SEMINAR WORKSHOP ON ENVIRONMENTAL REPORTING WITH FOCUS ON VALUATION OF NATURAL CAPITAL in partnership with NICKEL ASIA CORP. Hotel Alejandro, Tacloban City February 8-10, 2017
- 2. Outline 1. Development challenges 2. Defining natural capital ecosystem services 3. Interdependence of nature and people 4. Valuing Nature • Ecosystem service valuation • Natural capital accounting 5. Environmental issues in the Visayas region Photos by A. Ferrer 2
- 3. Economic expansion at the cost of degrading the environment future is uncertain! Development Challenges Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 3
- 4. Development Challenges 1. improving living standards of the people, particularly the poor 2. achieving a sustainable population 3. ensuring sustainability of the ecosystem Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 4
- 5. Development Challenges production of marketed commodities sustainable use of natural capital necessary to sustain human well-being Fundamental asymmetry at the heart of economic systems Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 5
- 6. Development Challenges sustainable use of natural capital production of marketed commodities sustainable use of natural capital production of marketed commodities integrating this information into decision and policy contexts, transforming the use of natural capital through better understanding of the role that natural capital plays in sustaining human well-being and changing institutions, policies, and incentives to reward long-term stewardship + + Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 6
- 7. Development Challenges sustainable use of natural capital production of marketed commodities invisibility of natural capital and ecosystem services in policies, decision-making - micro, market prices - macro levels, national capital accounts Degraded natural capital and underprovided ecosystem services 7
- 8. Natural capital Essential Elements of the Economy https://www.forumforthefuture.org/proj ect/five-capitals/overview. Downlooaded 6/2/2017 buildings and machines knowledge, skills, experience, and health plants, animals, soil and minerals, ecosystem services trust, norms, relationships and institutions monetary wealth Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 8
- 9. Capital interact to generate goods and services Availability of fish stocks high-quality habitat Boat fishing gear Fisher RA 10654 Photo by A. Ferrer Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 9
- 10. Natural capital “ ‘Natural capital’ refers to the living and nonliving components of ecosystems—other than people and what they manufacture— that contribute to the generation of goods and services of value for people” (Guerry et al 2015) Ecosystem the biological community that occurs in some locale, and the physical and chemical factors that make up its non-living or abiotic environment. minusNC = Fisher, boat, gear Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 10
- 11. Ecosystem services “Ecosystem services are the conditions and processes of ecosystems that generate—or help generate— benefits for people” (Guerry et al 2015) • Final - produce benefits directly, such as seafood • Intermediate - underpinning final services; e.g., the generation of habitats that support fish populations Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 11
- 12. Types of ecosystem services Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 12
- 13. Types of ecosystem services • the products that can be extracted from or harvested in ecosystems • those that provide basic provisions such as food, water, fuel, and fiber. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 13
- 14. Types of ecosystem services • those that regulate natural processes such as climate control, air and water circulation and purification, waste decomposition, and disease mitigation. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 14
- 15. Types of ecosystem services • those that provide intellectual, recreational, and spiritual benefits to people, including outdoor recreation and scientific discovery • the non-material benefits from ecosystem Photos by A. Ferrer Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 15
- 16. Types of ecosystem services • Ecosystem services that are necessary for the production of all other ecosystem services or those that provide support to provisioning and regulating services such as nutrient cycling, plant pollination, production of atmospheric oxygen, and provisioning of habitat. Photos by A. Ferrer Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 16
- 17. Interdependence of nature and people Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital MA 2005 17
- 18. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 18
- 19. Valuing nature • Values are not readily captured in markets. • Regulating and supporting services flowing from natural ecosystems are undervalued by society • Full value is not reflected in policy trade-offs and economic choices. • Many human-initiated disruptions of ecosystems are difficult to reverse on a “human relevant” timescale • A continued lack of awareness will dramatically alter the Earth’s remaining natural ecosystems within a few decades. • Poorly managed Natural Capital –an ecological, social and economic liability . Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 19
- 20. Valuing nature Ecosystem goods and services Private goods and services • For private goods, prices reflect relative scarcity and people’s willingness to pay • Prices for environmental goods do not exist or do not reflect full value of resource • Economic values need to be derived Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 20
- 21. Valuing nature • It is the latter view that justifies the use of economics when discussing the value of the environment. • Economics is inherently anthropocentric in its focus: it deals with how and why people behave. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital Intrinsic value instrumental value nature has value in its own right nature has value only to the extent that (some) people value it 21
- 22. Valuing nature Economic value – (instrumental value) (Freeman, 2003) • The economic value of something is a measure of its contribution to human wellbeing. • The economic value of resource-environment systems resides in the contribution that the ecosystem functions and services make to human well-being. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 22
- 23. Valuing Nature --- Ecosystem service Valuation • Total economic value (TEV) (Croitoru, 2007). Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital http://www.mdpi.com/2073-445X/3/3/557/htm 23
- 24. Valuing Nature • Total economic value (TEV) • Direct Use Value • Output/services can be consumed directly • Market prices are available for quantification and monetization Extractive uses • Fisheries • Aquaculture • Mariculture • Fuelwood, charcoal • Aquarium trade • Construction materials • Curio trade • Pharmaceutical • Genetic material Non-extractive uses • Tourism • Recreation • Research • Education • Aesthetic Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 24
- 25. Indirect Use Value • Functional benefits that are enjoyed indirectly • There are no direct market prices since these values are provided outside the market system. Biological support to: • fish • marine mammals • sea birds • turtles, marine reptiles • other ecosystems Physical protection to: • coastline • navigation • other ecosystems • Global life-support • -carbon storage Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 25
- 26. Option Value • This is the potential future direct and indirect uses of a natural system. • If there is uncertainty regarding future use, then the option value is the ‘risk premium’ paid to avoid irreversible damage. • The premium is the additional amount that an individual would be willing to pay above the current ‘price’ to keep the option available for possible future use. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 26
- 27. Non-use Value • Quasi-option value – Avoiding irreversible future damage bestows value today, e.g., expected new information. • Bequest value – This is related to the value derived from preserving the natural heritage for use by future generations. • Existence value – It arises from the satisfaction of merely knowing that an ecosystem or species exist, regardless of whether they will be used. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 27
- 28. TEV of mangroves Direct use –charcoal and poles –fish and prawns (pukat surung) –mud crabs –tourism –wildlife –traditional, non-traded use Indirect use –nursery role (offshore fish and prawns) –carbon sequestration –protection from erosion •Option value –biodiversity •Non-use value Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital Photos by A. Ferrer 28
- 29. TEV of wetlands Direct Use Indirect Use Option Existence Fish Nutrient retention Potential future uses Biodiversity Agriculture Flood control Future value of information Heritage Fuel/Wood Storm protection Bequest Recreation Groundwater recharge Wildlife Microclimatic Harvesting Shoreline protection Heat/energy Stabilization Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital https://www.epa.gov/wetlands 29
- 30. TEV of coral reefs • Direct use – Fisheries – Tourism – Research • Indirect use – Shoreline protection – Carbon sequestration • Option value – –Biodiversity value Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 30
- 31. Ecosystem Valuation Methods Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 31
- 32. Sample: Common valuation techniques for goods and services of coral reefs Technique Goods and Services Directly applicable market techniques Loss of earnings/human capital approach (HC) Tourism/recreation Change in productivity/Effect of production Fisheries/ornamental use/tourism Stock (houses, infrastructure, land) at risk Coastal protection Preventive expenditures Coastal protection Damage Cost Coastal protection Replacement Cost Coastal protection Revealed preference techniques Travel cost approaches Tourism/recreation Hedonic pricing method Amenity value Stated Preference Techniques Contingent valuation methods Cultural services, biodiversity Choice experiments NOAA Coral Reef Conservation Program, 2013 Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 32
- 33. Valuing Nature – Natural Capital Account • an important additional tool for informing sustainable development. – Highlight areas of developing “natural capital deficit” that may require policy intervention • Accounting frameworks – Inclusive wealth – attempts to value all forms of capital assets – human, manufactured, social, natural capital. • Means that future generations are endowed with a larger “productive base” to support human well-being. – Can be used as gauge of sustainability, although accurate measurement of the value of capital assets is challenging. Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 33
- 34. Recent advances - SEEA • Internationally agreed statistical framework to measure environment and its interactions with economy • Adopted as international statistical standard by UN Statistical Commission in 2012 • Developed through inter- governmental process • Published by UN, EU, FAO, IMF, OECD, WB Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 34
- 35. SEEA: A Statistical Standard • Countries are “encouraged to implement the standard” • International organizations have obligations to assist countries in implementation • Implementation strategy adopted by Statistical Commission in March 2013 • Data reporting mechanism will be established Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 35
- 36. • SEEA framework – Information is vital …and it needs to be integrated – The economy impacts on the environment and the environment impacts on the economy • To understand these linkages we need to integrate environmental and economic information • This is the explicit purpose of the SEEA Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital SEEA: A Statistical Standard 36
- 37. 37 Territory of reference Environment Natural Capital (stocks) -Land -Water -Ecosystems -Soil -Etc. Services & Resource flows -Materials -Energy -Water -Ecosystem services -Etc. Economy Activities -Production -Consumption -Accumulation Instruments -Financial/Monetary -Taxes/subsidies -Financing -Resource rent -Permits Actors -Enterprises -Households -Government -Non-profit institutions 37 The SEEA Framework Outside territory of reference Outside territory of reference Analytical and Policy Frameworks -Productivity analysis -Natural resource management -Climate change -Green Growth/Green Economy Land/ Resource use/ Ecosystems Emissions/ waste
- 38. Land account SEEA-EEA integration framework Integration of ecosystem services in macroeconomic aggregates, like GDP and NDP Raw data collection, processing and harmonization Consistent physical and monetary asset accounts Land cover/use Accounting units Administrative reg., habitats, ecoregions Ecosystem services in monetary and physical terms Amenity Risks 38
- 39. What are the uses of natural capital accounts? • Linking environmental and socio-economic data is essential for policymakers • Enables analysis of the impact of economic policies on the environment and vice versa • Provides a quantitative basis for policy design • Identifies the socio-economic drivers, pressures, impacts and responses affecting the environment • Supports environmental regulations and resource management strategies • Provides indicators that express the relationships between the environment and the economy Development challenges nature and people VN-Ecosystem service valuation VN – NCA Envi issuesNatural capital 39
- 41. Photo by A. Ferrer Closed fishing season for sardines in the Visayan Sea (Nov 15-Feb 15)
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- 53. References • Anne D. Guerrya, Stephen Polasky, Jane Lubchencof, Rebecca Chaplin-Kramer, Gretchen C. Daily, Robert Griffin, Mary Ruckelshaus, Ian J. Bateman, Anantha Duraiappah, Thomas Elmqvist, Marcus W. Feldmanm, Carl Folkein, Jon Hoekstra, Peter M. Kareiva, Bonnie L. Keeler, Shuzhuo Li, Emily McKenzie, Zhiyun Ouyang, Belinda Reyer, Taylor H. Rickett, Johan Rockström, Heather Tallis, and Bhaskar Vira.2015. Natural capital and ecosystem services informing decisions: From . promise to practice. PNAS. 112 (24). 7348-7355. • Croitoru, L. 2007. Valuing the non-timber forest products in the Mediterranean region. Ecological Economics 63:768-775. • Freeman, Myrick A. 2003. The measurement of Environmental and Resource values. Second Edition. USA: Resources for the Future. • Forum for the Future. The Five Capitals. https://www.forumforthefuture.org/project/five-capitals/overview • Millennium Ecosystem Assessment 2005. 54