Interim Report - TEEB

3TOWARDS A VALUATION FRAMEWORK
The previous chapter demonstrated the many
dimensions of the continuing decline of ecosystems
and biodiversity, its significant human impact and
the urgent need for action. Here we consider how the failure
to recognize the economic value of wild nature has
contributed to this continuing decline. We evaluate the
challenges of placing economic values on the benefits of
ecosystems and biodiversity that are not currently captured,
and consider vital issues of ethics and equity which need to
be at the heart of such evaluation. This chapter identifies
the difficulties in evaluating ecosystem services and the
main aspects of work we will carry out in Phase II, when
we will focus on addressing these difficulties while firming
up both a preferred framework and methodologies for
estimating ecosystem and biodiversity values.
MANY FAILURES, ONE PROBLEM
Biodiversity loss and ecosystem degradation continue,
despite the fact that policy makers, administrators, NGOs
and businesses around the world have been seeking ways
to stem the tide. There are many reasons for this, but
perverse economic drivers as well as failures in markets,
information and policy are significant factors. Markets tend
not to assign economic values to the largely public benefits
of conservation, while assigning value to the private goods
and services the production of which may result in
ecosystem damage.
The term market failure can cover anything from the lack of
markets for public goods and services (called public goods
failure, e.g. absence of “markets” for species conservation
or for most of the regulating and supporting services of
ecosystems) to imperfections in structure or process around
markets which cause inefficiency and distortions (e.g. it can
be argued that some price distortions in today’s carbon
markets are attributable to timid emissions caps).
Furthermore, there is potential for market-based instruments
to produce results that are socially unacceptable – carbon
markets could be said to have helped legitimize global
greenhouse gas emission levels (42 billion tonnes), that are
perhaps five times the Earth’s ability to absorb such gases
(Stern 2006).
The size of the challenge of market failure should not be
underestimated: for some services (e.g. scenic beauty,
hydrological functions and nutrient cycling) it is difficult even
to obtain a profile of demand and supply. There is an element
of information failure here which leads to market failure.
There are many cases across the globe where information
failure is overcome by measures such as environmental
impact assessments (EIA). They can provide arguments that
lead to less destructive options being taken. The viability of
road-building projects connecting Mexico and Guatemala
through the Mayan forest (see Box 3.1) was challenged on
economic grounds. In India, information provided to the Indian
Supreme Court on the value of ecosystems and biodiversity
helped enshrine rates of compensation for forest conversion
that will make it more difficult for approving authorities to take
decisions that destroy public value. Nevertheless, information
failure is common. For example, local authorities grant land
conversion permits that lead to the fragmentation of habitats
or damage to ecosystems for marginal private economic gain.
Decision makers often have insufficient facts, tools,
arguments or support to take a different decision and avoid
biodiversity loss. This is particularly unfortunate since much
of the lost biodiversity was of greater benefit to the region than
the private gains. There are many cases of local economy and
local societal losses in the interests of short-term private gain.
Lack of secure property rights is another cause of market
failure. Many people in developing countries may have weak
Box 3.1: Mayan Forest Road Projects: market
failure from information failure
Road-building projects in the Mayan Biosphere
Reserve to connect Mexico and Guatemala were
subjected to a cost-benefit evaluation. Up to an
estimated 311,000 hectares of jaguar habitat were
found to be at risk of deforestation due to these
projects. Some of the projects were shown to have
negative rates of return on investment on the basis of
project economics, whilst others would be negative if
only the carbon dioxide emissions (225 million tonnes
over 30 years) were accounted for. A fuller evaluation
including biodiversity values would have tilted the
conclusions more firmly in the direction of continued
conservation rather than road development.
Dalia Amor Conde,
Duke University, personal communication, 27 April 2008
Towards a valuation framework
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