Concept of Total Economic Valuation (TEV) in forestry
Transcript of Concept of Total Economic Valuation (TEV) in forestry
Concept of Total Economic
Valuation (TEV) in forestry
One week online training course on ECOSYSTEM APPROACH TO FOREST MANAGEMENT
(EAFM), Central Academy for State Forest Service Ministry of Environment, Forest and Climate
Change, Government of India P.O. New Forest, Dehradun – 248006.
23rd November 2020
Saudamini Das,
NABARD Chair Professor,
Institute of Economic Growth,
Delhi 110007
Outline
I. 1. Concept of Ecosystem Services & Total Economic Value
II. II. TEV in Ecosystem approach to Forest Management
III. III. Why TEV, not Timber
IV.IV. Measurement of TEV
V. V. Practical valuation studies
“A paradigm shift from timber centric management to focus on conservation and ecological security.
According to the ecosystem approach, forest ecosystems should be managed to ensure that their intrinsic values and their tangible benefits are shared in a fair and equitable manner.”
What are Ecosystem Services & why
valuation?
Ecosystem
-- a natural system consisting of plants, animals, microorganisms (biotic factors) in an area functioning together with all the non-living physical (abiotic) factors of the environment.
-- the conditions and the processes through which natural ecosystem and the species that make them up, sustain and fulfill human life (MEA, 2003).
Ecosystem services (ESS)
-- the benefits that an ecosystem provides to mankind . They consists of Ecosystem goods (such as food) and services(such as waste assimilation) represent the benefits the human population derives, directly or indirectly, from ecosystem functions
ESS Valuation
-- helps in explicitly accounting for the Ecosystems in land use planning
Ecosystem Services
Grouping of ESS
Use based Grouping (Krutila, 1967; TEEB, 2010)
Functional Grouping (Lobo, 2001; de Groot et al.
2002; MEA, 2005)
Use based categorization of ESS
Functional Grouping of ESS
Firewood
Charcoal
Construction material
(timber, poles, Nipa
singles)
Mangrove propagulas
Fodder
Green maneuver
Cellulose for paper
Food, beverages and
drugs (sugar, alcohol,
medicines)
Tannies and dyes
Finfish
Crustaceans (Prawns,
shrimps, mangrove crabs).
Malluses (cryster, mussels,
cockles)
Honey
Birds
Mammals
Reptiles
Water transport
Services of Mangrove Ecosystem
1. Provisioning
2. Supporting
Ground water
discharge,
Prevention of soil salinity,
Sediment/Toxicant
retention,
Nutrient retention,
Nursery ground for fish
fry,
Biomass export,
Water transport,
3. Regulating
Flood control,
Storm protection/wind break,
Shoreline stabilization and
erosion control,
Micro climatic stabilization,
4. CulturalBiological diversity,
Unique to culture/heritage,
Recreation/Tourism.
Source: Das (2009)
TEV: Definition
TEV = Use Value + Option Value + Bequest Value + Existence Value
= Use Value + Non-Use Value
= Use Value + Non-use Value – (Negative Externalities ?)
TEV: Why go for TEV based Management
TEV
Components
Category Type of Outputs Value (US $)
per year
%
Direct Use
Values
WFPs Timber 435,030,000 42,0
Firewood 14,785,000
NWFPs Resin 1,898,000 8,0
Mushrooms 11,482,000
Medicinal and aromatic
plants
8,642,000
Truffles 495
Styrax (Liquidambar oil) 56,000
Sticks and twigs 22,000
Bay leaves 9,253,000
Carob (fruit) 6,000
Chestnuts 262,000
Pine kernels 7,172,000
Snow drop, Cyclamen
and other bulbous plants
1,087,000
Thymus -Oreganium 13,237,000
Other NWFPs 32,927,000
Grazing Grazing 225,000,000 21,0
Hunting Hunting 35,948,500 3,4
Recreation Recreation 2,000,000 0,2
Indirect Use
Values
Carbon storage 158,400,000 14,8
Option Value Pharmaceuticals 112,500,000 10,5
Non Use Values Existence value (to
conserve
biodiversity)
1,380,000 0,1
Positive TEV Components 1,071,087,995 100.0
Negative
Externalities
Erosion -125,000,000 72,0
Risk of damage by
forest fires
- 8,607,537 5,0
Illicit fuelwood - 40,000,000 23,0
Negative TEV Components -173,607,537 100.0
NET TOTAL ECONOMIC VALUE OF TURKISH
FORESTS
897,480,458
Example from India: Himachal Pradesh
Contribution of Forests to the GSDP (Verma, 2000)
Total GSDP Rs.9258 crores
Forestry & Logging Rs.487 crores
Forestry as % of GSDP 5.26%
TEV of forests of HP ( as per current estimate) Rs.106664 Crores
. Corrected GSDP Rs.115434 crores
Forestry as % of corrected GSDP 92.4%
Valuation Approach
Valuation methods
Preferences
Revealed
preference
s
Stated
preferences
Market
based
Surrogate
market based
Market price
Productivity Change
(change in Consumer &
Producer surplus ),
Replacement
cost/saving, Avoided
damage etc
Hedonic pricing, Travel
Cost, Defensive
Expenditure,
Non-market based Choice experiment
Contingent valuationBenefit transfer with adjustment for
ecosystem health, preferences, etc
Ecosystem services & Valuation
Methods
Direct Use Values
• Market price
• Production function
• Travel cost
• Hedonic prices
• Stated preferences
Indirect use values
• Productivity change,
• Replacement cost/saving,
• Defensive expenditure,
• Avoided damage etc
Non-use values
• Stated Preferences (Contingent valuation, Choice modeling)
Policy on mangrove plantation
Impact on ecosystem: Mangroves
Change in ecological service: Fish catch
Identify the economic outcome: Cost
Choose the appropriate valuation method: Production function
Measure the total or marginal values: Change in profit (CS+PS)
Value changes using suitable indicator: Price of fish or cost of
fishing effort
Market based method (Productivity
change)
X is a marketed good
SS of X depend on environment
X’’
Examples
Replacement cost: Catskills (Land-Water supply)
Catskill/Delaware watershed
• New York City water requirement =
1.3 billion gallons per day
• Options:-- Preserve the water shade and use the water
filtration service of nature
OR
-- Construct water filtration plant
• Cost of filtration plant = $6-$8 billion for construction +
$200-$300 million operation and maintenance
• Cost of water shade protection program
including water quality monitoring = $1.3 billion
Value of water filtration services = cost of filtration plants- Cost of Protection
Valuation of Cultural Services
Does local/regional cultural centers have potential to act as engine
of growth?
Literature is thin, traditional travel cost method is not quite
appropriate,
Religious tourism is different from recreational tourism
Redefined travel cost estimates
Travel cost method
Non-market (Surrogate market) valuation method
Three Models: Individual, Zonal (both singe site
models) and Random Utility (multiple site model)
• Models ‘number of trips’
Tr = f(TCr, TCs,Y, Z), Tr is number of trips to site r per
year, TC is travel cost, s substitute sites, Y income & Z
demographic variables influencing trip.
• Data: usually interview visitors
Site
‘r’
Site
‘’s’’
Recreational value = consumer surplus
CS = Maximum willingness to pay
Valuation of cultural sites of KSL
Patal Bhubaneswar, Hat Kalika & Gwalek Kedar
Use modified travel cost method
Survey visitors and local households who visit these places
Measure the consumer surplus (the maximum willingness to pay to visit these places)
Patal Bhubaneswar VisitorsVariables Variable definition Mean
Total Trips No. of trips in 5 years 2.09
Travel Cost Total travel costs for current trip 8,789
Alternative Site TC Travel costs to alternative site 2,811
HH Income >300k 1 if annual hh income > INR 300k 0.48
Male 1 if respondent is male 0.65
Respondent’s Age Respondent’s age in years 38
Urban 1 if visitors is from urban area 0.73
Group Size No. of people visiting together 6.5
Recreational Propose 1 if the visitor is traveling for recreation 0.12
Agriculture 1 if visitor’s occupation is agriculture 0.13
Business 1 if visitor’s occupation is business 0.14
Government Employee 1 if visitor is government employee 0.23
NGO/Private 1 if visitor works for NGO/Private 0.21
Housewife 1 if visitor is a housewife 0.20
Other 1 if visitor’s occupation is ‘other’ 0.08
Less than 12 grade 1 if visitor has < 12 years of schooling 0.36
Bachelor 1 if visitor has bachelor degree 0.35
MA/PhD 1 if visitor has MA/PhD degree 0.29
Site Quality - Average 1 if site quality is average 0.04
Site Quality – Good 1 if site quality is good 0.36
Site Quality - Very Good 1 if site quality is very good 0.60
Hat Kalika and Gwalek Kedar Visitors
Variables Definition
Mean value -
Hat Kalika
visitors
Mean value –
Gwalek Kedar
visitors
Total Trips No. of trips in 5 years 15.15 21.88
Travel Cost
Travel costs for the last trip
(INR) 284 354
Alternative Site TC
Travel costs to alternative site
(INR) 163 786
HH income >50k
1 if monthly household income >
INR 50k 0.25 0.74
Male 1 if respondent is male 0.30 0.60
Respondent's age Respondent’s age in years 45 45
Household size No of member in household 5.36 7.0
Dalit
1 if respondent is classified as
lower caste 0.39 0.17
Education more than
grade 6
1 if respondent has information
education 0.48 0.29
Per person per trip use value of cultural
services at KSL area in INR (USD)
1. Patal BhuwaneshwarMeasure of
cultural value
(a) Full sample13,710
(211)
(b) Day visitors4199
(65)
2. Hat-Kalika visitors1184
(17)
3. Gwalek Kedar visitors2132
(33)
• Excludes revenue generated for the hotel owners or other service
providers (producers surplus) or other non-use values of the sites
Total cultural values of landscape
i. Total cultural (use) value for
three sites Rs.187.5 million
(US$ 2.9 million)
ii. Total cultural (use) value of
KSL area (for local residents
only) Rs.1.47 billion
(US$ 22.6 million)
Importance to local population
• Visitation rates of households: 77% (Hat-Kalika), 25%
(Chandak) and 40% (Gwallek)
• Per capita Income: USD 1703 (India) & USD 766 (Nepal)
• Cultural values as % of per capita income of the area:
-- Patal Bhubaneswar = 13% India, 28% in Nepal
-- Hat-Kalika = 6.1% in India
-- Gwallek kedar = 21% in Nepal
Policy implication
Cultural places in KSL provide high religious/amenity values to
people and are important for their wellbeing.
Have potential to work as drivers of eco-development of area.
Every cultural site has carrying capacity and study didn’t look
into management aspect
Cultural tourism potential need to be sustainably harnessed.
Cultural sites need to be included in landscape management.
Mangrove and storm protection:
Averted damage (Das, 2007)
Mangrove
District Boundary
River
LEGENDS Casurina Dense
Casurina Open
Mangrove
Mix Jungle(Kaju)
District Boundary
River
LEGENDS
Mangrove Forest cover before 1950
(30,766 hectares)
Mangrove Forest cover in 1999
(17,900 hectares)
29 Oct-3gmt
Overview of deaths
Area No of
Village
Total
Death
Mean
death
Entire District 1180 456 0.39
Villages with no or little
mangrove (M ≤ 0.5)
722 391 0.54
Villages with high
mangrove protection
(M > 0.5)
458 65 0.14
Villages inside
mangrove habitat
96 107 1.11
Villages outside
mangrove habitat
1084 349 0.32
Methodology: AD
Cyclone Damage Function (Bad output)
Di = f (Pi, Vi, Wi, Si)
Di is the damage suffered in the ith village
(human mortality, house damage and livestock loss)
Pi is property at risk
Vi is the approximate measure of wind velocity
Wi is the severity of flooding due to storm surge
Si is the group of socio-economic factors
influencing the damage occurrences
Di = f(pop99, Vmax (if dcypath<=15), velocitypow (or velocityexp) if dcypath>15, surge,
dcoast, topodumy, mhabitat, mangrove, casuarinadumy, dmajriver, dminriver, droad, roadumy, pop99, literate, schedulecaste, cultivators, aglabour, hhworker, otworker,
margworker, nonworker, tahasil)
Confounding effect of mangrove
with effect of distance from coast
●
●Village A
Village B
Mangrov
e
Sea
---- with effect of Mangrove Habitat
A● C●
• Exclude village A, include village C
• Test that protection at B is due to vegetation, not
habitat
B●
Sea
Mangrove habitat
Mangrov
e
Deaths Averted by Mangroves
,
Actual death (865 villages) 392
Predicted deaths if there were no
mangroves
603
Predicted deaths if current
mangroves were at 1950 level
31
Averted deaths under assumption 1
(603 – 392) = 211
211 (54%)
Averted deaths under assumption 2
(392 – 31) = 361
361 (92%)
Average house damage per village
0
10
20
30
40
50
60
70
80
118* 132* 148* 166* 181* 193.5*
Cyclone Impact
% o
f h
ou
se
s f
ully
da
ma
ge
d
No_mangrove
villages
Mangrove
villages
Wind protection to properties by mangroves
Storm Protection Value of Mangroves
during super cyclone
Area /
Mangrove unit
Value of 1km
width
Value of 1
hectare
Village Rs3,928/ Rs217/
Entire study
area
Rs33,39,166/
(USD 68, 586)
Rs1,82,080/
(USD 4335)
Should we preserve mangroves to adapt
to climate change?
Economic cost & benefit (1999 prices)
• Opportunity cost of conserving mangroves: -
- Market value of land in coastal Kendrapada: Rs 1, 72, 970 \ ha
- Annual return from land (8%): Rs 13, 837 \ ha \ yr
- (12%): Rs 20, 756 \ ha \ yr
• Benefit from retaining mangroves: -
- Storm protection value (only for 3 damages): Rs 1, 82, 080 \ ha
- Annual Probability of VSCS and SC: 0.15 \ yr
- Annual Storm Protection Value (3 damages): Rs 27, 312 \ ha \ yr
Mangrove Plantation & Fishery
Change in Mangrove cover in India
-200
-100
0
100
200
300
400
500
600
700
Change in mangrove area (1987 - 2011)
Source: Forest Survey of India
Total mangrove cover in Gujarat (sq
km)
0
200
400
600
800
1000
1200
1400
1600
1800
Year_1939 year_1990 Year_2013
854.93 876.36
1693.88
Source: 1939 – www.lib.utexas.edu/maps/ams/india/nf-45-14.jpg ; 1990 – Landsat Satellite (Landsat TM data
(Oct-Nov); 2013 – LISS-3 data from Satellite RESOURCESAT – 2 (Mar-April)
0
200
400
600
800
1000
1200
Year_1939
year_1990
Year_2013
District-wise change in mangrove cover
Type of creeks Average number
of species
caught
Average weight of
species caught (kg)
Creeks with no mangrove 3.2 (0.63) 4.81 (1.62)
Creeks with natural
mangroves
2.88 (0.7) 6.16 (1.86)
Creeks having enriched
plantations
3 (0.00) 6.97 (1.67)
Creeks with few year old
planted mangroves
2.5 (0.5) 3.69 (0.87)
Average daily fish catch of Pagediya
fishermen
Independent variables Estimated Coefficient Independent variables Estimated Coefficient
Natural mangrove creek 4.237*** (7.96) Whether educated -0.180* (1.77)
Enriched plantation creek 3.932*** (7.24) Number of male members 0.079 (1.57)
Planted mangrove creef 0.948*** (2.71) Number of female members 0.025 (0.48)
Medium polluted creek -3.008*** (8.85) Number of children -0.070** (2.16)
Highly polluted creek -4.069*** (7.25)
Has other subsidiary
occupation 0.143 (1.42)
Fishing experience (years) -0.009 (1.34) Ancestors fishermen -0.353 (0.88)
Carry bike in boat -0.304 (0.74) Carry food stock in boat 0.153 (0.90)
Carry blanket in boat 0.164 (0.36) Carry ropes in boat -0.129 (0.54)
Constant 6.087*** (8.85)
Joint significance test of mangrove coefficients being different
than zero chi2( 2) = 1322.89***
Number of observations 1029
Number of groups 57
Observations per group 15 to 20
Wald chi 2 (16) 1950.69 (P=0.00)
Concluding Observations on Mangrove
Fishery Link
Coastal mixed fishery: planted mangrove effect
nearly 1/4th of natural mangrove effect.
Commercial off shore fishery: planted mangrove
effect visible at state level catch, not at landing
centre level
Yearly contribution of planted mangroves to Gujarat
fishery: INR 3.64 billion (US$575.6 million)
15% of the annual earning of the state can be
attributed to planted mangroves
Area
(million ha)
Tourism NTFPs
($/ha/y
ear)
Carbon
($/ha/ye
ar)
Watershe
d
protectio
n
Option
value
($/ha/ye
ar)
Existenc
e value
Tropical
evergreen
9.7 330 100 6.4
Tropical
deciduous
16.1 56
Temperate
coniferous
16.9 103
Temperate
deciduous
8.8 330 20
Total area 51.5
Total value
($
million/year)
32.1 n/a 3788.3 2.3 331.7 60.2
Estimated values of elements of total economic
value (TEV) of Mexican forests
Type of value Methods
Carbon
sequestration
International offsets, public and
private
Option value of
pharmaceutic
als
Contracts, public and private,
domestic and foreign institutions
Tourism Differential entrance fees for
international & national visitors
Infrastructural investment
Community training
Existence
value
Property right attenuation
Land purchase
Debt-for-Nature Swaps
Global transfers (GEF, NGOs)
Thank You