Economics of Land Degradation Initiative

Richard J. ThomasELD Scientific coordinator

United Nations University Institute for Water, Environment and Health

ELD Business Forum:23 September, 2013

11.30-11.50 Windhoek, Namibia

‘The nation that destroys its soildestroys itself ‘.Franklin D. Roosevelt, 1937

Purpose of the Economics of Land Degradation Initiative

• To raise political and public awareness of the impacts of land degradation and benefits of Sustainable Land Management from an economic perspective.

• To develop a harmonized cost-benefit analysis tool box for use in decision making on rural development and food security via promotion of SLM

Why an initiative on the Economics of Land Degradation?

• Food security crisis and increased competition for land

• Not much action on reversing/preventing land degradation so far despite well-known technical solutions

• Socio-economic consequences of land degradation:– Social tensions; social unrest– Lack of development of existing economic activities– Lack of development and establishment of new economic

activities & investment opportunities• Associated growing unemployment, reduced economic wealth,

reduced social progress

The initiative considers the gaps for better decision making for Sustainable Land Management

1. Need for robust cost effective economic valuation methods

2. Understand better how land users take decisions

3. How to reverse the ‘investment deserts’ of degrading land

The ELD can help decision makers:

• Assess true costs and benefits of investments and policies by quantifying the impact of changes on provision of environmental goods and services

• Provide a rationale to choose between options for economic benefits

• Support policy by providing information to correct market failures• Raise awareness of investment opportunities for the private sector• Reduce social tensions eg., between development & conservation by

aiding equitable redistribution processes• Identify conditions for success and non-economic barriers to correct

policy and institutional failures

The ELD approach

Cost-benefit analysis based on the total economic value of ecosystem services derived from land, to compare the $$$ costs of action to the $$$ benefits from

action

If benefits > costs, we should take action!

Use Value Non-use Value

DirectUse Value

IndirectUse Value

Stewardship Value

Bequest Value

Existence Value

OptionValue

Non demand based methods

Revealed preference methods

(demand-based)

Stated preference methods

(demand-based)

Hedonic price method

Contingent valuation

Travel cost method

Choice experiment

Benefit transfer

Market price, replacement costs, dose-response

methods, damage cost avoided, mitigation costs,

opportunity costs

Total Economic Valueof Land And Land-based Services

A given piece of land, for a given legal, political and economic

context

Alternative livelihoods (economic activities)Improved productivity Change nothing

(business as usual)

Starting point:

3 options for action:

Estimate total economic value of economic costs and benefits:

Net economicbenefit from

Alternative livelihoods

Net economicbenefit from

Improved productivity

Net economicbenefit from

business as usual

Choose option with greatest net economic benefit for action (or inaction)and adapt legal, political and economic context

to enable adoption of chosen option

Decision-making framework

Targeting the poor as a priority

Scaling up SLM practices that are adopted by the poor and establishing an enabling environment could bring the greatest and most efficient rewards in achieving food security and global land restoration

Why?Most of the world’s 1 billion poor are fed by hundreds of millions of

small holders (<2ha) using mixed crop-livestock systems

What is needed at the private sector level?

Investments that create wealth and employment for small scale farmersand that scale up successful interventions

Ie., reverse the “investment deserts” of degrading land

Options/actions at the private sector level

• Help establish new markets for ecosystem services• Focus on local cluster building (after Porter & Kramer, Shared value)• Joining existing research, policy and stakeholder platforms such as

ELD, UN Drylands action plan (STAD’s), Evergreen agriculture, etc.

Local cluster development

• Clusters include support related to education, transportation, health, increasing the pool of workers (gender aspects)

• Support to suppliers, micro-financiers, service providers and logistical infrastructure

• Collaboration with trade associations, cooperatives, government agencies and NGO’s

Next steps for ELD

• Continue compile & synthesize case studies (>200 so far)• Establish case study research sites for TEV (3 proposals funded)• Build capacity for economic valuation in developing countries• Three working groups to contribute to reports for private sector,

practitioners & decision makers, and scientific community• Harmonize methodologies (tool box)

Take home message

A focus on economics can bring balance, equity and foster stakeholder collaboration

Please join ushttp://eld-initiative.org