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HÍ: Nature based Tourism 27 February 2003. The Economic Importance of Nature. Agriculture, natural resources and societal change. Stefán Gíslason, MSc Environmental Management & Policy. - PowerPoint PPT Presentation
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The Economic Importance of Nature.Agriculture, natural resources and societal change
Stefán Gíslason,MSc Environmental Management & Policy
HÍ: Nature based Tourism27 February 2003
“If you don’t know the value of a 700 years old tree, then ask how much it would cost
to make a new one”Amory Lovins, Hunter Lovins, Paul Hawken
(Úr: Natural Capitalism: The Next Industrial Revolution)
Prologus on Local Agenda 21
Local Agenda 21 is a plan for sustainable development of individual communities in the 21st century, with three basic demensions, i.e. an ecological, an economic and a social one.
According to Chapter 28 of Agenda 21, adopted by 179 nations at the 1992 Rio conference on environment and development, all local authorities should create a Local Agenda 21 plan in co-operation with the local citizens.
1992 The Rio Summit
1996 “most local authorities in each country
should have…”
1996-1997 Nordic Project / Egilsstadir Conference
March 1998 Contract of ME and NALA
Oct 1998 Launch of the 18 months project
- 31 municipalities, 109,000 inhabitants
Jan 2001 A new 5 years contract =
Extension of national co-ordination
to the end of 2005
From Rio to Reykjavík
A couple of facts
Iceland: Number of municipalities: 105
Number of inhabitants: 288.201
Status of implementation
Number of municipalities working with LA21
Never:83
Some activities:
39
32%
68%
Feb. 2002
Status of implementation
Number of inihabitants involved
26.892
259.383
Never 9%
91%
Some activities
Feb. 2002
What is the value of Nature?
How to evaluate it?» Methods for monetary evaluation
» Foreign cases
» Suggestions for use in Iceland
Contents
What is the value of Nature?
The value of an environmental asset is not simply equal to the income or revenue originated from it
But other values tend to be “forgotten” in any economic valuation, partly because they are not that easily calculated
These values, however, have to be taken into account in decision making in line with sustainable development
But what kind of values are we referring to?
And how can we assess them?
Direct Use
Value
•Income from tourists
•Grassing•Lake catch•Liechens (Cetraria islandica)
• Etc.
Indirect Use
Value
• The value for tourists (“consumers’ surplus”)
•Flood prevention
•Climate impact
•Etc.
Option Value
Direct and indirect use value in the future, (e.g.
through Ecosytem
Services and biodiversity)
Bequest Value
Value of the area for future
generations
Existence Value
Value from knowledge
of continued existence
Total Economic Value (TEV)
Use Values + Non Use Values
Vicarious Value
Value in the form of welfare
created by indirect use, such as via
books, films, etc.
Conventional Market
Approach
Surrogate Market
Approach
Questionnarires (Surveys)
(Assessing the Willingness to pay or accept)
Experiments(A small-scale
experimnet conducted)
Methods for monetary evaluation
Direct Valuation Approach Indirect Valuation Approach
Experiments(A small-scale experimnet conducted, (part of the area))
Examples:
Recreation site:The same type of recreation site created to find out about the number of visitors and their willingness to pay an entrance fee
Improved water quality in a city:Water quality standards and property taxes raised in some cities and not in others to “see how many people found it worthwhile to move into cities with improved water qualities and higher taxes”
Not easily applied to the Icelandic highlands
Conventional Market
Approach
Surrogate Market
Approach
Questionnarires (Surveys)
(Assessing the Willingness to pay or accept)
Experiments(A small-scale
experimnet conducted)
Methods for monetary evaluation
Direct Valuation Approach Indirect Valuation Approach
Questionnaires (surveys)(Assessing peoples’ willingness to pay or to accept)
People are asked directly how they would rank certain values (goods) or
• how much money they are willing to pay for a certain change or to prevent such a change (WTP)) and/or
• how much money they are willing to accept to forego a change or tolerate a change (WTA)
Contingent Valuation Method (CVM)
“The only means available for valuing Non-use values”
Contingent Ranking Method (CRM)
Makes it possible to compare to real market goods (rarely used)
Appropriate for evaluation of the values of highlands
Conventional Market
Approach
Surrogate Market
Approach
Questionnarires (Surveys)
(Assessing the Willingness to pay or accept)
Experiments(A small-scale
experimnet conducted)
Methods for monetary evaluation
Direct Valuation Approach Indirect Valuation Approach
Averting Behaviour Technique
Looking at changes in
expenditures on goods,
substituting or complenting
the environmental
resource
Travel Cost Method
Looking at direct expenditures of
visitors, such as:
•transport
•fuel
•time?
Hedonic Property Pricing
How do changes affect the property
market in the area?
Hedonic Wage - Risk Estimate
Looking at the effects of risks on
salaries(e.g. divers,
helicopter pilots)
Possibly applicable in the highlands
Surrogate Market Approach
“Looking at markets for private goods and services which are related to the environmental commodities of concern”
Household Production Functions (HPF) Hedonic Pricing
Travel Cost Method
Example:
Monteverde Cloud Rainforest (Costa Rica)Began with the “collection of address information of domestic visitors” to the reserve. Visitors were “then zoned according to their canton (state) of origin and an average visitation rate for each zone calculated”, (no.of visits/no.of inhabitants). “Next, zonal average visit cost” was estimated, “based on a standard cost per kilometre, () out of pocket costs, a fraction of fixed costs (ie wear and tear) and a value of travel time”. A minimum estimate of the expenditures of foreign tourists was added. Finnally a certain growth rate was used as a proxy to increasing visitor value due to higher demand in line with increasing rarity of rainforests. The result was $1.250 per hectare, or roughly 12-fold the maximum current price of land outside the reserve.
Tobias, D & R. Mendelsohn, 1991
Hedonic Pricing
Scope of usage (v/Property Pricing):
USAWidely used for evaluation of air pollution, noice, national parks, etc.
Example: What is the value of silence?Comparison has been made of the price of two identical houses close to a railway and further away in order to assess the monetary value of “silence”
Conventional Market
Approach
Surrogate Market
Approach
Questionnarires (Surveys)
(Assessing the Willingness to pay or accept)
Experiments(A small-scale
experimnet conducted)
Methods for monetary evaluation
Direct Valuation Approach Indirect Valuation Approach
Conventional Market Approach
Used to value environmental ‘damage’, where the damage is reflected in measurable “changes in the quantity or price of marketed inputs or outputs”.
Based on market prices. Can be based on ‘shadow prices’ if the market price does not reflect the rarity of the commodity, or on an estimated price if no
market is present.
Dose-Response Technique
“Aims to establish a relationship between
environmental damage (Response) and some cause of the damage
such as pollution (Dose)”
Replacement Cost Approach
“Looks at the cost of replacing or restoring a damaged asset to its
original state and uses this cost as a measure of the
benefit of restoration”. The ‘Shadow Project Approach’ argues that this cost is the minimum valuation of the
damage done.
Opportunity Cost Approach
Indirect evaluation. “The benefits of the activity causing environmental
degradation are estimated to set a bencmark for what the
environmental benefits would have to be” for the activity
not to be worthwile.
Applicable in the highlands
Not applicable in the highlands
Summary and conclusions The economic value of an environmental asset is not
simply equal to the income or revenue originated from it in the foreseeable future
Several known methods can be used for monetary evaluation of these values, but none of these is simple to use
The monetary value of nature has to be taken into account in decision making processes, not only the part of the values that are reflected in the economic balance sheet
No evaluation is absolutely correct,but any valuation is better than no valuation at all
ReferencesAustralian Department of the Environment:Techniques to Value Environmental Resources: an Introductory Handbook,http://www.ea.gov.au/pcd/economics/value/
Sigríður Ágústa Ásgrímsdóttir: Verðmætamat á náttúru, minjum og útivist á fyrirhuguðum virkjanasvæðum í Skagafirði. Háskóli Íslands, ritgerð til meistaraprófs í hagfræði, 1998.
Stefán Gíslason: Landbúnaður, náttúruverðmæti og samfélagsþróun. Ráðunautafundur, Bændasamtök Íslands, Bændahöllinni, Reykjavík 2.-5. feb. 1999
Turner, R. Kerry; David Pearce og Ian Bateman. Environmental Economics. An Elementary Introduction. Harvester, Wheatsheaf. London, 1994
United Nations Environment Programme (UNEP):Economic Values and the Environment in the Developing World,http://www.unep.org/unep/products/eeu/ecoserie/ecos14/ecos14.htm