Can economics alone achievebetter biodiversity

conservation?

Boundaries of economics for biodiversity conservationand the complexities of socio-ecological change.

©Franz W. Gatzweiler

Center for Fevelopment Research, ZEF Bonn, University of Bonn, Germanyfgatz@uni-bonn.de

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Questions

1. By what changes is economics adapting to global environmental change?

1. The idea of economic growth

2. Valuation of nature

2. Why do we need this change and how does itlook like?

3. Conclusions

Diamond (2005): „Collapse“

“Values which formerly served a society well cannot all be maintained under new

circumstances.”

Former values: instrumental, utilitarian

New circumstances: Global ecosystem degradation, “sixth extinction”

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What is biodiversity?

…what do you see?

• Twofold nature of biodiversity:

1. Private goods

2. Public goods and services

• Club goods, common pool resources

• Complex set of very different components, structures, processes, interrelationships,…

• As economists we tend to see private goods and see theproblem in public goods being „externalised“ – if theyweren‘t, biodiversity loss wouldn‘t be a problem.

o Fully informed; everybody about everything

Biodiversity - The Web of Life(CBD)

• …the variety of life on Earth and the natural patterns it forms.

• …forms the web of life of which we are an integral part and upon which we so fully depend.

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Perceptions of biodiversity and itsvalues

• Reductionistic: Biodiversity as an assemblage of many different goods (parts) and functions which work like a giantclockwork and are useful for human well-being. Conservation of BD serves merely thegoal of improving the quality of life.

• Values WTP

• Holistic: Biodiversity as a living system, constantly changing, complex, uncertain, basis for life, [public goods & services], conservation of biodiversity not a means to a higher end but an end in itself

• Values include intrinsic values

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Economics

Lifescience

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The Gaia theory suggests a holistic view of the world, where all life on Earth interacts with the physical environment to form a complex system that can be thought of as a single super-organism.

„The „true“ value of ecosystems…“

• Observed phenomena are never objective or„true“, only part of a web of interconnectedness(Experiment: Time an object takes to fall to the ground – air resistance, are temperature, air convections, breathing patterns,…only approximation possible)

• „What we observe is not nature itself but nature exposed to our method of questioning“(Heisenberg)

• Scientific descriptions are always forced to leavesomething out. Therefore: never „true“, alwaysapproximate knowledge

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Situation

• Radical changes in observable global environmentalconditions

• Radical changes in worldviews and ontology, inspired byknowledge gains in physics, psychology,…

• Standstill and continuity of mainstream economics as applied to „ecosystems and biodiversity“

• How relevant can such an economics be for (whichaspects of) biodiversity conservation?

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Biodiversity loss = Externalities

• e.g.: deforestation, soil erosion, noise, water, air pollution

• = „…Interrelations whose connecting links are external to the economists‘ abstract world of commodities but verymuch internal to the world in which we live,…“ (Daly 1996: 258)

• Aim: internalise by valuation, incentives

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Economic cause for biodiversity loss

• Externalities

11Source: Marggraf, R. 2005. In: Markussen et al., Valuation and Conservation of Biodiversity, Springer

Choice: a) sustainable forest use, b) conversion into agriculturalland

MPB = MSB, rests on theassumption that WTP foragric. product =market price

L1 L2?

Individul: Yes, becauseMPB>MPC 0

Land conversionBiodiversity loss

$

MPC

MSC2 = MPC+MCExt

MSC1

MPB=MSB

Le1 L1 L2 Le

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Choice for land conversion

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0Land conversionBiodiversity loss

$

MPC

MSC2 = MPC+MCExt

MSC1

MPB=MSB

Le1 L1 L2 Le

2

f

L1 L2?

Society: Yes, if MSC2

No, if MSC1

The closer MSC is to MPC, the more costsare externalised, themore biodiversity islost.

The closer MPC is to MSC1, the more costsare internalised, theless biodiversity islost.

Therefore…

• Clear economic decision rules: Choose A if A>B

• Rational behavior

• Less BD loss, the more externalities accountedfor and internalised

Problem:

„True“ social costs ?

Which values count ? Intrinsic values don‘t.

Whose values count? Conflict

Which values are relevant for life support functions?

….many unknowns and unknown unknowns13

Valuationecosystems and biodiversity

„What we did before – but more of it“

„Being more inclusive“

Defect economic compass?

• TEEB: our well-being depends on "ecosystem services which are predominantly public goods with no markets and prices, so they are not detected by the current economic compass."

• TEEB: Economics is „blind“ for many of the values of biodiversity.

• TEEB: Economics needs to be more inclusive

Economic compass works well for the landscape ithas been designed for but it has not beencalibrated to the changing global environmentallandscape we are facing today.

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Accounting for more values

Economicvalues

Economic valuation and intrinsicvalue

• Economic value is the value of an „assemblage of parts and functions“ – not that of living systems

• Economic value does not capture, nor is it designed to capture, intrinsic value.

• Intrinsic values are values in themself – irrespective actual or potential utility. Nature has it to the degre as people have it.

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Total economic valueof biodiversity

Limits of markets for biodiversityconservation

• To make sure that all externalities are internalised, we need (Marggraf, 2005: 11):

Organised , collective action

Legislation for BD conservation

Direct and indirect regulations (sanctions, penalties, education, information, tax, PES) = increasing private costs

• The circumstances in which markets work for biodiversity conservation need to be designed by collective action and government intervention.

• Market failure arises from the free functioning of the market place. (Pearce, 1994:17)

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Valuation

• A choice of method and of the way in which analytical valuation "tools" will be applied, is not a purely scientific affair, it is also necessarily an action charged with social, cultural, political meaning.

• Value articulating institution = valuation method (Vatn 2005)

• The values revealed are revealed and influenced by the method applied.

Remember Heisenberg: „What we observe is not nature itself but nature exposed to our method of questioning“

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Different epistemological stances and valuation

VALSE Project, 1998 --- O‘Connor, M. 2000

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How to decide?(adapted from Vatn 2005: 326, after Toman 1994)

Increasing irreversibility of ecologicaly damages

Increasing impact/cost of ecological damages

Large ecological consequences

•Safe minimum standard•Precautionary principle•Moral consideration•Collective choice

•Cost-Benefit Analysis•Individual choices

Irreversible ecological damage

Economic growthecosystems and biodiversity

„Grow and then clean up, among others by internalising the mess (externalities)

created by growth“

Limits to growth?

Maybe, but:

• TEEB: „Economic growth and the conversion of natural ecosystems to agricultural production will, of course, continue. We can not and should not put a break on the legitimate aspirations of countries and individuals for economic development.“ (p. 9)

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Growth and poverty

• Growth model is failing (Rees, W.)

80% of the benefits of growth go to 20% of the people who need it least

Income increases - happiness decreases >> uneconomic growth (Daly, H.)

Income disparities in developing countries and between rich and poor countries grow

• Reducing income disparities better than absolute growth by

• redistributing wealth to the poor countries

• Instead we aim at continuous growth 24

„Growth ethic is done for“ (Rees, W.)

• Rich countries with wide income disparities tend to be unhappier

• Once you have reached sufficiency, more does not make you happier

• Fact: income gap is growing

• Only fixed amount of energy available

• We are now consuming natural resources faster than nature is producing

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Uneconomic growth

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Growth and biodiversity(MA, Biodiversity Synthesis)

• „…the management of ecosystem services cannot be sustainable globally if the growth in consumption of services continues unabated.” (MA, BD Synthesis: 9)

• “But the basic challenge remains that the current economic system relies fundamentally on economic growth that disregards its impact on natural resources.” (MA, BD Synthesis: 13 + 75)

• Loss of biodiversity is least in the two scenarios that feature a proactive approach to environmental management (TechnoGarden and Adapting Mosaic).

• Loss of biodiversity is highest in those scenarios with the highest economic growth (Global Orchestration and Order from Strength).

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Growth and biodiversity loss

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Growth and biodiversity(Rosales, J. 2006)

• Tradable permits are increasingly becoming part of environmental policy and conservation programs. The efficacy of tradable permit schemes in addressing the root cause of environmental decline—economic growth—will not be achieved unless the schemes cap economic activity based on ecological thresholds.

• Lessons can be learned from the largest tradable permit scheme to date, emissions trading now being implemented with the Kyoto Protocol. The Kyoto Protocol caps neither greenhouse gas emissions at a level that will achieve climate stability nor economic growth.

• If patterned after the Kyoto Protocol, cap-and-trade schemes for conservation will not ameliorate biodiversity loss either, because they will not address economic growth. In response to these failures to cap economic growth, professional organizations concerned about biodiversity conservation should release position statements on economic growth and ecological thresholds.

• …calls for capping economic activity based on ecological thresholds represents sound conservation science.

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„Building biodiversity business“(Bishop, J. et al. 2008)

Is about:

Creating or expanding markets for biodiversity resources

Commercial enterprise that generates profits via activities thatconserve and use biodiversity

Improving social corporate identity

• „Can we create or expand markets for … (biodiversity)…?“

• Economic growth is put into relation with biodiversity loss, however, it is not questioned. Instead:

„The question is how to enlist both the purchasing power of consumers and the productive capacity of business to help meet the global biodiversity challenge.“

Doesn‘t the purchasing power of consumers and the productive capacity of business result from economic growth?

So: grow and lose BD first in order to conserve what is left later?

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Conclusions-1

• Yes! There is much scope for building biodiversity business.

• Also: Much scope to get our accounting right and apply the rules of micro level (break-even) to macro level (limits to growth)

• TEEB remains within the pre-analytic premises of the neoclassical tradition, although economics itself has developed,e.g. institutional, ecological, evolutionary economics

• Economics itself needs to change and adapt to knowledge gains in the life sciences:

Behavioral assumptions of human beings

Deterministic/reductionistic vs. Constructivistic/holistic worldview

Deductive reasoning vs. inductive and abductive reasoning

• We witness biodiversity loss caused by the growth ethic but we don‘t question the growth ethic

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Conclusions - 2

• Uncertainty, complexity, irreversibility,… can not be mastered by ever more counting, optimisation.

• Challenge:

Abandon an economics which is rooted in obsolete worldviews

Economics integrated into natural, political,…and other social sciences.

• New (life) science for ecosystems and biodiversity, instead of economics only.

• As man-nature relationship change fundamentally in reality, it needs to change in the underpinning assumptions of economic theory.

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Conclusions-3

• Improving and expanding economics in this manner, is useful for the conservation of biodiversity if it is confined to the reductionistic view of biodiversity

• Taking a holistic approach to biodiversity conservation, it is necessary to confine economics to the realm in which it operates well (the world of parts, objective truths, rational, free-to-choose individual,…) and applying VAI from the epistemological stances of „democracy“ and „complexity“

EXAMPLE: Whether a public park is to be privatised or remain public is not necessarily a question of people‘s WTP for the park´s goods and services but whether it should remain public or not – a normative and political question.

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To reach the goal…

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Why do we need to check the boundaries of economics for conservation of biodiversity?

To reach the target we need the mechanic (economists) and his toolboox, the vehicle (economy) to move us, and the driver (people) with the right vision, knowledge, experience and feeling/intuition to take the right speed for the next bend.

Its not the economist whose driving the car.