Incentive measures: application
of tools for valuation of biodiversity and biodiversity resources and functions
The Conference of the Parties,
Recognizing that biodiversity and its resources and functions provide
important ecosystem services to humankind that need to be adequately recognized
and taken into account in private and public decision-making,
Also recognizing that public and private decisions can be improved
if they are informed of the economic value of these ecosystem services under
alternative management options and involve deliberative mechanisms that bring
to bear non-economic considerations as well,
Recalling that the programme of work on incentive measures adopted
by decision VI/15 foresees as one of its expected outcomes “the assessment,
as appropriate and applicable to circumstances of Parties, of the values
of biodiversity in order to internalize better these values in public policy
initiatives and private-sector decisions”,
Underlining that the development and application of practical methods
to assess the changes of the value of biodiversity resources and functions,
and associated ecosystem services, that result from public and private decision-making,
can contribute to meeting the 2010 target,
Recalling that the Conference of the Parties, in decision VI/15,
recognized that the full internalization is often not possible because of
the limitations of valuation methods, but that identifying and assessing
the value of biodiversity and the environmental services it provides can
be an incentive in itself and supports the design of other incentive measures,
Also recalling that the recommendations for further cooperation
endorsed by decision VI/15, inter alia, call for further cooperative
work on valuation methodologies and tools, including their continued exploration
as well the development and refining of non-market valuation methods and
tools, and for the establishment or strengthening of information systems
including on valuation methodologies,
Cognizant that a careful application of valuation methodologies
is fairly demanding in terms of capacity and time and that the main constraints
are likely to be costs of implementation, understanding the complementarity
of approaches, and the lack of trained specialists, especially for developing
countries, in particular the least developed and small island developing
States among them, and countries with economies in transition,
Recognizing that benefits transfer has been the subject of considerable
controversy in the economics literature,
Also recognizing that theoretical and methodological challenges
remain, in particular with regard to an adequate incorporation of biodiversity
values in conventional macroeconomic indicators of growth, and that further
research directed at the development of a biodiversity adjustment for national
accounting seems to be an important means to have biodiversity losses better
reflected in macro-economic discourse,
Noting with appreciation the work of other international organizations
and initiatives that have developed protocols and guidelines on valuation
of biodiversity resources and functions and associated ecosystem services,
1. Takes note of the options for the application of tools for valuation
of biodiversity and biodiversity resources and functions annexed to the present
decision;
2. Invites Parties and other Governments to take, in accordance
with their national policies and legislation, their capacity, and taking
into account other international instruments, these options into consideration
as possible inputs for analysis when considering, on a voluntary basis, the
application of methods for assessing the changes of the value of biodiversity
resources and functions, and associated ecosystem services, that result from
their decision-making, including through pilot projects;
3. Encourages relevant national, regional and international organizations
and initiatives to extend capacity-building and training on the valuation
of biodiversity resources and functions and associated ecosystem services,
in accordance with the human development processes of countries and with
national needs and priorities;
4. Invites national, regional and international organizations and
initiatives to promote systematic analysis and information exchange with
a view to promote common understanding of valuation techniques and managerial
skills in technical staff of Governments and stakeholders to facilitate the
extension of capacity-building and training referred to in paragraph 3 above.
5. Invites institutions that support web-based information systems
and databases on valuation, in accordance with their mandates, to fully include
cases on the valuation of biodiversity resources and functions and associated
ecosystem services, especially in developing countries, in particular the
least developed and small island developing States among them, and countries
with economies in transition in their databases, and to facilitate access
to the databases in particular for experts and practitioners from the countries
referred to above;
6. Invites national,
regional and international funding institutions to identify gaps and needs
to support the building or enhancement of national capacity as well as
research and training, including through pilot projects, in accordance
with the needs and priorities identified by Parties, for undertaking valuation
of biodiversity resources and functions and associated ecosystem services;
to support the further development of regional and international capacity
such as regional and international information systems and databases on
valuation, and to explore options for interlinked funding mechanisms with
a view to supporting the design and the harmonized application of valuation
tools among different multilateral environmental agreements;
7. Encourages relevant
national, regional and international research institutions to strengthen
research activities including research cooperation and exchange at national,
regional and international levels including through South-South cooperation
and/or the establishment of regional research consortia as appropriate,
in order to promote a common understanding of valuation techniques among
governments and stakeholders, on, inter alia:
(a) Integration of the values of biodiversity resources and functions and
associated ecosystem services into national accounting and decision-making,
taking into account the conceptual framework of the Millennium Ecosystem Assessment;
(b) Conducting a limited number of pilot valuation studies in developing
countries, in particular the least developed and small island developing States
among them, in countries with economies in transition and in countries that
are centres of origin of biodiversity, with a view to enable Parties to develop,
based on such experience, appropriate valuation tools;
(c) Capturing the calculated values through the careful analysis and design
of markets for ecosystem services where appropriate, taking into account the
three objectives of the Convention;
8. In carrying out the work in paragraphs 6 and 7 above, encourages relevant
institutions to support the participation of indigenous and local communities,
in order to facilitate the inclusion of cultural values in work on valuation
of biodiversity resources and functions and associated ecosystem services
with a view to generate valuation mechanisms that are suitable to indigenous
and local communities;
9. Invites national, regional and international funding institutions
to support the research activities identified in paragraph 7 above;
10. Requests the Executive Secretary:
(a) To continue, in cooperation with, and with input from, Parties, Governments
and relevant international organizations, the compilation of information on
methods for the valuation of biodiversity resources and functions and associated
ecosystem benefits, and to disseminate this information through the clearing-house
mechanism of the Convention and other means, including the CBD Technical Series,
in order to promote a common understanding of valuation techniques among Governments
and stakeholders;
(b) To explore with relevant organizations options for cooperative activities
that strengthen existing information systems on valuation methodologies and
existing cases for the purpose of the Convention, in accordance with annex
II to decision VI/15, in order to promote a common understanding of valuation
techniques among governments and stakeholders;
(c) To explore options for the design and application of flexible and reliable
innovative tools for assessment and valuation of biodiversity resources and
functions and associated ecosystem services;
(d) To prepare, in cooperation with relevant organizations and initiatives,
terms of reference for a study on how monitoring can support the implementation
of valuation tools and positive incentive measures. The study would propose
a framework to capture the relationship between the monitoring of, and the
valuation of, biodiversity resources and functions, and would aim to provide
Parties with a practical tool to facilitate in-country studies.
Annex
1. Biodiversity and its resources and functions generate substantial ecosystem
services many of which are not traded on markets and whose value is therefore
not reflected in market prices. Consequently, private and public decision-making
and the allocation of funds will be distorted if the repercussions of
activities on biodiversity resources and functions, and the associated ecosystem
services, are not adequately taken into account. This distortion is an important
underlying cause of biodiversity decline. Undertaking valuation of biodiversity
resources and functions and the associated non-marketed ecosystem services
has the potential of improving private and public decision-making, thereby
contributing to the target of the Convention to significantly reduce by 2010
the current rate of biodiversity loss.
2. Total Economic Value (TEV) . Most public and private resource management
and investment decisions are strongly influenced by considerations
of the monetary costs and benefits of alternative policy choices. Undertaking
valuation should seek to address the relevant components of the Total
Economic Value of non-marketed ecosystem services, bearing in mind that the
concept of Total Economic Value includes both the direct and indirect use
value and well as non-use value of ecosystem services and hence goes beyond
the immediate benefits of commercial exploitations of biodiversity resources.
Decisions can be improved if they are informed by the economic value of alternative
management options and involve mechanisms that bring to bear non-economic
considerations as well.
3. The options of valuation tools provided in the appendix below should not
be taken as a closed set of tools, considering the evolutionary character
of this field.
4. A number of valuation tools are available that, when applied carefully
and according to best practice, can provide useful and reliable information
on the changes in the value of non-marketed ecosystem services that result
(or would result) from management decisions or from other human activities
(see the appendix below). Data requirements may be quite demanding for a
number of tools, as are the preconditions in terms of technical expertise.
Moreover, conducting primary valuation studies is typically time-consuming
and costly. Therefore, other approaches, including deliberative mechanisms
that bring to bear non-economic considerations, will often be needed to support
final decision-making.
5. Efficiency . A cost/benefit criterion should be applied, as appropriate,
to the valuation study itself. In principle, valuation techniques or tools
should be used when the anticipated incremental (including long-term) improvements
in the decision are commensurate with the costs of undertaking the valuation.
6. Choice of valuation tools . The choice of the valuation
tool or valuation tools in any given instance will be informed by the characteristics
of the case, including the scale of the problem and the types of value deemed
to be most relevant, and by data availability. Several techniques have been
specifically developed to cater to the characteristics of particular problems,
while others are very broadly applicable but may have other limitations that
should be taken fully into account when choosing the appropriate tool or
set of tools. Different approaches can be used in a complementary manner.
In general, tools based on observed behaviour (the so-called revealed-preference
techniques) are preferred to tools based on hypothetical behaviour (the so-called
stated-preference techniques).
7. Stated-preference techniques. Stated-preference techniques are,
however the only techniques that are able to capture non-use (or passive‑use)
values, which tend to be important in certain biodiversity contexts, and
can provide useful and reliable information when used carefully and in
accordance with authoritative best practice. Limitations of stated-preference
techniques include: (i) the detail of information needed by respondents in
order to value complex processes or unfamiliar species or ecosystem functions;
(ii) difficult external validation of the results; and (iii) the need for extensive
pre‑testing and survey work, implying that this technique can be expensive
and time consuming. Their application could therefore be considered if
all of the following conditions are met: (i) non-use values are expected
to be an important component of the value of the ecosystem service under
consideration; (ii) it can be ensured that the sample group of respondents
is representative and has an adequate understanding of the issue in question;
and (iii) capacity requirements for an application in accordance with best
practice, including adequate skills in survey design, are met.
8. Cost-based approaches. Cost-based approaches can provide useful
guidance, if the nature and extent of physical damage expected is predictable
and if the cost to replace or restore damaged assets, and the resulting ecosystem
services, can be estimated with a reasonable degree of accuracy, and does
not exceed the value of the ecosystem services in the first place. These
approaches can in particular be used when the specific decision-making problem
calls for a comparison of the costs resulting from different replacement
or restoration options to meet a specific objective, and there is a general
view that the benefits associated with meeting the objective outweigh the
costs.
9. Benefits transfer . Benefits transfer can provide valid and reliable
estimates under certain conditions, including: (i) that the commodity or
service being valued be very similar at the site where the estimates were
made and the site where they are applied; (ii) that the populations affected
have very similar characteristics; and (iii) that the original estimates
being transferred must themselves be reliable. When used cautiously, it has
the potential to alleviate the problems of deficient primary data sets and
limited funds often encountered in valuation. However, benefits transfer
is still a developing subject. More work needs to be undertaken to assess
its validity in studies where it has been used to value biodiversity. Cautious
application and further development of this method needs to be undertaken.
10. Development or improvement of institutions. Adequate institutional
arrangements can generally be identified as an important precondition to
the further promotion of valuation as a tool in biodiversity management and
the generation of reliable valuation studies. These arrangements should, inter
alia, provide a clear assignment of responsibilities for conducting appraisal
processes and auditing for quality control.
11. Biodiversity values and national‑income accounts. In the last
two decades there have been numerous attempts, at national and international
levels, to include environmental externalities into national‑income accounts,
including through satellite accounts, and to apply measures of environmental
depreciation to reflect the environmental losses that occur as a result of
economic activities. Such measures can serve as a basis for prioritizing
national environmental policies and giving focus on mitigation or reversal
of environmentally damaging activities. The development of a biodiversity
adjustment for national accounting may be useful in reflecting biodiversity
losses more adequately.
12. Development of national guidelines. National valuation guidelines
and protocols can be useful means to ensure that biodiversity values are
adequately taken into account and/or integrated in domestic appraisal processes
and income accounts. They can also ensure that valuation tools are applied
in accordance with domestic conditions and can thereby contribute to increasing
the credibility and acceptability of appraisal processes including the application
of valuation methods.
13. Involvement of stakeholders as well as indigenous and local communities. The
full involvement of all relevant stakeholders as well as indigenous and local
communities is another important means of increasing the credibility and
acceptability of decision-making processes including the application of valuation
methods. By ensuring that sample groups are representative, their full and
effective involvement can also contribute to the quality of applying certain
valuation tools. Institutions should therefore have mechanisms in place that
ensure the full and effective involvement of relevant stakeholders as well
as indigenous and local communities in appraisal processes including the
application of valuation tools.
14. Awareness-raising and incentive measures. Identifying and assessing
the value of biodiversity resources and functions and of the associated
ecosystem services can raise awareness, thus creating incentives for the
conservation and sustainable use of biodiversity, and can also support the
adequate design and calibration of other incentive measures for the conservation
and sustainable use of biodiversity,
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bearing in mind that incentive measures should not negatively affect biodiversity
and livelihoods of communities in other countries. Furthermore, raising awareness
among all stakeholders of the value of biodiversity improves the chances
for other incentive measures to be successful.
15. Awareness-raising and pilot projects. Undertaking valuation
studies as pilot projects on key domestic ecosystems can be another effective
means to raise awareness of the value of biodiversity resources and functions
and associated ecosystem services, and to advance the application of biodiversity
valuation in domestic decision-making procedures.
16. Capacity-building. The effective application of tools for the
valuation of biodiversity resources and functions and associated ecosystem
services requires considerable capacity and technical expertise. In many
countries, capacity needs to be enhanced for putting adequate institutions
in place, for conducting effective appraisal processes including the valuation
of biodiversity and associated ecosystem services, for improved oversight
and auditing for quality control, as well as for putting valuation results
to good use in governmental decision-making by an effective and credible
follow-up. Capacity would also be needed to, as appropriate: improve biophysical
information to support biodiversity valuation; address ethical concerns about
valuing environmental impacts in monetary terms; and address technical concerns
surrounding the use of valuation tools for biodiversity.
17. Regional workshops. Regional workshops on ecosystem valuation
are an important means to exchange national experience on best practices
in the valuation of biodiversity resources and functions and associated
ecosystem services, and in the development of national guidelines and protocols,
and to extend training.
18. Regional and international cooperation and training. Training
is an important component in activities to build or enhance domestic capacities.
A number of mechanisms exist that extend training on the valuation of biodiversity
resources and functions and associated ecosystem services, and could be
further strengthened. They include:
(a) Regional centres of expertise which offer training activities;
(b) Long-term and short-term academic exchange programmes;
(c) Short-term courses offered by international organizations;
(d) Bilateral arrangements between agencies for temporary secondment;
(e) Web-based resources and training manuals.
19. International databases for benefits transfer. There exists web-based
databases that collect valuation data for use in benefits transfer. As the
use of this concept seems to be an increasingly appealing way to advance
the use of valuation information in particular in light of the time and resource
requirements for undertaking extensive primary research, fostering its further
development and wider application should therefore be considered. This could
also include increased cooperation among existing initiatives with a view
to ensuring, in accordance with their mandates, a comprehensive coverage
of cases of valuation of biodiversity resources and functions and associated
ecosystem services, especially in developing countries, in particular the
least developed and small island developing States among them, and countries
with economies in transition.
20. International research cooperation. Considerable progress has
been made in the last decades in developing reliable tools, as well as the
protocols for their application, for the valuation of biodiversity resources
and functions and associated ecosystem services. However, important opportunities
for further research and development remain. Research initiatives that address
these opportunities and seek to establish regional or international cooperation
and exchange should be supported.
21. Biodiversity valuation and national accounting. Further research
directed at the development of a biodiversity adjustment for national accounting
seems to be an important means to have biodiversity losses more reflected
in macro-economic policy-making.
22. Valuation tools. Further research on the conditions for validity
and robustness of valuation techniques, in particular of stated‑preference
techniques, may contribute to further the reliability of valuation information
of non-marketed ecosystem services, in particular with regard to non-use
values.
23. Benefits transfer. Further research on the conditions for validity
and robustness of benefits transfer may further advance the use of valuation
information under tight time and resource constraints, which prevent extensive
primary research.
24. Links between biodiversity, biodiversity functions, and associated
ecosystem services. Despite recent progress made in understanding the
links between biological diversity, biodiversity functions, and the associated
ecosystem services, many questions remain unresolved. Further research
in addressing these important questions is therefore warranted and may
also lead to the development of innovative tools and methodologies for
the valuation of biodiversity and biodiversity resources and functions.
Appendix
MAIN VALUATION TECHNIQUES (SOURCE: ADAPTED FROM MILLENNIUM ECOSYSTEM ASSESSMENT)
Method |
Description |
Applications |
Data requirements |
Potential challenges/limitations |
Revealed-preference methods |
|
|
|
|
Change in productivity |
Trace impact of change in ecosystem
services on produced goods |
Any impact that affects produced
goods |
Change in service; impact on
production; net value of produced goods |
Lacking data on change in service
and consequent impact on production |
Cost of illness, human capital |
Trace impact of change in ecosystem
services on morbidity and mortality |
Any impact that affects health
(e.g. air or water pollution) |
Change in service; impact on
health (dose-response functions); cost of illness or value of life |
Lacking dose-response functions
linking environmental conditions to health; value of life cannot be estimated |
Cost-based approaches (e.g.,
replacement, restoration costs) |
Use cost of replacing or restoring
the service |
Any loss of goods or services;
Identification of least cost option to meet given objective |
Extent of loss of goods or
services, cost of replacing or restoring them |
Risk to over-estimate actual
value if unknown benefits are higher than identified costs |
Travel cost (TCM) |
Derive demand curve from data
on actual travel costs |
Site-specific recreation; site-seeing
(e.g. protected areas) |
Survey to collect monetary
and time costs of travel to destination, distance travelled |
Limited to described applications;
difficult to use when trips are to multiple destinations |
Hedonic prices |
Extract effect of ecosystem
service on price of goods that include those factors |
Air quality, scenic beauty,
cultural benefits |
Prices and characteristics
of goods |
Requires transparent and well-working
markets, and vast quantities of data; very sensitive to specification |
Stated-preference methods |
|
|
|
|
Contingent valuation (CV) |
Ask respondents directly their
WTP for a specified service |
In particular in cases where
non-use values are deemed to be important |
Survey that presents scenario
and elicits willingness to pay (WTP) for specified service |
Ensuring sample representativeness
important but large survey is time-consuming and costly; knowledge of
respondents may be insufficient; potential sources of bias in responses;
guidelines exist for reliable application |
Choice modelling |
Ask respondents to choose their
preferred option from a set of alternatives with particular attributes |
In particular in cases where
non-use values are deemed to be important |
Survey of respondents |
Similar to Contingent valuation,
but minimizes some biases; analysis of the data generated is complex |
Other methods |
|
|
|
|
Benefits transfer |
Use results obtained in one
case in a different, but very similar case |
Any for which suitable and
high-quality comparison studies are available; applicable in cases where
savings in time and costs outweigh certain loss of accuracy (e.g., rapid
assessments) |
High-quality valuation data
from other, similar sites |
Can be wildly inaccurate when
not used cautiously, as many factors may still vary even when cases seem
“similar” |
1 / See decisions IV/10 A
and VI/15, annex I, paragraph 22.
