TITLE:

VALUING BIODIVERSITY IN ECONOMIC AND SOCIAL DEVELOPMENT

AUTHORS: 1. DR. KIRTI S ZANKHARIA. Associate Professor. Department of Economics, Department of Economics. Veer Narmad South Gujarat University. Surat 395 007 Email: [email protected]

2. DR. S.SRINIVASA RAO. Professor & Head. Department of Economics. Department of Economics. Veer Narmad South Gujarat University. Surat 395 007. Email: [email protected]

CONTACT NOS: First Author: Second Author:

98251 64794. 94282 43365.

VALUING BIODIVERSITY IN ECONOMIC AND SOCIAL DEVELOPMENT

DR. KIRTI S ZANKHARIA & DR.S.SRINIVASA RAO

At least forty percent of the worlds economy and eighty percent of the needs of the poor are derived from biological resources. In addition, the richer the diversity of life, the greater the opportunity for medical discoveries, economic development, and adaptive responses to such new challenges as climate change The convention about life on Earth, Convention on Biodiversity website www.cbd.int/

Introduction:
The links between biodiversity and the socio-economic development are complex and somewhat circular as loss of biodiversity can lead to socio-economic problems like poverty. The reverse can also be said about which can also underlying cause for the loss of biodiversity especially in developing countries. However, Biodiversity, as is realized in the recent times, is crucial to the reduction of poverty, due to the basic goods and eco-system services it provides. They include the provision of food, fiber and medicine, soil formation, air quality and

climate regulation, the regulation of water supply and quality and the cultural and aesthetic value of certain plants and species. Bio-diversity is also integral to key development sectors such as agriculture and livestock, forestry and fishing. More than 1.3 billion people depend on biodiversity and on basic eco-systems, goods and services for their livelihoods.

The aims of development do not stop at poverty reduction; environmental sustainability is also a fundamental development objective. Biodiversity and development are closely linked, as biodiversity sustains development and development in turn has impact on biodiversity either positive or negative. Although biodiversity does not contribute directly to all sectors of development, sustainable development cannot be achieved if biodiversity is compromised by development efforts. Since the poor in the developing countries are particularly dependent on the goods and services supplied by biodiversity, development strategies that ignore their protection undermine poverty alleviation and are therefore counterproductive. For this reason, it is crucial for development and poverty alleviation strategies and programmes to prioritize biodiversity. Biodiversity are of direct and

indirect importance to food availability, health, nutrition, household development, income generation and vulnerability. Furthermore, improvements to core productive assets (including biodiversity-related factors of soils, water, trees and natural vegetation) is identified by the Millennium Project task force 2 on hunger as the first step of principle strategy for reducing under nutrition in households high risk environments (Vide Annexure 1) biodiversity. The paper shall deal with the social and economic aspects concerning the loss of

Paper Presented at the 1st International Interdisciplinary Research Conference on Business, Management, Engineering, Technology and Social Science. Organised by J Z Shah Arts and H P Desai Commerce College, Surat., Choice College of Arts and Commerce, Pune and Southern Gujarat Chamber of Commerce and Industry. 24-25th August. 2012 Associate Professor, Department of Economics, Veer Narmad South Gujarat University, Surat 395007 email: [email protected]

Professor & Head. Department of Economics, Veer Narmad South Gujarat University, Surat 395007. [email protected]

The following paragraphs in the paper shall discuss the various values attached to biodiversity, the impact of biodiversity and related policy changes on the economy and livelihood in particular.

Why should we care about Biodiversity?

To understand the importance of biodiversity for socio-economic development we need to evaluate the products that can be used (both species and genes) and the eco-system services that support human development. An accurate valuation of the biodiversity needs to consider different values associated with the biodiversity. Various forms of biodiversity have different set of values attached to it. These can vary spatially and by the period and time of valuation. A set of biodiversity may be valued in a different way in India compared to any other part of the world. These biodiversity is exploited by different stake holders ranging from market stake holders to stake holders in a society e.g., individual. The following table shall describe the values associated with the biodiversity and other environmental goods, sometimes supported by examples of valuations that has been already undertaken by different studies.

The total value of natural resources or to be specific a biodiversity can be described as follows.

Table-1: Total Economic Value of Biodiversity

TOTAL VALUE
USE VALUES (Material Uses/Values)
DIRECT
Sustainable timber; NTFPs, Recreation and Tourism; Medicine; plant Genetics, education, human habitat

NON-USE VALUES (Psychological or Emotional Values)

OPTION
Future Use as per, direct and indirect values. Intrinsic values (Non-human species and ecosystems have value of independent of any value to humans

INDIRECT
Water Shed Protection; Nutrient cycling; Air Pollution reduction; Microclimatic functions; Carbon store, biodiversity

EXISTENCE
Existence Values, Cultural, Religious(belief, taboos, ceremonial values),heritage values,

Sources: G.Kadekodi Indian Journal of Agricultural .Economics(2001). P.285. Also vide. DFID, IUCN & EU(2000)

Just depicting the type of values a biodiversity or natural resources has does not put an end to the importance of the issue. One needs to quantify these values by various methods that have been adopted around the world.

Beyond the concepts of values is the question of estimating them in specific situations similar to those mentioned above. Alternative methods can be considered to arrive at the same value concept. However, the

appropriate method to be used will have to be based on some sound economic and social aspects. What are the situations under which the valuations have to be undertaken? One can make cases for three different situations: (i) When a market for a natural resource exists; (ii) when the market for the substitute exists; and (iii) when no market and no substitute or surrogate exists. Due to time and space, it is difficult detail out valuations under different situations. However, some widely talked about methods1 as mentioned in Table No. 2 can be categorized as presented in the following.

Table No. 2: Methods of Valuing Biodiversity and Natural Resources

MARKET VALUATION OF NATURAL RESOURCES MAINTENANCE COSTING OF NATURAL RESOURCES OBJECTIVE VALUATION a. Replacement/ relocation / restoration cost approach b. Productivity method c. The Welfare Method Property value method SUBJECTIVE VALUATION Hedonic Method CONTINGENT VALUATION TECHNIQUES BENEFIT TRANSFER METHOD

1. Market price approach; 2.The avoidance cost approach; 3.The opportunity cost approach; 4. The shadow price approach; 5. The User cost approach

Method used when markets do not exist

Travel cost Method

The Method is often difficult as valuation methods for various biodiversity is yet to evolve

Source: Kadekodi (2001). P.295

Not all the methods are used every-time. These need to be used on the basis of time and space and the form of biodiversity and natural resources. A small mention of the sectors which are dependent on genetic resources is made to draw the attention towards the value of genetic resources imbibed into the production of the goods by the sector. A study conducted TEEB (2009) in an attempt to compile build and make a compelling economics case for the conservation of ecosystems and bio-diversity has documented the value for the products which are dependent on genetic resources (Table No.3). According to this report, the value of natural resources is not reflected in the national income statistics, nor in the GDP of a country. If these were added to the GDP or national income, the same would have been some-times higher than those depicted. The study adds that investments in protected areas generate a cost-benefit ratio of 1:25 and even 1:100 in some cases planting and protecting nearly 12000 hectares of mangroves in Vietnam costs just over a million dollars but saved annual expenditure on maintenance assets affected of well over seven million dollars 2

Table-3: Examples of Market sectors dependent on genetic resources

1 2

For a wider discussion on the methods Vide Kadekodi (2001) Stephen Leahy, (2009)

SECTOR Pharmaceuticals Biotechnolgy

SIZE OF THE MARKET US $ 640 Bn (2006) US $ 70 Bn (2006) from Public companies alone US 30 Bn.(2006) US 43 Bn (2006) for food products

Agricultural Seeds Personal care, Botanical and food & Beverage Industries

COMMENT 25-50 percent derived from genetic resources Many products derived from genetic resources (enzymes, Microorganisms All derived from genetic resources Some Products Derived from genetic resources, represents natural component of the market.

Source: The Economics of Ecosystems and Biodiversity for National and International Policy makers (2009), p.17

The Links between Biodiversity and Poverty

As mentioned above, the stakes for the businesses are very high. Drawing from biodiversity or nature creates a huge market and along with the profits. But the fact is, it is not only the market that is the stake holder in the preservation and conservation of the biodiversity. Traditionally biodiversity has been the source of livelihood for many of the populations in different parts of the world. It supplies a wide range of products on which people rely for subsistence. Its role in supporting livelihoods is important at various levels. The following aspects would cover the same.

Genetic

diversity confers resilience. A broad genetic base allows crops and livestock to adapt to changing

conditions. This is vital for the poor who cannot afford to rely on chemical fertilizers or the pesticides which protect monocultures from diseases, pests and soil problems. Genetic information also provides the raw

materials which the breeding programmes use to enhance crop and stock productivity - for eg. For higher yield or disease resistance. It further provides information for medical science and biotechnology3.

Species diversity supplies a range of wild plant and animal products on which people rely for subsistence, barter and trade.

Foods, including fruits, nuts, fish, mammals, insects, birds and roots Wood for fuel, building, making tools, households implements and furniture Grasses, reeds and leaves which are used for thatch, mats, baskets, leaf litter as fertilizers Various other products (oils, resins, bark, etc) are used

Estimates show that in rural Zimbabwe, wild products provide 37 percent of total household income and are as important as other income sources. Moreover, the poor are more dependent on a variety of natural resources than other segments of the society. The poorest 20 percent of the community receive 40 percent of the their total income from environmental products, whereas it provides only 29 percent for the richest 10 percent.

This often hidden value of genetic biodiversity is illustrated by Californias barley crop, worth US $ 160 Million a year, which has been protected from yellow dwarf virus by introduction of gene from Ethiopian barley

In addition, in times of shortage when staple products become unavailable, the poor fall back on a wide range of gathered species. In dry-land India, for example, whereas wild products normally provide 14-23 percent of the rural poors income, in time of drought this rises to 42-57 percent.

Ecosystem diversity involves interactions between plants, animals and micro-organisms such as crop pollination and pest control, which are crucial for maintaining wild and agricultural landscapes. The interaction between living and non-living parts of the environment also provide ecosystem services such as soil formation, water recycling, carbon sequestration and climate regulation on which productive livelihoods depend. It is rare to see valuations of these services, because they are often invisible and difficult to measure and are not traded in market. However, the results of ecosystem destabilization can be devastating4. Further more, many people maintain stron cultural and religious links with natural habitats or species within them; the natural world can provide people with a sense of place and well being not only for living populations but also for future generations.

Table-4: Links between Local Livelihoods and Biodiversity

Biodiversity loss

Decline in Livelihoods Intensive and large-scale resource Extraction of valuable resources by private companies Target Species (eg. Timber) are no longer available to local communities. Logging can lead to loss of other biological resources (eg. Non-timber forest products) which may be important for subsistence or income

Improvement in Livelihoods Conversion of natural habitats agriculture

to

Biodiversity Maintenance or increase

Strict Protected Areas Protected areas yield conservation benefits, but local communities may suffer if their access to resources is restricted, or where crop raiding and live stock predation by protected wild animals increases

Commercial agriculture systems favor monocultures, which lead to losses in crop genetic diversity as well as natural habitat. It enables the large-scale supply of food to urban centers, and efficiency gains from economies of scale, can bring product prices down thereby benefiting the poor Sustainable Management of biodiversity Poor and indigenous communities in marginal tropical areas depend on biodiversity and their management techniques are often designed to maintain biodiversity for the use of future generations

Source; DFID. IUCN. Biodiversity in Brief -1. P.3

The Constraints to linking biodiversity and poverty reduction

Despite the opportunities presented a number of constraints stand in the way. Improved livelihoods and enhanced biodiversity are not necessarily coincidental and the opportunities for a win-win situation are limited. The above table depicts the complexity of balancing the different values, interests and goals which converge in biodiversity management. In many if not most cases, there will be need to trade-offs between different activities based on bio diversity and poverty criteria. A principle constraint is that bio-diversity is rarely assigned the same value by all stake holders. Commercial interests tend to out weigh the ecosystem services, socio-cultural values, future generations needs and the
4

Floods in Mekong Delta which have forced more than one million people from their homes, and the loss of 50,000 ha of farmland in Laos alone, have been directly linked to deforestation upstream.

potential that genetic diversity has for scientific advances. Poor people themselves are often the cause of biodiversity loss and especially if lack of income alternatives drive them to over-exploit the resources. This overuse of biodiversity will only be reduced when tangible livelihood gains are derived from sustainable use. It is important that mechanisms are in place to ensure the rights of the poor people are respected and that benefits accrue to them. The equitable sharing of benefits arising from genetic resources is one of the aim (Convention on Biological diversity) Development agencies have an opportunity to play an active role in supporting ways of making bio-diversity work for poor. Co-operation should therefore address policy, institutional and legislative constraints at local, national and international levels Improving poor peoples access to and tenure of, biodiverse resources:. Support is necessary for the development of systems that recognize and accommodate the needs, rights, roles and responsibilities of diverse groups Involving the poor in decision making: Investment is needed to ensure transparency in the processes of governance, and that policy development incorporates a much wider range of views. This might involve capacity building of representative groups or the provision of accurate information to the poor groups Better marketing of tropical biodiversity products from sustainable sources: Much work needs to be done on market reforms to make such products competitive, eg., through the repeal of restrictive licensing rules, creation of incentives. Further more, participation of poor groups in markets is often hindered by their inability to meet quality and supply requirements. Further, the development cooperation should support improvement in local production skills and technologies plus the capacity building and provision of market information. More investment in research and development allocated to poor peoples priorities. There has been a tendency to invest in improving highly-productive agricultural systems that use only a few food species/varieties. This has undoubtedly yielded important benefits, especially for urban consumers, but smallholder, multi-species and organic production systems have suffered a lack of investment. This imbalance needs to addressed. Developing new mechanisms for exploiting the public interest in biodiversity maintaining products and services: There is much potential for generating significant livelihood benefits from the contribution of biodiversity-rich areas to global public good values (eg. Climate regulation). This potential is likely to increase as biodiversity declines, and as international awareness of the consequences of this decline grows. At present there exists few suitable transfer mechanisms either voluntary or compulsory, but this is an opportunity for developing new approaches which should be investigated.

Conclusions:
We have observed in this paper that environmental assets and biodiversity have immense economic values. We have also observed in the paper that there are different methods to value the environment. The classification of the economic values of biodiversity and the markets associated with the same, reveal a lot of economic and social potential of the biodiversity for the economy as a whole and society in particular. There is a need to tap this potential for amelioration of the poverty among the populations of the nations. For this the rights of the Common Biodiversity need to be specified apart from providing the necessary marketing channels by the necessary institutions.

References:
Bateman I.J and Turner R.K (1993)., Valuation of the Environment Methods and Techniques The Contingent Valuation Method IN Turner R.K (ed) (1993) Sustainable Environmental Economics and Management: Principles and Practice., Bethoven Press, London. Chopra Kanchan (1998). The Valuation of Biodiversity within Protected Areas: Alternative approaches and a Case Study IEG Discussion Paper Institute of Economic Growth, New Delhi.

CIEL (2000). Biodiversity and Intellectual Property Rights Reviewing Intellectual Property rights in the Light of the Convention on Biological diversity. Joint Discussion paper,March. DFID (2000).Biodiversity in Development , Strategic Approach. DFID London. DFID (2001).Biodiversity in Development , European Commission, European Aid Office, Belgium Jagannath Vijay N. (1989)., Poverty Public Policies and the Environment Working Paper No. 24. Policy Planning and Research World Bank. Kadekodi, G.K(2001). Valuation of Natural and Environmental Resources: Methodology and Estimation, Indian Journal of Agricultural Economics, Vol.56(3) July-Sept. pp. 285-311. OECD (2002). Handbook of Biodiversity Evaluation a Guide for Policy Makers, Paris. Stephen Leahy, Environment: Save at least Half the Planet, or lose it all, Interpress service, November 17 2009. UNU-IAS (2009). Benefit Sharing in ABS: Options and Elaborations, Institute for Advanced Studies, Japan.

WEBSITES www.ias.unu.edu www.cbd.int/

ANNEXURE : 1 BIODIVERSITY LINKS TO THE DIMENSIONS OF POVERTY

Example of Biodiversity Dimensions of Poverty Elements of Well-being

Ecological integrity Vulnerability to biodiversity loss (incl. food and nutritional securities) Sustainable Livelihoods Access to Resources Access to income and resources Benefit Sharing

Ecosystem Approach to conservation

In-situ Conservation Life insurance policy for life Sustainable Use Reducing vulnerability Environmental Managment Health, sanitation, energy, water and governance

Annexure: 2 Vicious Cycle of Poverty and Environment Degradation in Developing Countries

INTERNATIONAL ECONOMIC FACTORS: DEBT SERVICE: AID PROGRAMMES Increased Demand

RURAL POVERTY
Increase fertility FACTORS Increase

POPULATION GROWTH
RESOURCE EXPLOITATION

Increase

Urban Migration
Intensification of Agriculture
ENVIRON. MENTAL DEGRADATION

Loss of Sustainability

Forest Migration

GROWTH OF PRIMATE CITIES

Decreased investments in rural areas Urban Pollution

Demand

URBAN INVESTMENTS

Increase

10