Protected Areas

1
Protected Areas Economic ValuesHow an
economist thinks about the value of protected
areas

• Vic Adamowicz
• Department of Rural Economy
• University of Alberta

2
Outline

• Introduction Definitions and Concepts
• A case study using opportunity cost analysis
• A case study examining benefits and costs of a
  protected area expansion
• An example of another use of economic value
  estimates for protected areas
• Conclusions

3
Economic Values

• Economic value is based on individual preferences
  (what people want)
• Values express tradeoffs how much of one thing
  to give up for another
• Values expressed in monetary terms are the
  amount of money an individual would give up to
  obtain something,
• Or accept in compensation to give something up.
• Values apply to things that can be purchased
  (ipods, coffee) as well as things that cannot.
• Prices (or expenditures) often do not reflect
  value
• Coffee costs me 2, but I would be willing to pay
  5 on most mornings.
• If coffee was unavailable I would save 2, but
  would lose 5 in overall value (net of 3.)
• Value is based on demand (preferences)

4
Goods and Values

• Types of goods
• Private goods (rival, excludable)
• Public goods (non-rival, non-excludable)
• Who benefits from an improvement?
• From a pure public good everyone
• Total value is the sum of benefits
• From a pure private good specific individuals /
  groups in society

5
Whats the value of a Protected Area?

• First what change is being evaluated?
• With without principle
• Protected area versus no protected area?
• Generate changes in
• Market values limited (perhaps NTFPs)
• Non-market values
• Use values recreation, traditional use
• Passive use values just knowing its there
• Environmental goods and services
• Generate changes in market and nonmarket values
• Carbon (market) water (non-market?)
• Valuation of endpoints

6
How to Value Goods?

• Examine tradeoffs that people make in markets
• Not very helpful for public goods / passive use
  values.
• Examine outcomes from referenda
• How much is a community willing to tax itself to
  realize a public goods goal?
• Highly structured surveys that act as referenda
• Would an individual vote to approve taxing
  themselves to obtain the benefits of a protected
  area?

7
National Survey Results from April 2006

• Percent Stating that governments should do a lot
  more about
• Reducing air and water pollution 70
• Maintaining parks and wildlife 43
• Protect species at risk 50
• Improve roads and highways 60
• Encourage economic growth 52
• Improve health care 73
• Improve education 60
• Reduce taxes 52

Source Olar et al 2007.
8
Benefits continued

• Incorporating uncertainty, irreversibility
• Changes over time
• Environmental values may be increasing over time
• Scarcity
• Technology can reduce scarcity for material
  goods, but not for unique natural environments
• But, some important caveats.
• Environmental values tend to increase with
  increasing incomes

9
Pergams and Zaradic (2008)
Source Pergams and Zaradic (2008) PNAS. Page 2296
10
What about costs?

• Opportunity cost
• Impacts on the forestry sector
• Sequencing, location, etc.
• Impacts on energy
• Delay, avoidance
• Other users / rights holders
• Analyzing the opportunity costs of attaining
  environmental objectives can be useful!
• Implicit cost-effective land use strategy
• Implicit cost-effective protected areas /
  floating reserve strategy?
• But analyzing costs alone is only part of the
  picture

11
Setting Objectives
Benefits

Costs
Stringency of Target
12
Example 1 Opportunity Cost Approach

• Biodiversity Conservation in the Boreal Forest
• What are the tradeoffs (economic impact of
  alternate biodiversity objectives)?
• What would the least cost approach to a
  particular biodiversity objective be?
• Least cost protected area strategy?
• What mechanisms can be used to achieve the
  objectives at least cost?
• Direct regulation? Tradable development rights?

13
SFMN Bioregional Assessment ProjectBoreal
Ecology and Economics Synthesis Team (BEEST)

• Investigators
• Vic Adamowicz
• Fiona Schmiegelow
• Steve Cumming
• Marian Weber
• Grant Hauer
• Lee Foote
• Stan Boutin
• Fred Bunnell
• Werner Kurz
• Chokri Dridi
• Research Associates
• Pierre Vernier
• Xianli Wang
• Students and Support
• Michael Habteyonas
• Robert Jagodzinski

• Partners
• Alberta Sustainable Resource Development
• Alberta Energy
• Alberta Environment
• B.C. Ministry of Forests
• Ducks Unlimited
• Alberta-Pacific Forest Industries
• Canadian Forest Products (BC)
• Weyerhaeuser Company
• Millar Western
• Funded by the Sustainable Forest Management
  Network

14
Production Possibility Frontiers
Profit
Max. profit
Plan A
Current Mgmt?
Plan B
Plan C
Biodiversity targets
15
Model Optimization Structure

• Max NPV (Forest Sector)
• s.t.
• Initial Area by Forest Type/Age/Location
• Forest Dynamics
• Demand/Capacity/AAC
• Old Mesic Forest gt Target (50-100yrs, periods
  5-10)

16
Source Hauer et al 2007.
17
Source Hauer et al 2007.
18
Biodiversity Forest Product Tradeoffs
Source Hauer et al 2007.
19
Percent old forest with no constraints
Percent old forest with 44 constraint
Source Hauer et al 2007.
20
Bird count of Canada Warbler with no constraints
Bird count of Canada Warbler with 44 constraint
Source Hauer et al 2007.
21
Summary

• Opportunity cost analysis provides insights into
  least cost (or cost effective) approaches to
  achieving ecological objectives, but
• Where should we be on the cost curve?
• Who decides?

22
What about benefits?

• Market benefits recreation, tourism
• Passive Use Benefits
• Stylized referendum
• Implicit value of decision
• Challenges

V
Biod
23
Example 2 Protected Areas Planning in
OntarioSverrisson, Boxall and Adamowicz

• Protected area in a region - how much is enough?
• Costs of program (land values)
• Benefits of program
• Structured survey of Ontario residents to
  identify how much they would be willing to
  invest.

24
The Mixedwood Plains

• Various natural habitats
• Diverse concentration of animal and plant
  species
• Increased human pressures on biodiversity

25
Institutional Framework

• Ontario Parks (OP) invests public funds to
  acquire protected areas
• Three main methods of acquiring properties
• Direct purchase
• Donations
• Conservation easements

26
Estimated Cost Curve for Expanding Protected
Areas in Ecodistrict 6E-12
27
Valuation Scenarios

• Binary choice referendum (contingent valuation)
• Each respondent votes 8 times between the current
  situation and a proposed program
• Attributes and levels describing the proposed
  programs
• Protected area targets
• 1 - 5 - 12
• Year when protected area target is reached
• 2016 - 2026
• Price of the proposed program
• 20 - 60 - 175 - 325
• All combinations of attribute levels resulted in
  24 different votes

28
Valuation Surveys

• Lots of concern about
• hypothetical bias
• strategic behaviour
• Information provision
• Research effort devoted to developing and testing
  survey research methods that approximate actual
  choice behaviour

29
Data

• Internet panel provided by Ipsos Reid
• Sample representative of the public of Ontario
• 1,629 participants
• 8 votes per respondent gt 13,032 observations
• A variety of validity tests and analyses

30
Sample Valuation Scenario
Vote Current Situation Proposed Program

Year when protected area target is reached Not applicable 2026
Your households share of the annual investment paid through increases in taxes for the next 5 years, 2007-2011 0/Year for 5 years 25/Year for 5 years
Current Situation Proposed expansion
Protected area targets
0.6 (630 km2) of the Mixedwood Plains protected
12 (12,600 km2 approx.) of the Mixedwood Plains
protected
31
WTP for the Mixedwood Plains
32
Costs and Benefits
33
Ontario Parks Progam Summary

• Benefits are greater than costs for expanding the
  protected area network to a certain extent
• Maximum net benefits depend on the costs of
  acquiring additional areas
• Does not take into account other benefits or
  costs
• Does not address mechanisms for achieving the
  targets

34
What did we learn?

• Cost curves costs of achieving various targets
• Affected by current policy, conservation
  mechanism
• Benefit curves challenging but important
• Public values?
• Expert groups / decision makers?
• There are other criteria!

35
Another use for the estimation of the value of
protected areas Natural Resource Damage
Assessment

• British Columbia (B.C.) versus Canadian Forest
  Products Ltd (Canfor)
• 1992 fire burns a large area of public forest
  (1500 Ha), including some environmentally
  sensitive areas (225 Ha)
• Initially, trial judge awarded damages for the
  costs of fighting the fire and re-forestation,
  but dismissed the claim that additional
  compensable losses occurred related to
  environmental damage. (Elgie and Lintner, 2005)

36
Decision on Environmental Values

• Canadas Supreme Court did not allow B.C.s claim
  for environmental damage, because B.C. attempted
  to use the timber value as a proxy for the
  environmental damage (Elgie and Lintner, 2005)
• The Supreme Court rejected this approach to
  evaluating the environmental losses, and in doing
  so discussed more appropriate measures of
  damages.

37
Valuation and Damage Assessment

• Supreme Court Statements about damage assessment
  (Elgie and Lintner, 2005)
• Typically, the minimum amount is the commercial
  value arising from the resource
• Loss is compensable using non-market valuation
  techniques
• Government can recover losses as a parens patriae
  
• Recognized use value, passive use value and
  inherent value
• No requirement for specific status (e.g. U.S.
  CERCLA) to implement damage assessment

38
Conclusions

• Values associated with protected areas (or
  achieving ecological goals) are complex, but many
  are measurable.
• Identifying the objectives is critical but
  difficult.
• The use of information tools to analyze the
  tradeoffs is essential
• Setting objectives
• Science information critical
• Valuation techniques lots of work to do
• Benefits and costs arent the only criteria
• Mechanisms are required to achieve the outcomes
• Capacity?

39
References

• Elgie, S. A. G. and A. M. Lintner. 2005. The
  Supreme Courts Canfor decision Losing the
  battle but winning the war for environmental
  damages. University of British Columbia Law
  Review 38 22362.
• Hauer, G., S. Cumming, F. Schmiegelow, W.
  Adamowicz, M. Weber, and R. Jagodzinski. 2007.
  Tradeoffs between forestry resource and
  conservation values under alternate forest policy
  regimes A spatial analysis of the western
  Canadian boreal plains. University of Alberta
  Working Paper. Department of Rural Economy.
  Edmonton.
• Olar M., Adamowicz W., Boxall P. , West G.E.,
  Lessard F., and Cantin G. 2007. Estimation of the
  Economic Benefits of Marine Mammal Recovery in
  the St. Lawrence Estuary. Department of Fisheries
  and Oceans.
• Olewiler, N. 2007. Securing natural capital and
  ecological goods and services in Canada. In A
  Canadian Priorities Agenda Policy Choices to
  Improve Economic and Social Well-Being Co-edited
  by Jeremy Leonard, Christopher Ragan and France
  St-Hilaire Institute for Research on Public
  Policy. Montreal.
• Sverrisson, D., P. Boxall and W. Adamowicz. 2007.
  Estimation of the Passive Use Values Associated
  with Future Expansion of Provincial Parks and
  Protected Areas in Southern Ontario. Department
  of Rural Economy, University of Alberta,
  Edmonton.