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Socio-economic aspects of biodiversity offsets

Joshua Bishop

IUCN-The World Conservation Union

29 September 2006

Pretoria, RSA

[ http://www.iucn.org ]

Biodiversity offsets andsustainable development

• Ecological sustainability– “no net loss” → “net positive impact”

• Economic efficiency– cost effectiveness → sustainable production

• Social equity– no harm to the poor → poverty reduction

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Improving the socio-economic sustainability of biodiversity offsets

1. Information and analysis

2. Decision-making processes

3. Financing mechanisms

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1. Socio-economic information and analysis for biodiversity offsets

• Institutional context– Demographic trends (e.g. migration)– Regulatory framework (offset requirements; rights to trade offsets)– Resource ownership, access, use and control– Direct and underlying threats to biodiversity– Capacity of NGOs, CBOs, government, etc

• Assessment of values– Net benefits of resource uses (= opportunity costs of an offset)– Financial costs of creating an offset (land purchase, environmental enhancement,

validation, management in perpetuity)– Non-market benefits of benchmark, impact and offset sites

• Social impact analysis– Costs and benefits of impact AND offset to vulnerable groups (e.g. landless and

female-headed households, children)

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2. Decision making processesfor biodiversity offsets

• Participation– Consultation– Local involvement– Local initiation and control– Distant stakeholders (regional, national, global)

• Transparency– Who provides what information when, how and to whom?

• Credibility– What institutions are trusted to assess impacts, to design,

validate and implement sustainable offsets?

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3. Financing mechanismsfor biodiversity offsets

• Sufficiency– Long-term funding (duration of impact)

• Autonomy– Independence from expropriation (trust funds)

• Risk management– Insuring against failure or non-performance (over-

compensation, performance bonds)

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Biodiversity and human well-being

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Assessing biodiversity values

• Qualitative methods– Expert opinion– Focus groups– Participatory assessment

• Quantitative methods– Market values (surveys, cost models)– Non-market values (revealed preference, stated

preference, dose-response function)– Benefits transfer (“fit” data from elsewhere)– Macroeconomic models (for indirect impacts)

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Participatory assessment• Wealth ranking• Calendars of activities

(livelihood and forestry)• Map of forest product flows• Ranking and scoring of

livelihood benefits• Ranking and scoring of forest

benefits• Discussion of costs or

disadvantages of conservation• Key informant calculations• Barter game to establish values

of non-marketed products• PRA sustainability of stock and

product flows exercise• Feedback by research team

Source: Richards M., Kanel K., Maharjan M. & Davies J. 1999. Towards Participatory Economic Analysis By Forest User Groups In Nepal. Overseas Development Institute in collaboration with the Nepal-UK Community Forestry Project (June).

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Market Valuation Techniques

Market Valuation Techniques

Non-market Valuation Techniques

Non-market Valuation Techniques

Physical Linkages Behavioural Linkages

Revealed PreferenceDose-response Functions

Change in Outputs (productivity)

Change in Outputs (productivity)

Change in Inputs (resource costs)

Change in Inputs (resource costs)

Cost-of-illnessCost-of-illness

Replacement CostReplacement Cost Preventative ExpenditurePreventative Expenditure

Travel Cost MethodTravel Cost Method

Hedonic Property Analysis

Hedonic Property Analysis

Hedonic Wage-risk Analysis

Hedonic Wage-risk Analysis

Contingent Valuation Method

Contingent Valuation Method

Stated Preference

Benefit TransferBenefit Transfer

Conjoint Analysis (choice models)

Conjoint Analysis (choice models)

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Costs and benefits of reforestation at selected sites in Coastal Croatia

-2,000

-1,000

0

1,000

2,000

3,000

4,000

Jase

nje-

Bis

ernj

akov

ica

Mus

apst

an-

Zem

unik

Nov

igra

d

Per

uca

Tro

gir

Sla

no

Pod

imoc

Rud

ine

Ost

rikov

ac

Brs

ecin

e

Pet

rinj

Srd

j

Ave

rage

Costs Landscape Hunting Wood production Erosion protection

NPV ($/ha)IRR (%)

86019

-300 1,37018

-1,190 1,75025

1,42023

-390 -450 1,44022

1,38023

2,79034

79017

Cos

ts a

nd b

enef

its o

f re

fore

stat

ion

($/h

a)

World Bank, 1996. “Croatia Coastal Forest Reconstruction and Protection Project: Staff Appraisal Report.” Report No.15518-HR. Washington: World Bank

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Atlantic forests of E. Paraguay Adapted from: Naidoo R, Ricketts TH (2006) Mapping the Economic Costs and Benefits of Conservation. PLoS Biol 4(11): e360

Ecosystem services valued:

• Sustainable bushmeat harvest

• Sustainable timber harvest

• Bioprospecting

Benefit-cost ratios of corridor options:

1) 0.22

2) 0.27

3) 0.76

Indigenous Reserve

B>C ($/ha)

B<C ($/ha)

Agricultural uses:

• smallholder agriculture (12%)

• large-scale cattle ranching (14%)

• soybean production (2.4%)

Mbaracayu Forest Biosphere Reserve

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Social distribution of biodiversity benefits (impact and offset sites)

Extraction of forest

products

Downstream water

services

Biodiversity conservation

Recreation

Benefits to… Local communities

Global community

Rest of country

Local communities

Global community

Rest of country

Ben

efits

from

the

eco

syst

em

(U

S$

or

US

$/h

a)

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Distribution of the costs and benefits of Madagascar’s protected areas

-150

-100

-50

0

50

100

150

200

Total Local population Water users Tourism sector ANGAP

To

tal b

enef

its

ove

r 10

yea

rs (

US

$ m

illio

n) Watershed protection Ecotourism

International biodiversity payments NTFP foregoneFuelwood foregone Agricultural revenue foregonePA management costs

Carret, J.-C., and D. Loyer. 2003. “Comment financer durablement le réseau d’aires protégées terrestres á Madagascar? Apport de l’analyse économique.” Paris: AFD and World Bank

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Questions for discussion

• What are the roles of different stakeholders to ensure the sustainability of offsets?

• How to ensure equitable decision-making and sharing of costs and benefits over the very long-term?

• How to avoid ‘leakage’ i.e. the transfer of damaging activities to other locations?

• How to quantify the indirect impacts of a project and offset (e.g. migration, product use)?

• Should developers be liable for indirect impacts, and to what extent?