Peter Elsasser
Peter ElsasserThünen-Institute for International Forestry and Forest Economics, Hamburg
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Economic Valuation of FES and approachesto payments for FES in Germany
Peter Elsasser
Overview
1. Preliminary consideration: What are „economic values“?
2. What do we know about economic values of FES in Germany?
3. Approaches to Payments for FES: Some examples under German conditions
August 2017Page 2
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
Overview
1. Preliminary consideration: What are „economic values“?
2. What do we know about economic values of FES in Germany?
3. Approaches to Payments for FES: Some examples under German conditions
August 2017Page 3
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
1. Preliminary consideration:
What are „economic values“?
Theoretical background: Environmental Economics & Welfare Theory
• Two fundamental methodological norms: Individualism/Self-determination
• Individualism: „values“ are determined by individual utility only• Self-determination: preferences are expressed by the individuals
Measurement concept: individual Willingness to Pay (WTP)
Maximal amount (of money, time or other goods) an individual is willing togive up in order to obtain a defined quantity & quality of a good/service
⇒ ultimately rooted in individual utility / individual demand⇒ usually expressed in monetary terms (→ cardinal indicator for ordinal utility)
Practical application
⇒ primarily: policy advice (adjustment of policies, financial support, etc.)⇒ further implication: upper bounds for market prices/PES (→ WTP ≠ „prices“!)
August 2017Page 4
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
Overview
1. Preliminary consideration: What are „economic values“?
2. What do we know about economic values of FES in Germany?
a. Data sources
b. Aggregate values of different FES in Germany
c. Ongoing project "ReWaLe"
3. Approaches to Payments for FES: Some examples under German conditions
August 2017Page 5
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
2. WTP for FES in Germany: a. data sources
1) Market goods (e.g. timber, game meat)
Regularly updated official price reports & statistics
but: usually report prices; welfare measures (WTP) are rarely deduced
2) Non market goods (most FES)
Many specific studies worldwide (primarily in USA, UK, Scandinavia)
In Germany : several studies exist – but less extensive coverage
• Systematic reseach only since ~1990ies
• Today: about ~100 studies on FES available(mostly local case studies, methodological analyses; varying quality)
August 2017Page 6
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
2. WTP for FES in Germany: a. data sources (non market goods)
August 2017Page 7
Main idea: supplementing other international data bases (like EVRI)
Developed & maintained by Thünen Institute & TU Berlin (regular updates)
Methods covered: CVM, TCM, CE, BT
Data Base on FES valuation in the German speaking area
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Data Base (Excel) andexplanatory reportdownloadable underhttps://www.thuenen.de/en/wf/figures-facts/environmental-valuation/data-base-forest-services/
Source: Elsasser, Meyerhoff, Weller 2016
Peter Elsasser
2. WTP for FES in Germany: b. aggregate values of different FES
Results from the German TEEB study
August 2017Page 8
3542
199
267
1928
2200
0 500 1000 1500 2000 2500 3000 3500 4000
Holzproduktion(Produktionswert nach FGR)
Wildbret (Primärwertvon Schalenwild)
Senkenleistung(ZB für Emissionsreduktionen)
Erholungsleistung(Betretensrecht)
Umsetzung d. Biodiversitäts-strategie (hier: in Wäldern)
Million Euro /year
Source: Naturkapital Deutschland – TEEB.DE, p. 152-179
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Realisation of BiodiversityStrategy (here: in forests)
Recreation(access rights)
Carbon Sequestration (WTP for emission reduction)
Game Meat(primary value of hoofed game)
Timber Production(production value according to
national forestry accounting)
Peter Elsasser
2. WTP for FES in Germany: b. values of FES: State of knowledge
August 2017Page 9
Most available non market studies focus on
• Cultural services of biodiversity & nature protection
• Recreation/tourism (everyday and holiday)
• Little knowledge about spatial distribution & trade-offs
Further ecosystem services of forests(potable water supply; local protection against flooding, landslides, climatic extremes; tourism; landscape aesthetics; recreationalhunting)
• Information even more fragmentary
• Mostly local case studies
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
2. WTP for FES in Germanyc. ongoing project "ReWaLe" (2016-18)
August 2017Page 10
ReWaLe = "Regionalisation of values of FES in Germany"
Goals
Analysis of economic values of FES, regarding• spatial variability• trade-offs between services
Further development into a spatial model• Effects of changes in forest area, composition, management• Scenario analyses for spatial optimisation potentials
Approach
Regression analyses of existing valuation studieswith respect to regional explanatory variables
Additional primary surveys, where necessary Spatial distribution via „benefit function transfer“
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
Overview
1. Preliminary consideration: What are „economic values“?
2. What do we know about economic values of FES in Germany?
3. Approaches to Payments for FES: Some examples under German conditions
a. Subsidisation
b. legal/institutional adjustment
c. Private initiatives
August 2017Page 11
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
3. Approaches to Payments for FESa. Subsidisation (PES in a broader sense)
Competences at three governmental levels
• Generally: Länder programmes• Joint programme "GAK" (federal government & Länder)• EU (co-financing)
Problems
• Historically oriented at timber production profitabilityrather than (public) FES
• Complicated regulations⇒ low demand by forest enterprises⇒ declining acceptance & implementation by Länder governments
August 2017Page 12
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
3. Approaches to Payments for FESb. Legal / institutional adjustment
Example: "Eco-Accounts"
Possible due to legal reform of compensation rulesin Nature Protection and Building codes
→ allow for trading & banking[Fed. Nature Protection Act §§ 16 ff.; Building Act §200a]
Basic mechanism
Land owner invests in voluntary nature protectionmeasures
In return, nature protection agency issues eco-creditvouchers
Land owner sells eco-vouchers to third party which isobligated to compensation measures(e.g. due to land development)
August 2017Page 13
Sources: Naturkapital Deutschland –TEEB.DE, S. 72-98; Ulrike Pröbstl
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
3. Approaches to Payments for FESc. private initiatives
Example: "upgrading"
→ Generating additional benefits by „upgrading“ private goods
Basic mechanism
sale of private goods, which are valorised by bundling themwith a public good
Examples:
Nature Tourism
Mobile telephone apps(e.g. video guides for forest excursions)
etc …
August 2017Page 14
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
3. Approaches to Payments for FESc. private initiatives
Example: sponsoring
basic mechanism
company donates for a „good cause“
receives exclusive advertising rights
August 2017Page 15
Example: Krombacher Beer Brewery
reafforestation after wind throw (city of Brilon)
(further projects for wetlands, rain forest protection)
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
3. Approaches to Payments for FESc. private initiatives
Example: „corporate responsability“ services
Basic mechanism
Co-financing of FES-related forest management by third partieswishing to compensate for their ES consumption
Example: voluntary emission reduction certificates
World wide market size: 28 m t CO2 / 216 m US$ (2012)
German example: „forest share“ (afforestation for compensating emissionsdue to holiday travels)
August 2017Page 16
Sources: Naturkapital Deutschland – TEEB.DE, S. 72-98; Peters-Stanley et al. 2013
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser
3. Approaches to Payments for FES„corporate responsability“ services
Example: „corporate responsability“ services cont.
Example: „Drinking Water Forest“
Compensation of large-scale consumers‘ water uptakeby forest conversion measures
August 2017Page 17
Sources: bionade.de; rittweger-team.de
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
„We plant drinking water“
Peter Elsasser
Conclusion: WTP and income potentials
Substantial WTP exists for unpriced forest services in Germany under current conditions as well as for potential improvements
WTP inform about the utility of forests & FES for society Marketing potentials for forest enterprises (upper price bounds)
Preconditions for FES marketability Securing & enforcement of property rights Commitment & dedication
PES examples show: Niche markets exist even for „public“ goods of forests Marketing may be beneficial for society and forest owners
August 2017Page 18
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017
Peter Elsasser17.9.2016 Tagung „Wem gehört der Wald?“ der August-Bier-StiftungSeite 19
Thank you for your attention!
Peter Elsasser
Relation betweenWTP – demand curves - prices
August 2017Page 20
Consumersurplus
turnover
Market price
quantity
Relation between WTP and prices for private goods
Forest Europe Expert Group on FES, Bratislava, 12./13.9.2017