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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS) Executive Summary under Valuation & Accounting of Natural Capital for Green Economy (VANTAGE)
United Nations Environment Programme
The Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS) is an output of a joint initiative of UNEP entitled “Valuation and Accounting of Ecosystem Services of Small Island Developing States (SIDS): Operationalizing the Sustainability Path” implemented by the Ecosystem Services Economics (ESE) Unit, the Marine and Coastal Ecosystems (MCE) Unit and Regional Seas Programme of the Division of Environmental Policy Implementation (DEPI), United Nations Environment Programme (UNEP). This Manual is developed as a new issue of UNEP’s Ecosystem Services Economics Guidance Manual Series and Regional Seas Reports and Studies Series. Disclaimer: This views expressed do not necessarily represent the decision or the stated policy of the United Nations. This is an Advance Copy of the Executive Summary of the Manual. Therefore, this Copy may differ slightly from the final published Manual, which will be available in September, 2014. Copyright © United Nations Environment Programme, 2014 This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. No use of this publication may be made for resale or for any other commercial purpose. Leaders of the Initiative: Pushpam Kumar, UNEP/ESE Unit/DEPI and Takehiro Nakamura, UNEP/MCE Unit/DEPI Author: Paulo A.L.D. Nunes, WAVES, World Bank Reviewer of the Summary: Eric Mungatana, UNEP Reviewers of the Manual: Andrea Ghermandi, University of Haifa; Laura Onofri, Ca’ Foscari University of Venice; Eric Mungatatna, UNEP; Harpinder Shandhu, Flinders University; Lalit Kumar, Delhi University; Mike Christie, Aberystwyth University; Luke Brander, Hong Kong University; Samia Sarkis, Government of Bermuda; Umiich Sengebau, Minister of National Resources, Environment & Tourism, Government of Palau; Isabel Torres de Noronha, Future Ocean Alliance (FOA) Editor: Elizabeth Kemf Acknowledgements: Sun Cho; Levis Kavagi; Anne Ogoti; Ruth Watulo; Janet Opati Cover Photo Credits: © Lukas Kurtz/Lux Tonnerre, Flickr Printing: UNON, Publishing Services Section, Nairobi, ISO 14001:2004-certified Job No: 14-01399/ 50 copies
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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS) Executive Summary under Valuation & Accounting of Natural Capital for Green Economy (VANTAGE)
June 2014 Ecosystem Services Economics (ESE) Unit, Division of Environmental Policy Implementation (DEPI), United Nations Environment Programme (UNEP)
Contents Key messages .................................................................................................................................................... 1 1. Rationale and background............................................................................................................................ 6 2. Objectives.................................................................................................................................................... 7 3. End users of the guidance manual................................................................................................................ 7 4. Methodological approaches and materials used ........................................................................................... 8 5. Key lessons and conclusions ...................................................................................................................... 11
Executive Summary
Key messages
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Valuation and accounting of Island Ecosystem Services (IES) is fundamental to our ability to achieve sustainable, green growth in Small Island Developing States (SIDS), also known as large ocean states.1 SIDS are characterized inter alia by: (a) a well-defined set of in situ socio-economic-cultural and governance conditions; (b) a population’s clear perception and use of IES; (c) a high richness in natural capital; and (d) the delicate nature of the many ecosystems that support livelihoods and local economies. In this context, this Guidance Manual on Valuation and Accounting of Ecosystem Services for SIDS (Guidance Manual) provides a methodological approach to “read” these conditions and the respective implications in terms of the selection, design and implementation of the IES valuation and accounting exercises. The process of ecosystem services valuation and accounting through a SIDS-lens is fundamental to correct and tailor the use of the various techniques in the context of SIDS. From a technical and methodological point of view, this Guidance Manual also informs policy makers that there is no “silver bullet” solution with respect to the valuation and accounting of ecosystem services for SIDS. Recommendations to SIDS policy makers, with respect to the choice of the economic valuation and accounting technique, are ultimately anchored in the type of economic-policy and the category of IES that it targets, i. e. provisioning, regulating or cultural services. The Guidance Manual gives policy makers a complete ranking of the most suitable valuation techniques for application in the SIDS context – including monetary valuation techniques such as market prices, production function, travel costs, hedonic pricing, costbased, stated preferences and value transfer as well as ecological production function (i.e. a nonmonetary valuation technique). A survey of IES valuation literature in SIDS reveals that less than a quarter of the studies reviewed were commissioned by government or governmental agencies. Among these, the market demand and supply approach, including the production function technique, are shown to be the most frequently used. We can interpret this as signalling the strong degree of suitability of this technique to meet policy and management questions in the context of SIDS. Tables 1, 2, and 3 provide an overall synthesis of the valuation techniques’ applicability at the centre of SIDS context (considering unique and relevant environmental, socioeconomic and governance issues).
1 There are currently 32 small island developing States in three geographic regions: the Caribbean; the Pacific; and Africa, Indian Ocean and South China Sea. See http://www.un.org/en/events/islands2014/didyouknow.shtml and http://www.sids2014.org/index.php?page=view&t ype=255&nr=7084&menu=1504 as well.
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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS)
Table 1: Application of economic valuation techniques for provisioning services for SIDS Economic Value Category
Beneficiaries/Contribution to SIDS
Most suitable valuation techniques in SIDS
Food and Raw Material
National-Regional/Very strong
••oo MP •••o PF TC HP ••oo CB SP BT •••o EPF
Natural habitats
National-Global/Strong
MP •••o PF TC HP ••oo CB SP BT •••o EPF
Genetic, Ornamental and Medicinal Resources
National-Regional/Medium- strong
••oo MP •••o PF TC HP ••oo CB SP BT •••o EPF
Notes: Market Prices (MP); Production Function (PF); Travel Cost (TC); Hedonic Pricing (HP); Cost-based (CB); Stated preferences (SP); Value Transfer (VT); Ecological Production Function (EPF); The degree of spatial distribution of the beneficiaries: ‘local’, ‘national’, ‘regional’ and ‘global’; The role of ecosystem services in terms of its contribution to the human well-being of the communities based in SIDS, with a particular focus on subsistence-based communities: ‘minimum’, ‘medium-strong’, ‘strong’, and ‘very strong’. The extent of spatial distribution of beneficiaries in the context of SIDS is: quality assessment scale, ranging from a minimum, denoted by ‘oooo’ to a maximum, denoted by ‘••••’. A blank indicates the valuation technique under consideration is not appropriate in SIDS.
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Executive Summary
Table 2: Application of economic valuation techniques for regulating services for SIDS Economic Value Category
Beneficiaries/Contribution to SIDS
Most suitable valuation techniques in SIDS
Gas regulation, including carbon
Global/Very strong
MP •••o PF TC oooo HP ••oo CB SP BT •••o EPF
Climate regulation
Global/Strong
MP •••o PF TC oooo HP ••oo CB SP BT •••o EPF
Coastal protection
Local-National/Very strong
MP •••o PF TC •••o HP ••oo CB •••o SP •••• BT •••o EPF
Water supply and regulation
Local/Very strong
•ooo MP •••o PF TC •••o HP ••oo CB •••• SP •••• BT •••o EPF
Soil formation, nutrient and waste regulation
Local/Very strong
MP •••o PF TC ••oo HP ••oo CB •••o SP •••• BT •••o EPF
Pollination and biological regulation
Local - National/Strong
MP •••o PF TC HP ••oo CB SP BT •••o EPF
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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS)
Table 3: Applicability of the techniques for cultural services valuation in SIDS Economic Value Category
Beneficiaries/Contribution to SIDS
Most suitable valuation techniques in SIDS
Recreational
Local/Very strong
MP PF •••o TC ••oo HP CB •••o SP •••• BT •••o EPF
Tourism, including ecotourism
National /Very strong
••oo MP •••o PF TC HP CB •••o SP •••• BT •••o EPF
Legacy, spiritual and historical
Local-National/Medium- strong
MP PF TC HP CB •••o SP •••• BT EPF
•
The key methodological recommendation of the Guidance Manual for SIDS is presentation of illustrative applications of valuation and accounting of IES, through the provision of a comprehensive, inclusive step-by-step guide. The institutional SIDS context, within which the valuation and accounting of IES is undertaken, potentially affects every stage of the process: from the prioritization of the ecosystem services to be valued to the identification of the beneficiaries, to the validity of policy prescriptions and economic incentives resulting from the valuation exercise.
•
A step-by-step practical guide has been tested for IES valuation and applied to monetary valuation techniques such as market prices, production functions, travel costs, hedonic pricing, cost-based, stated preferences, and value transfer; these have been adequately tailored to the SIDS context. A step-by-step guide for IES accounts has also been developed in order to build experimental physical ecosystem natural capital accounts and to create monetary ecosystem services accounts. In all cases, the step-bystep practical guide is followed by examples in the SIDS.
•
This step-by-step guide enables the provision of all the adequate, specific information that is needed for improving SIDS policy makers’ understanding of the use of valuation and accounting techniques in decision-making, therefore bringing IES to conventional decision-making frameworks of fiscal, monetary, and industrial policies and ultimately backing up the policy makers’ ability to achieve sustainable, green growth.
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From an economic-policy point of view, valuation and accounting of IES can improve cost-benefit-analysis and policy-appraisal in SIDS. This information may support policy decisions regarding the level of investment in built infrastructure/capital (i.e. expansion of a SIDS’ harbour for cruise lines) or/and investments in nature infrastructure/capital (i.e. creation of a Marine Protected Area). In these cases, the IES valuation is fundamental in shedding light on how much to invest, with the aim to manage natural resources efficiently and sustainably. This Guidance Manual supports policy makers’ ability to value IES in cost-benefit-analysis and policy-appraisal in the SIDS.
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Executive Summary
•
Valuation and accounting of IES plays a key role in supporting proper pricing of IES, including the formulation of Payment for Ecosystem Schemes (PES) schemes in SIDS. This Manual provides technical guidance on how to design and structure a PES in SIDS. The Green Fee in Palau is an example of such a PES, which is fully supported by the concept of economic valuation of IES.
•
Valuation and accounting of IES is fundamental for integrating this information within the SIDS’ System of National Accounts (SNA). SIDS countries rely on SNA, but some information is often missing or invisible to national GDP, including information regarding the contribution of ecosystem services, such as carbon storage, coastal protection and flood mitigation. In coordination with the principles of the United National Statistical Commission, through its System of Environment and Economy Accounts (SEEA), this Guidance Manual fills this gap by supporting policy makers’ ability to produce data about the SIDS’ country patrimonial situation with respect to environment and ecosystem services. In this way, it backs up policy makers’ ability to develop better indicators for monitoring sustainable development/long-term growth. In addition, environmental and island ecosystem services accounting informs policy makers how the poorest households use and depend heavily on natural capital.
•
Finally, valuation and accounting of IES produces information that can be used in fine-tuning fiscal policies by changing the final market prices of some goods and services. This Guidance Manual supports policy makers’ ability to disentangle the dependency of countries’ economic sectors on IES. Consequently, this backs up policy makers’ ability to design schemes for taxes and subsidies aligned with the sustainable use of critical natural resources.
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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS)
1. Rationale and background
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The rationale and background of this Guidance Manual is linked to the preparation of the Third International Conference on SIDS, which takes place in Samoa, September 2014. It is also closely related to a wide set of international initiatives, including The Economics of Ecosystems and Biodiversity (TEEB). TEEB is a global initiative focused on attracting attention to the economic benefits of biodiversity including the growing cost of biodiversity loss and ecosystem degradation. TEEB presents an approach that can help decision-makers recognize, demonstrate and capture the values of ecosystem services and biodiversity. TEEB’s wide range of national assessments, which were carried out with greater vigour and confidence, clearly show the relationship between changing ecosystems and their impacts on people, especially the poor. Since the results from the TEEB report series were presented at the Conference of the Parties of the Convention on Biological Diversity (CBD) in 2010, a considerable number of additional countries have initiated TEEB studies with an aim to demonstrate the values of nature and to encourage policymaking that recognizes the values of ecosystem services and biodiversity. TEEB’s outcomes and recommendations have paved the way for the creation of the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES), which aims to assess the condition of the world’s ecosystems, synthesize knowledge on the issue to be used by policymakers, and develop capacity to assess and use scientific information for better decisions leading to enhanced human well-being. Similarly, this Guidance Manual is also linked to the UNEP-led Inclusive Wealth Index (IWI), which emphasizes the need to estimate wealth of all types including natural capital in order to promote the sustainability of economy and society. It is also closely related to the UN-led System of Environmental-Economic Accounting (SEEA) and Central Framework and Experimental Ecosystem Accounting. The latter takes the System of National Accounts (SNA) to its logical culmination where statistics recognize the need for environmental indicators to better capture the global and national sustainability discourse. In addition, the World Bank’s Wealth Accounting and the Valuation of Ecosystem Services (WAVES) partnership also backs up countries that want to implement natural capital accounting. This Guidance Manual aims to enrich and compliment the above-mentioned background initiatives by bringing the discussion and operationalization of valuation and accounting techniques of IES into the context of SIDS, improving SIDS policy makers’ understanding of the use of valuation and accounting techniques in decision-making. In this way, the Manual should help bring IES to conventional decisionmaking frameworks of economic policies and ultimately support SIDS policy makers’ ability to achieve sustainable, green growth.
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Executive Summary
2. Objectives
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The primary objective of the Guidance Manual is to provide an illustration and selected applications of qualitative and quantitative methodologies for the economic valuation and accounting of ecosystem services in SIDS. The Guidance Manual also describes and discusses, with selected applications, the set of valuation methodologies that can assist policy makers in mainstreaming the valuation of IES into general macroeconomic development policies as well as integrating IES with equity and distributional issues. It also provides indications on how these can be tailored to the specific environmental and socio-economic conditions in SIDS. Specific objectives of the Guidance Manual include provision of: a non-technical introduction to the criticality of applying valuation and accounting of ecosystem services in the context of SIDS, including strengths and limitations; illustrative applications of standardized methodology for the valuation and accounting of IES, through a step-by-step guide; an overview of the available resources for conducting valuation and accounting of ecosystem services in SIDS; and demonstration of the application through case studies with specific focus on the management of island ecosystems in SIDS.
3. End users of the guidance manual This Guidance Manual is mainly directed to policy makers, ranging from governments to national economic planning agencies. In addition, the Guidance Manual will be of use to development practitioners as well as the wider community with responsibilities in the national management of natural resources in SIDS. Policy makers are concerned about valuation and accounting of ecosystem services because they need to know the contribution of SIDS’ natural environment and their island ecosystem services to national GDP and the main economic sectors, including tourism, fisheries and mining. Policy makers seek quantitative information that expresses and translates the contribution of IES on GDP, and ultimately the contribution of IES on the welfare of SIDS communities. Preference is therefore given in translating IES values in monetary terms. This way, policy makers can compare directly IES contribution to national income as well to selected economic sector revenues. This Guidance Manual provides an understanding of the standardized (monetary) methodologies for implementing valuation and accounting of IES, taking into consideration the unique environmental, socio-economic and capacity issues relevant to SIDS.
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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS)
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4. Methodological approaches and materials used
This Guidance Manual introduces three critical methodological issues that have to be taken into consideration when addressing the economic valuation and accounting of ecosystem services for SIDS. The first issue sketches the theoretical background that inspire economic valuation and accounting of ecosystem services, by showing the strong interrelation between economic theory and related economic valuation methodologies. Economic valuation is an empirical exercise strongly rooted in economic theory. The second issue refers to the need to “tailor” the economic valuation and accounting methodologies to the context of SIDS. The main point here is to make clear that the specific environmental, socio-economic and capacity issues relevant to the context of SIDS are brought for discussion in the application of “standard” economic valuation methods. Such a methodological adaptation and tailoring is crucial for guaranteeing the success of the valuation and accounting exercise as well as for the overall statistical validity of the values and their legitimacy in supporting policy action. The final issue refers to the strong multi-disciplinary nature of ecosystem services valuation and accounting, by encouraging the collaboration of environmental scientists in the fine-tuning of the valuation. Furthermore, the proposed multi-disciplinary work needs to be clearly articulated with policy makers, who often express a demand for synthesis on valuation, accounting and mainstreaming of ecosystem services into conventional decision-making frameworks of fiscal, industrial and monetary policies. The Guidance Manual also complements the state-of-the-art of methodological framework by extending the economic valuation of ecosystem services to accounting. In fact, the Guidance Manual also aims to define a step-by-step guide that is a scientifically credible as a proposed methodology of accounting of ecosystem services for SIDS with illustrative applications. This step-by-step guide goes hand-in-hand with the recent adoption of the System of Environment and Economy Accounts (SEEA) and with wide acceptance of the need to put natural capital accounting into policy action. This institutional-driven demand is also extended to ecosystem services accounting. There is, however, no agreed international standard on how to measure and account for ecosystem services. As a result, there is renewed momentum with ministries of finance and ministries environment that support experimental work on ecosystem services accounting as this can be used to back decisions on the most effective management of ecosystem services in supporting individual and societal wellbeing. In this setting, the Guidance Manual presents a step-by-step guide for building experimental physical ecosystem natural capital accounts, with a case-study application in Mauritius, and a step-bystep guide for building monetary ecosystem services accounts, with an application in Madagascar.2 The proposed guidelines for building physical ecosystem services accounts in Mauritius are characterized by the use and the processing of multiple datasets and their assimilation into a geographical grid, relying on GIS tools and high-resolution land cover maps from satellite images. A first account is established for land cover stocks and
2 Although Madagascar is not a SIDS country, the application provides a solid illustration of the proposed methodology in an institutional context that is similar to that of many developing countries, including SIDS.
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Executive Summary
change; it covers the inland territory as well as the coastal waters, whose bottom can be mapped (i.e. lagoons and coral reefs). This land cover account is the data infrastructure upon which accounts of biomass-biocarbon, water and the ecological infrastructure and biodiversity (including species) accounts are developed. These three accounts start with basic balances of stocks and flows; next, the resource that is really accessible (and its use) is estimated. Furthermore, the step-by-step guide also presents and maps the ecosystem capital account of coastal seas. Finally, as a proof of concept, the calculation of ecosystem capability in a composite currency, Ecosystem Capability Unit (ECU), is attempted. Again, at this stage, the experimental character of the project and the provisional status of data must be emphasized. The second case study is based on the piloting work on natural capital accounting in Madagascar, coordinated under the WAVES umbrella. In particular, the step-by-step guide was applied to account for the monetary value of ecosystem-freshwater in a Malagasy forest area and the Ankeniheny-Zahamena Corridor (CAZ). In CAZ, ecosystemwater is used as a production input to three economic activities: (1) mining; (2) agriculture; and (3) ecotourism. The proposed experimental step-by-step guide on monetary ecosystem-water account is a microeconomic funded procedure and it respects the principles of the SNA. The approach starts from the marginal contribution of the ecosystem services, i.e. ecosystem-freshwater, on the production activity. Using production functions, the marginal impact of water on total outputs in the different sectors is estimated. Following microeconomic theory, a monetary value to the marginal impact of ecosystem-water in the different sectors is computed. Finally, the total market value produced with the selected ecosystem services is calculated and ready to be transferred to national account sheets. The Guidance Manual also reviews the current initiatives and working groups with a focus on ecosystem services valuation and accounting in SIDS, including database repositories, such as the Environmental Valuation Reference Inventory (EVRI), the TEEB Ecosystem Services Valuation Database and the Marine Ecosystem Services Partnership Library. All these economic valuation repositories, however, do not focus much attention on the economic valuation of ecosystem services in SIDS countries. Furthermore, most of the existing economic data are not linked to a policy process and therefore do not have the objective of assisting policy makers. In addition, the Guidance Manual also lists all relevant international platforms operating with/from SIDS in the areas of environmental conservation and management or with a specific linkage with the valuation and accounting of ecosystem services, including WAVES. Many regional working groups contribute with a rich communication, collaboration and exchange of data on IES and research experience among SIDS. This Guidance Manual also highlights the need to orient all these initiatives in the perspective of economic valuation and accounting and how to bring these for policy design. As a follow up, this Guidance Manual discusses how SIDS may develop their potential in creating policy-oriented valuation datasets of IES by reflecting the specific priorities of SIDS. SIDS have the potential to become worldwide leaders in the area of natural capital and ecosystem accounting if this work is done in coordination with the partners, and principles, supporting the implementation of SEEA. The Guidance Manual presents selected IES valuation case studies and discusses the estimation results in a policy perspective. This highlights the fact that valuation and accounting of ecosystem services in SIDS is not seen here as a technical exercise, but as a means to convey information for policy makers, to support policy makers’ ability to design economic policy actions and to ultimately achieve sustainable, green growth for the SIDS. As an illustrative example of application in SIDS, one can consider the application of the travel cost technique in Puerto Rico. The valuation exercise focuses on the benefits experienced by domestic visitors from the Caribbean National Forest in Puerto Rico regarding cultural services (Step 1 and 2: specify the change in the IES and identify beneficiaries impacted). An on-site survey was performed and collected data from 11 different sites (Loomis et al 2007)3. Data were collected regarding demographic information of the users, distance and time travelled, and characteristics of the visited sites (Step 3 and 4: develop and administer a questionnaire to visitors and calculate the average travel cost for recreational visitors using the travel distance, the cost and the travel time of the round-trip. A negative binomial distribution corrected for on-site sampling bias was used to analyse the
3 Loomis, J.B., Gonzalez, J.M. and Gonzalez-Caban, A. (2007). «Spatial Limits of the TCM Revisited: Island Effects», Selected paper prepared for presentation at the Western Agricultural Economics Association Annual Meeting, Portland, Oregon.
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Guidance Manual on Valuation and Accounting of Ecosystem Services for Small Island Developing States (SIDS)
collected data. Robust standard errors were calculated for each model coefficient. Responses where the visit to the site was not the main purpose of the visit were discarded (Step 5: Estimate a demand function for visiting the site using statistical analysis and the data collected). The travel cost method yielded a net willingness-to- pay (WTP) per trip of USD 17 for the corrected model and USD 29 for the uncorrected version (Step 6: Estimate the total economic benefit of the site to visitors). A significant difference was found when comparing to the results of the contingent valuation exercise (USD 109 per trip), which is attributed to the physical size limit of the island of Puerto Rico. This study, therefore, highlights the problems arising from the assumption of a continuous spatial market in the travel cost model, when applied to islands or other isolated areas, by comparing the consumer surplus per person per trip obtained, by analysing the travel costs and the means of a contingent valuation exercise. Another illustration refers to the proposed experimental step-by-step guide on a monetary ecosystemwater account. The step-by-step guide starts from the empirical estimation of the marginal productivity of the freshwater-ES/input, in the production of selected market goods, and finishes in recording that value in monetary terms for national accounts. Such condensed information can be of high relevance to the policy maker. Valuation results show that the production of cobalt, for instance, presents diminishing returns. This is a technical expression that indicates that a small increase of ecosystem-freshwater corresponds to a less than proportional increase in the production of cobalt. The production is therefore not technically efficient, and the more cobalt the firm wants to produce, the more (than proportional) amount of freshwater the firm has to use. The ecosystem balance might be hampered by an excessive exploitation of freshwater for the production of cobalt. The use of freshwater in agriculture/rice, on the contrary, is more efficient. However, the market of cobalt is much more profitable (in monetary terms) than the market of rice. The trade-off that the policy maker has to face (ecosystem services conservation vs. economic profitability) is clearly measured and accounted. The policy maker will select according to the agenda and preferred criterion. However, valuation and accounting of ecosystem services becomes a necessary pre-requisite for choice and trade-offs balancing. A final case study refers to the discussion of values that measure ecosystem services impacts on SIDS coastal tourism. Ecosystem services are drivers of touristic attraction in SIDS. The effect of ecosystem services on tourists’ arrivals can be measured in order to inform policy makers on the contribution of this natural resource to the development of coastal tourism markets. For example, estimation results show that the (marginal) impact of the coastal protected areas on the number of international arrivals is estimated at 2.90 for the SIDS countries. Based on these regression results, a one per cent increase in the number of coastal protected areas is associated with a 2.90 per cent increase in arrivals of international coastal tourists. The empirical results show that international tourists have a strong preference for SIDS’s coastal habitat abundance and marine biodiversity and therefore provide an important indication for tourism policies. This means that the policy maker can look at the ecosystem services-based “coastal protected area” as an attraction factor in the international tourism market. This statement becomes even stronger when we compare the SIDS estimates with the global estimates; in fact, the global study, the estimated coefficient for “coastal protected areas” equals 1.44 (Onofri and Nunes 2013).4 Therefore, in SIDS the conservation and protection of coastal areas can also be interpreted as a good investment for attracting international tourists. In this context, one could suggest to finance the management and conservation of this marine natural capital by exploring the use of market-based instruments. This can occur in different ways. Policy makers can design and apply a “green tax - payment for ecosystem services” (i.e. airport arrivals and hotel taxes) that international tourists pay as a contribution for supporting national management and conservation programmes and initiatives. This “green tax” is both incentive compatible (the tourist is willing to contribute for a good that enters its preference structure and is consumed; while the policy-maker receives the payment) and economically viable (the estimated coefficient for total expenditures has a larger magnitude and is more statistically significant for international tourists). These economic valuation results fully support the Green Fee presented in Palau. Finally, the Guidance Manual also uses studies involving emerging markets in SIDS, like the biotechnology markets where selected IES are crucial production factors, and discusses its insights in terms of policy instruments and the development of this emerging sector.
4 Onofri, L. and Nunes, P.A.L.D. (2013). “Some Like it Green: Tourism Demand and Marine Biodiversity: a Worldwide Analysis”, Ecological Economics, vol. 88, p.p. 49-56.
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Executive Summary
5. Key lessons and conclusions
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A number of key lessons and conclusions can be drawn from this Guidance Manual: Economic valuation and accounting of ecosystem services must be grounded on economic theory and tailored to the specific features of the site where the valuation is performed; the Guidance Manual presents to policy makers a step-by-step guide that has been tailored to the SIDS context and therefore is able to provide all the adequate, specific information that is needed for improving SIDS policy makers’ understanding of the use and the significance of valuation and accounting techniques in decision-making. Economic valuation and accounting of ecosystem services is a multidisciplinary exercise, involving the work of economists, natural scientists and statisticians, but it also needs to be rock-solid and linked to the SIDS policy making context, including addressing the demand of policy makers for synthesis on valuation and accounting, mainstreaming IES to conventional economic decision-making frameworks, and ultimately supporting policy makers’ ability to achieve sustainable, green growth. From a methodological viewpoint, the economic valuation of IES is anchored in welfare economics and looks at the identification and monetization of all the benefits that IES produce on human welfare. IES produce market and non-market benefits on human welfare. The latter are not captured in the existing markets and national production. For this reason, there is a toolbox of valuation techniques that allow us to identify and capture the economic value of IES. This Guidance Manual provides a step-by-step valuation Guide of IES that is adapted to the SIDS context, which is also fully supported by on economic theory and is able to directly address the demand of policy makers for IES valuation synthesis and mainstreaming IES into macro-economic policy design. From a methodological viewpoint, the rationale for accounting of IES is embedded in the notion of exchange value and is ultimately linked to existing markets and national production. The contributory value of IES to a national economy, however, is often invisible in the current system of measurement of national production. Therefore, it is necessary to immediately disentangle and measure the magnitude of such a contribution from the existing market price and value information. This Guidance Manual provides a distinct step-by-step accounting guide to recognize and factor out the contribution of selected IES on national production that is consistent with the principles of the System of National Accounts. The review of worldwide data repositories on economic valuation of ecosystem services informs us that most of the studies and economic values are not specific to SIDS or to IES. Furthermore, less than a quarter of the studies reviewed were commissioned by a national government or governmental agency. In other words, less than a quarter of the studies reviewed were explicitly carried out with the objective of feeding policy formulation. In this context, one of the conclusions of this Guidance Manual is that there is a need for building a SIDS-facilitated global partnership. This could support and pilot IES valuation and accounting with the main objective to bring and mainstream IES values to macro-economic policy making and thus support policy makers’ ability to achieve sustainable, green growth in SIDS or large ocean states.
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