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Vol. 6 No. 1 - Millennium Issue - January 2000

Assigning Economic Value to Biodiversity

By: Nandita Singh

Biodiversity refers to the diversity of life in all its forms and all its level of organisation, not just plant, animal and micro­organism species. At its most elemental level, biodiversity, encompasses the varied assemblages of organic molecules that comprise the genetic basis of life. On the other end of the spectrum there are biomes- the vast stretches of tundra, desert, forest, ocean, etc. In between come-population, race, sub-species, community, ecosystem.

Why is biodiversity important?

For many people the very questioning of the worth of biodiversity is illicit. They would argue that humankind has a moral obligation to conserve biodiversity, an obligation that comes with the fact that humans have the capability to destroy much of that biodiversity. Others find a religious support for such a view there is some stewardship responsibility on behalf of some deity. One problem with these moral views is that they often conflict with other moral views about, say, the right to earn a living, the right to have access to basic needs such as food, cloth and shelter, and so on. If conserving biodiversity conflicts with those rights, then some ‘meta-ethical’ principle is required for deciding which moral view should prevail.

One aspect of the process of changing popular perceptions about biodiversity resources is to show that the sustainable use of biodiversity has positive economic value and that this economic value will often be higher than the alternative resource uses which threatens biodiversity.

Valuing biological diversity conservation

The issue at hand concerns the measurement of natural capital, great difficulties arise in assigning values to natural capital precisely because the market in which it is traded are limited.

In the past few decades a number of techniques have been developed to place monetary value to the benefits of conserving an area for biodiversity. Some rely on market prices of related goods and services both to value benefits and to estimate costs, while other rely on survey­based approaches to infer values.

Hedonic pricing method

Property values are affected by a number of variables including environmental quality. After excluding other variables, including environmental quality, the residual price difference can then be ascribed, at least theoretically, to differences in environmental quality, e.g., the increased value of property located next to natural areas. According to a report by Nelson (1982) traffic noise, measured in Leq (equivalent continuous sound level), a one unit change produces property price depreciation of 0.5 - ­1.0%.

Ravel - cost method

This approach looks at the pattern of recreation use of a natural parks and uses this information to derive a demand curve to estimate the total amount of consumer’s surplus. For example, travel behaviour reveals that Costa Rican visitors are willing to pay USD 35 per household to visit a tropical rainforest site in Costa Rica. Foreign visitation is likely to be worth far more than domestic, as foreign visitors have higher travel costs.

Contingent Valuation Method

The Contingent Valuation Method (CVM) bypasses the need to refer to market prices by asking individuals explicitly to place values upon environmental assets. This is also referred to as an expressed preference method. An interesting advantage of the CVM approach is that it can, in theory, be used to evaluate resources, that people have never visited personally e.g. the Antarctica which people are " Willing to Pay" to preserve but would not in general ever want to visit.

Consumptive benefit method

There are a number of products which can be harvested on sustainable basis and marketed. For example, a probable number of higher plant species, which are widely used as basis for pharmaceutical drugs, is some 500,000. According to Pearce and Moran (1994) economic value of these plants can be approached by looking at:

(i)           the actual market value of the plants when traded,

(ii)         the market value of the drugs of which they are the source materials,

(iii)        the value of the drugs in terms of their life-saving properties, and using a value of a ‘statistical life’,

(iv)       the lost pharmaceutical value from disappearing species.

As there is absence of ‘global markets’ in the benefits of biodiversity, the developing countries face major problems of appropriating the global benefits of sustainable use of biodiversity. As long as these global values cannot be captured by host countries, biodiversity will be a risky investment in many contexts.

Dr. (Mrs.) Nandita Singh is a scientist at the National Botanical Research Institute, Lucknow - 226001 (India)

This article has been reproduced from the archives of EnviroNews - Newsletter of ISEB India.

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