Post-2015 Consensus: Biodiversity Assessment, Markandya

Assessment Paper

Summary of The Targets From The Paper

Biodiversity Targets	Benefit For Every Dollar Spent
By 2030, stem the loss of coral reefs by 50%	$104
Reduce global forest loss by at least 50%	$70
Reduce wetlands losses by 50%	$19
By 2020, ecosystem resilience and the contribution of biodiversity to carbon stocks has been enhanced, through conservation and restoration, including restoration of at least 15 per cent of degraded ecosystems, thereby contributing to climate change mitigation and adaptation and to combating desertification.	$7
By 2020, at least 17 per cent of terrestrial and inland water areas and 10 per cent of coastal and marine areas, especially areas of particular importance for biodiversity and ecosystem services are conserved through effectively and equitably managed, ecologically representative and well-connected systems of protected areas and other effective area–based conservation measures and integrated into the wider lands.	$0.85

Summary

The post 2015 agenda seeks to replace the MDGs with new goals that “move beyond meeting basic human needs and promote dynamic, inclusive and sustainable development”. There has been an active debate on what precisely these goals should be and what indicators should be used to track them. The Zero Draft of proposed goals and targets from the UN Open Working Group includes under Goal 14 ten targets focused on marine resources, while Goal 15 has 12 targets dealing with terrestrial natural resource issues.

The targets draw significantly on the Aichi Targets that were adopted as part of the Convention of Biological Diversity’s (CBD’s) Strategic Plan for Biodiversity 2011–2020, in Nagoya, Japan, in 2010. There is a large degree of overlap between the two sets, but also a number of differences. A benefit-cost analysis cannot be done for the SDGs as currently constituted. There is not enough information on quantitative targets and not enough data collected on the costs of meeting them. For this reason the paper selects Aichi targets for which we can estimate the net benefits in monetary terms.

The Aichi Targets

There are 20 targets covering five strategic goals:

Address the underlying causes of biodiversity loss be mainstreaming it across government and society (targets 1-4);
Reduce the pressures on biodiversity and promote sustainable use (Targets 5-10);
Improve status of biodiversity by safeguarding ecosystems, species and genetic diversity (Targets 11-13);
Enhance benefits to all from biodiversity and ecosystem services (Targets 11-16);
Enhance implementation through participatory planning, knowledge management and capacity building (Targets 17-20).

For our purposes, they can also be divided into three other groups: those where the benefit cost method is not possible or appropriate, those where it could be applied if data were available but such data are not, and those where the method can be applied now, with some qualifications. For the second group, it is almost certain that the benefit-cost ratios would vary between regions, and the amount of work involved in collecting the necessary data is considerable.

The following are the four targets, for which benefit-cost analysis is possible, but this evaluation is necessarily approximate and this should be regarded as a first attempt with very limited resources:

Target 5 - By 2020, the rate of loss of all natural habitats, including forests and wetlands, is at least halved and where feasible brought close to zero, and degradation and fragmentation is significantly reduced.

Target 10 - By 2015, the multiple anthropogenic pressures on coral reefs, and other vulnerable ecosystems impacted by climate change or ocean acidification are minimized, so as to maintain their integrity and functioning.

Target 11 - By 2020, at least 17 per cent of terrestrial and inland water areas and 10 per cent of coastal and marine areas, especially areas of particular importance for biodiversity and ecosystem services are conserved through effectively and equitably managed, ecologically representative and well-connected systems of protected areas and other effective area–based conservation measures and integrated into the wider lands.

Target 15 - By 2020, ecosystem resilience and the contribution of biodiversity to carbon stocks has been enhanced, through conservation and restoration, including restoration of at least 15 per cent of degraded ecosystems, thereby contributing to climate change mitigation and adaptation and to combating desertification.

Cost and Benefit Assessment

The discount rate used here is 5%, to be consistent with the other studies in this series. While a sensitivity analysis for different rates can be applied in further work we do not consider that the benefit to cost ratios obtained here will be changed by such an analysis. This assessment reports the Benefit-Cost Ratio (BCR) and Internal Rate of Return (IRR).

The assessment has used cost data collected by UNEP (CBD, 2012), covering the period 2013-2020. We note, as do the authors of the data compiled, that these cost estimates have gaps and inconsistencies and the range of estimates is wide. Nevertheless they do provide a more or less coherent set of figures calculated on a common basis.

Costs and Benefits of Reducing the Rate of Loss of Forests and Wetlands (Aichi Target 5)

The rationale for this target is that habitat loss is the most important factor driving biodiversity loss and that the rate of change needs to be substantially reduced. While for some ecosystems it may be possible to bring the rate of habitat loss close to zero by 2020, for others a more realistic goal is to halve the rate of loss. Significantly reduction of habitat degradation and fragmentation will also be required in order to ensure that those habitats which remain are capable of supporting biodiversity. The emphasis of this target should be on preventing the loss of high-biodiversity value habitats, such as primary forests and many wetlands, and of ecosystems where continued loss risks passing “tipping points” that could lead to large scale negative effects on human well-being.

Forests

For the first half of the 21st Century, the physical losses are estimated at 9% of 2000 boreal forest stocks, 19% of temperate forest stocks and 12% of tropical forest stocks. The losses have been valued using studies of the commercial and fuel wood values of timber, recreational values for forests, passive values (i.e. the values of those who are willing to pay for forest to be conserved in addition to paying for those services they do use), and carbon storage values of forests. There is a range of values; the lower bound is US$334 billion per year while the upper bound is US$1,118 billion. In this study we have taken these estimates, assumed the losses are uniform over the time period 2000 to 2050, and then updated the figures to US$2012. Avoiding these losses is the benefit of the proposed SDG target. Costs are taken from the 2013 CBD study. It is also assumed that 50% of the losses will be avoided, that benefits will accrue from 2021 and continue to 2050.

For the lower bound of benefits, the benefit-cost ratio is 29.7% (an IRR of 44%), and these figures rise to 99.4 and 66% for the upper bound. This program would be highly justified if the 50% reduction can be delivered. Annualised benefits would amount to around $219 billion from 2021 onwards, while total costs over the period 2103-2020 would be only $10-14 billion. However, implementation is a major factor. Problems of encroachment are difficult to address and it is possible that the costs of attaining the targets are underestimated. Indeed it may be impossible to prevent losses in some places for this reason. Nevertheless the ratios are so high that even a partial success would make a program such as this justified on cost benefit grounds.

Wetlands

In the case of wetlands the calculation is more difficult. Current areas are even more uncertain than they are for forests and services provided vary significantly by location. We used the WWF database as the source for 2010 estimates of wetland area: 1,061 million ha for inland wetlands (including lakes, rivers, freshwater marshes and swamp forests) and 152 million ha for coastal wetlands (including mangroves). The annual rate of loss in both cases is put at about 0.7%.

The services provided by wetlands cover provisioning (food, water, raw materials etc.), regulating (climate regulation, water flow, erosion prevention etc.), habitat (nursery and genetic diversity), and cultural (recreational use, spiritual experience etc.). Estimates of the value of benefits provided cover a wide range: for freshwater wetlands the lower bound (in 2007 international dollars) is around $3,000/ha/year and the upper bound is $105,000/ha/year. Likewise the values for coastal wetlands range from $37,000/ha/year to $888,000/ha/year. As for forests, the program is targeted to reduce loss rates by half from 2021.

The results of economic analysis are summarised in the table.

If the lower bound of the benefits is right the target is hard to justify on benefit-cost grounds. If, however, the upper bound is correct the target is amply justified. In practice the true values are probably somewhere between the two and will depend on where the programs are implemented.

Costs and Benefits of Reducing Loss of Coral Reefs

Given the expected longer term impact of climate change and ocean acidification, it is important to reduce other anthropogenic pressures on coral reefs and other vulnerable ecosystems. This would include, for example, reducing pollution and overexploitation, as well as harvesting systems with negative impacts.

A NOAA study estimates that by 2050 60% of the world’s coral will be dead, implying a loss rate of 2.2%. We take this rate and apply it to the estimated stock as of 2010, of around 19 million hectares. Coral reefs provide very significant ecosystem services, in the forms of raw materials and genetic resources (habitats for fish), erosion prevention and disturbance moderation, and recreation. For 94 studies, the lower bound of annual benefits was $36,800/ha, while the upper bound was $2.129 million/ha.

We use the lower bound of benefits for two programs which start in 2013 and provide benefits from 2021: one that reduces losses by 50% and the other by 80%. The capital cost of halving the loss is $684 million, with a recurrent cost of $81 million. For the more ambitious targets, the capital and recurring costs are $1,036 million and $130 million respectively. The benefit-cost ratios for the two programs are both very high – 95.3 and 98.5 respectively – with internal rates of return of over 50%.

Even taking the lowest bound of estimated benefits, the target and associated program are well justified. Indeed it would make sense to go for the more ambitious target of reducing losses by 80%. There is some concern, however, that the outlays of around $80 million a year are not enough to achieve the goal of a 50% reduction in loss rates. Nevertheless, the big difference between the benefits and costs indicates that there is ample scope to increase outlays on coral protection and still achieve a benefit to cost ratio that is well over one.

Costs and Benefits of Increasing Protected Area Coverage (Aichi Target 11)

Target 11 aims to increase protected areas to 17% of terrestrial land area and 10% of coastal and marine areas by 2020. There are currently some 13% of terrestrial areas, 5% of coastal areas and very little of the open oceans under protection. Major efforts would therefore be needed to expand marine protected areas. Protected areas should be established and managed in close collaboration with indigenous communities and vulnerable populations. Relevant indicators to measure progress are numbers of sites of biodiversity significance covered by protected areas and the connectivity/fragmentation of ecosystems. Other possible indicators include the overlay of protected areas with ecoregions, and the governance and management effectiveness of protected areas.

We assume that currently 10% of all eco-regions are protected, with a total protected area of 13.2 square kilometres in 2000. The cost of converting further land is considerable; in the range from $2,473 to $10,513 per hectare, or $46-196 billion in total. A considerably higher figure was estimated by the CBD in 2013, but this included meeting the target of 10% of marine areas. No breakdown is available for the costs of marine and terrestrial protection, so we use the figures per hectare quoted above.

The areas that increase in most parts of world include grassland and forest, but in some cases protected areas are created by reducing land from these biomes as well. There are global benefits which result from carbon capture, plus a range of other benefits with largely local impact. Lower bound benefits do not include the less certain benefits of carbon capture, but these are added in to provide the upper bound.

For the higher cost estimate, BCRs are below one for both upper and lower bound benefits. Only when we take the lower bound of costs do they rise above unity, to 1.15 for the lower benefits and 1.97 for the higher.

There are some important qualifications to this. First, the method of estimating benefits does not account for some of the possible gains from protection, in the form of species protection and increase in biodiversity. Second, it is doubtful that such an increase in area can be achieved in a period as short as 2011 to 2020, at least without a substantial increase in transactions costs. Third, the distribution of the costs of protection is important. If an areas is heavily used by poor people then the costs to them of restricting access has be taken into account.

Costs and Benefits of Conserving Carbon Stocks (Aichi Target 15)

The program for forest restoration assumes that 150 million hectares will be planted over the period 2013 to 2020. Here, we assume that between 2.4 and 16.9 tonnes of CO₂ are sequestered per hectare, starting after year one, rising to a maximum at year 10 and continuing for at least 30 more years. The value of the carbon sequestered can be estimated either as the marginal cost needed to achieve a given reduction or as the damage done per tonne emitted (the Social Cost of Carbon, or SCC). Costs for the program estimated by the CBD are a one-off investment of $100 million and a recurrent annual cost of $6.4 billion from 2013 to 2020, assuming that the reforestation takes place at a constant rate over the period.

For the lower end of the sequestration range, the NPV of the program is $2 billion using the SCC estimate but $119 billion using the marginal cost of abatement. BCRs are 2.1 and 10.5 respectively, and IRRs are 11% and 25%. For higher rates of sequestration, the BCRs rise accordingly, indicating the program is well justified.

Conclusions

Many of the Aichi targets are really difficult to evaluate in terms of cost and benefit. This is not a reason to reject them outright (not everything that is important can be so quantified), but it does suggest that we will need other indicators of cost effectiveness to be sure we get good value for money.

For Target 5 (to halve the rate of loss of forests and wetlands) it is necessary to divide it into the forests and wetlands components. The figures indicate that the forest component is justified at the global level but the wetlands component depends on which of the wide range of possible benefits we take.

Target 10 relates to coral reefs and the figures indicate that the benefits are well in excess of the costs even with the lower bound of estimates being taken for the former. The costs, however, may be underestimated and more work is needed to fully determine these.

Target 11 is analysed only with respect to the terrestrial protected areas as data were not available for the marine areas. The figures here are more problematic as the range of costs is very wide and the benefits that can be quantified are limited. The analysis shows that if we include carbon benefits and take the lower end of the range of costs the target is justified but it is not justified if the costs are at the upper end.

Finally for Target 15 (forest restoration) the benefits are in excess of the costs based on current estimates of carbon values.