Economic benefits from biodiversity Steve Polasky University of

Economic benefits from biodiversity Steve Polasky University of Minnesota & Natural Capital Project

Introduction • Ecosystems and biodiversity provide a wide array of goods and services of value to people: “ecosystem services”

Value of the earth

Value of the earth Costanza et al. (1997): ~$33 trillion annually

Value of the earth Toman (1998): “…serious underestimate of infinity. ”

The Millennium Ecosystem Assessment (2005) Ecosystems and biodiversity are essential for human well-being

Millennium Ecosystem Assessment

Millennium Ecosystem Assessment

Markets and incentives • Markets provide clear signals of value for some goods and services • Market do not provide clear signals of value for most ecosystem services – Externalities – Public goods • Systematically ignore or undervalue ecosystem services

Provision of clean water

Water funds • New York City – Catskills watershed protection: avoided filtration cost of $6 -8 billion • Minnesota Headwaters Fund: $10 million for conservation in Upper Mississippi River basin • Latin America: 32 Water Funds, drinking water for nearly 50 million people

Pollinators Pollination fees (2012): Total: $626. 8 Million Almonds $292. 5 Million Source: USDA ERS/NRCS

Modeling multiple ecosystem services and tradeoffs at landscape scales Nelson et al. 2009. Frontiers in Ecology and Environment 7(1): 4– 11.

Willamette Basin

Projected land use change in 2050 under the three scenarios

Outputs through time

Ranking of scenarios depends on set of ecosystem services considered

The Impact of Land Use Change on Ecosystem Services, Biodiversity and Returns to Landowners: A Case Study in the State of Minnesota Photo by Raymond Gehman, National Geographic Polasky, Nelson, Pennington, Johnson. 2011. Environmental and Resource Economics 48(2): 219 -242

Change from 1992 to 2001 by scenario: carbon sequestration Baseline 20. 0 10. 0 Mg C -10. 0 -20. 0 -30. 0 -40. 0 -50. 0 -60. 0 -70. 0 -80. 0 No Ag No Urban New Ag New Forest Conservation

Change in phosphorus exports to mouth of Minnesota River Baseline 300 Mg P/yr 200 100 0 -100 -200 -300 -400 -500 No Ag No Urban New Ag New Forest Conservation

Percentage change in habitat quality for grassland breeding birds Baseline 3. 0% 2. 0% 1. 0% 0. 0% -1. 0% -2. 0% -3. 0% -4. 0% No Ag No Urban New Ag New Forest Conservation

10. 0% 5. 0% 0. 0% -5. 0% -10. 0% -15. 0% re se on C N ew Fo Ag N ew rb U o N Ag o N Ba se lin e an st rv at io n Percentage change in habitat quality forest breeding birds

Change from 1992 to 2001 by scenario: market returns to agriculture, forestry, urban Baseline Agriculture No Ag No Urban New Ag New Forest Conservation $4, 000 $3, 000 $2, 000 $1, 000 $0 -$1, 000 Forestry 2001 price and cost in 2001 $4, 000 $3, 000 $2, 000 1992 price and costs in 2001 $1, 000 $0 -$1, 000 Urban $4, 000 $3, 000 $2, 000 $1, 000 $0 -$1, 000 Baseline Million 1992 US $ No Ag No Urban New Ag New Forest Conservation

Annual value from land use change scenarios 1992 -2001 Actual land use Change in total value: carbon, water quality, ag & forest production, $3, 328 urban using actual prices (M 1992 $) Change in returns to landowners: ag & forest production, urban using $3, 320 actual prices (M 1992 $) No ag expansion No urban expansion Ag expansion Forest expansion Conservation $3, 407 $3, 040 $2, 742 $3, 300 $3, 380 $3, 343 $3, 027 $3, 418 $3, 292 $3, 221

Economic valuation attracts attention $ But is only part of the story…. Vertical Lightning At Sunset" by Christian Meyn Free. Digital. Photos. net

Summary • In the 21 st century economic systems should evolve to include the value of ecosystem services and biodiversity

Thank you