[MUSIC] What's valuation? So what do you value? Yeah, you value your friends, your family. You value a beautiful sunny day like this in Geneva. You value other things about nature. Of course you value your house, your car. You value a number of things. It's a human institution. And of late, we found that the need to value nature and its services, what we call ecosystem services, has become quite an interesting new area to be explored by policy makers, by businesses, and by NGOs. That's the kind of valuation we're talking about, which is also a self-reflection. Because looking at the value of what nature provides to us, mostly which is free, is also a way for us to understand how we distance ourselves from nature. And how we need to reconnect, perhaps using the means of valuation as a formal mechanism. Before we get into the valuation, we must understand the purpose of valuation. In other words, the why of valuation. And when we do that, we also realize that actually the purpose of valuation determines the valuation. For example, let us say you're in India, and you're looking at the flow of nutrients and fresh water, from the Nepal mountains into the state of Bihar. Yeah, that's a valuable service, but at the same time, there's also soil erosion there and there are occasional floods, and that destroys value. And you are, for example, trying to negotiate between two countries, a payment for ecosystem services agreement. Well, if you were in India, you would say all we see is damage from floods. If you were Nepal, we'd say all we provide is nutrients and fresh water. And actually, you would come to different values if you were negotiating, compared to what both countries might come to if we were merely adjusting national accounts for ecosystem services. So depending on the purpose, whether it's national accounting adjustments or whether it's domestic agreements for paying for ecosystem services, or whether it's cross-border agreements, you might come up with different valuation approaches. Valuation also has serious ethical implications. This is not only about the complexity of nature because we hardly understand the processes of nature. When we do, we don't necessarily identify and understand the functions, the things that nature does, and how those functions deliver value to us, ecosystem services, or indeed, how they should be valued. There is many layers of uncertainty and risk when we value. But perhaps another dimension of that risk and uncertainty is understanding the local context, the society context, the community context. Who should value? We said that valuation is a human institution, but who should value is the question, should it be the government? Should it be the local communities? Should it be an independent third party? These are ethical issues. It's very difficult to push upon a local community a way of valuation that doesn't belong to it, especially when it, the community, is the one who literally lives in that natural area. And finally, and perhaps most fundamentally, the whole idea that we can engage valuation as we have defined it, itself is an ethical issue because it presumes a certain way of thinking. It presumes a kind of Judeo-Christian approach to nature which is that we are distinct from nature, we are the agent of valuation, whoever we may be. And we can apply certain principles and norms and methods and signs and come to an answer. Well, others might argue with that. A local community might say, who are you to presume so much? Who are you to disconnect us from the nature which is part of our home, and of which we are part of existence? That kind of valuation is intuitive. It doesn't require a Cartesian approach. So, taking the idea that you can value, itself, creates a certain risk that you may assume in a long-term basis. That somehow or the other, you can make and determine these choices, which may be, may not be appropriate for a different community or, indeed, may turn out to be dangerous for society. So in summary, valuation is a human institution, who values matters. You need to define the purpose of valuation. In other words, you must know why to value. You need to recognize risk and uncertainties because that is about the ethics of valuation. You need to identify the further risk and uncertainty, which is the ethical choice of the discount rate. And finally, you need to recognize that, in engaging the process of valuation, you are already making a kind of ethical trade-off. Because you are accepting a Cartesian Judeo-Christian approach, which may or may not be appropriate for another community at another time in another place. The project, The Economics for Ecosystems and Biodiversity, pull together a lot of knowledge on the issue of valuation. How to use it, when to use it, and what were the implications for policymakers, businesses, and citizens. Here's how TEEB views valuation, which is really in three tiers, recognizing value, demonstrating value, and capturing value. You can recognize value, merely by being a human being. There's no need for economics. For instance, tribal communities would recognize the value of the forest in which they reside. They would probably associate a spiritual value as well, because they see their ancestors as living there. Last century, several areas were declared as protected areas in the US and in the UK, places like Yosemite National Park in the US or the Oxford Arms in the UK. And that was done on the basis that it was for posterity. It was part of the culture to preserve what we could see for future generations, no economics to be considered. It was just recognizing value and enshrining it in legislation. Demonstrating value, however, does require some economic calculus. It does require some reference to the knowledge of economics. And finally when we say capturing value, that's about transferring a payment from one party to the other. Someone pays, someone receives. So these are all forms of value and valuation. And if we notice, each of these forms of valuation will have typical responses. For instance, when you are recognizing value, the typical responses would be potentially a change in regional plan, such as what was done by Baoxing county in China, when they decided that certain areas of the county were rich in ecosystem services as measured by the InVEST software. And they decided to reserve those for the purpose of providing ecosystem services and use other areas for development purposes. You can also recognize value when you have a change in legislation, such as the Philippines. After the 1998 bleaching event for coral reefs, decided to reserve around the Tubbataha Coral Reef, an area which became the no-go zone. Which after a few years, was found to have developed an increase in coral cover as a result of protecting it from intrusion. And was found to have increased the supply of fish almost fourfold compared to other regional areas. These were all ways of legislating, and in fact will happen as a result of that, further legislation increased the protected area through a buffer zone around it. You can also demonstrate value. And an example of that would be the value of a protected area, such as happened in the case of the city of Kampala and its neighboring swamp, the Nakivubo swamp. Which was servicing, effectively, the city of Kampala as a natural sewage treatment plant because of the natural disintegration of human waste that went into that. And economists had calculated that if the city proceeded with its plans of converting that into agricultural and residential areas, then that would be at a huge cost of more than a couple of million dollars per annum. That the city would have had to pay to create an alternative sewage treatment plant. Well, that's an example of valuing one service of the protected area, and then making a change in legislation because as a result of this evaluation, the swamp was, in fact, turned into a conservation zone. An example of certification is such as took place in Japan, where rice that was grown in a conservation area called White Stork Rice because it was helping conserve the area where the White Stork, which was locally extinct in Toyoka City, had been reintroduced. As a result of this conservation practice of higher biodiversity rice growing, the farmers were able to realize a higher value for their rice. The support of the certification agency was vital, because that helped the rice sell at a higher price. And of course, in addition to the certification, there was also a payment for ecosystem service that had been introduced by the local authority. Which rewarded the farmers for the practice of converting their normal rice culture into a more organic rice culture, which allowed the feed of the white storks to take hold. So these are different ways in which valuation elicits typical responses. And you will notice, and in fact, I haven't yet discussed a market response. And that's indeed true, because markets are really one form of response, which are quite rare in the world of ecosystems and biodiversity. Fundamentally, this is because most of ecosystems and most of biodiversity are in the realm of public goods. These are public goods and services which nature provides to all of humanity for free typically. And it’s quite difficult to suggest that the first thing one should jump to, to solve the problems of ecosystem degradation and biodiversity loss is actually a market solution. You will see that out of the 120 odd solutions, for instance, that are listed in the various TEEB report, hardly a handful, less than ten, have anything to do with markets. On the other hand, the solutions that have been demonstrated show that valuation and the use of economic argument, demonstration, and capture, in fact, is quite a useful way of achieving what we want. The purpose of valuation, ultimately, is about conserving ecosystems and protecting biodiversity. [MUSIC]
