Commentary on CAFF (2015), The Economics of Ecosystems and Biodiversity (TEEB) Scoping Study for the Arctic, with a special focus on Arctic Marine Ecosystem Services and economic approaches.
CAFF 2015. The Economics of Ecosystems and Biodiversity (TEEB) Scoping Study for the Arctic. Conservation of Arctic Flora and Fauna, Akureyri, Iceland. ISBN: 978-9935-431-46-2
The TEEB scoping study purports to highlight values of ecosystem functions with regard to Arctic ecosystems. It is a joint effort between the Conservation of Arctic Flora and Fauna (CAFF) Working Group, United Nations Environment Programme (UNEP) TEEB, World Wide Fund for Nature (WWF), and GRID-Arendal. It builds upon the Arctic Biodiversity Assessment (ABA) (CAFF, 2013) a rather seminal report touching upon a series of status and trends of Arctic biodiversity, synthesizing both Arctic related scientific research and traditional ecological knowledge while also including a number of policy recommendations which among everything else duly stress the importance of economic values for biodiversity.
The methodology applied here is based on the classical TEEB ecosystem approach which also serves as a basis for individual countries’ studies (TEEB, 2013) (Sukhdev, Wittmer, & Miller, 2014) and consists of clearly defined steps: underscoring the recognition, demonstration and capture of the ecosystem values prior to actions and decision making. The policy scenario analysis included is worthy of consideration while what also holds a discernible role in the report is the intentional avoidance of enforcing economic valuations in cases where such valuations might mislead or cause misunderstanding.
Starting with an overview of Arctic economies, it recognizes that their future is poised between opportunities and uncertainties as well as potential conflicts due to their diverse natures, particularly since they include both market activities (eg oil and gas exploration, mining) and non-market ones (eg subsistence hunting, fishing, reindeer herding). Climate change effects along with increases in industrial development and shipping are identified as emerging challenges to be met. In the light of globalization and intensification of demands for resources, there are concerns being expressed on the potential of undermining small-scale activities; indicative examples given include remote decision making economic centers (such as the EU) opposing trapping and seal hunting, thus imposing trade bans and hurting local economies.
The ecosystem services as described in the Millennium Ecosystem Assessment (2005) are classified into a) provisioning b) regulating c) cultural and d) habitat/supporting services. The interlinkages among those services are particularly emphasized in the report while also documented from an online questionnaire that took place in 2014, following a CAFF’s initiative. Despite the small sample size (60) that could easily raise doubts regarding the results’ validity, respondents represented both Arctic and non-Arctic nations as well as various different stakeholders.
The report contains a thorough analysis on terrestrial, freshwater and marine ecosystems but I focus only on the latter here. After briefly delineating key aspects of the Arctic marine environment (eg 18 Large Marine Ecosystems – LMEs, polynyas and coastal leads, annual primary production – Fig. 1, advective water and zooplankton transport), the report follows a more focused categorization among the different services. Indicatively, provisioning services within Arctic and sub-Arctic waters mostly include fisheries, which are the most lucrative of the services, responsible for over 10% of international fishery catches and 5.3% of crustacean catches. An important fact omitted though at this point is that despite the large scale of the Alaskan fisheries on crustaceans, on the other side of the Arctic, in the Barents Sea, besides the profitable fishery that has developed, there are also worrisome ecosystem consequences from the crustacean invasions of the Red King Crab (Paralithodes camschaticus) and the Snow Crab (Chionoecetes opilio) (Kourantidou, Kaiser, & Fernandez, 2015). Despite their high market value and the profits they generate, they are suspected of negatively impacting the Arctic benthic habitat and otherwise creating economic damages (Kaiser et al., 2015; Kourantidou et al., 2015). The cultural services with regard to marine ecosystems mostly consist of recreational values, often considered along with provisioning services such as hunting and recreational fishing that are responsible for boosting touristic activities. The interactions among beneficiaries are very well underscored in the report; for the case of fisheries with the successful use of the example of potential overexploitation of fishery resources, which may constitute a threat for Arctic marine ecosystems while also for indigenous coastal communities.
Fig. 1 Main Features of pan – Arctic ecosystems: Includes a) terrestrial regions, different bio-climatic sub-zones and vegetation zones, b) marine regions (18 LMEs named, polynyas and coastal leads depicted with yellow and red thick lines respectively and annual primary production in g carbon/m2 with red numbers), c) freshwater boundaries and bodies
Source: CAFF 2015
Risks linked to ecosystem services are explicitly addressed. For Arctic coastal and marine ecosystems in particular, they include: coastal erosion, impacts on non-migratory-species, seabirds and ice-dependent species, trophic disturbances due to sea ice seasonality and ocean temperature changes, ocean acidification, northward moving species, changes in prey-predator relationships, abrupt changes hindering evolutionary adaptation and temperature-ice related increases in marine primary productivity.
The report also includes an analysis on risks related with social responses to drivers of change in ecosystem services. While recognizing the opportunities arising from increased shipping traffic as well as from the anticipated development in Arctic marine fisheries, light is shed on the risks to ecosystem functions while emphasis is put on the required infrastructure such as port facilities that may serve as pathways for the introduction of non-indigenous species.
In the context of ecosystem services governance, Ecosystem Based Management is highlighted and the example of Norway’s Barents Sea Management plan is discussed as a case of inadequate consideration of ecosystem services. In its effort to grapple with management issues in the Barents Sea, both monetary valuation and non-monetary, while also participatory, valuation methods would significantly contribute to an improved approach.
The Environmental Economics
From an economic perspective, clearly externalities pose a series of challenges and thus the “polluter pays principle”, the “user/beneficiary pays principle” and the “full cost recovery principle” are suggested for improving stewardship. Governance in the Arctic Ocean, taking into account the different boundaries of international waters (areas beyond national jurisdiction) and the different use-policies, stands as a mammoth challenge. Explicit examples of broader policy instruments for governance of Arctic ecosystem services are given, drawing from national scale ones where most of them are rather macroeconomic. Within the governance realm, the measurement of biodiversity and ecosystem services through inventories and indicators is presented as critical, while linking natural capital to macroeconomic, societal indicators and national accounts is of equal importance. The latter can be achieved through a System of Economic Environmental Accounting but still more concerted efforts are required for effectively incorporating ecosystem services into national accounts. In addition to the above, informed management of natural capital, building on ecosystem services assessment through the use of Integrated Assessments on a national level Integrated National Assessments and Integrated Ecosystem Assessments can significantly contribute to both the valuation of natural capital and the provision of information critical for effective decision making processes. For the means of improving the distribution of costs and benefits, which is eventually expected to address social and environmental concerns (e.g. fairness), tools such as the following can be used: “Polluter Pays Principle”, “Payments for Ecosystem Services”, Recognition of rights to resources and collective/cooperative management of common goods, as well as Re-evaluation and potential removal of harmful subsidies within a managing transition process which indicates a shift towards more sustainable resource use. Planning and management instruments are also succinctly explained through the use of a series of reasonable examples within: Ecosystem-Based Management, Marine Spatial Planning and Terrestrial as well, Strategic Environmental Assessments and Environmental Impact Assessments, Protected Areas Networks and Co-management of Natural Resources.
Additional economic instruments suggested in the report that could best equip Arctic stakeholders to meet governance challenges include the introduction of taxes (eg on fuel, water, energy consumption) and fees (eg on access to parks, timber logging/fishing licenses), for discouraging extensive consumption of natural resources. There are definitely many aspects of this recommendation that could bear additional explanation since the beneficial effect of taxes and fees can be easily questioned especially with regard to the impacts on indigenous communities. The report at this point though is limited to the overall benefits attached to financial resources generated through fees on the use of natural resources. Public information instruments such as product certification/eco-labelling are also suggested and really well reflected through the example of the MSC (Marine Stewardship Council), which has certified up to 90% of Greenlandic shrimp and Barents Sea cod and haddock fisheries. Trading schemes as a means for governmental allocation of property rights could also be a useful tool, reflected potentially through Total Allowable Catches and transferable quotas. Apart from those tools mentioned above, there is also space for non-market economy (barter) tools, or mixed economy tools (compensation trade), such as those practiced in Arctic Indigenous communities.
The Arctic Council’s work here on governance of ecosystem services has garnered considerable attention so far and has overall proved successful within its policy making processes, despite being a rather “soft law” decision making body. Other TEEB initiatives with respect to Arctic ecosystems are also of great interest. Denmark, an Arctic coastal nation, along with Finland and Sweden (Arctic nations) and the EU member states find themselves in a process of assessing their ecosystems and services in their national territories by 2020 as a follow-up to the EU Biodiversity Strategy to 2020 (EU, 2011), while the Nordic countries (Finland, Sweden, Norway, Denmark, Iceland) have already worked together towards forming a framework for highlighting the socio-economic role and significance of biodiversity and ecosystem services in their region (TEEB, 2012). TEEB’s approach has behooved Norwegians to set up an expert commission explicitly dealing with values of ecosystem services, while in Sweden a similar effort was undertaken with the scope of highlighting the values of ecosystem services among society, decision makers and governmental stakeholders.
IPIECA, the global oil and gas industry association for environmental and social issues has contributed a chapter to the report on the industrial perspective of ecosystem services in Arctic oil and gas development, where it recognizes the risk imposed on provisioning and cultural services while it also highlights the potential environmental impacts induced by vessels’ activity, exclusion zones and seismic shooting at the sea surface.
According to my personal opinion one of the report’s most haunting messages seems to be lying in the “Limited future outlook” chapter where it is stated that despite Arctic Council’s efforts so far (Adaptation Actions for a Changing Arctic and Arctic Resilience Report), there is still lack of dedicated involvement of environmental economists and thus it begs the very interesting question of whether it is indeed a lack in research or whether the role of economics has been partly overlooked.
The fact that the contribution of economic science is sorely needed for capturing values associated with Arctic ecosystems with related “informed” trade-offs being the cornerstone of ecosystem valuation is indisputably emphasized within the report. Responses from the questionnaire are used as an input towards forming the baseline for the valuation process. The argumentation regarding economic values centers around the fact that they differ markedly to monetary ones which are often used to stress the importance of ecosystem services but may be inappropriate in many Arctic cases. The measurement units can vary while the ways of expression can vary too (eg in the form of scores or index). Drawing from the Guidance Manual for TEEB Country Studies (TEEB, 2013) with regard to the design of valuation studies, it is marginal values that seem to matter the most as opposed to total values, while scenario analysis contribute to broadening the picture. Distributional effects are also worthy of consideration in order to ensure social/intergenerational justice.
The typical methods used in formal environmental economic literature based on revealed and stated preferences (Pearce, 2002) are briefly described while it is also being pointed out that choosing one of them as the most appropriate eventually depends on existing policy goals: Hedonic Pricing, Travel Cost, Choice experiments, Contingent Valuation, Production function/damage cost and replacement cost. The oil spill example on the Spanish Coast in 2002 and the 1989 Exxon Valdez incident elucidate critical aspects of valuing environmental losses, market effects (catches in commercial fisheries, fish farming, fish processing) and clean-up costs. Climate change costs on the other hand are approached through what Euskirchen, Goodstein, & Huntington (2013) suggest for the cost arising from sea ice and snow losses as well as for the methane from thawing permafrost which basically comes down to the conversion of those changes in annual CO2 equivalents, using the “social cost of carbon”. The third example cited focuses on ex ante assessment of MPA (Marine Protection Areas) designation in the UK, where benefits were measured in terms of anticipated increases in value of ecosystem services provisioned by MCZs (Marine Conservation Zones) as opposed to different MCZ scenarios.
A prominent feature of the report is the emphasis it puts on cultural ecosystem services in the Arctic context, since there are fears expressed about underestimating such services due to limited understanding. Disciplines of economics and anthropology are believed to be capable of contributing towards properly valuing cultural ecosystem services while the set of tools/methodologies may range from analytical methods to qualitative measures (narrations, traditional knowledge, etc.). Challenges include potential conflicts between cultural values as perceived on a local level and perhaps on an international level. Furthermore, Multi-Criteria Analysis is seen as a tool to approach multiple values after they have been assigned with different weights and it seems that the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) provides an appropriate framework for that since it includes intrinsic values while with respect to the Arctic the inclusivity of multiple value systems and knowledge systems confers advantages. Human health values are also ranked as important and link to: food security, contaminants in the Arctic, environmental and other physical and psychological health benefits arising from nature.
The international community has lately become far more cognizant of the importance of ecosystem values in business decision making in the Arctic (commercial fishing, tourist traffic, and mineral and gas extraction) as a means of informing business for risks and informing public policies and regulations. What needs to be factored and is usually omitted in prices are the external environmental costs of products and services as well as the dependencies of production of goods and services on biodiversity and ecosystem services.
The role of biophysical measures and indicators is explicitly addressed as a useful tool for valuing ecosystem performance and productivity, since despite the fact that it is usually feasible to quantify some provisioning and regulating services. The ASTI (Arctic Species Trend Index) indicator, established by CAFF through the Circumpolar Biodiversity Monitoring Program for describing trends across species (vertebrate) is a very successful example. Attention is also paid to insurance values which refer to protection against possible eventualities; ecosystem regime shifts are more likely with the resilience reductions humans are causing (Folke et al., 2004).
Drawing both from the aforementioned questionnaire and a related project workshop that took place last May in Reykjavik (Eamer, Medeiros, Banul, Price, & Sommerkorn, 2014), the report includes some themes of interest for potentially initiating a TEEB study in policy areas pertaining to marine food security and commercial fisheries. Policy examples are further analyzed with the aim of preparing the groundwork for a TEEB Arctic assessment of that kind. In the marine policy example which is of great interest to me, policies based on ecosystem approach are being delineated along with existing policy shortfalls. The emphasis is being put once more on the various risks related to marine ecosystem services as well as the habitat/supporting, provisional and cultural services.
The report also calls for a coordinated response among various “Arctic” stakeholders for clearly communicating what are the expectations from a TEEB Arctic study. With the Arctic policy environment being rather complicated by multiple confounders, TEEB’s task sounds challenging enough and thus a sketch of the objective of that study is being provided as a step for further stimulation of discussions.
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