I’m an economist – I’m here to help

How economics can enhance the success of ecological restoration


Key messages:
  • Economic principles, tools and instruments can be applied to a range of factors that affect the success of a restoration project
  • Addressing four key aspects of ecological restoration would enhance their success:
    • (1) assessing social/economic benefits,
    • (2) estimating overall costs,
    • (3) effective prioritisation, and
    • (4) long-term financing

Ecological restoration is complex and expensive. Economists can provide multiple insights on how to make it more effective. (Photo courtesy of Greening Australia)

Ecological restoration is complex and expensive. Economists can provide multiple insights on how to make it more effective. (Photo courtesy of Greening Australia)

What would an economist know about ecological restoration? Well, while he or she may not be up on the taxonomy or ecology of the plants and animals being targeted in a restoration effort, an economist brings considerable expertise when it comes to evaluating the costs of a project (expertise that historically has been lacking in some of the solutions proposed by conservation scientists). Accurately evaluating likely costs is an important dimension of effective ecological restoration, however, the discipline of economics has so much more to offer. Unfortunately, many restoration practitioners don’t think beyond ‘costs’ when it comes to economics. Well, it’s time they did because economics has a lot more to offer to enhance the likelihood of success of a restoration effort.

Up front it needs to be said that ecological restoration is a complex process with many ecological, technical, social, and economic challenges. Many of these can be addressed by applying sound economic principles and techniques. Here are four key aspects of restoration where economics can provide valuable assistance: estimation of restoration benefits; estimation of the costs of restoration; selection and prioritisation of projects, and securing long-term financial resources to support restoration.

Estimating restoration benefits

In many cases, practitioners fail to demonstrate the links between the ecological restoration and society. In so doing they undersell the social benefits of restoration. Consideration of the broader social and economic benefits of restoration may help practitioners tailor their programs to promote better engagement.

Several economic methods are available for benefit assessment. The method applied depends on the type of value likely to be produced by the project. Market-based methods are generally not applicable because most of the values generated through the restoration are not traded in formal markets (ie, they are non-market values). Non-market values have either a use value (eg, recreation) or a non-use value (eg, preserving a threatened species for future generations). Revealed-preference approaches are applied to measure use values, and stated-preference approaches are applied to nonuse values. Benefit-transfer method could be applied when it is too expensive to conduct primary studies.

Estimating costs of ecological restoration

Cost information is important for ecological restoration planning because it informs decisions on whether to conserve or to restore, which projects to pursue, and which methods to use. The four main costs involved are acquisition, establishment, maintenance and transaction.

Acquisition costs are the costs of acquiring the property rights to the land to be restored. Establishment costs are upfront capital investments involved. Maintenance costs include ongoing management, administration, and monitoring. And transaction costs may include searching for suitable sites, organising programs, and negotiating and signing contracts.

Different economic tools are used to estimate different types of costs. Establishment and maintenance costs are often most easy to estimate because market prices are available for most items in these costs categories. Acquisition costs and opportunity costs are estimated using capitalised gross revenue or gross margin of the productive use of land or using methods based on property or sales prices, such as hedonic pricing.

Transaction costs can be estimated by conducting surveys among the participating landholders or agencies and reviewing documents.

It’s one thing to know the cost of a restoration activity (such as direct seed drilling as pictured here), but to ensure the best outcomes of ecological restoration it’s critical to incorporate the full range of social, ecological and economic benefits into your planning.  (Photo courtesy of Greening Australia)

It’s one thing to know the cost of a restoration activity (such as direct seed drilling as pictured here), but to ensure the best outcomes of ecological restoration it’s critical to incorporate the full range of social, ecological and economic benefits into your planning. (Photo courtesy of Greening Australia)

Prioritising restoration projects

Once the costs and benefits have been appropriately measured, the choice among projects requires an index or metric to help guide which projects are chosen (and which are not). A metric is a formula or a model that ‘translates’ the various parameters of a project (such as cost, effectiveness, and area) into a single score that can be compared to the score of other projects (see the box on strong and weak metrics). The use of a rigorously designed metric is even more important when combining multiple benefits (which could be complex and conflicting). Concessions may be required in the location, design, and complexity of restoration projects to achieve broader benefits. The acceptability of such a trade-off is likely to vary between restoration projects and depends on factors such as project outcomes specified by regulatory or funding bodies, threat status of the biodiversity asset, and value of the biodiversity asset to the community.

Long-term financing of restoration projects

Even when restoration benefits and costs have been correctly assessed and an appropriate prioritisation procedure has been employed, without adequate financial support failure is possible, particularly for long-term (decades) projects. While there are examples of long-running environmental programs (such as the Conservation Reserve Program in the United States which was established over 30 years ago), in most cases environmental programs have short funding time-frames. Given this, it might be useful for agencies to consider innovative solutions to securing long-term funding, an issue considered by some as one of the greatest hurdles to restoration. Long-term funding could be implemented by working within existing funding arrangements; developing synergy among existing programs; financing through property taxes, developing public-private partnership and through volunteerism.

Bring an economist into your discussion The science and practice of ecosystem restoration has for many years been based primarily on ecological considerations. Only recently have restoration scientists and practitioners begun to include economic aspects in the design of restoration projects. Given the enormous challenge and cost of effective ecological restoration, we believe it’s important that restoration practitioners increase their engagement with economists to better tap into the value that economics can provide. On the other side of the coin, we’d encourage economists to be more active in sharing the lessons of economics with practitioners working outside of the field of economics. At the end of the day, if we fail to capture the full suite of benefits and costs involved in a restoration process, we risk undervaluing restoration and making poor investment decisions.


Strong and weak metrics

The metric used to compare restoration projects is critical to outcomes. Fiona Gibson and David Pannell analysed the impact of using strong versus weak metrics and found that poor metrics resulted in environmental losses of up to 80% – not much better than completely random uninformed project selection (Gibson and Pannell, 2016). The most costly errors that contribute to a metric being ‘weak’ is omitted information about environmental values, project costs or the effectiveness of management actions. Using a weighted-additive decision metric for variables that should be multiplied is another costly error commonly made in realworld decision metrics. They found that omitting information about project costs or the effectiveness of management actions, or using a weighted-additive decision metric (that should be multiplied) can reduce potential environmental benefits by 30 to 50 per cent.

Think about how hard it would be to double your budget (achieve a bigger slice of the funding pie); yet an equivalent environmental benefit could be achieved in effect in many cases by simply strengthening the decision metric being used.

Reference

Gibson F & D Pannell (2016). What a difference a metric makes: Strong (and weak) metrics for agri-environment schemes in Ansell D, F Gibson & D Salt (Eds) (2016). Learning from agrienvironment schemes in Australia: Investing in biodiversity and other ecosystem services on farms. ANU Press, Canberra. http://press.anu.edu.au?p=346093 And see Decision Point #82


More info: Sayed Iftekhar mdsayed.iftekhar@uwa.edu.au

Reference

Md Sayed Iftekhar, Maksym Polyakov, Dean Ansell, Fiona Gibson & Geoffrey Kay (2016). How economics can further the success of ecological restoration. Conservation Biology. http://onlinelibrary.wiley.com/doi/10.1111/cobi.12778/abstract

 

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