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C1) Economics of Management for Biodiversity

Economic valuation of biodiversity-oriented forest management strategies

Marc Hanewinkel & Rasoul Yousefpour,
Doctoral researchers: Andrey Lessa Derci Augustynczik (2016 - 2019) & Nicole Still (since 2019)

University of Freiburg, Faculty of Environment & Natural Resources, Institute of Forest Sciences,
Chair of Forestry Economics and Forest Planning

Background

The Millennium Ecosystem Assessment classifies biodiversity as an existence value under the non-use values. If forest owners and managers have to be convinced to modify forest management to enhance biodiversity, the economic effects of the modified management strategies have to be understood. It is thus crucial to find forest management solutions that harmonize production and conservation objectives in forested landscapes, especially under increasing environmental pressures. During phase I, project C1 addressed the costs of biodiversity-oriented forest management strategies and proposed models to define effective levels of biodiversity provision in temperate forest landscapes. Still, a comprehensive analysis of multi-taxon responses to biodiversity-oriented management and retention forestry at the landscape-scale is missing. Therefore, phase II of the C1 project seeks optimal solutions and takes into account the trade-offs between different ecosystem services, including biodiversity and economic efficiency.

 

Study questions and hypotheses

The general hypotheses of the C1 project are that orienting forest management towards biodiversity has economic implications that can be quantified on different spatial scales and that biodiversity goals can be achieved in a more economically efficient way than current management practices. In the first phase, the value of biodiversity was expressed as an opportunity cost within a simulation-optimization approach, and optimal retention levels and the most cost-effective measures to promote forest biodiversity were investigated.
Research in phase II focuses on the quantification of the benefits of biodiversity under environmental risk and uncertainty for improved management optimization across spatial and temporal scales. We hypothesize that biodiversity-oriented management leads to structural diversification across forest landscapes, reducing the risk of catastrophic losses in ecosystem functioning and improving the total economic value of forest ecosystems, and will seek to answer the following research questions:

  • What is the optimal management portfolio to internalize the value of biodiversity into forest management under climate change and disturbance risk?
  • What is the insurance value of biodiversity to forest owners facing risk and uncertainty under climate change?
  • What are potential synergies and trade-offs between the provision of biodiversity, economic efficiency, and other ecosystem services?
  • What are the implications of the optimized retention strategies for the conservation of multiple taxa at the landscape scale?

 

Approach, methods and linkages

To answer these research questions, the C1 project will employ coupled ecological-economic models in a simulation-optimization framework. Using coupled process-based landscape and species distribution models, we will quantify the marginal ecological and economic implications of biodiversity-oriented management strategies to identify optimal retention levels. We will then simulate the effect of increased environmental disturbances and climate change at the landscape scale and compare the economic outcomes of different management strategies, including biodiversity-oriented management. We anticipate that some management strategies may provide a type of natural self-protection insurance, through which an actor can reduce the likelihood of economic loss with management interventions that protect against service provision and/or function loss. Thereby, the C1 project will assess the natural insurance value of biodiversity-oriented management to forest owners. The project will further employ spatially-explicit robust optimization techniques to find management portfolios and landscape structures that guarantee the flow of ecosystem services in the face of environmental pressures and uncertainty. Finally, the C1 project will disentangle synergies and trade-offs between the provision of habitat for multiple taxa and other ecosystem goods and services, collaborating closely with A and B projects for information on the relationship between forest structure and biodiversity, and the C2 and D projects for insights on the socio-economic parameters involved in management decision-making.

 

Findings

During the first phase, the C1 project focused on the opportunity costs of biodiversity and optimal management at the forest enterprise and landscape scale. The main findings indicate that, through the use of adequate decision-support tools, it is possible to mitigate the trade-offs between forest profitability and biodiversity conservation. Under changing environmental and economic conditions, however, forest management and retention forestry need to be adapted. The main sources of uncertainty affecting forest management were investigated and economic parameters, namely interest rate and wood price, were the most important sources of uncertainty to decision-making in forestry. When taken into account in a conservation planning model, these multiple sources of uncertainty required a major expansion of conservation actions at the forest-enterprise level. Moreover, in order to mitigate the negative impacts of uncertainty, it was necessary to diversify forest management. A similar pattern was observed at the landscape scale to balance the maintenance of tree microhabitats, forest profitability, and forest birds. A strong diversification of forest management was necessary to promote an increase in bird abundance while maintaining the tree microhabitat abundance at desirable levels. Taking into account biodiversity benefits at the landscape scale, we found that current management practices are unable to account for the adequate social value of biodiversity and an increase in the share of broadleaf forests is required to correct the biodiversity supply in the region. To reduce the gap between efficient and current supply, biodiversity may be promoted in publicly-owned forests through voluntary fundraising mechanisms. The efficient provision level, however, needed to be reduced due to the private information held by the population regarding their valuations on biodiversity.

 

Perspectives

The C1 project will provide detailed management prescriptions and recommendations for the allocation of conservation actions required to maximize the provision of ecosystem services across forest landscapes. Increasing environmental pressures are likely to require increased robustness of management actions to allow for flexibility and thus, we expect to analyze how climate change and other environmental risks affect forest biodiversity and the decision-making process and possible optimal management solutions. The project will also produce maps of the total economic value of forest stands in the southern Black Forest region, disentangling its components, as well as for the insurance value of biodiversity. This will provide a basis for the implementation of policies to increase biodiversity supply in the region. Taking an interdisciplinary approach, the C1 project will allow for a comprehensive multi-taxon analysis of the responses to different landscape structures, and deal with tailored management actions and dynamic conservation planning to tackle these challenges.