Capturing Nature’s Value

Conservation is becoming one of the most important, topical and contentious issues of our day. Historically most people understand conservation in the sense of an area set aside to protect local wildlife. Typical examples of this would be the game reserves of Africa, and other such national heritage sites across the world. But conservation, as we are beginning to understand, is not so simple as roping off an area to protect flora and fauna within it. This is perhaps a simple way of protecting our environments, but we equally need to protect privately owned areas of land.  A system known as payment for ecosystem services (PES) is increasingly being encouraged and used by a variety of conservation groups, industry and governments. Ecosystem services are the natural benefits to humans from an ecosystem such as material goods (food, fuel, climate regulation, floods etc) and non material benefits such as spiritual or aesthetic beauty. These benefits can also be directly linked to human welfare. For example, forests impact on local climate, water table levels and natural pollination.

Often the natural benefits are ignored when land is used for “a more economic” purposes, such as infrastructure, extraction, urban development or even agriculture, largely because the ecosystem services are either not valued or difficult to value at a market level. Typical examples of this would include the unsustainable use of land, such as deforestation where land owners don’t always realise the long term dangers of lost forest services. Everything from unregulated urban or coastal development, over fishing, unsustainable agriculture and extractive industries are affecting the biodiversity of local ecosystems. The issue being that many of the ecosystem services directly benefit human welfare; from water supply, cleaner air to food, so if these systems are unbalanced they are likely to negatively impact on local human welfare and health.

The PES system has been developed where the beneficiaries of the ecosystems pay the providers of the services (i.e. the landowners) to protect their local ecosystem. Examples of this might be tourist companies paying African communities for the protection of local wildlife or a water company buying watershed protection from farmers near the water source. It is vitally important that land owners recognise the importance of their local ecosystems and its services, and help to protect it, even if only for their own well-being and personal future profitability.

Normal definitions of PES are based around the idea of one ecosystem provider and one buyer of the services, and often auctions or competitive tenders are used to efficiently allocate the resources for ecosystem services. However, it’s not news that the best result for improved or protected ecosystems is with a larger area, but the key to this is encouraging the landowners to collaborate with their ecosystem services tenders, so that these services can be provided at a landscape scale. But it isn’t just about the total number of ecosystem sites, it’s also the location within the landscape relative to other sites, because biodiversity conservation tends to be more effective when conserved sites are connected together to form a corridor or larger habitat area.

In order to find a way to encourage landowners to submit bids that will work together for a more productive and larger ecosystem, Dr Andrew Reeson and a group of researchers at CSIRO Sustainable Ecosystems, Australia have studied how best to create a collaborative auction system on a landscape scale.

A landscape scale based ecosystem service needs to cover a region of interconnected areas, the efforts need to address specific conservation objectives and the landowners in that region need to collaborate to achieve those objectives. The actual value of each bid within this system is therefore dependent on the other bids in the final successful group. There are then 2 key issues to cover in such instances, one being the combined value of the ecosystem services and second to coordinate the individual landowners to offer the best group of bids. Iterative auctions seem to offer the best hope as they allow for information and strategies on each bidder to be made available as the auctions continue, as it encourages landowners to submit bids which align with their neighbours. But it doesn’t always work, as coordination may in fact lead to collusion by landowners.

The group of Australian researchers decided to set up auction trials to find out if collaboration could be encouraged. A series of experiments was run in which participants took on the role of landowners in a conservation auction. To make the scenario more realistic they received payments based on the results of the auction and their land management decisions. This approach allows a number of variations of the auction mechanism to be tested and compared under laboratory conditions. GenStat’s generalized linear models (GLM) were used to analyse individual bidding behaviour and simulate biodiversity outcomes in the auctions.

One measure of the effectiveness of an auction is the amount by which individuals inflate their bids – the higher their bid prices, the less land can be secured for conservation. GenStat’s GLM tested how bid prices were impacted by various auction rules. The results showed that in auctions with more rounds participants initially inflated their prices by more; however where the number of rounds was unknown to participants, this strategic behaviour was greatly reduced, resulting in a more efficient auction. It appears that participants didn’t dare inflate their bids too far in case of missing out if the auction suddenly ended.

Another test is the amount of ecosystem services provided across the simulated landscape in the auction. Analysis of a GLM showed that this was higher in iterated auctions than for one-off auctions, as there were more opportunities for landowners to link up with their neighbours to form conservation corridors. The analysis also showed that iterated auctions were more effective when some bids were locked in early on. These results show that iterated auctions have the potential to deliver landscape-scale ecosystem services, such as connected conservation areas, in an efficient manner. This can be applied by conservation managers to ensure they get the best possible bang for the limited bucks they have available to reconnect fragmented landscapes.

Find out more about the project, or to read the full paper, go here.

Our thanks to Dr Andrew Reeson and colleagues for their help and collaboration with this.

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