The Conservation of Renewable Resources

Chapter 4 further develops the theory of the conservation of living systems. Natural resource management problems are analyzed using optimal control methods. Natural resources are the state variables of the problem and management instruments are control variables. Management might include harvest, culling, restocking, reseeding, and replanting, or interventions affecting, for example, the fire regime, hydrological flows, the structure of habitats, the functioning of the system, and the ecosystem processes involved. The chapter considers three types of systems: aquatic systems, forest systems, and rangelands. It shows how the methods developed to model conversion/conservation decisions in all cases embed the Hotelling arbitrage condition. It shows how the level of conservation in each type of system is impacted by access rules, and the array of benefits obtained from the system.

Substitutability and the Valuation of Natural Capital

Chapter 7 considers the substitutability between produced and natural capital—assets used in the production of goods and services, and between environmental and other goods and services. It shows the ways in which the limits of substitutability are captured in both production and utility functions, and what this means for conservation. The chapter also discusses the relation between substitutability and the value of environmental inputs, using concepts of gross substitutability and complementarity, and the elasticity of substitution. The authors also note that the relative value of environmental inputs is frequently dependent on the environmental conditions under which production takes place.

The Valuation of Environmental Assets

Chapter 6 examines the value of environmental assets, which lies in the discounted stream of services they offer. Their conservation depends on the expected rate of change in their value, if conserved, relative to the rate of return on alternative assets. This chapter considers how the portfolio of environmental assets—natural capital—has been valued at the national scale. The two main approaches adopted are the United Nations’ System of Environmental-Economic Accounts (SEEA), and the World Bank’s (Inclusive) Wealth Accounts. The authors consider both approaches, and what they mean for the sustainability and the efficiency of natural resource use. Particular attention is paid to the residual left over after taking account of all marketed inputs in production: total factor productivity.

Conservation in the Future

The final chapter considers the factors likely to influence the value of species and ecosystems to individual users and the wider community in the future, including the factors likely to drive a wedge between the value of ecosystems to individual users or individual communities and to the rest of the world. It reviews environmental trends identified by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, and economic trends identified by organizations such as the World Bank. Using the European Union’s subsidiarity principle as a guide, the chapter discusses the optimal scale at which to manage future conservation challenges, and the implications this has for governance. It concludes by applying the discussion to four issues of particular concern: forest conversion, the loss of landraces and crop wild relatives, marine capture fisheries, and emerging infectious zoonoses.

Conservation at the International Level

The conservation of ecosystems that either span national jurisdictions or extend beyond areas of national jurisdiction requires the establishment of governance mechanisms that operate above national governments, and hence that involve some cession of national sovereignty. This involves the coordination of national action, usually through the negotiation of bilateral or multilateral agreements. Chapter 14 considers the problem of conservation across national jurisdictions, focusing on ecosystems that span jurisdictions, migratory species, and the international movement of pests and pathogens as an incidental effect of trade and travel. It explores the impact of strategic behavior on the effectiveness of multilateral agreements, and the institutions developed to supply transboundary public goods such as climate mitigation.

The Valuation of Environmental Goods and Services

Chapter 5 introduces the concept of value, and the methods used to obtain estimates of the value of scarce environmental goods and services—particularly the provision, cultural, and regulating ecosystem services. It discusses the concept of social opportunity cost, and shows how the concept informs our understanding of the trade-offs involved in application of the equimarginal principle. It clarifies the relation between the income and substitution effects of changes in value, compensating and equivalent variation, and the willingness to pay or willingness to accept. Valuation methods discussed include both revealed preference (travel cost, averting behavior, hedonic price, production function, replacement cost) and stated preference (contingent valuation, contingent behavior, choice modeling) approaches. The valuation of biodiversity is approached through the regulating ecosystem services, using a portfolio approach to the management of uncertainty. The chapter shows how managers may select which species to conserve so as to balance environmental risk and the benefits from ecosystems.

Environmental Public Goods

Chapter 8 considers the conservation of environmental public goods. The nonexclusive and nonrival nature of public goods provide an incentive to free-ride on the efforts of others. The result is that such public goods are systematically undervalued and the underlying environmental assets—such as watersheds, habitats, and ecological communities—are underconserved. It shows how individuals determine their contribution to public goods (via a Nash-Cournot reaction curve), and compares the result to the contribution that would be made if resources were being allocated efficiently from the perspective of society. Types of environmental public goods considered include additive (climate change), best- and better-shot (defence), weakest- and weaker-link (infectious disease control), and local public goods (common pool resources). The chapter also shows how strategic behavior by the beneficiaries of public goods may lead to socially undesirable outcomes (such as prisoner’s dilemmas).

Hotelling Conservation

Chapter 3 explores the Hotelling theory of conservation. It shows how the Hotelling arbitrage condition provides a test for whether it is optimal to convert or conserve a resource in some state. If the value of a resource when conserved is expected to grow faster than its value when converted, it will be optimal to conserve it. The chapter shows how the arbitrage condition applies to both nonrenewable and renewable resources, and how it is embodied in the conditions required for the optimal conversion/conservation of natural resources of both kinds. It also introduces Hamiltonian methods commonly used to optimize natural resource management, and shows the relation between Lagrangian and Hamiltonian methods. Finally, it discusses the relation between Hotelling conservation and the methods applied in conservation biology.

Poverty, Value, and Conservation

Chapter 10 addresses the relation between conservation, income, and wealth, focusing on the problem of biodiversity. It reconsiders the current consensus that poverty alleviation will reduce biodiversity loss. It addresses three dimensions of the problem: the role of income in the demand for natural resources; the empirical relation between income and biodiversity conservation; and the link between wealth, property rights, and the incentive to conserve. The first connects poverty, population growth, and the demand for natural resources. The second shows how biodiversity conservation and per capita income are related. The third connects poverty and property rights. It shows that for rural landholders to have an incentive to conserve their land, they also need to have secure rights. A necessary condition for land conservation to be optimal by the Hotelling principle is that the rights-holder can realize the gains to be had from conserving the resource.

Environmental Conservation and Environmental Change

Chapter 1 introduces the content and structure of the book. It identifies the main characteristics of the Hotelling approach to conservation, and the nature of the conservation problems it can address. It summarizes the evidence for large-scale, systematic changes in biodiversity and ecological functioning across biomes. It identifies what elements of the biophysical system have and have not been conserved, how this differs from one society to the next, and what has been gained or lost in the process. Finally, the chapter also discusses the different ways in which the conservation problem has been analyzed by natural and social scientists.