Environmental Decision-making

Total economic valuation of threatened and endangered species

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The endangered Steller sea lion. Source: Rolf Ream/NOAA

[Authorship attribution for this article should be cited as John Loomis, Leslie Richardson and Arthur Edwards]

Introduction

Protecting  habitats for species threatened with or in danger of extinction is often aided by demonstrating the economic benefits to such protection comparable to the benefits of  developing the habitat. The financial returns to commercial development are often obvious and concentrated in the hands of a few. The benefits of protecting threatened and endangered species (T&E) are widespread to hundreds of millions, if not several billion people on the planet. However, if the monetary benefits of protecting T&E species are not measured, then it appears that commercial development is of greater economic use than preservation of the habitat. This feeds the false dichotomy of the “economy versus the environment”. This article will show, the environmental has  economic value, and in particular, people will pay to protect the habitat of endangered species. The number of species classified as threatened or endangered continues to rise throughout the world, and is likely to continually to so for the foreseeable future. It would be extremely important to quantify the many benefits these species provide for people when considering conservation policies.

The many benefits species provide are called Total Economic Value (TEV) of the species. TEV consists of both recreational use of T&E species (e.g., wildlife viewing, ecotourism, photography) and nonuse values or passive use values (existence and bequest values) placed on the species. All of these values are measured by economists as the maximum amount of money a person would pay to protect the species and its habitat to provide that particular use. For example, the amount a visitor would pay for the opportunity to view sea otters in their natural habitat is a measure of the value to the visitor. The same is true of existence value. Existence value is the maximum amount a person would pay to know that the species exists in its natural habitat. Likewise for bequest value, the maximum amount a person would pay to know that preservation today will provide the species to future generations.

Currently, one of the accepted methods used to quantify these benefits is the  Contingent Valuation Method (CVM), which employs the use of surveys outlining a hypothetical market or referendum in order to elicit people’s willingness-to-pay (WTP) for the preservation of a particular species (Mitchell and Carson, 1989). It has been found that people are willing to pay a small portion of their income towards the protection of endangered or rare species for a variety of reasons. The Contingent Valuation Method has been used by economists for over 30 years in the United States and other developed countries as a means to quantify the monetary benefits of natural resources that are not priced in markets but nevertheless have considerable value, such as threatened and endangered species. While the use of CVM in developing countries is still relatively new, with the majority of studies published in the last five to ten years, it is clearly on the rise. Our goal is to review synthesize the literature on the economic value of rare, threatened, and endangered species throughout the world. We draw upon a total of 43 existing Contingent Valuation studies of T&E species from eight different countries that were found in our literature review.     

Comparative Valuation of Groups of Similar Species

Our first comparison looks at the average Total Economic Value of groups of similar threatened or endangered species in studies conducted in the U.S. and abroad. In CVM studies, the surveys given to respondents to elicit the value they place on a particular species, present the hypothetical payment as either an annual, recurring payment, or a single lump-sum, one time payment. Table 1 compares average WTP values in U.S. versus rest of the world studies for different groups of similar species broken down into studies using annual versus lump sum payments. Unfortunately no studies valuing endangered fish were found outside of the United States, so hopefully this will be an area of future research. 

Table 1: Average WTP Values per Household Based on Payment Frequency ($2006)

  U.S. Studies Rest of the World Studies
Annual WTP    
Mammals $17 $50
Marine Mammals $40 $72
Birds $42 $44
Fish $105  
     
Lump Sum WTP    
Mammals $61 $9
Marine Mammals $203 $23
Birds $209  

A few things stand out in Table 1. First, USA studies using lump sum payments get very high average values for both marine mammals and birds. However, the average value of marine mammals is based on only one study with two estimates. The 1989 study by Samples and Hollyer surveyed Hawaii households to elicit a value for the monk seal and the humpback whale. The high value can be attributed to the fact that these species are two of the most charismatic marine mammals in the U.S., and have gained considerable attention over the years. The average value of birds is based on only two studies, one of which values the bald eagle, a nationally symbolic species which would be expected to have a very high value placed on it. If we remove the bald eagle study, the value drops considerably to about $32. Secondly, rest of the world studies using lump sum payments to value mammals get a much lower value than would be expected. This could be due to the fact that the estimate is based on only four different types of mammals, three of which are smaller, less charismatic species; the water vole, red squirrel, and brown hare.

Comparative Valuation of Individual Species

This section shifts the focus from the average economic benefits for groups of similar species to the economic benefits of individual species in order to compare studies conducted in different countries to see if they get similar values for the same, or very similar, species. This will allow us to account for specific study variables, such as the change in the size of the species population being valued, and if respondents are valuing a gain in the species or avoiding a loss. Since the socioeconomic characteristics of respondents can differ greatly in various countries, it is also important to compare these values as a percentage of annual income (also converted to U.S. dollars and 2006 base year for comparison).

 Starting with mammals, we will look at the Total Economic Value of the wolf. The one study conducted outside of the U.S. surveyed Swedish households in 1993/1994 to obtain the value of the wolf in Sweden. The authors found that respondents would pay on average about $123 annually to avoid the loss of wolves in Sweden when faced with one WTP question format and $63 annually when faced with a different WTP question format (Boman and Bostedt, 1999). Eight U.S. studies valuing thegray wolf were found, but some are considerably different than the Swedish study because they surveyed visitors to a national park. Four USA studies surveyed households to elicit a value for the gray wolf. Three of these studies valued  reintroduction of gray wolves to a national park near surveyed households,  the fourth valued avoiding further loss of gray wolves. Each study found a lump-sum WTP value between $20 and $40 (Duffield et al., 1993 and USDOI, 1994) with the fourth study parallel in survey parameters to the Swedish study finding a value of $23 (Chambers and Whitehead, 2003). It is reasonable to compare these values to the $123 value found in the Swedish study using the same question format. In addition, the mean income of respondents in all four U.S. studies was higher than the mean income of respondents in the Swedish study, widening the gap between these estimates. Because the Swedish study involves asking annual WTP, the present value over several years would be even larger than the U.S. lump sum amounts. So it appears that on average for this particular species and holding as many variables constant as possible, the value placed on wolves in Sweden is much higher than the value placed on wolves in the U.S.  

Next, turning to endangered marine mammals, there is one CVM study from Greece valuing the Mediterranean monk seal and one similar CVM study from the U.S. valuing thenorthern elephant seal, both of which are members of the Phocidae ("true seals") family. The Total Economic Value of the Mediterranean monk seal was found by surveying local households in Mytilene, on the island of Lesvos, Greece in 1995. Respondents were willing to pay $24 every 3 months, so about $72 annually to avoid further loss of the seal (Langford et al., 1998). The study in the U.S. valuing the northern elephant seal surveyed California households in 1984 and found that respondents on average would pay $35 annually to avoid further loss of the species (Hageman, 1985). If we try to compare these values as a percentage of income, the difference becomes even more apparent. In the U.S. study mean annual income of respondents, when adjusted to the mean income in 2006, is a rather high $67,000. Although mean income of respondents is not reported in the Langford et al. study, the authors do point out that in terms of development, Mytilene at the time of the survey was somewhere between a developed city and a less developed settlement characteristic of the islets across the Aegean. It is highly unlikely that the income of respondents was any higher than the average in Greece at that time, which was much lower than $67,000. So again, it appears that the value placed on seals in Greece is higher than the value placed on seals in the U.S.   Next we look at another marine mammal, the sea otter. A study published in 1997 by White et al. surveyed households in North Yorkshire, Britain and finds an average lump sum WTP of $23 for a 25% gain in the species population. A similar U.S. study valuing the threatened California sea otter surveyed California households in 1984 and found an average annual WTP of $40 to avoid the further loss of the species (Hageman, 1985). Since the annual payment is greater than the lump sum payment, we can just look at the confidence intervals and since one estimate does not lie in the confidence interval of the other estimate, we can see that these values are significantly different. The value placed on the sea otter is higher in the U.S. than in Britain. However, the two studies differ in the change in population size being valued, which hinders comparability between the two.

Finally, we find two studies valuing the endangered sea turtle, one from the USA and one from Australia. Both studies surveyed households to find an annual WTP value for the respective sea turtle in each region using the same question format, allowing us to get a general comparison of the values. In the U.S. study, the economic value of the sea turtle is found to be about $19 annually (Whitehead, 1992) while in the Australia study the value is found to be about $43 annually (Wilson and Tisdell, 2007). There are no confidence intervals reported in these studies to test if these values are significantly different. However, given the fact that when WTP values differed between countries in the seal and sea otter cases by a factor of two and were significantly different, we suspect the sea turtle values would also be significantly different. A summary of these individual species comparisons can be found in Table 2.

Table 2: Comparison of WTP Values per Household for Individual Species

  U.S. Studies Rest of the World Studies
Species     Country
Wolf $20-$40 $123 Sweden
Seal $35 $72 Greece
Sea Otter $40 $23 Britain
Sea Turtle $19 $43 Australia

Comparison of WTP Values in Developing and Developed Countries

This section compares differences between studies in developing versus developed countries. Since we found only three studies conducted in developing countries, we will have to look at these on an individual basis. Two of the three studies value the endangered Asian elephant, one taking place in Sri Lanka and the other in India. The first we will look at values the endangered elephant in Sri Lanka. This not only gives us insight into how people in developing countries versus developed countries value endangered species, but since the elephant is considered very symbolic in Sri Lankan culture, it is interesting to compare its value to a nationally symbolic species in the U.S.,the bald eagle. A survey of Colombo, Sri Lanka households in 2004 found that the value placed on the elephant ranges from about $14.50-$17.50 annually, for various percentage gains and avoidance of losses in the species population. While this may not seem like a lot, the average income of respondents was only about $1,620 per year, meaning that respondents would pay nearly 1% of their annual income toward the preservation of this species (Bandara and Tisdell, 2005). If we compare this value as a percentage of income to another study conducted in a developing country, which valued the black-faced spoonbill in China, we find that respondents there would only pay about 0.2% of their annual income toward the preservation of this particular bird species (Jianjun et al., 2007). Likewise, a study by Ninan et al. (2007) values the threatened elephant in India, surveying households in Maldari village as well as Badaganasirada villagers in Uttar Kannada. While the nature of this CVM study differed slightly, it is again very interesting to see how a culturally important species is valued by the local community. The majority of respondents in these samples reported their willingness to pay for participation in an elephant conservation program in terms of time, which was then converted into a dollar value based on the opportunity cost of their time in terms of forgone income. Given this marked difference in the way people were asked to pay, these monetary values were not included in average WTP values in Table 1 due to concerns about commensurability. The value of the elephant in terms of income forgone is $140 annually per household in Maldari to avoid further loss of the species and $60 annually per household in Uttar Kannada. This represents a large percentage of respondents’ income, in the 10% range, but this could be due to the way the value was elicited as an opportunity cost of time, a resource probably less constrained than income for many of these households.   

Turning to U.S. studies, there are three studies valuing the bald eagle, a nationally symbolic species in the USA. The first study, published in 1987, surveys Wisconsin households and finds an average WTP value of about $21 annually to avoid further loss of the species (Boyle and Bishop). The second study, published in 1991, surveyed New England households and finds an average WTP value of about $45 annually to avoid further loss of the species when using one WTP question format and $32 when a different WTP question format is used (Stevens et al.). The third study, published in 1993, gets a considerably larger estimate. This is due to the fact that it surveys Washington visitors rather than households and values a 300% gain in the species. The author finds an average lump sum WTP value for the bald eagle of about $350 with one question format and $245 for another WTP question format (Swanson, 1993). Although the mean income of respondents was not reported in these studies, using the USA Census averages for those regions, we find that for the two studies that surveyed households, respondents were only willing to pay about 0.05-0.07% of their annual income. Visitors were willing to pay considerably more and although we don’t have the mean income of respondents, if we take this value as a percentage of the average income of United States residents at the time, we find that this value represents about 0.6% of their annual income. Looking at the WTP as a percentage of income for other birds in the U.S. which are not nationally symbolic, we find that on average people are willing to pay about 0.1% of their annual income toward the preservation of a species. So, it appears that for studies in developing countries, people are willing to pay more as a percentage of income for nationally symbolic species than species that do not have symbolic significance. In the U.S. however, it appears that only visitors and not necessarily households are willing to pay on average more for nationally symbolic species than species without this significance. In addition, it seems that when it comes to these nationally symbolic species, households in developing countries are willing to pay more as a percentage of income then households in the USA to preserve habitat for these species.   

Conclusion

This analysis has brought up a few important issues when it comes to the valuation of threatened and endangered species. First, when comparing the Total Economic Value for groups of similar species we find that respondents in USA studies seem to be willing to pay more on average for the conservation of a species than respondents in rest of the world studies when asked to pay a one-time, lump sum payment. However, USA respondents would pay less on average than respondents in rest of the world studies when asked to pay an annual payment scheme. Second, when comparing values for similar individual species in studies conducted throughout the world, we find that these values are often significantly different depending on which country the study was conducted in. As more studies valuing endangered species emerge in the future, it will be interesting to see if this trend continues. Third, in comparing studies conducted in developing versus developed countries, it seems that respondents in developing countries are, on average, willing to pay more as a percentage of income for the preservation of threatened or endangered species, especially for nationally symbolic species. There is a definite need in the literature for more contingent valuation studies on threatened and endangered species in developing countries, so hopefully this will be an area of future research. While there were some differences in the values obtained in studies conducted in various countries, there were generally no major differences found in the way the contingent valuation methodology was applied. Nearly all studies use similar practices in the way the Contingent Valuation Method is carried out, regardless of where the study takes place. This allows greater confidence and ease in comparing the Total Economic Value of endangered species throughout the world. This methodological consistency make comparison of values around the world easier for prioritizing and ranking species conservation investments by international environmental and non governmental organizations.   

caption Image by S. Taheri

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Glossary

Citation

Loomis, J., Edwards, A., & , L. (2014). Total economic valuation of threatened and endangered species. Retrieved from http://www.eoearth.org/view/article/51cbef167896bb431f69c4a9

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