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The private and public insurance value of conservative biodiversity management

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  • Baumgärtner, Stefan
  • Quaas, Martin

Abstract

The ecological literature suggests that biodiversity reduces the variance of ecosystem services. Thus, conservative biodiversity management has an insurance value to risk-averse users of ecosystem services. We analyze a conceptual ecological-economic model in which such management measures generate a private benefit and, via ecosystem processes at higher hierarchical levels, a positive externality on other ecosystem users. We find that ecosystem management and environmental policy depend on the extent of uncertainty and risk-aversion as follows: (i) Individual effort to improve ecosystem quality unambiguously increases. The free-rider problem may decrease or increase, depending on the characteristics of the ecosystem and its management; in particular, (ii) the extent of optimal regulation may decrease or increase, depending on the relative size of private and external effects of management effort on biodiversity; and (iii) the welfare loss due to free-riding may decrease or increase, depending on how biodiversity influences ecosystem service provision; it increases, unless higher biodiversity greatly decreases the variance of ecosystem services. --

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Bibliographic Info

Paper provided by Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS) in its series UFZ Discussion Papers with number 27/2005.

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Date of creation: 2005
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Handle: RePEc:zbw:ufzdps:272005

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Keywords: biodiversity; ecosystem services; ecosystem management; free-riding; insurance; public good; risk-aversion; uncertainty;

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References

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  1. Thomas Aronsson & Sören Blomquist, 2003. "On Environmental Taxation under Uncertain Environmental Damage," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 24(2), pages 183-196, February.
  2. Aronsson, T. & Blomquist, S., 1999. "On Environmental Taxation Under Uncertainty," Papers, Uppsala - Working Paper Series 1999:14, Uppsala - Working Paper Series.
  3. Di Falco, Salvatore & Chavas, Jean-Paul & Smale, Melinda, 2006. "Farmer management of production risk on degraded lands: the role of wheat genetic diversity in Tigray Region, Ethiopia," EPTD discussion papers 153, International Food Policy Research Institute (IFPRI).
  4. Salvatore Di Falco & Charles Perrings, 2004. "Crop Biodiversity, Risk Management and the Implications of Agricultural Assistance," Working Papers, National University of Ireland Galway, Department of Economics 0084, National University of Ireland Galway, Department of Economics, revised 2004.
  5. Salvatore Di Falco & Charles Perrings, 2003. "Crop Genetic Diversity, Productivity and Stability of Agroecosystems. A Theoretical and Empirical Investigation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(2), pages 207-216, 05.
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Citations

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Cited by:
  1. Baumgärtner, Stefan & Becker, Christian & Frank, Karin & Müller, Birgit & Quaas, Martin, 2008. "Relating the philosophy and practice of ecological economics: The role of concepts, models, and case studies in inter- and transdisciplinary sustainability research," Ecological Economics, Elsevier, Elsevier, vol. 67(3), pages 384-393, October.
  2. Markus Groth, 2008. "An empirical examination of repeated auctions for biodiversity conservation contracts," Working Paper Series in Economics 78, University of Lüneburg, Institute of Economics.
  3. Markus Groth, 2008. "Perspektiven der Nutzung von Methanhydraten als Energieträger – Eine Bestandsaufnahme," Working Paper Series in Economics 76, University of Lüneburg, Institute of Economics.
  4. Heike Wetzel, 2008. "European Railway Deregulation: The Influence of Regulatory and Environmental Conditions on Efficiency," Working Paper Series in Economics 86, University of Lüneburg, Institute of Economics.
  5. Baumgärtner, Stefan & Quaas, Martin F., 2009. "Ecological-economic viability as a criterion of strong sustainability under uncertainty," Ecological Economics, Elsevier, Elsevier, vol. 68(7), pages 2008-2020, May.
  6. Markus Groth, 2008. "Private ex-ante transaction costs for repeated biodiversity conservation auctions: a case study," Working Paper Series in Economics 84, University of Lüneburg, Institute of Economics.
  7. Quaas, Martin F. & Baumgartner, Stefan & Becker, Christian & Frank, Karin & Muller, Birgit, 2007. "Uncertainty and sustainability in the management of rangelands," Ecological Economics, Elsevier, Elsevier, vol. 62(2), pages 251-266, April.
  8. Quaas, Martin F. & Baumgärtner, Stefan, 2008. "Natural vs. financial insurance in the management of public-good ecosystems," Ecological Economics, Elsevier, Elsevier, vol. 65(2), pages 397-406, April.
  9. Christian Growitsch & Heike Wetzel, 2007. "Testing for Economies of Scope in European Railways: An Efficiency Analysis," Working Paper Series in Economics 72, University of Lüneburg, Institute of Economics.

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