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The Private and Public Insurance Value of Conservative Biodiversity Management

  • Martin F. Quaas

    ()

    (Department of Ecological Modelling, UFZ-Centre for Environmental Research Leipzig-Halle)

  • Stefan Baumgärtner

    ()

    (Centre for Sustainability, University of Lüneburg)

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 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 ecosytsem and its management; in particular, (ii) the size of the externality may decrease or increase, depending on how individual and aggregate management effort influence biodiversity; and (iii) the welfare loss due to free-riding may decrease or increase, depending on how biodiversity influences ecosystem service provision.

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Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 33.

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Length: 48 pages
Date of creation: 26 Oct 2006
Date of revision:
Handle: RePEc:lue:wpaper:33
Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

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  1. Blomquist, Sören & Aronsson, Thomas, 1999. "On Environmental Taxation under Uncertainty," Working Paper Series 1999:14, Uppsala University, Department of Economics.
  2. Thomas Aronsson & Sören Blomquist, 2003. "On Environmental Taxation under Uncertain Environmental Damage," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 24(2), pages 183-196, February.
  3. 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.
  4. Salvatore Di Falco & Charles Perrings, 2004. "Crop Biodiversity, Risk Management and the Implications of Agricultural Assistance," Working Papers 0084, National University of Ireland Galway, Department of Economics, revised 2004.
  5. 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).
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