LAND CONVERSION, ECOSYSTEM SERVICES AND BIODIVERSITY CONSERVATION

Transcription

1 LAND CONVERSION ECOSYSTEM SERVICES AND BIODIVERSITY CONSERVATION Rafa Alam Gran MacEwan College Edmonon Nguyen Van Quyen Unversy of Oawa Oawa. INTRODUCTION Bologcally dverse land provdes many economc and non-economc servces o he human socey. One of such servces s he ecosysem servces ha help o mprove he producvy of he agrculural secor. These servces nclude phoosynhess sol generaon and preservaon pollnaon of crops recyclng of nurens flerng of polluans and wase assmlaon flood conrol clmae moderaon operaon of he hydrologcal cycle dsurbance regulaon bologcal conrol Cosanza e al. 997 Folke e al In ecosysem erms ecosysems are fundamenal facors of producon Barber e al. 994 Jansson e al Bu hese conrbuons of bologcally dverse land are no refleced n he marke sysem. Ecosysem funcons have srong publc goods characerscs and so are ofen gnored n he prvae secor s producon process. Accordng o Cosanza e al. 997 because ecosysem servces are no fully capured n he marke or adeuaely uanfed n erms comparable wh economc servces and manufacured capal hey are ofen gven oo lle wegh n polcy dscussons. Falure o nclude ecologcal benefs of bodversy rch land resuls n hgher level of deforesaon Barber and Burgess 997. Emprcal evdence also confrms ha ecosysem servces are needed for agrculural producon. Very few models have been developed o nclude ecosysem servces n he producon process. Folkes e al. 996 consdered ecosysem as a naural capal and as a prmary npu n he producon process. Bule e al. modeled he flow of ecosysem Regm and Weber repor ha crop yelds have connuously been decreasng over me largely caused by heavy op sol losses whch s prevened by ecosysem servces. They also repor evdence ha a loss of 3.9 nches of op sol reduced yeld by 5% n Wes Afrca.

2 servces as a geomerc Brownan moon o capure he rend and uncerany aspecs of ecosysem servces. Huang and Smh 998 and Paanayak and Bury 3 have modeled he flow of ecosysem servces as a weak complemenary facor o he producon process. In hs paper o analyze he mpac of nernaonal rade on he paern of land converson and bodversy loss we formulae a Norh-Souh rade model ha ncludes he flow of ecosysem servces n he agrculural producon funcon of he Souh as a weak complemen. Furhermore o capure he dynamcs of land converson ecosysem servces and savngs he model s se n he framework of overlappng generaons. The model hus formulaed s mean o explan how he absence of asse markes oher han land affecs he paern of land converson n he Souh. Incluson of ecosysem servces n he producon process mposes a lm on he growh of agrculural producon. In exreme suaons when he amoun of bodversy rch land reaches a crcal hreshold he margnal producvy of land n agrculure becomes negave. Currenly here are varous effors around he world o creae markes for ecosysem servces or o use fscal ools o conserve bodversy rch land o ensure he flow of ecosysem servces. For example Cosa Rca has nsued a sysem of envronmenal servce paymens made o he prvae owners of conserved land. In Europe he US and Canada ools such as land axes land developmen fees and paymens for se asde lands are used for land conservaon purposes. The chaper proposes some nsrumens o capure he value of ecosysem servces. Many oher facors also explan he curren desrucon of bologcal dversy. A major dvdng lne n he debae on he causes of he bodversy desrucon separaes he camp ha emphaszes populaon and povery facors as he causes of bodversy loss from he camp ha arbues he loss of bodversy o marke and nsuonal facors falure. See for example Angelsen 998. Ths chaper by emphaszng populaon and povery facors as well as marke and nsuonal facors conrbues o explanng how facors from boh camps cause bodversy desrucon.

3 The srucure of he paper s as follows. Secon descrbes he model. The defnon of compeve eulbrum s gven n Secon 3. The properes of he compeve eulbrum are dscussed n Secon 4. Polces for nernalzng he value of ecosysem servces are dscussed n Secon 5. Some concludng remarks are gven n Secon 6.. THE MODEL.. Technologes Tme s dscree and denoed by... There are wo counres called counry he Norh and counry he Souh respecvely. Each of hese counres produces wo goods one manufacurng good called good and one agrculural good called good from labor L and land A. In wha follows he counres wll be ndexed by and he goods by j j. Le A be he land endowmen of counry. In each counry par of he land endowmen has already been developed and s ready for use as npu n he producon process. The remanng par s sll n a sae of wlderness and mus be cleared before beng used as a facor of producon. Le A denoe he sock of land already developed and avalable as an npu for producon a he begnnng of perod n counry. We shall assume ha all he land n he Norh has been developed.e. A A. In he Souh he wlderness land s rch n bologcal dversy and provdes useful ecosysem servces and par of hs regon can be cleared n any perod for use as npu n food producon n he followng perod. In he Souh he area of wlderness land ha remans a he begnnng of perod s A A. In each counry hree classes of economc agens coexs n each perod : a young generaon an old generaon and compeve frms. In each perod... he demographc srucure of counry s represened by he ls N N where N and N denoe respecvely he sze of he young generaon and he sze of he old

4 generaon n ha counry n perod. The evoluon of N N hrough me s aken o be exogenous. An ndvdual lves wo perods frs as a young person and hen as an old person. The ndvdual works when she s young and reres when she s old. In any perod and n each counry he sock of developed land s owned by he old generaon of ha perod. The assumpon of he model s ha here are no oher asse markes n he Souh ha he old generaon can use o generae old-age ncome. So s only hrough he land she owns ha an old ndvdual provdes for her old-age consumpon. A young ndvdual owns no asses excep for one un of me ha she supples n-elascally on he labor marke. Par of her labor ncome s spen on curren consumpon and he remanng par her savng s used o acure developed land a he end of he perod. I s hrough hs amoun of land hus acured ha a young ndvdual provdes for her oldage consumpon. Le a denoe he amoun of land cleared n he Souh n perod. I s assumed ha wlderness land s cleared by perfecly compeve frms wh he help of labor and ha he oal amoun of labor npus needed o clear a uns of land s gven by Γ a γa where γ s a posve parameer. We shall assume ha he wlderness land cleared durng perod s offered for sale o he young generaon a he end of ha perod. The sock of developed land avalable for use n producon a he begnnng of he nex perod n he Souh s hen descrbed by he followng dfference euaon: A A a s gven. A In each perod he manufacurng good n counry s produced accordng o he followng Cobb-Douglas producon funcon: 3 Y A L where Y A and L denoe respecvely he oupu of he manufacurng good he land npu and he labor npu all n perod used o produce he manufacurng good n counry. Also < < s a parameer.

5 As for he agrculural secors he oupu of he agrculural good produced n he Norh s assumed o be gven by 4 Y A L where Y A and L denoe respecvely he oupu of he agrculural good he land npu and he labor npu all n perod used o produce he agrculural good n he Norh. Also < s a parameer. < In he Souh he sock of wlderness land s assumed o provde a flow of ecosysem servces o he agrculural secor n hs regon. These ecosysem servces can be consdered as npus whch complemen he radonal facors of producon used n he agrculural secor n he Souh. More precsely he oupu of he agrculural good n he Souh n any perod s gven by he followng producon funcon: 5 Y A. µ A A L e In 5 Y represens he oupu of he agrculural good produced n he Souh; A and L denoe respecvely he npus of land and labor used n he producon of he agrculural good. Also < s he parameer ha characerzes he elascy of < he oupu of he agrculural good wh respec o he labor npu and µ > s he parameer ha characerzes he ecosysem servces conrbued by he remanng wlderness land o he producon of he agrculural goods. In 5 he ecosysem servces A A are represened by he expresson [/ e µ ]. Observe ha he value of ecosysem servces rses wh he amoun of undeveloped land bu a a decreasng rae. Furhermore he oupu of agrculural good s no reduced o zero even f all he wlderness land s developed. Hence ecosysem servces can be consdered as weak complemens of he essenal npus land and labor n he producon of he agrculural goods... Preferences

6 Consder a young ndvdual who lves n counry n perod. A lfeme consumpon plan for such an ndvdual s a ls x x x x where x j denoes her consumpon of good j n perod when she s young and x denoes her consumpon of good j n perod when she s old. Her dscouned lfeme uly s hen gven by 6 u x x δ u x x where u x x s he sngle-perod uly funcon n erms of he manufacurng good and he agrculural good consumed n ha perod. Also δ δ < s he facor used o dscoun uly. In wha follows he sngle-perod uly funcon for an ndvdual n counry s assumed o have he followng form: 7 u x x Logx α Logx where α < s a parameer. < < j.3. The Prce Sysem Le ω and r denoe respecvely he wage rae and he renal rae of land ha preval n perod n counry. Also we denoe by p j he prce of good j ha prevals n perod n counry. As for land we shall le be he prce a whch land can be bough and sold a he end of perod n counry. By a prce sysem we mean an nfne. seuence P p p ω r.4. Cos Mnmzaon n he Manufacurng Secor and n he Agrculural Secor Le p p ω r P be a prce sysem. In perod he cos funcon of he represenave frm ha produces he manufacurng good n counry s obaned by solvng he followng cos mnmzaon problem: 8 mn A L r A ω L

7 subjec o 9 Y A L. The soluon of he cos mnmzaon problem consued by 8 and 9 s well known and s gven by A P Y r ω Y and L P Y r ω Y. Furhermore he cos funcon n perod of he represenave frm ha produces he manufacurng good n counry s gven by C P Y r ω Y. Smlarly n perod he cos funcon of he represenave frm ha produces he agrculural good n counry s obaned by solvng he followng cos mnmzaon problem: 3 mn A L r A ω L subjec o 4 Y A L. The soluon of he cos mnmzaon problem consued by 3 and 4 s gven by 5 A Y r P ω Y and 6 L P Y r ω Y. Furhermore n perod he cos funcon of he represenave frm ha produces he agrculural good n he Norh s gven by

8 7 C P Y r ω Y. In perod he cos funcon of he represenave frm ha produces he agrculural good n he Souh s obaned by solvng he followng cos mnmzaon problem: 8 mn A L r A ω L subjec o 9 Y A. µ A A L e The soluon of he cos mnmzaon problem consued by 8 and 9 s gven by µ A A A P Y r ω Y e and µ A A L P Y r Y e. ω Furhermore n perod he cos funcon of he represenave frm ha produces he agrculural good n he Souh s gven by C P Y r ω Y µ A A e..5. Lfeme Uly Maxmzaon Consder a young ndvdual n he counry n perod. She solves her lfeme uly mzaon problem by mzng 6 subjec o he followng ner-emporal budge consran: ω p x p x 3 p x p x r. Observe ha he lef sde of 3 represens he expendures on he wo goods n perod when he ndvdual s old. On he rgh sde of 3 [ ω p x p x ]/ represens her savngs n he form of land a he end of perod. The rgh sde of 3

9 hus represens he ncome of he ndvdual from her land ownershp n perod when she s old. The opmal lfeme plan for a young ndvdual n counry n perod s gven by: 4. p α r α x p α r x r p α r a x r p α r x δ δ ω δ δ ω δ δ ω δ ω δ ω P P P P P Noe ha n 4 he amoun of land ha she acures a he end of perod as a real asse o provde for her old-age consumpon n perod s denoed by. P As for an old ndvdual n counry n perod she solves he followng smple oneperod uly mzaon problem: 5 x x Logx Logx α subjec o 6. r x p x p Noe ha n he old-age budge consran 6 denoes he amoun of land owned by an ndvdual of he old generaon n counry n perod. The soluon of he uly mzaon problem consued by 5 and 6 s gven by 7. p r x p r x α α α P P

10 3. DEFINITION OF COMPETITIVE EQUILIBIRUM Le P p p ω r sysem P s an array A be a prce sysem. An allocaon nduced by he prce x P x P x P x P x P x P P Y A P Y L P Y j j j j j j x P x P x P x P x P x P P Y A P Y L P Y a Γ a j j j j j where he producon plan Y A P Y L P Y j... j j j j j j mzes he profs n perod of he represenave frm producng good j n counry and he producon plan Γ a a mzes he profs of he represenave frm ha clears wlderness land n he Souh. Observe ha n A he sock of land owned by an old ndvdual of perod n counry s whch s also eual o A / N. The hree elemens of he ls x x P P represens respecvely he land owned by an old ndvdual of me n counry her consumpon of he manufacurng good and her consumpon of he agrculural good. As for he ls x x P x P x P s frs wo elemens represen P P respecvely he consumpon of he manufacurng good and he consumpon of he agrculural good of a young ndvdual of perod n counry. The nex wo elemens represen her consumpon of he manufacurng good and her consumpon of he agrculural good respecvely when she s old. The las elemen namely represens her savng under he form of land. P The par P A s sad o consue a compeve eulbrum f he followng condons are sasfed.

11 Frs for... he followng marke-clearng condons mus hold n he Norh: 8 A A P Y A P Y 9 N L P Y L P Y 3 A N. P Observe ha 8 represens he eulbrum condon of he marke for land a he begnnng of perod n he Norh. In hs eulbrum condon we recall ha A s he supply of land; whle A P Y and A P Y denoe respecvely he demand for land by he represenave frm n he manufacurng secor and he demand for land by he represenave frm n he agrculural secor. As for 9 represens he eulbrum condon n he labor marke a he begnnng of perod n he Norh. Fnally 3 represens he eulbrum condon on he marke for land as an asse a he end of perod. Here P δ ω / δ s he demand for land as an nvesmen asse o provde for old-age consumpon by a young ndvdual n perod n he Norh. Second for... he followng marke-clearng condons mus hold n he Souh: 3 A A P Y A P Y 3 N L P Y L P Y Γ a 33 A N where P 34 A A a s gven. A Observe ha 3 represens he eulbrum condon of he marke for land a he begnnng of perod n he Souh. In 3 we recall ha A s he sock of developed

12 land avalable a he begnnng of perod ; whle A P Y and A P Y denoe respecvely he demand for land by he represenave frm n he manufacurng secor and he demand for land by he represenave frm n he agrculural secor boh a he begnnng of perod n he Souh. As for 3 represens he eulbrum condon n he labor marke a he begnnng of perod n he Souh. On he lef sde of 3 represens he labor supply; whle on he rgh sde of 3 L P Y L P Y N and Γ represen respecvely he demand for labor by he represenave frm n a he manufacurng secor he demand for labor by he represenave frm n he agrculural secor and he demand for labor by he represenave frm n he wlderness land clearng secor all n perod n he Souh. Fnally 33 represens he eulbrum condon on he marke for land as an asse marke a he end of perod wh 34 descrbng he dynamcs of he sock of developed land generaed by he profmzng behavor of he represenave frm ha clears wlderness land n he Souh. Here recall ha a s he amoun of land cleared durng perod and s avalable for sale as an nvesmen asse a he end of ha perod and s he demand for land as P an nvesmen o provde for her old-age consumpon by he young generaon n he Souh a he end of perod. Thrd he followng condons mus hold on he nernaonal markes for he manufacurng and agrculural goods. 35 p j p j p j and 36 Y Y N x N x N x N x j. j j j j j j Condon 35 assers ha under free rade he prces of each commody are he same n he Norh and he Souh whle condon 36 assers ha on he nernaonal marke for each good demand s eual o supply.

13 4. PROPERTIES OF THE COMPETITIVE EQUILIBRIUM 4. Eulbrum n he Land-Clearng Secor Le P A be a compeve eulbrum. In wha follows we shall choose he wage rae n each perod n he Souh as he numerare; ha s we se ω... Because he echnology of wlderness land clearng s lnear he followng condon mus hold n eulbrum: 37 γω. γ Furhermore when he neualy n 37 s src no wlderness land clearng acves wll be carred ou n he Souh. Now accordng o 4 he demand for land by a young Souherner a he end of perod s δ ω δ 38 P. δ δ Noe ha he second eualy n 38 has been obaned by usng he assumpon ha wage rae n any perod n he Souh s he numerare. The aggregae demand for land by N δ he young generaon n he Souh a he end of perod s hus eual o. δ On he oher hand he amoun of land held by he old generaon n he Souh n perod s A. If no new land s added o he sock of developed land a he end of perod hen n eulbrum we mus have N δ 39 A δ from whch we oban he followng expresson for he eulbrum prce of land a he end of perod : N δ 4. δ A

14 Now when no wlderness land clearng acves are carred ou he prce of land mus be less han or eual o s producon cos. Thus n any perod durng whch no new land s added o he sock of developed land we mus have N δ 4 γ. δ A Observe ha he neualy n 4 wll only hold f N s no oo hgh relave o A.e. f he number of young ndvduals n he Souh n perod s no oo hgh relave o he sock of developed land exsng a he begnnng of he perod. Ths neualy wll N δ no hold f > γ δ A n whch case he excessve demand for land as an nvesmen asse o provde for her old-age consumpon by he young generaon n he Souh a he end of perod wll rgger wlderness land clearng acves n ha perod. The amoun of wlderness land cleared durng perod namely a depends on how much wlderness land remans. If here s much wlderness land remanng hen he amoun of newly developed land wll be jus enough o rase supply o he pon where he prce of land s eual o he producon cos of wlderness land clearng. Under such a scenaro N δ 4 γ. δ A a a wll sasfy he followng condon: On he oher hand f he populaon exploson s severe say N s so hgh ha N 43 δ γ δ A hen all he remanng wlderness land wll be cleared durng perod.e. a A A and he eulbrum prce of land n he Souh a he end of perod s N δ 44. δ A Observe ha he rgh sde of 44 wll be hgher han γ f N s hgh. Under such a scenaro he wlderness land clearng secor wll make posve profs n clearng he

15 remanng wlderness land. The followng proposon summarzes he precedng dscusson. PROPOSITION : Recall ha A s he sock of developed land avalable a he begnnng of perod n he Souh and ha N s he sze of he Souhern young generaon n ha perod. N δ a If γ δ A hen no new land wll be added o he sock of developed land n he Souh a he end of perod and he prce of land a he end of hs perod N δ wll be gven by. δ A N δ b On he oher hand f > γ δ A hen he wlderness land clearng operaon n he Souh wll be acve and he amoun of wlderness land cleared durng N perod depends on wheher or no δ < γ. Furhermore δ A N b f δ < γ δ A hen he amoun of new developed land n perod N δ s gven by a A and he prce of land a he end of perod δ γ n he Souh wll be. On he oher hand γ N b f δ γ hen all he remanng wlderness land n he δ A Souh wll be developed n perod and he prce of land a he end of N δ hs perod wll be gven by γ. δ A The followng proposon follows drecly from Proposon.

16 PROPOSITION : Le N sup N be he upper bound on he sze of he populaon n he Souh and A be helong-run sock of developed land n he Souh. Nδ a If < γ hen he eulbrum sock of developed land n he long run n δ A δ he Souh s gven by A N and he eulbrum prce of land n he long δ γ run s gven by. γ Nδ b On he oher hand f γ δ A hen n he long run all he wlderness land n he Souh wll be developed.e. A and he eulbrum prce of A land n he long run n he Souh assumng ha m N N s Nδ δ A. The above wo proposons show ha wheher land wll be cleared or no n he Souh depends on he relave sze of he young people o he avalable developed land. Also he amoun of land o be cleared depends on he relave sze of he young people o he mum amoun of land avalable. Noe ha n hs model land nvesmen s drven by he savng behavor of he successve generaons no by rade. Even when wo counres rade wh each oher he savng behavor of he resdens n he wo counres s no changed due o rade. Ths s lke he overlappng generaon model of savng n whch he long-run capal sock depends on he rae of me preference. 4. Absence of Asse Markes The model we formulae reflecs he curren reales n he Souh. Because fnancal nsuons are no well developed n he Souh here are no oher asses han land ha are avalable o he old generaon: developed land s he only asse ha can provde ncome for an old ndvdual s consumpon. Thus land s he only form of savng

17 avalable o a young ndvdual of any perod. So n any perod f he sze of he young generaon n he Souh s relavely larger han he avalable developed land he demand for developed land pushes he land prce hgh enough o acvae he land-clearng secor. In hs way he lack of alernave real asses oher han developed land coupled wh a growng populaon are he causes of bodversy loss n he Souh as suggesed by he analyss n Secon 4.. The followng corollary follows from he precedng dscusson and Proposons and. COROLLARY : Due o he absence of any oher real asse marke oher han he land marke a large young generaon n any perod ncreases he demand for developed land and pushes he land prce above he land clearng cos.e. N δ δ A > γ whch makes he land-clearng acves profable and conrbues o he loss of bodversy. 4.3 Impac of Land-Clearng Cos Anoher mporan resul follows from he eulbrum condons of he land-clearng secor. Accordng o 4 land-clearng acves wll no be carred ou when he prce of land s less han or eual o s producon cos. The mplcaon of hs neualy s ha he land-clearng acves depend on he un cos of land clearng. If he un cos of land clearng namelyγ s hgh enough o exceed he prce of land hen landclearng acves wll no ake place. The cos of clearng undeveloped land may be hgh for he followng reasons. Frs f he undeveloped land s remoe and naccessble due o geographcal and naural barrers may push he cos of land clearng o a very hgh level. Second f here s no naural or man-made access lke rals and roads o he undeveloped land area or f akes oo much me o reach o he clearng se may rase he clearng cos subsanally. Thrd f he weaher condons and he ecosysem of he undeveloped land are sressful and harmful o human healh may push he clearng cos beyond reach. Fnally f here are naural

18 condons lke sol eroson weeds pess salny waer-cloggng floodng ec. ha makes dffcul o ransform he wlderness land no good agrculural land. In hs case he cos may be very hgh. All he above facors can push he land clearng cos hgh enough o make 4 hold wh src neualy whch wll cause land-clearng acves o be suspended and bodversy rch areas o be preserved. The followng corollary summarzes he precedng dscusson. COROLLARY : If he per un land clearng cos γ s hgh enough so ha N δ γ δ A holds hen no new land wll be added o he sock of developed land n he Souh a he end of perod Impac of he Dscoun Rae on he Land-Clearng Marke To analyze he nfluence of he dscoun rae on he land-clearng acves n he Souh le us rewre he neualy n 4 whch holds when land-clearng acves are no carred ou as follows: A 45. N γ / δ The lef sde of 45 s he developed land labor rao n perod. The lower hs rao s he lower wll be he oupu per worker n ha perod. Ths rao s hus an ndex of he povery of he Souh n perod. The rgh sde of 45 s ncreasng of he dscoun facor δ. Observe ha a lower dscoun facor nduces a rse n curren consumpon and reduces savng for old-age consumpon whch a foror means a lower demand for developed land as nvesmen. Thus 45 s lkely o hold f here s exreme povery n he Souh and f he Souhern populaon s exremely mpaen. The mpac of he dscoun rae s raher puzzlng gven he convenonal wsdom on he mpac of a hgh dscoun rae on he desrucon of bodversy. In he leraure on exhausble resources s well known ha a rse n he dscoun rae ls he paern of consumpon oward he

19 presen causng he resources o be depleed sooner. In he conex of bodversy loss hs resul akes he form of converng wlderness land no agrculural land a a faser rae. I mples ha he urgency of sasfyng he curren needs may lead o faser land clearng n he Souh. Bu he concluson n hs chaper s dfferen from he above. On he oher hand Pearce and Turner 99 Pearce 99 saed ha he demand for naural resource use n any counry s ambguous. Rowhorn and Gardner 999 concluded ha n a neoclasscal growh model wh developed land as an npu and wh preferences ha value speces a hgh dscoun rae favors speces. Our resul s n lne wh hese conclusons n a dfferen conex n whch savngs ake he form of developed land. Perhaps he seemng paradox arses from he fac ha mos researchers n he leraure looked a he problem from he perspecve of a cenral planner. The model we formulae s a dynamc general eulbrum model no one of cenral plannng. The followng corollary summarzes he mpac of mpaence on he loss of bodversy. COROLLARY 3: If he dscoun facor n he Souh δ s low enough whch s euvalen o a hgh dscoun rae and f he populaon pressure s no large enough so ha N A γδ / holds hen no new land wll be added o he sock of developed / δ land n he Souh a he end of perod. 4.5 Impac of Ecosysem Servces on Land Conservaon To analyze he mpac of ecosysem servces on he agrculural secor le us dfferenae 5 wh respec o A o oban Y µ 46. µ A A A A A e A Observe ha on he rgh sde of 46 he erm s srcly decreasng from / A nfny o A / as A rses from o A. As for he erm

20 A A A µ A A µ µ /[ e ] s srcly rsng from µ /[ e ] o µ / as A rses from o A A. Le 47 A m A and 48 m A. A Then f µ s hgh.e. f ecosysem servces are valuable we wll have µ 49 < µ A A A e A.e. he margnal producvy of developed land s negave whch means ha oo much land n he Souh s cleared and he level of ecosysem servces obaned are sub-opmal. We summarze he resuls jus obaned n he followng proposon: PROPOSITION 3: If he ecosysem servces are exremely valuable hen he compeve eulbrum s no effcen because oo much land s developed n he Souh. 5. POLICIES FOR INTERNALIZING THE VALUE OF ECOSYSTEM SERVICES AND CONSERVING BIODIVERSITY 5.. Polcy Tools Alhough ecosysem servces are valuable o he Souhern economy especally o he agrculural secor n hs regon here s no marke for hem. If a marke can be creaed for he conservaon of undeveloped land and f agrculural producers pay for s conservaon wll serve as an ndrec marke for he ecosysem servces. Due o he weak complemenares of he ecosysem servces and non-pon naure of he users hs marke has o be nsuonalzed by he governmen. There may be dfferen ypes of

21 polcy ools ha can be used. Currenly around he world governmens are ryng o mplemen dfferen ools o creae markes for ecosysem servces. Land Developmen Fee Accordng o Corollary land-clearng acves wll no be carred ou f he cos of land developmen hgh enough. By mposng a land developmen fee he governmen can effecvely rase he land-clearng cos and conserve land and he flow of ecosysem servces. If he land developmen fee s se hgh enough hen no new land wll be developed. Tax on Developed Land Anoher ool he governmen of he Souh can use s o mpose a ax on he demand for developed land. Tha wll shf he demand curve for developed land o he lef and keep he bodversy-rch land conserved. The ax revenues can hen be used o monor he undeveloped land and he res can be redsrbued among he populaon. Fees on Agrculural Producon and Paymens for Ecosysem Servces As here s no drec marke for ecosysem servces he governmen can work as a mddle-man o creae an ndrec marke for. If paymen for ecosysem servces s nsuonalzed he undeveloped land wll also be consdered as an ncome-generang asse ha can be used o provde for old-age consumpon. In hs manner he savng porfolo of an old ndvdual wll conss of boh developed and undeveloped land. Furhermore n order for a young ndvdual o pu her savng n boh developed and developed land he raes of reurn o hese asses mus be eual. If we denoe he prce of undeveloped land by E and he fees for ecosysem servces per un of developed land used n he agrculural secor byσ hen he followng condon mus hold. r σ E 6. E

22 5.. Impac of he Polcy Tools on he Terms of Trade Boh he land developmen fee and he ax on developed land wll ncrease he prce of developed land. The paymen for ecosysem servces wll add an exra cos o he users of developed land. The Souhern comparave advanage n producng agrculural producs a a lower cos may be affeced by hese polcy ools and he Souh may lose s comparave advanage. I he exreme case when he land developmen fee he land ax or he ecosysem fee s hgh enough he paerns of rade may reverse and he Souh may become a ne mporer of boh he agrculural and manufacurng goods. 6. CONCLUSION The model n hs paper helps us o sae some very mporan proposons and resuls. The paper explans some of he reales ha he bodversy-rch developng counres currenly confron. Frs he paper explans he long-run dynamcs of he land clearng secor. I shows ha wheher all he land n he Souh wll be cleared or no depends on how large he ulmae sze of he Souhern younger generaon relave o he ulmae land resources n he Souh. In he same way n any perod wheher he land-clearng secor wll be acve or no depends on he sze of he Souhern younger generaon relave o he avalable developed land n he Souh n ha perod. As here are no avalable alernave real asses oher han land n he Souh he old generaon can only use he land marke o oban asses for old-age secury. Wh populaon growh here s added pressure on he landclearng secor whch acceleraes he desrucon of bodversy hrough land developmen. Second he paper shows ha f he land-clearng cos s hgh enough hen no new land wll be cleared n he Souh.

23 Thrd s he pressure generaed by a populaon exploson ha s a he source of bodversy loss no a hgh rae of dscoun. Our resul agrees wh Pearce & Turner 99 Pearce 99 and Rowhorn & Gardner 999 who sugges ha a hgh dscoun rae may help n conservaon of bodversy. Fourh alhough land developmen fees land ax and ecosysem fee may help n he conservaon of he bodversy-rch undeveloped land can decrease he welfare of he Souhern consumers when he populaon ncreases overme. The resuls of hs paper have mporan polcy mplcaons. To he Souhern workers land clearng s a form of nvesmen as oher benefs of bodversy-rch land are very low or no valued a all n he marke sysem. As decreasng producvy only akes place afer a subsanal loss of bodversy-rch land here s no ncenve for creang a marke for undeveloped land and s ecosysem servces. Hence he governmen has o use fscal ools or creae markes hrough nsuonal mechansms. Polcally hese mechansms may be hard o mplemen as hey mgh lower he welfare of he Souhern consumers. The model also shows ha he absence of markes for real asses oher han developed land n he Souh encourages land clearng. So he creaon of alernave real asse markes such as he bond marke he sock marke for ownershp of physcal capal or an ncome-generang sysem for he older generaon are keys o reduce bodversy loss n he Souh. Alernave earnng and employmen opporunes oher han land clearng can also slow down desrucon of bodversy. The resuls of he paper also mply ha naurally geographcally and bologcally remoe areas of he bodversy-rch land would probably be safe for he near shor run due o very hgh cos of land developmen. Developmen of access facles such as roads and oher forms of communcaon should be avoded for hghly bodversy-rch areas known as he ho-spos.

24 We should probably look for more pro-acve measures oo. Alernave measures such as bo-prospecng or eco-oursm o creae economc values for conservaon effors should be aken. The bodversy-rch developng counres have o dversfy wh respec o alernave asse generaon employmen and earnng opporunes. Also he nonmarkeed publc-good ype values of bodversy resources have o be pad n some forma o keep hem conserved. The ransfer schemes such as he global envronmenal fund should be one of he prncpal mechansms o conserve he bodversy sock of he world. Furher exenson of he model can be carred ou by ncludng he evoluon of he bodversy resources ecosysem servces and he populaon. The exensons may provde rcher and more realsc resuls han he curren model. Incluson of he dynamcs of he land clearng acvy mgh be anoher exenson. Also furher nsgh can be ganed by nroducon of dfferen polcy ools. These exensons are lef for fuure research.

25 REFERENCES Angelsen Arld Agrculural Expanson and Deforesaon: Modellng he Impac of Populaon marke Forces and Propery Rghs Journal of Developmen Economcs Barber E. B. and Burgess Joanne C. The Economcs of Tropcal Fores land Use Opons Land Economcs Barber E. B. Burgess Joanne C. and Folke C. Paradse Los? The Ecologcal Economcs of Bodversy Earhscan 994 London England. Bule E. Soes Daan P. Van Kooen G. Cornels Van and Schpper Rober A. Fores Conservaon n Cosa Rca when Nonuse Benefs are Unceran Bu Rssng Amercan Journal of Agrculural Economcs Cosanza e al. The value of he World s Ecosysem Servces and Naural Capal Naure Folke Carl; Hollng C. S. and Perrngs Charles; Bologcal Dversy Ecosysems and Human Scale Ecologcal Applcaons Huang J. and Smh V. K. Weak Complemenary and Producon Economc Leers Jansson A. M. Hammer M. Folke C. and Cosanza R. eded book: Invesng n Naural Capal: The Ecologcal Economcs Approach o Susanably Island Press 994 Washngon D.C. USA. Paanayak Subhrendu K. and Bury Davd T. Fores Ecosysem Servces as Producon Inpus n Sll and Ab Eded book Foress n a Marke Economy Dordrech The Neherlands: Kluwer Academc Publshers Pearce D. W. Economc Valuaon and he Naural World Repor Prepared for he World Developmen Repor 99 Developmen and he Naural World 99 World Bank. Pearce D. W. and Turner R. K. Ecdonomcs of Naural Resources and he Envronmen The John Hopkns Unversy Press 99 Balmore. Regm Punya P. and Weber Karl E. Problems o Agrculural Susanably n Developng Counres and a Poaenal Soluon: Dversy Inernaonal Journal of Socal Economcs 7 7/8/9/

26 Rowhorn Bob and Brown Gardner When a Hgh Dscoun rae Encourages Bodversy Inernaonal Economc Revew Vol