The Economic Value of the Upper Tuul Ecosystem

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1 The Economic Value of the Upper Tuul Ecosystem L. Emerton, N. Erdenesaikhan, B. de Veen, D. Tsogoo, L. Janchivdorj, P. Suvdaa, B. Enkhtsetseg, G. Gandolgor, Ch. Dorjsuren, D. Sainbayar, A. Enkhbaatar.

2 introduction to the study

3 background Traditionally, economic calculations do not include environmental values They present incomplete (or even incorrect) information to decision-makers Under-valuation can lead to decisions being made which: miss opportunities to generate economic benefits result in activities that impose economic costs Environmental valuation aims to overcome these problems

4 aims First ever application of environmental valuation techniques in Mongolia Objective to improve understanding about the value of the environment to Mongolia s economy Looked at the ecological, hydrological and economic impacts of ecosystem conservation and ecosystem degradation in the Upper Tuul watershed

5 international examples

6 the value of the world s ecosystems Biome Area (million ha) Global value ($ trillion/yr) Open ocean 33, Coastal 3, Tropical forest 1, Temperate forest 2, Grass/rangelands 3, Tidal marsh/mangroves Swamps/floodplains Lakes/rivers Cropland 1, Total 51, Costanza, R., d'arge, R. de Groot, R. Farber, S., Grasso, M., Hannon, B., Limburg, K., Naeem, S., O Neill, R.V., Paruelo, J., Raskin, R.G., Sutton, P. and M. van den Belt The value of the world's ecosystem services and natural capital. Nature 387:

7 the global costs of biodiversity loss the degradation of biodiversity and ecosystems means that each year the world loses natural capital worth between 1.35 and 3.19 trillion European Community The Economics of Ecosystems and Biodiversity. An Interim Report.

8 forest watershed values in the USA every $1 invested in watershed protection can save anywhere from $7.50 to nearly $200 in costs for new urban water treatment and filtration facilities

9 national income accounts in Norway detailed physical environmental accounts (linked to national income accounts) show the relationship between economic activities and the depletion of renewable and non-renewable natural resources

10 hydropower dam in Kenya valuation of biodiversity and ecosystem costs of dam construction (US$ 47 million NPV) meant that government and donor changed the design option

11 wetland conservation in Sri Lanka valuation of flood control, wastewater treatment and downstream fisheries benefits of Muthurajawela Marsh (US$ 2,500/ha) used to justify higher budget for wetland conservation

12 oil spill liabilities in the USA valuation of biodiversity impacts of Arthur Kill oil spill used as the basis for reaching court settlement on damages (US$ 11 mill)

13 the Tuul River Basin

14

15 Khan Khentii SPA Gorkhi-Terelj NP Ulaanbaatar

16

17 ecosystem services & values

18 land use in the Upper Tuul

19 Erdene winter grazing area tourist ger camp close to Tuul River Bridge split firewood Siberian pine nuts

20 herding

21 herding Nalaikh Erdene All herders Value of livestock production (Tug mill/year) Milk , , Wool Cashmere Airag Hides Hay Large stock Smallstock All production , ,361.07

22 tourism

23 tourism Number Bednights Gross revenues (Tug mill) Ger camps ,575 17, Hotels 6 67,111 5, Guest houses 1 9, Wooden houses 2 11, Children's camps 5 94, Government resorts 5 20,263 - Sanatoria 5 43,399 - Total ,488 24,597.13

24 timber & firewood

25 timber & firewood Harvest (m 3 /year) Market value (Tug mill/year) Timber Firewood Timber Firewood Total Legal cutting 643 4, Illegal cutting 606 4, Household structures 2, Total 3,295 8,

26 non-timber forest products

27 non-timber forest products Average harvest (kg/hh/year) Average price (Tug/kg) Total value (Tug mill/yr) Home Sale Total Fruits & berries 25 2, Wild vegetables 7.5 1, Pine nuts , Medicinal plants 2.5 5, Total

28 the value of upstream land & resource use Local households Outside businesses Local Government Total Tourism , , Herding 3, , Timber Firewood Non-timber forest products Total (Tug mill/year) 4, , ,343.40

29 water in Ulaanbaatar

30 water in Ulaanbaatar

31 water in Ulaanbaatar Houses 0.3% Institutions 3,5% Industries 3% Businesses 11% Power plants 24% Crops 1.9% Livestock 1.8% Ger settlements 2.2% Apartments 53% 5.00 m3 million > 60 million cubic metres 4.25 J F M A M J J A S O N D

32 impacts of ecosystem change

33 gully erosion and garbage in Terelj burned forest in Bugatiin am dense tourism by Turtle Rock land sub-division in Gachuurt

34 scenario modelling for the Upper Tuul Ecological Change Hydrological Change Economic Change 25 year time-frame No Protection little or no budget few conservation measures environmental regulations and laws unenforced rapid and large-scale land conversion and ecosystem degradation Gradual Deterioration low budgets weak conservation and enforcement of regulations unlicensed land and resource uses continue tourism and settlement continue to spread into protected areas Conservation sufficient budgets effective protected area zoning and management environmental regulations enforced land and resource uses developed at ecologically sustainable levels

35 land use change 100% 80% 60% 40% 14% 23% 63% 21% 33% 46% 14% 23% 63% 18% 28% 54% 14% 23% 63% 16% 25% 59% 20% 0% No protection Gradual deterioration Conservation Forest Grassland Bare & built-up land

36 hydrological change Average runoff (m 3 /s) Mean of annual maximum floods (m 3 /s) Mean of annual low flows (m 3 /s) Current Year 25 no protection Year 25 gradual deterioration Year 25 - conservation

37 changes in ecosystem values Tug billion No protection Tug 1,243 bill Gradual deterioration Tug billion Tug billion Conservation Tug 1,293 bill Tug 1,370 bill

38 changes in ecosystem values No protection Present Value (Tug billion) Gradual deterioration Conservation Tourism Pasture Non-timber forest products Timber Firewood Upper Tuul land & resource uses Ulaanbaatar water availability Total upstream & downstream value , , , , ,370.42

39 findings & conclusions

40 economic returns to conservation more than 3,000 local people and businesses depend on the land and resources of the Upper Tuul, and more than a million people and industries in Ulaanbaatar depend on its water conservation has the potential to generate water, land and resource benefits over 25 years with a NPV of Tug 1,370 billion by 2030, the Upper Tuul ecosystem will be generating ecosystem services worth Tug 55 billion a year more than if it were not protected if the Upper Tuul ecosystem continues to be degraded, the loss of water, pasture and forest values will cost the Mongolian economy between Tug 400 billion and Tug 655 billion over the next 25 years every Tug 1 invested in conservation over the current situation would generate additional economic benefits of Tug 15 each year

41 management implications ecosystem degradation is not just a biological or ecological concern, it also has serious economic and development consequences there is a strong development rationale to investing in conservation investments in ecosystem conservation should form a core part of future water sector funding it is a high priority to ensure that sufficient funds are allocated to managing Khan Khentii Strictly Protected Area and Gorkhi-Terelj National Park there is an urgent need to set in place financial and economic incentives for sustainable land and resource use in the Upper Tuul watershed

42 Thank You