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University of Zurich (2010)

The economic value of real options in biodiversity management : the case of bush encroachment control in semi-arid rangelands

Lukomska Nataliia

Titre : The economic value of real options in biodiversity management : the case of bush encroachment control in semi-arid rangelands

Auteur : Nataliia Lukomska

Université de soutenance : University of Zurich

Grade : Master in Environmental Sciences 2010

Résumé
The objective of this study is to investigate the economic implications of biodiversity management under uncertainty. In particular, biodiversity management here is discussed by livestock farming strategies in conditions of semi-arid climate. The dynamics of a semi-arid rangeland ecosystem, driven by stochastic precipitation, is described by a coupled ecological-economic model. The model captures the dynamics of biomass production, which is determing the livestock production and the income of the farmer. The farmer’s grazing management strategies, altering the state of range ecosystem, and eventually improving the biodiversity of the pasture, are resting and debushing. The principle of the “resting” strategy is to leave a pre-specified part of the pasture to rest in rainy years. “Debushing” is the eradication of bushes down to the optimal level in order to increase the carrying capacity of the pasture. The farmer’s decisions, concerning application of sustainable management practices, are shaped by his preferences, such as risk aversion, discount rate and time horizon. We study whether the optimal strategies of the livestock farmer are environmentallysustainable (i), whether the option to debush incorporates a “natural insurance” value (ii) and if debushing has a positive economic value (iii). We find that debushing leads to more conservative and correspondingly more environmentallysustainable grazing strategies than in comparision with a non-debushing setting (i). In the same time, our expectation concerning the natural insurance value of debushing is not confirmed : Debushing leads to a more volatile green biomass production and thus increases the risk premium for the debushing farmer as the result of the increased income volatility (ii). The economic value of the option to debush is positive and debushing has therefore a positive effect on the well-being of the farmer (iii). Keywords : ecological-economic modeling, semi-arid rangeland management, biodiversity, uncertainty, economic value, sustainable strategies.

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Page publiée le 31 décembre 2011, mise à jour le 26 novembre 2019