This blog was written by Andrew Bovarnick Global Head at Food and Agricultural Commodity Systems (FACS), UNDP; Marlon Flores, Senior Technical Advisor on GCP TSA, FACS, UNDP and Francisco Alpízar, Professor and Chair of the Environmental Economics and Natural Resource Group, Wageningen University and Research.

The 2021 Dasgupta Review on the Economics of Biodiversity sounds a compelling warning that we cannot go on using up nature as if it is an endless no-cost resource. The Review adds tremendous value to the global development debate by focusing on nature as an indispensable productive asset, and on biodiversity as a key determinant of nature’s productive capacity, and its capacity to withstand shocks and adapt to changing conditions. By making all of humanity’s endeavors conditional on nature’s limits, we can identify critical sectors and activities that are part of the problem and hence part of the solution.

So, how do we do this in practice? UNDP has developed Targeted Scenario Analysis to highlight the contrasts between ‘business as usual’ and ‘sustainable ecosystem management’ approaches. To date, decision makers in 10 countries around the world have used TSA in policy reform decision making for people and planet.

The Review – commissioned by the UK Treasury (finance ministry) - highlights that "at the heart of the problem lies deep-rooted, widespread institutional failure.” On the one hand, efforts at valuing nature are piece meal, and are seldom reflected in day-to-day production and consumption decisions. Secondly, governments at all levels have systematically failed to protect nature, even if suitable tools are at their disposal.  The problem is that implementing environmental taxes, fines, subsidies, pricing instruments, Payment for Ecosystem Services, and other mechanisms to increase investment involve a range of social, economic, and political challenges, particularly in developing nations. Policy scenarios do not always provide the definite, unequivocal answers that decision-makers need.

Governments and the private sector still rely on simplistic cost-benefit analysis (CBA) and Net Present Value estimates to assess and justify investment policies and projects. Too often this results in severe degradation of natural capital because these tools do not generate information on the full set of consequences of converting natural capital into consumption goods. Besides, CBA cannot reflect indicators that are difficult or impossible to quantify in monetary terms, and it is difficult to put a price on nature.

When confronted with a confusing array of policy, management, and investment choices, decision-makers need a tool to help them determine how different options affect multiple economic, environmental, and social objectives.

UNDP's Targeted Scenario Analysis (TSA), was designed to meet this need. TSA builds on and combines traditional cost-benefit analysis (CBA) and different economic valuation methods to present a clear choice. TSA projects the consequences of implementing a policy intervention or management strategy in terms of the changes in handpicked physical, financial, economic, and social indicators. The analysis weighs the pros and cons of continuing with the business-as-usual (BAU) path or following a sustainable development path in which natural capital is effectively managed. This alternate path is termed sustainable ecosystem management (SEM). Financial, economic, social, and environmental criteria and indicators are used to compare the BAU and SEM scenarios and estimate net gains or losses. The TSA approach is client and sector-focused, and the outcome is a balanced, time-bound presentation of economic and financial evidence on each of the options for the decision-maker to act on.

The TSA approach was designed and introduced by UNDP’s Green Commodities Programme in 2013. In partnership with governments, producers and the private sector, UNDP has completed the first generation of TSA studies. These studies include action plans to follow up on the TSA's policy recommendations. These are implemented as part of Global Environment Facility (GEF) funded projects and are supported by Partnership for Action on Green Economy (PAGE). Recent TSA sector studies include palm oil in Liberia, small-scale gold mining in Ecuador, coffee and cocoa in Peru, livestock and beef in Paraguay, forestry in Kazakhstan, livestock management in Colombia and illegal wildlife trade in Thailand. Further TSAs are planned in Indonesia (commodities) Fiji (invasive alien species), and Cuba (land use planning, PA management, fisheries, tourism, agriculture, and forest management). By comparing business as usual with sustainable ecosystem management, the TSA studies' recommendations are expected to support the policy reform needed to increase investment in Nature.

The Dasgupta Review points out that "humanity faces an urgent choice. Continuing our current path where our demands on Nature far exceeds its capacity to supply presents extreme risks and uncertainty to our economies." We need to invest in assisting policy makers to understand, in concrete terms, the consequences of every policy choice they face, translating and bridging global arguments into local reality. TSA is that bridge and is an indispensable tool to enabling a sustainable path to transform our economies for the well-being of Nature, ourselves, and our future generations.

More information about UNDP's Targeted Scenario Analysis (TSA), here.

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