Economics of invasive alien species: pre-emptive versus reactive control

The expanding global economy presents various challenges to production and environmental systems worldwide. Biosecurity provides a framework for managing the risks presented by different types of diseases and species spread by globalisation. One element of biosecurity is protection against invasive alien species (IAS). These are species spread by human actions outside their natural zones of dispersal. IAS present a threat to biological diversity at all levels and may have a negative impact on the goods and services provided by ecosystems. IAS may result in non-production and production costs. The first category includes physical impacts materialising as environmental, health and cultural costs, whereas the second category includes the subsequent economic impacts, such as production losses, domestic market effects and trade effects. In addition, IAS may impose control costs either on the society or a specific sector, depending on the type of species and the chosen policy. Management of IAS is a public good and remains under-provided by the free market, which partly explains the involvement of the state in IAS control. A broad division of IAS management is between what is here called pre-emptive and reactive control. Pre-emptive control refers to actions taken to totally eradicate the IAS when found. Such actions reduce the probability of entry and/or establishment of IAS. Reactive control refers to letting a possible invasion to take place and be followed by application of reactive control measures, reducing the extent and magnitude of damages in the event of an invasion. Preventative actions are generally advocated as the preferred strategy to deal with IAS, but it is possible that the costs incurred due to an invasion are less than the costs incurred in continued preventative actions. In such a case, continued efforts to prevent the species from invading consume the limited resources and may lead to other, more dangerous, species not being targeted with sufficient resources. These two policies are in this study considered in the context of the Colorado potato beetle (CPB). The CPB is a destructive plant pest, whose main host plant in Finland is the cultivated potato. The potential for the beetle's range expansion to Finland has been shown by both genetic and climatologic studies, and it provides a convenient case for studying the effects of invasions, uncertainty and local change. Given the life history characteristics of the CPB, there are five important factors from an economic point of view. First, the beetle has spread very rapidly across the continent, although its spread has slowed down as it has approached its ecological limits. Second, in propitious environmental conditions its population size can increase extremely rapidly. Third, it is capable of causing significant damage to potato plants. Fourth, cold summers and winters hinder its establishment, but it is most likely capable of establishing in at least some parts of Finland. Finally, lack of natural predators and ability to develop resistance to chemical control substances make the beetle difficult and expensive to control. This thesis seeks answers to four specific issues: i) review and evaluate the scale, type and magnitude of impacts IAS are capable of causing; ii) specify the policy problem in IAS management and review how the institutional framework in Finland addresses the issue; iii) review existing cost-benefit studies on agricultural IAS and determine the components that such studies should include; and iv) undertake an economic risk assessment of the CPB in Finland and evaluate the conditions under which it is optimal to prevent the species from establishing. On basis of a literature review undertaken, we suggest ten points to be taken into account when conducting economic policy evaluations of IAS: i) choose at least two realistic policy options to evaluate; ii) consider all possible direct and indirect impacts, monetise the ones you can and take the others into account qualitatively; iii) describe which costs and whose costs are included in the analysis and how they are derived; iv) formalise the basis of the analysis; v) undertake an ex-ante analysis to supplement an optional ex-post analysis; vi) carry out sensitivity and uncertainty analysis; vii) consider how the impacts excluded from the quantitative analysis affect the results; viii) discuss to whom the costs and benefits accrue; ix) make a (conditional) policy recommendation; and x) relate the findings to the wider framework of biosecurity measures. The empirical analysis uses a cost-benefit framework to assess the policy response, comparing the costs of prevention with the costs that would ensue if the species is allowed into the country. The primary focus is on ex-ante analysis, although an ex-post assessment of past seven years is also conducted. The framework presented estimates expected aggregate costs over time, using Monte Carlo simulation and allowing stochastic variation in the key variables. In addition, linear temporal change in certain key variables is included in the analysis. The main lesson from the ex-post cost-benefit analysis carried out in this study is that it is not sufficient to look at the costs over only a short period of time. Protection against IAS is to a large extent an investment that may produce potentially very high revenues in terms of avoided costs in the future. The results of the ex-ante cost-benefit analysis indicate that the current policy based on a protection system is economically viable, provided that there will be some future change and a non-insignificant level of pest winter survival. Considered the other way round, we can give up protection if we are certain that there is no future change, pest winter survival stays permanently below about 20%, or potato crop losses will not exceed 5% of the yield. If we cannot be certain that one of these three conditions materialises, we should be cautious regarding the possibility of abandoning protection because the risk associated with giving up protection is at the extreme nearly thirty times greater than that associated with protection. Results also indicate that the fact that invasions come very seldom is not a valid argument for abandoning protection, and that it is the variable costs of the protection system rather than the fixed costs that are important in determining policy profitability. The sensitivity analysis suggests that winter survival, logistic spread rate and variable cost of protection are the most important variables in determining economic profitability. The aggregate results suggest that the current policy of CPB exclusion should be continued. The future challenge lies in considering the issue of IAS and diseases in a holistic biosecurity framework. Within this framework, the issue would be managed in an integrated fashion from the point of view of multiple threats, multiple pathways, multiple parties involved and multiple methods and stages of control. Many challenges lie ahead in planning a functioning framework to deal with the issue of biosecurity.