4 How do we measure the contribution of ecosystem services?
4.4 Conceptual principles and frameworks for valuation
It is also important to clearly define the principles guiding any valuation. Pearce et al. (2006: 175) identified the following requirements for successful ecosystem valuation:
• Identifying ecosystem services and products in a context where we are usually uncertain about how ecosystems behave and what they ‘do’.
• Focusing on marginal or discrete changes, rather than the value of the ‘total ecosystem’ (see Section 4.3.1 below).
• Determining the degree of irreversibility in ecosystem change.
• Establishing the geographical scope of the benefits generated, from local to global. • Establishing the property rights regime for the resource in question.
• Valuing the products and services as if they are independent of each other.
• Analysing, in simplified form, the interactions between services to see, as far as possible, how this might modify the ‘sum of independent values’ approach.
Turner et al. (2010: 96) argued for a ‘sequential analytical process which encompasses’: 1. The spatial context of ecosystem service provision and beneficiaries
2. Appropriate application of the concept of marginal analysis 3. Avoidance of the double-counting trap (see Section 4.3.2 below)
4. As far as is feasible, a comprehensive understanding of the underlying biophysical relationships so that non-linearities may be identified
5. Full consideration of possible threshold effects
Bateman et al. (2011a: section 22.2.2) echoed many of the themes raised by both Pearce et al. (2006) and Turner et al. (2010), reinforcing that ‘one of the most serious problems facing effective and robust valuation of ecosystem services is that there are gaps in our understanding of the underpinning science relating those services to the production of goods’.
4.4.1
Total and marginal ecosystem service values
Attempts to estimate the value of global ecosystem services (e.g. Costanza et al. 1997; de Groot et al. 2012)107 have met with many criticisms relating to two different aspects—the validity of the estimated value magnitudes108and the relevance of the estimates to policy. However, estimates of the value of total ecosystem services—usually a very large number—underscore the importance of nature, and can be helpful in communicating to lay audiences why we should respect nature and make more effort to protect the ecosystem services it provides.
Policy makers are not usually facing decisions that will result in the loss of all ecosystem services, however, and so for them the total value is not helpful either for evaluating specific projects or for carrying out strategic environmental assessments to guide the development of policies and plans. Bateman et al. (2011a: 1076) concluded that:
The focus upon changes in value between feasible, policy-relevant scenarios is much more useful for decision purposes … [F]or the valuation of any good we require:
i) understanding of the change in provision of the good under consideration given changes in the environment, policies and societal trends;
ii) a robust and reliable estimate of the marginal (i.e. per unit) value; and iii) knowledge of how ii) might alter as i) changes.
107 Similar studies have been undertaken in New Zealand (Cole & Patterson 1997; Patterson & Cole 1999), which applied values from Costanza et al. (1997) to areas of New Zealand.
108 This debate questioned the process of scaling up marginal values to estimate total value (Bateman et al. 2011). Resulting total value estimates have been claimed to be too high because they exceeded global product, but also too low, because without ecosystem services, life on Earth would cease, implying that ecosystem services in toto have infinite value.
Braat & de Groot (2012: 11) painted a more complex picture. They supported the use of marginal changes in most scenario analyses, but noted that not all decisions are marginal: ‘When, however, the proposed land use change involves nearly complete loss of ecosystems, biodiversity features, and disappearance of ecosystem services, marginal value changes are in fact irrelevant’. Issues of scale are clearly important here and have an impact on values. A marginal change can create a non-marginal effect—for instance, a small change in water chemistry could destroy the function of a wetland. However, what should be valued is the loss of services from the wetland. If there are many wetlands, the total loss of one may have very limited welfare implications. Such arguments would obviously not apply to larger scale events, such as global climate change, for which a tipping point may create calamitous consequences. As Farley (2012: 40) noted, ‘If ecosystem services are essential, then marginal analysis and monetary valuation are inappropriate tools in the vicinity of thresholds’. This matter can be resolved by considering the three-step process outlined by Bateman et al. (2011a) and the points raised by Pearce et al. (2006)—however, the main difficulty is in modelling a system’s response to policy and other changes, a task which requires input from a range of disciplines, and then valuing that response, recognising that marginal values do not apply to non-marginal changes.When valuation is performed in the context of decision making about specific ecosystems, it is usually the last step in a chain of events emanating from policy change (TEEB 2011: 4:5). This chain is as follows:
1. Policy changes result in impacts on ecosystems 2. These impacts change ecosystem services 3. These changes impact on human welfare
4. These impacts ultimately drive the economic value of changes in ecosystem services This relationship is characterised in Fig. 8.
Valuation can also be used strategically before policy decisions are made to allow the implications of different options to be assessed, e.g. see Box 13.
4.4.2
Direct and indirect services
Ecosystem processes and functions underpin the delivery of ecosystem services; and a resilient, functioning ecosystem is necessary to maintain a sustained flow of benefits. Although outputs are valued directly, processes and functions also have value due to their roles in supporting the delivery of outputs. For example, the value of orchard pollination services from a specific insect (a supporting service) results from the increased value of fruit produced as a result of insect pollination services.
Figure 9 depicts the value generation chain for eosystem services, and suggests that the economic value of an ecosystem is composed of the insurance value of ecosystem support systems and functions, plus the output value of direct services. However, this characterisation has drawn some criticism on the grounds that it leads to double counting (Johnston & Russell 2011; Ojea et al. 2012), which underpins Wallace’s call for researchers to ‘clearly separate means (processes) and ends (services) when classifying ecosystem services’ (Wallace 2007: 242). Howarth & Farber (2002: 424) made the distinction between direct and indirect environmental services, claiming that ‘Since consumption itself reflects the contribution that ecosystems provide to the production of market goods, only the value of direct environmental services should be added to consumption in evaluating welfare change’.
Figure 9. The relationship between ecosystem processes, functions and benefits (TeeB 2010a: 193).
Functioning Structure
Core ecosystem processes e.g. Water cycling
Resilience
Ecosystem service benefits Water for households, industry and irrigation
Ecosystem functions
e.g. Water provisioning, purification and regulation
Insurance value Ecosystem’s capacity to maintain a sustained flow of benefits Output value Value attached to direct ecosystem’s
services and benefits
Economic value of the
ecosystem
109 Johnston & Russell (2011: 2244) noted that the ‘[P]rovision of unpolluted surface water (e.g. in a lake) may represent a final ecosystem service for those who drink the water or engage in contact recreation such as swimming. The same service, however, may represent an intermediate ecosystem service for those who fish in the lake, to the extent that catchable fish abundance depends on water quality.’
An important advantage of valuing only final ecosystem services is that the valuation does not rely on the public’s understanding of biological production functions or the complex relationships supporting ecosystem functions (Boyd & Krupnick 2009). Johnston & Russell (2011) provided a set of rules for distinguishing between intermediate and final services, noting that the distinction is context dependent and so the same ecosystem services may be classed as intermediate or final by different individuals109. The UK National Ecosystem Assessment agreed with this, and distinguished between intermediate and final ecosystem services. Similarly, WBCSD (2011: 23) excluded supporting services because ‘they are already captured within provisioning, regulating and cultural services’.
Mace & Bateman (2011: 16) took the position that ‘provisioning and cultural services are always classed as final ecosystem services; regulating services may be either final services or intermediate services/processes; and supporting services are always intermediate services/
processes’. However, Costanza (2008) strongly rejected this position, claiming that the ‘end’ is sustainable human wellbeing, with ecosystem services being a means to that end. Wallace (2007), Costanza (2008) and subsequent responses to them (Wallace 2008; Fisher et al. 2009) highlight the ongoing differences in objectives, definitions and methods in the ecosystem services valuation arena, as noted by Fisher & Turner (2008: 1167) who claimed that ‘the differences that exist stem from the fact that ecosystem services classification schemes are founded upon the specific context in which they are being used as well as the definition used’.
4.4.3
economic valuation frameworks
There are two main frameworks for defining the spectrum of economic values: the ecosystem services framework, adopted by the MEA (2003), and the Total Economic Value (TEV) framework (see Sharp & Kerr (2005) for a New Zealand application of the TEV framework). These two frameworks are largely complementary, mainly differing in the way they group sub-components of economic value.
The ecosystem services framework provides an important reminder of the complexity of natural/ human systems and the reliance of some parts of the system on good functioning of other parts of the system. This framework adds richness by breaking use and non-use values into significant numbers of value sub-classes, and recognising the system whereby resources generate values of importance to people. However, because it identifies values at several steps along the chain leading to end-use values (intermediate services/products), the ecosystems services framework can be prone to double counting.
The TEV framework focuses on anthropocentric end-values (Table 8) and uses very broad categories, which are essentially the wider set of use-related values (use value per se, option value and quasi-option value) and non-use values (existence value, sometimes broken into a small set of sub-categories, including bequest value). Unlike the ecosystem services framework, the TEV framework incorporates uncertainty about the future through the two option value categories. Figure 10 outlines the nature of the relationship between the TEV and ecosystem services
frameworks, showing how some exemplar ecosystem service values can be mapped to TEV values. There is a growing literature questioning the merits of the ecosystem services framework for framing the valuation of environmental changes. For example, Boyd & Banzhaf (2007) suggested that ecosystem services were too ad hoc to be of use in welfare accounting. By contrast, Farley (2012) and Hauck et al. (2013) supported use of the ecosystem services framework, albeit with some warnings around its use by the latter. A special issue of Environmental and Resource Economics (2011: Volume 48, Issue 2) canvassed many of the points of contention around
vALue TyPe DeFiniTion exAMPLeS
use value The values obtained by using, visiting or viewing something.
Scenic amenity, timber harvest, recreational use.
option value The value of having the opportunity to use, visit or view something in the future (over and above expected use value). This is a type of insurance premium against changes in taste, income, capabilities, supply of substitute sites, etc.
The value of retaining a recreational resource that is not currently used by the individual in case of a possible future change in the individual’s recreation preferences. Quasi-option value The value of unknown future uses of an
irreplaceable resource.
Loss of genetic material that future knowledge developments could reveal to be a valuable medicine.
existence value The value people obtain from a resource being in some preferred state (usually more pristine).
The value of preserving an endangered species.
110 www.journals.elsevier.com/ecosystem-services/ Disciplines covered include ‘ecology, and economics, institutions, planning and decision making, economic sectors such as agriculture, forestry and outdoor recreation, and all types of ecosystems’
111 www.journals.elsevier.com/ecological-economics/
ecosystem services valuation and their implications for policy analysis. In this issue, Bateman et al. (2011b) provided a comprehensive overview and Balmford et al. (2011) used an ecosystem services viewpoint to analyse the consequences of losing wild nature.
The ecosystem services framework continues to develop. In 2012, the first issue of the academic journal Ecosystem Services was published, which covers the science, policy and practice of ecosystem services across a wide range of disciplines110. The history of ecosystem services, their interactions with policy and the role of the Ecosystem Services journal are outlined by Braat & de Groot (2012). The journal Ecological Economics111 also regularly publishes articles on ecosystem services, including a special issue in 2002 (Volume 41, Issue 3) on ‘The dynamics and value of ecosystem services: integrating economic and ecological perspectives’.
To date, ecosystem services analysis has not, however, progressed to a stage where there is acceptance of a single framework that is universally applied by analysts (Fisher et al. 2009; Layke 2009; Sagoff 2011; Dempsey & Robertson 2012). Nahlik et al. (2012: 29) were of the opinion that:
Development of a single definition of ‘ecosystem service’ and a classification system that facilitates the identification of ecosystem services and a strategy to help guide research development in a way that is meaningful to natural and social scientists, and the public is imperative to moving ecosystem services from a concept to a practice. Currently there is no such system and no consensus.
Figure 10. Application of a Total economic value framework to ecosystem services (TeeB 2011). Indirect Use Provisioning services: Timber & Fuel wood Food/fodder & other forest products (latex) Bioprospecting: bio‐ chemicals, medicines Fresh Water Cultural services: Recreation Tourism Education/science
Non‐Use Value
Use Value
Total Economic Value (TEV)
Direct benefits from use of primary goods Provision services: Fresh Water Regulating services: Carbon storage Air quality Cultural services: Scenery/landscape Recreation Education/science Supporting Services: Soil quality Provisioning services: Fresh Water Bioprospecting Regulating services: Carbon storage Air quality & water purification Erosion control Natural hazards management Cultural services: Scenery, recreation Supporting services: Soil quality Cultural services: Scenery/landscape Community identity/ integrity Spiritual value Wildlife/biodiversity ExistenceDirect use Option Bequest
Bequest value (value for future
generations) Option for future
use (direct or indirect) of goods & services
Benefits from secondary goods & services (including non‐ consumptive use) Value of existence without use / consumption of goods or services