Some thoughts on the valuation of ecosystems

Posted October 31st, 2013 by Sylvia S Tognetti and filed in Interfaces of science and policy

[This post is in response to some questions that were posed in a twitter chat on Oct 31, on Revaluing Ecosystems]

The idea behind the concept of ecosystem services is that if people better understood the value of ecosystems for such things as providing clean water and storing carbon, they would take action to protect them, or at least be willing to pay for the added costs.  This could, in turn, provide a source of finance for the added costs of conservation practices as well as provide an incentive for land owners to implement them. There have been many attempts to do this in various kinds of compensation schemes, i.e.,  “Payments for Ecosystem Services” or PES initiatives, in which payments are presumably conditional on the provision of a well-defined service.

In practice, it is never quite that simple and there have been many lessons learned.  Given the variability and complexity inherent in ecosystems, which is exacerbated by rapidly changing conditions, many of these services can be difficult to define. In the context of watersheds for example, payments are often (but not always) made by governments rather than individual water users, for practices rather than for demonstrated benefits which can take time to materialize. Transaction costs of engaging many small landholders can also be high. A commonly cited definition of an ideal PES that includes these and three other criteria is usually accompanied by the acknowledgement that few if any PES initiatives actually meet all of them (Wunder, 2005). Nevertheless, it continues to be viewed as a framework for analyzing and comparing PES initiatives.

Although it is absolutely necessary to change the economic incentives if land is to be managed as an ecosystem, what I want to suggest is that the definition of a PES as well as of ecosystem valuation needs to take into account that services from ecosystems have very different characteristics from a loaf of bread. A learning approach will also be needed, that  supports the development of new institutional capacities and that links different levels of governance in which individual small scale initiatives are nested. What follows is a framework I developed with a colleague in my earlier work on payments for watershed services, which can also be found buried in a chapter of the Millennium Ecosystem Assessment for which I was a lead author.

As a point of departure, I take it as a given that ecosystem values are at best hypothetical unless and until there are policies and institutions in place that enable their protection. Therefore (building on the ideas of Elinor Ostrom): to the extent that ecosystem services have public good characteristics (i.e., access to them is not exclusive), and there is rivalry over access to them, willingness to pay for them will depend not only on demand, but also on confidence in the effectiveness of management actions needed to ensure the service is delivered, and that those who pay the costs will have access to the benefits.  In other words, the value of ecosystem services will depend on:

  • The integrity of ecosystem functions or processes that support service provision;
  • The scale at which impacts or benefits have economic significance; and
  • The effectiveness of institutional arrangements needed to insure provision of the service and access to benefits by those who incur the costs.

(Tognetti et al 2005; Aylward et al 2005)

Another way of putting it is that, an adaptive approach to managing ecosystems will require an adaptive approach to valuation, or will at least require standard approaches to valuation to be used in a broader framework. Standard approaches to valuation and cost benefit analysis were only intended to to used to evaluate small or marginal rather than systemic changes. Before one can even begin to consider costs and benefits, stakeholders need opportunities to learn about changing conditions, and reconsider objectives.

 

References

Aylward, Bruce, J. Bandyopadhyay, J. Belausteguigotia, P. Borkey, A. Cassar, L. Meadors, L. Saade, M. Siebentritt, R. Stein, and S. Tognetti. 2005. “Freshwater Ecosystem Services.” In Millennium Ecosystem Assessment. Volume 3. Policy Responses, edited by Kanchan Chopra, Rik Leemans, Pushpam Kumar, and Henk Simons, 3:213–255. Washington DC: Island Press. (link to pdf)

Tognetti, Sylvia S., Bruce Aylward, and Guillermo F. Mendoza. 2005. “Markets for Watershed Services.” In Encyclopedia of Hydrological Sciences. UK: John Wiley & Sons. (link to pdf)

Wunder, S. (2005). Payments for environmental services: some nuts and bolts (No. OP-42). Bogor, Indonesia: CIFOR. (link to pdf)

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