Ecosystem valuation is an economic process which assigns a value (either monetary, biophysical, or other) to an ecosystem and/or its ecosystem services. By quantifying, for example, the human welfare benefits of a forest to reduce flooding and erosion while sequestering carbon, providing habitat for endangered species, and absorbing harmful chemicals, such monetization ideally provides a tool for policy-makers and conservationists to evaluate management impacts and compare a cost-benefit analysis of potential policies. However, such valuations are estimates and involve the inherent quantitative uncertainty and philosophical debate of evaluating a range non-market costs and benefits.

Despite Costanza's fanfare, the World Bank, three decades later, that "the benefits provided by natural ecosystems are both widely recognized and poorly understood.”

Citing the importance of such knowledge to informed policy-making, in 2007, Environmental Ministers from the G8 + 5 nations agreed to both publicly call for and begin to undertake the calculation of global ecosystem benefits, conservation costs, and the opportunity costs of developing such ecosystems. The resulting watershed initiative and ongoing project is The Economics of Ecosystems and Biodiversity (TEEB).

In the United States, the President's Council on Science and Technology suggested in 2011 that the “U.S. government should institute and fund a Quadrennial Ecosystems Services Trends (QuEST) Assessment” that studying trends in ecosystem performance, quality, and value.

Economic models: values, costs, and value methodology

Ecosystem valuation attempts to capture the range of benefits and costs contained within a complicated natural web with a range of economic methodologies.

Ecological systems provide four general categories of services: provisioning (e.g. fish to eat, timber to sell), regulatory, supporting, and cultural (e.g. ecosystems supporting indigenous gathering techniques, or supplies for traditional clothing). See Figure 1. for a mangrove-specific example of this complex subject.

thumb|Figure 1. Example of ecosystem services range for mangrove habitat

These four types of services can then provide two basic categories of value: the use and non-use categories. Environmental economists have further separated categorizes for which individuals are willing to pay:

  • Direct-use value.
  • The simplest form of ecosystem valuation for orthodox environmental economists, this translates the direct ecological yield as it would be on international trade markets: e.g. the value of water, timber, fish, or other commodities if immediately developed and sold at market price.Thus, an exchange value or 'price' is associated with the objects of value, regarded as natural capital, associated with ecosystems and this may be based on the ability of a system to produce yields each year that are exchangeable in operating markets and have existing exchange prices.
  • Indirect use value attributed to indirect utilization of ecosystem services, through the positive externalities that ecosystems provide.
  • The World Bank explains that these values are "derived from ecosystem services that provide benefits outside the ecosystem itself. Examples include natural water filtration which often benefits people far downstream, the storm protection function of mangrove forests which benefits coastal properties and infrastructure, and carbon sequestration which benefits the entire global community by abating climate change." The monetary value society attaches to ecosystem services depends on the income distribution. It is argued that ecosystem valuations must steadily increase over time, in line with rising global income as well as increasing scarcity of functioning ecosystems.

Valuation results

While the literature is still emerging, many important studies have resulting in striking valuations.

One academic paper by de Groot et al., which synthesized more than 300 scholarly works collectively evaluating the 10 main biomes, "shows that the total value of ecosystem services is considerable and ranges between 490 int$/year for the total bundle of ecosystem services that can potentially be provided by an ‘average’ hectare of open oceans to almost 350,000 int$/year for the potential services of an ‘average’ hectare of coral reefs." This potential benefit can take many forms depending on the degree of exploitation and such exploitation's sustainability, but can result, for example, in large ecotourist revenues for local communities, protection from storm destruction, or profit for an international lumber company.

Furthermore, de Groot et al. find that most of their paper's calculated value is "outside the market and best considered as non-tradable public benefits. The continued over-exploitation of ecosystems thus comes at the expense of the livelihood of the poor and future generations."

Beyond biome "price tags," these environmental valuations can explore quite complex policy questions. For example, the Copenhagen Consensus think tank calculated that stemming the loss of coral reefs by 50 percent by 2030 would return more than $24 for every dollar spent. The Consensus' founder, Bjorn Lomborg, explains that "coral reefs, which both act as fishery hatcheries and fishing resources while storing abundant numbers of species. At the same time, coral reefs possess an amazing beauty, which both shows up in large tourism revenues but also in most individuals saying they are willing to pay a certain amount to make sure they continue to exist for our grand children. … [Programs to preserve 50% more coral reef by 2030] cost about $3 billion per year but the total benefits likely run to at least $72, or about $24 dollars back for every dollar invested."

The National Oceanic and Atmospheric Administration (NOAA) manages the Integrated Valuation Environmental Services and Tradeoffs (InVEST) Natural Capital Project. This open-source tool—although geared towards policy-makers, advocates, and scientists—allows anyone to interact with a map quantifying "trade-offs between alternative management choices" and identifying "areas where investment in natural capital can enhance human development and conservation.”

As another example, the Basque Centre for Climate Change (BC3) hosts the Artificial Intelligence for Environment & Sustainability (ARIES) Project. This open-source software was designed to integrate scientific models for environmental sustainability assessment and policy-making, with an initial focus on ecosystem services

Payment for environmental services (PES)

After (and, sometimes, before) evaluating the ecosystem costs and benefits, some programs have attempted to internalize those values with specific programs providing payments for environmental services. Costa Rica paid about $42/hectare for landowners to preserve forests; in 2010 Norway began paying Indonesia a total of $1 billion to mitigate deforestation; China responded to 1998 floods with payments targeting deforestation and soil erosion;

See also

  • Payment for Ecosystem Services
  • Ecological economics
  • Ecological goods and services
  • Environmental Ethics
  • Deep Ecology
  • Earth Economics

References

;General

  • Pearce, David W. and R. Kerry Turner, 1990. Economics of natural resources and the environment. BPCC Wheatsons Ltd., Exeter, UK. 378 pp.
  • Futehally, Ilmas. Strategic Foresight Group, India. [http://www.strategicforesight.com/ecosystem_economics.htm]
  • Assessment Report on Diverse Values and Valuation of Nature by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), 2022.
  • Environmental Valuation Reference Inventory
  • Ecosystem Valuation Toolkit
  • The EcoValue Project
  • Nature Valuation & Financing Network
  • Ecosystem Valuation
  • Reports on environmental valuation in Tropical countries