Valuation of Ecosystem Services

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Valuation of Ecosystem Services

• Presentation to
• Models and Modeling
• for the World Water Assessment Programme
• Joel D. Scheraga
• National Program Director
• U.S. EPA
• December 11-12, 2000

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Ecosystem Services

• Ecosystem services refers to how humans benefit
  from ecosystems
• a wide range of conditions and processes
  through which
• natural ecosystems, and the species that are part
  of them, help
• sustain and fulfill human life
• - Daily et al., 1997

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Ecosystem Services

• Ecosystem services relevant to freshwater
  ecosystems include
• recreation (including hunting and fishing)
• intrinsic or existence values (value of something
  irrespective of any human use)
• amenity functions
• wildlife viewing
• maintenance of biodiversity and landscape
  diversity
• water quality protection and regulation of water
  flows
• genetic material and maintenance of a gene pool
• amelioration of weather and climate regulation

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Ecosystem Services

• Ecosystem services (cont.)
• pest control
• fisheries
• soil retention (erosion control), formation, and
  maintenance of fertility
• storm protection, flood control and regulation of
  hydrologic cycles
• nutrient cycling
• cultural (e.g., aesthetic, artistic, spiritual,
  scientific values)
• food and fiber production
• medicines and pharmaceuticals

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Purpose of Ecological Assessment

• Evaluate how human activities affect ecosystems
• Evaluate which of these changes are important
• Provide decision makers with information about
  tradeoffs involved in their decisions
• in ecological terms
• in economic terms

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Example of Difficult Tradeoff for Decision Makers

• Use of water to sustain ecosystems
• vs.
• Use of water for food production

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Fundamental Problem of Economics

• The allocation of scarce physical and human
  resources among competing and unlimited human
  wants and desires
• Key concept Scarcity
• desired
• limited in quantity
• Water can be a scarce resource

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Challenge for Policy Makers

• Decide which use of scarce resources (e.g.,
  water) is valued higher
• Societal decision
• Assessors can inform Values human place on
  different resources,
• e.g.,
• survival of wildlife
• ecosystem functions/services
• adequate human nutrition
• We can facilitate Understanding of tradeoffs
  (nature magnitude) inherent in any decision
• Assessors job is not to make policy decisions

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Need to Focus on Changes in Ecosystems

• Humans depend upon ecosystems for their
  fulfillment and survival.
• Without ecosystems, no living things could exist.
• Valuation of total systems, however, is generally
  irrelevant to decision making.
• Most decisions neither eliminate nor destroy
  complete ecosystems.

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Important Caveat

• There are aspects of ecosystems that are valuable
  but may not be amenable to economic analysis
• Such circumstances may require
• other analysis and communication tools
• other decision-making frameworks

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Measuring the Economic Value of Ecosystem
Services

• Economic definition of value
• the amount of compensation required to make
  individuals
• as well off after a change as before the change.
• Value to society
• determined by the sum of individual values when
  there is a
• marginal change in an ecological service (e.g.,
  recreational
• fishing)

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Values for Ecological Services Categories and
Examples

• Market Use Values
• food, building materials (e.g., gravel), fuel,
  drinking water supplies, electric power
  generation, transportation of coal, tourism
• Nonmarket Use Values
• recreation, fishing, swimming, boating, hunting,
  bird-watching, hiking, camping, sight-seeing,
  transportation and fuel
• flood control, mitigation of drought, stormwater
  treatment and/or retention, partial stabilization
  of climate, water purification, cycling of
  nutrients and minerals, flow of energy
• Nonmarket Nonuse Values
• habitat value, scarcity value, option value,
  existence value, cultural value, historical
  value, biodiversity, intrinsic value, bequest
  value, philanthropic value

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Valuing Changes in Ecological Services

• Economists use several methods to measure
  peoples willingness to accept tradeoffs
• whether they are ecologists, economists, bird
  watchers, hikers, carpenters, baseball players,
  ballerinas, musicians, etc.
• Prefer methods based on how people behave when
  faced with real-world tradeoffs
• e.g., between ecological services and other goods
• revealed preference approaches
• When observed behavior does not reveal
  preferences
• survey techniques
• stated-preference approaches

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Methods for Valuing Changes in Ecological
Services

• Revealed Preference
• (Hedonic) Property Value
• uses changes in private property values to
  estimate an implicit price for changes in
  ecological services
• relies on natural experiments
• Travel-Cost Method
• observes recreators observed pattern of trips
  among available sites
• accounts for observed variations in site
  characteristics, including ecological services

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Methods for Valuing Changes in Ecological
Services

• Stated Preference
• Contingent Valuation
• involves direct survey of individuals to elicit
  their willingness to pay for different levels
  of services
• Stated Choice
• Involves survey in which respondents are asked to
  express preferences among attributes that include
  specific ecological services (e.g., fish catch
  protecting an endangered species)
• Strength respondents think in terms of
  tradeoffs
• Researchers can identify equivalent tradeoffs by
  analyzing series of responses

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Challenges in Translating Ecological Value to
Economic Value

• Conditions ideal when
• possible to describe or predict the ecological
  change accurately,
• nature of ecological good/service that is
  lost/gained is understood, and
• importance of the change can be quantified (e.g.,
  monetized) or ranked
• These ideal conditions seldom are met.
• Three major challenges
• uncertainty
• irreversibility and cumulative effects
• issues of fairness (e.g., intergenerational
  equity, discounting, and environmental justice)

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References

• Ecological Assessment of Aquatic Resources
  Application, Implementation, and Communication,
  Pellston Workshop, September 16-21, 2000
  (forthcoming)
• Natures Services Societal Dependence on
  Natural Ecosystems, Gretchen C. Daily (ed.),
  Island Press, Washington, DC, 1997.
• Guidelines for Preparing Economic Analyses,
  U.S. EPA. June 11, 1999 (draft)

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Additional Information

• EPAs Global Change Research Program
• www.epa.gov/globalresearch