Examples of Valuing Ecosystem Services

1. Examples of Valuing Ecosystem Services Stephen Polasky University of Minnesota

2. The Three Challenges of Ecosystem Service Valuation • Ecology: quantities/qualities of ecosystem services • Economics: values of ecosystem services • Linking ecology and economics

3. Challenge 1: Ecology What is the ecological production function? (quantity/quality of services) From ecosystem structure and function To ecosystem services - do we know how services are produced? - do we know how production changes as ecosystem is altered?

4. Challenge 2: Economics What are the values of services? From quantities (quality) To values - what methods can be applied to ascertain values? - are these methods reliable? - total values or marginal values?

5. The Three Challenges of Ecosystem Service Valuation • Production function (ecology) • Valuation (economics) Often studies by one group do not mesh with studies by other group Studies of ecologists and economists need to link together to get estimates of value of ecosystem services

6. Examples Organized examples by increasing scale/complexity • Value of a single service in an ecosystem • Multiple services within an ecosystem • Comprehensive services measures

7. Single Service Examples: Catskills Watershed Protection • Ecosystem service of interest – provision of clean drinking water for New York City • Policy choice: build filtration plant or protect the watershed • By protecting the watershed, avoid the cost of filtration plant • Estimates of avoided cost of $6-8 billion (Chilchilnisky and Heal 1998)

8. Catskills • Clear policy choice and evidence on ecosystem service was sufficient to inform the policy debate • Complications • Will high-quality water supplies be maintained over the longer term? • Are the two alternatives really perfect substitutes?

9. Coastal Wetlands and Fisheries • Coastal wetlands as breeding and nursery grounds for fish • Production function approach: estimate increased fishery productivity due to wetlands • Value of fishery productivity: for commercial fishery it is the change in profit plus consumer surplus with increased productivity

10. Coastal Wetlands and Fisheries • Issues • Complex nature of the ecological relationships involved make it difficult to estimate effect of wetlands on productivity • Economic studies to date have typically used highly simplified ecological models • If the price of fish is low, or open access fishery that does not generate profit, does that mean that wetlands aren’t valuable?

11. Single Service Examples • Studies of a single ecosystem service show promise of delivering results that can inform important environmental policy decisions • Danger of such studies is mistaking single service value for the value of the entire ecosystem

12. Multiple Ecosystem Services: Columbia River Basin • Fish production • Irrigation • Transportation • Drinking water • Recreation • Flood control

13. Columbia River Basin • Issues • Endangered salmon: problems for both ecologists (what is effect of dams on salmon?) and economists (what is the value of an endangered species?) • Choices involve tradeoffs among services: dams or no dams? Decision delivers different mix of services

14. Multiple Ecosystem Services • Ecosystems produce multiple ecosystem services, many of which are closely interconnected • Interconnections make it difficult to analyze one service in isolation • Policy choices may involve tradeoff among services • Raises the difficulty of conducting a successful study vis-à-vis a single service study

15. Valuing Ecosystems: Exxon Valdez • Natural resource damage assessment: need to know the change in value of ecosystem when accident • Economic methods included contingent valuation (existence values and other values), production function (commercial fishery), travel cost (recreational fishery)

16. Exxon Valdez • Issues • Court case: interested in settlement not in value of services per se • Existence values are among the most challenging values to reliably estimate • Understanding time path of effects of oil spill on the ecosystem is difficult

17. Valuing Ecosystems: Everglades Restoration • Multi-billion dollar effort to restore the Everglades • What will it accomplish? • What is the worth of restoration? • Exceedingly complex question involving hydrology, ecology, economics, social factors (and politics) • No estimates of value of restoration currently exist

18. Valuing Ecosystems • In one sense, attempting to value all ecosystem services is the correct approach - a complete accounting • Yet, trying to attain the “value of everything” through a complete and reliable accounting of all ecosystem services cannot be done with current understanding and methods and is unlikely to be accomplished anytime soon

19. The Challenges • Difficult problems for both ecologists and economists (challenges 1 and 2) • But the biggest challenge may be overcoming hurdles to successful integration of ecology and economics

20. The Serengeti