Ecological Economics : Valuation of Ecosystem services

Ecosystem services are the beneficial outcomes, for the natural environment or people that result from ecosystem functions. Some examples of ecosystem services are support of the food chain, harvesting of animals or plants, and the provision of clean water or scenic views. In order for an ecosystem to provide services to humans, some interaction with, or at least some appreciation by humans is required. Thus, functions of ecosystems are value-neutral, while their services have value to society.

Ecosystem functions are the physical, chemical, and biological processes or attributes that contribute to the self-maintenance of an  ecosystem; in other words, what the ecosystem does. Some examples of ecosystem functions are provision of wildlife habitat, carbo cycling, or the trapping of nutrients. Thus, ecosystems, such as wetlands, forests, or estuaries, can be characterized by the processes,or functions, that occur within them.

SOCIO-ECOMOMIC IMPORTANCE

Ecosystem values are measures of how important ecosystem services are to people – what they are worth. Economists measure the value of ecosystem services to people by estimating the amount people are willing to pay to preserve or enhance the services. However, this is not always straightforward, for a variety of reasons. Most importantly, while some services of ecosystems, like fish or lumber, are bought and sold in markets, many ecosystem services, like a day of wildlife viewing or a view of the ocean, are not traded in markets. Thus, people do not pay directly for many ecosystem services. Additionally, because people are not familiar with purchasing such goods, their willingness to pay may not be clearly defined. However, this does not mean that ecosystems or their services have no value, or cannot be valued in rupees terms.

Some Factors That Complicate Ecosystem

Management Decisions

Decisions about ecosystem management are complicated by the fact that various types of market failure are associated with natural resources and the environment. Market failures occur when markets do not reflect the full social costs or benefits of a good. For example, the price of gasoline does not fully reflect the costs, in terms of pollution, that are imposed on society by burning gasoline. Market failures related to ecosystems include the facts that: (i) many ecosystems provide services that are public goods; (ii) many ecosystem services are affected by externalities; and (iii) property rights related to ecosystems and their services are often not clearly defined.

It is thus observed that ecosystem services are often public goods, which mean that they may be enjoyed by any number of people without affecting other peoples’ enjoyment. For example,an aesthetic view is a pure public good. No matter how many people enjoy the view, others can also enjoy it. Other services may be quasi-public goods, where at a certain level of use, others’ enjoyment may be diminished. For example, a public recreation area may be open to everyone. However, crowding can decrease peoples’ enjoyment of the area. The problem with public goods is that, although people value them, no one person has an incentive to pay to maintain the good. Thus, collective action is required in order to produce the most beneficial quantity.

Ecosystem services may be affected by externalities, or uncompensated side effects of human actions. For example, if a stream is polluted by runoff from agricultural land, the people downstream experience a negative externality. The problem with negative externalities is that the people (or ecosystems) they are imposed upon are generally not compensated for the damages they suffer.

Finally, if property rights for natural resources are not clearly defined, they may be overused, because there is no incentive to conserve them. For example, unregulated fisheries are an openaccess resource – anyone who wants to harvest fish can do so. Because no one person or group “owns” the resource, open access can lead to severe over-harvesting and potentially severe declines in fish abundance over time.

It is not necessary for ecosystem services to be bought and sold in markets. What is required is a measure of how much purchasing power people are willing to give up to get the service of the ecosystem, or how much people would need to be paid in order to give it up, if they were asked to make a choice similar to one they would make in a market.

Overview of methods to estimate rupees values gives an overview of,and rupees -Based Ecosystem Valuation Methods describes in more detail, the methods that economists use to estimate rupees values for ecosystems and their services. In addition to improvements in the current condition of the ecosystems and services, alternatives to the current high-density livestock livelihoods will need to be identified and investigated. Thiswork has highlighted two characteristics of the ecosystem services that might be of use: (1) the key role that biodiversity play in the system, and (2) the potential of carbon storage and tourism for the future economy of the region.

Ecosystem valuation can help resource managers deal with the effects of market failures, by measuring their costs to society, in terms of lost economic benefits. The costs to society can then be imposed, in various ways, on those who are responsible, or can be used to determine the value of actions to reduce or eliminate environmental impacts. For example, in the case of the crowded public recreation area, benefits to the public could be increased by reducing the crowding. This might be done by expanding the area or by limiting the number of visitors. The costs of implementing different options can be compared to the increased economic benefits of reduced crowding.