Biodiversity

A course for Planners & Decision-Makers

Module 1: Setting the stage for biodiversity Lesson 4: What is the value of ecosystem services?

NRE

Prepared by Micael Junkov 2008/09 EPU/Danidas Environmental Programme The Biodiversity Component

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

What have we seen in Lessons 1 to 3 of relevance to the value of biodiversity and ecosystem services
Sustainable development is an almost universally

accepted goal
Environmentally sustainable development

requires that critical resource stocks and ecological functions are safeguarded
Maintaining the flow of ecosystem services

requires intact systems which retain their structure and diversity

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

What have we seen in Lessons 1 to 3 of relevance to the value of ecosystem services

A functional definition of capital in general is "a

stock that yields a flow of valuable goods or services into the future
Biodiversity is important because it supports

ecosystem processes and the provision of services vital to our society and human wellbeing
All our activities, including the global economy,

are made possible thanks to the diversity of services that nature provides
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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

The value of things

Not all that is very useful commands a high value (water, for example) and not everything that has a high value is very useful (such as a diamond)
Adam Smiths Wealth of Nations (1776) (Paraphrased by TEEB 1)

EC & GFEM. 2008.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Land use transitions versus GDP

100% Frontier clearings Urban Protected/ Restoration/ recreational rehabilitation 70 60 50

Proportion in the landscape

Subsistence agriculture & smallscale farms Intensive agriculture

Global GDP in trillion of US$ (1990)

40 30 20 10 0

Natural ecosystems Natural ecosystems

0% PreFrontier settlement Subsistence Intensifying Intensive 1700 Future Year 1900 2007

Time (stages in land use transitions)

Modified from Foley et al., 2005.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Changing paradigms
The ecosystem services paradigm has enhanced

our understanding of how the natural environment matters to human societies Societys most fundamental assets include: natural; physical; human; social; and intellectual capital

However
Despite growing recognition of the importance

of ecosystem functions and services, they are often taken for granted and overlooked in planning and decision-making
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Lesson 4: Setting the What stage isfor the biodiversity value of ecosystem services?

Module What 1: Setting is Biodiversity the stage ?

What are ecosystem services?

Biodiversity: Life on Earth
Provisioning Services
Products obtained from ecosystems

Regulating Services
Benefits obtained from regulation of ecosystem processes

Cultural Services
Non-material benefits obtained from ecosystems

Food Fresh water Fuelwood Fibre Biochemicals Genetic resources

Climate regulation Pest regulation Runoff regulation Water purification Pollination Mitigate erosion Mitigate tsunamis

Spiritual & religious Recreation & ecotourism Aesthetic & inspirational Educational Cultural heritage Existence values

Supporting Services
Services necessary for the production of all other ecosystem services

Soil formation

Nutrient cycling

Primary production

Provision of habitat

Oxygen production

Modified from Pereira, H.M. and Cooper, H.D. 2006.

BioD underpins ecosystem services

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

A closer look at examples of ecosystem functions, processes, and flow of services

Function Provisioning Process Service

Food

Conversion of solar Farming/aquaculture energy into edible plants (small/large scale) and animals Fodder and fertiliser Hunting, fishing, gathering of fruits, etc.

Gas Regulating Climate

Role of ecosystems in bio-geochemical cycles Influence of land cover and biol. mediated processes on climate

UVb-protection by O3 Maintain good air quality Influence on climate (e.g. temperature, wind, rainfall, rainfall intensity) Storm/tsunami protection (e.g. coral reefs, mangroves) Flood mitigation (e.g. by forests and wetlands)

Mitigate Ecosystem structure disturbances which reduces impacts

From: De Groot et al. 2002.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

A closer look at examples of ecosystem functions, processes, and flow of services

Function
Pollination

Process
Role of biota in movement of pollen Role of vegetation & biota in removal or breakdown of nutrients and compounds Population control through trophicdynamic relations

Service
Pollination of wild plant species Pollination of crops Pollution control / detoxification Filtering of dust particles Mitigate noise Control of pests and diseases Reduction in crop damage

Regulating

Waste treatment

Biological control

From: De Groot et al. 2002.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Total Economic Value

Use Value
Direct Use
Goods/services that can be consumed directly Extractive: Forest Wildlife Fish Agricultural Forage Medical Genetic Energy Water supply Water transport Non-extractive: Recreation Landscape Research Education Modified from Spurgeon, 2002.

Non-Use Value
Option Value
Value of the option to maintain future use of:

Indirect Use
Functions/ services enjoyed directly

Quasi-Option
Value arising from expected new information from avoiding irreversible loss of:

Bequest Value
Value arising from leaving assets to future generations

Existence Value
Value arising from knowledge of continued existence

Shoreline Habitat protection Species Storm protection Decreasing ease Sediment regulation Nutrient retention Water quality maintenance External support of fish/habitat Groundwater discharge Microclimatic stabilization Carbon sink

of valuation

Biological and genetic diversity Uniqueness Heritage

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

In 1996 New York City invested US$1 - US$1.5 billion in natural capital expecting savings of US$6 US$8 billion over 10 year This means an expected Internal Rate of Return of 90-170% in a payback period of 4 7 years How on Earth did that come about?

Chichilnisky G & Heal G. 1998.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

Watersheds 5,000 km2 Before high quality

water, now housing development and runoff from roads and agriculture a threat In 1996 NYC two options: 1)Filtration system $2-6 billion + $300 million p.a. 2) Protect watersheds
From NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

1997 Watershed

Memorandum Agreement
Federal, state, local

authorities, and NGOs NYC spend $250 million during 10-year buying undeveloped land (willing sellers)

NYC Investment plan

Thorough monitoring

includes status of freshwater biodiversity

From NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

New York Citys water supply
Despite regulations and comprehensive framework

uncertainties exists in sustaining long-term high quality drinking water Provision through natural processes rather than human engineering offered estimate of value of restoring ecosystem service Replacement costs for natural processes providing clean water estimated to $2-6 billion ($4,000 to $12,000 per hectare) Relative specific policy question meant that currently available economic methods of ecosystem service valuation was sufficient to provide an estimate
From NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

New York Citys water supply
Obtaining a precise estimate of value of provision of clean

From NRC, 2004.

water through watershed conservation difficult because: 1. Filtration versus watershed protection provide same level of water quality and reliability? 2. No guarantee that protecting watershed continues to be successful 3. Replacement cost can only be used when alternatives exists to provide same service and least-cost applies (i.e. service will still be demanded) i. Value of providing clean water is only partial measure of the value of ecosystem services provided by watersheds ii. Replacement cost is rarely a good measure of the value of an ecosystem. M1L4S15

Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

Pollination
More than 200,000 plant species worldwide depend on

animal pollination to produce seeds Pollinators include in their ranks about 1,200 species of vertebrates and at least 200,000 species of insects Pollinators affect 35% of the worlds crop production, increasing output of 87 of the leading food crops worldwide Despite the utter centrality of pollination to terrestrial life, there is an extraordinary deficiency of dependable data on pollinator populations in general The status of pollinators is or should be a matter of great concern particularly since reports of apparent pollinator declines around the world over the past decade has led to a brewing international pollinator crisis.

From NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Valuing a single ecosystem service

Pollination
In the US the honeybee alone facilitates production of over

90 crops and amount to more than $15 billion per year. 1 According to a French/German study published 20092: Economic value of insect pollination for the world agriculture in 2005 was 153 billion (i.e. 9.5% of the total value of the world agricultural food production). Vegetables and fruits were the leading crop categories in value of insect pollination with about 50 billion each, followed by edible oil crops, stimulants, nuts and spices. Pollinator disappearance would translate into a consumer surplus loss estimated between 190 to 310 billion. Although this valuation clearly demonstrates the economic importance of insect pollinators, it does not take into account the strategic responses of the markets.
1 2

Berenbaum MR, 2007. Gallai et al. 2009.

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Lesson 4: What is the value of ecosystem services?

Multiple services in multiple ecosystems

What is the value of natures life support

The value of everything

Module 1: Setting the stage

services? Some 30 + ecosystem services referred to in scientific literature In 1997 an international team of economist valued 17 services from 16 ecosystems including:
Wetlands
Forests Grasslands

Estuaries
Other marine and terrestrial ecosystems
Costanza et al., 1997.

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Lesson 4: What is the value of ecosystem services?

Multiple services in multiple ecosystems

Service Category
Provisioning

The value of everything

Module 1: Setting the stage

Ecosystem Services
Water supply Food production Waste treatment Disturbances Gas Water Cultural values Nutrient cycling Raw materials Genetic resources Climate Erosion Biological control Pollination Recreation Soil formation

Regulating

Cultural Supporting
Costanza et al., 1997.

Habitat
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Lesson 4: What is the value of ecosystem services?

The value of everything

How did they do it?

Module 1: Setting the stage

Estimated productivity of a hectare (ha) for each

ecosystem type for each service and a willingness to pay estimate for the service Multiplying these estimates generated a per ha value of the ecosystem service for each ecosystem type Summed all services to establish a value per ha for each ecosystem type Finally, multiplied this per-ha value by the number of ha of each ecosystem type and summed across ecosystem types to derive the total value of ecosystem services
Costanza et al., 1997.

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Lesson 4: What is the value of ecosystem services?

The value of everything

The bottom line

Module 1: Setting the stage

In 1994 the value of ecosystem services for the

planet ranged from $16 trillion to $54 trillion, with a mean estimate of $33 trillion. This value was notably higher than the value of global GDP (Gross Domestic Product) at the time ($18 trillion) i.e. almost twice the size.
Global Gross National Product (GNP)

Global Ecosystem Services (2 x global GNP)

Costanza et al., 1997.

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Lesson 4: What is the value of ecosystem services?

The value of everything

What did people say?

Module 1: Setting the stage

Meaningless exercise since the true value of

ecosystem services is infinite given that our economies would soon collapse without them Simple multiplication of a physical quantity by unit value cannot be done in natural systems Environment since they do not follow linear relationships Society The approach assumes that ecosystem service Sustainable production is scale -free Economy Development In one sense, it was a correct approach towards complete accounting. However, present understanding and methods is unlikely to accomplish it anytime soon
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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Conclusions
The valuation of ecosystem services is an

evolving discipline which requires the integration of ecology and natural sciences with economy. Examples of approaches and interdisciplinary studies that provide such integration indicate successful beginnings The ability to generate useful information about the value of ecosystem services varies widely for case studies 1 For some policy questions, enough is known about ecosystem service valuation to help in decision-making.
1

NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Conclusions
Our constraints in supporting decision-making with reliable ecosystem values may arise from: 1. Insufficient ecological knowledge/information to estimate:
i. The quantity of ecosystem services produced; or ii. How ecosystem service production would change

under alternative scenarios 2. Existing economic methods may be unable to generate reliable and uncontroversial estimates of value for the provision of various levels of ecosystem services
3. Lack of integration of ecological and economic analysis.
1

NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Conclusions
Studies that focus on valuing a single ecosystem service

show promise of delivering results that can inform important policy decisions Even when the goal of a valuation exercise is focused on a single ecosystem service, a workable understanding of the functioning of large parts or possibly the entire ecosystem may be required Valuation of a single ecosystem service is easier than valuating multiple services. However, the interconnections among services may make it necessary to expand the scope of the analysis. Ecosystem processes are often spatially linked, especially in aquatic ecosystems The value of ecosystem services depends on underlying conditions.
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NRC, 2004.

Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

Recommendations 1
There is no perfect answer to questions about the

proper scale and scope of analysis in ecosystem services valuation.

Estimates of value should be placed in context.

Concerted efforts should be made to overcome

existing institutional barriers that prevent ready and effective collaboration among ecologists and economists regarding the valuation of terrestrial, freshwater and marine ecosystem services.
Existing and future interdisciplinary programs

aimed at integrated environmental analysis should be encouraged and supported.

1

NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Value of ecosystem services:

Case Studies 1

Module 1: Setting the stage

Single ecosystem service Providing clean drinking water (p. 132) Drinking water from ground water (p. 137) Valuation of fish production provided by coastal wetlands and estuaries (p. 141) Provision of flood control services (p. 143) Valuing multiple ecosystem services Fish production, irrigation waters, navigation, flood control, and clean drinking water (p. 146) Upstream vs. downstream water use (p. 149) Food production, recreational fishing, and provision of drinking water from lakes (p. 151)
1

NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Value of ecosystem services:

Case Studies 1

Module 1: Setting the stage

Valuing ecosystems Oil spill (p. 154) Restoration of water resources (p. 156) Multiple services in multiple ecosystems (p. 159)

NRC, 2004.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

References
Berenbaum MR. 2007. The Birds and the BeesHow Pollinators Help Maintain Healthy Ecosystems. Testimony before the US House of Representatives, 26 June 2007. Chichilnisky G & Heal G. 1998. Economic returns from the biosphere. Nature 391 (6668), pp. 629-630. Costanza R, dArge R, de Groot R, Fabes S, Grano M, Hannon B, Limburg K, Naeem S, ONeil RV,Pareulo J, Raskin R, Sulton P and van der Belt M. 1997. The value of the worlds ecosystem services and natural capital. Nature 387: 254-260. De Groot RS, Wilson MA & Boumans RMJ. 2002. A typology for the classification, description and valuation of ecosystem functions, goods and services. Ecological Economics 41:393-408. EC. 2008. The economics of ecosystems & biodiversity. An interim report. European Commission and the Germans Federal Environment Ministry.

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Lesson 4: What is the value of ecosystem services?

Module 1: Setting the stage

References
Foley JA, Defries R, Asner GP, Barford C, Bonan G, Carpenter SR, Chapin FS, Coe MT, Daily GC, Gibbs HK, Helkowski JH, Holloway T, Howard EA, Kucharik CJ, Monfreda C, Patz JA, Prentice IC, Ramankutty N, and Snyder PK. 2005. Global consequences of land use. Science 309:570-574, 22 July 2005. Gallai N, Salles J-M, Settele J, Vaissiere, BE. 2009. Economic valuation of the vulnerability of world agriculture confronted with pollinator decline. Ecological Economics 68 (3), pp. 810-821. NRC. 2004. Valuing Ecosystem Services: Toward Better Environmental Decision-Making. National Research Council. Water Science and Technology Board. National Academies Press. Washington, D.C. OECD. 2002. Handbook of biodiversity valuation. A guide for policy makers. Paris. Pereira, H.M. and Cooper, H.D. 2006. Towards the global monitoring of biodiversity change. TRENDS in Ecology and Evolution. Vol. 21, No. 3, March 2006. Spurgeon, 2002. Rehabilitation, conservation and sustainable utilization of mangroves in Egypt. FAO, Cairo.
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Thank you!

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