# Presentation: 303022

## 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

## 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

##  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

##  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

## 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

## Example of Difficult Tradeoff for Decision Makers 

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

## 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

## 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

## 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.

## 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

## 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)

## 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

## Valuing Changes in Ecological Services 

- Economists use several methods to measure people’s 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**

## 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

## 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

## 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)

## References 

*Ecological Assessment of Aquatic Resources:  Application, Implementation, and Communication*, Pellston Workshop, September 16-21, 2000 (forthcoming)
*Nature’s 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)

## Additional Information

- EPA’s Global Change Research Program:
**www.epa.gov/globalresearch**