213

Economic Assessment of Ecosystem Services Provided by
the Satoyama and Satoumi
Masataka WATANABE1*, Shiro TAKEDA2, Tomohiro OKADERA3 and Kazunori TANJI4
1

Graduate School of Media and Governance, Keio University
5322 Endo, Fujisawa, Kanagawa 252-0882, Japan
2
Faculty of Economics, Kyoto Sangyo University
Motoyama, Kamigamo, Kita-ku, Kyoto 603-8555, Japan
3
Center for Regional Environmental Research, National Institute for Environmental Studies,
16-2 Onogawa, Tsukuba, Ibaraki 305-8506, Japan
4
Faculty of Environment and Information Studies, Keio University*e-mail: masawata@sfc.keio.ac.jp

Abstract
The study applied the framework of the Millennium Ecosystem Assessment for assessing the economic
values of ecosystem services derived from the satoyama and satoumi to provide policy options for anature-harmonious society. Using a regional CGE (computable general equilibrium) model, we quantitatively
evaluated the effects on the conservation and utilization of the satoyama/satoumi of 1) a satoyama stewardship policy, 2) a trade liberalization policy and 3) a high brand-value policy for domestic agricultural products.
We used a static single-country model, with 23 sectors and eight domestic regions and the Interregional
Input-Output Table for Japan 2005 as the benchmark data. GDP increases when a stewardship policy is
introduced, but the equivalent variation decreases unless the cost of stewardship is reduced to half of thereference case. A trade liberalization policy increases the welfare and GDP in Japan as a whole even if theeffect of externalities on satoyama services is included. A high brand-value policy increases GDP and GDP
per capita, particularly in Hokkaido, Tohoku and Kyushu. These findings indicate the effectiveness of thismethod for providing policy options for reconstruction of the satoyama and satoumi with a clear
demonstration of the costs/benefits of ecosystem services.
Key words: ecosystem service, externality, multi-regional CGE model, satoumi, satoyama

1. Introduction
Historically, human activities have existed in harmony with the environment in the satoyama and satoumi
in Japan. However, in recent years, depopulation and an
aging society as well as mass imports of inexpensive
agricultural and fishery products have accelerated a decline of management, resulting in a degradation of theharmonious relationship. Furthermore, in addition to
global changes such as climate change, the Great East
Japan Earthquake and the nuclear power plant accident
have had a significant impact on production activities inthe satoyama and satoumi. Japan and international society are urgently pressed to overcome these situations andscientifically set out methods for making effective use ofnatural resources without impairing the wide variety of
benefits provided to human society by biodiversity andecosystems. Using the conceptual framework of theMillennium Ecosystem Assessment, this study has defined various benefits provided to human society by the
Global Environmental Research
16/2012: 213-219
printed in Japansatoyama and satoumi as ecosystem services in order toevaluate the provisioning services (e.g., food production
function and water supply function), regulating services(e.g., atmosphere/water purification, soil erosion prevention and flood control), and cultural services (e.g., spiritual well-being and ecotourism). Moreover, it has alsoestablished a multi-regional computable general equilibrium model that enables comprehensive assessment of
impacts exerted on human societal well-being by direct
and indirect exogenous drivers through changes in ecosystem services. At a time when the risks of an importdependent food system have emerged as an issue andwhen the desire of consumers has obviously shifted tocohabitation with the nature and ensuring a secure andsafe life, this study proposes the policy option of rebuilding a symbiotic society in harmony with the naturalenvironment. This policy option would decrease external
dependency and clarify the degree of human intervention
which allows for the maintenance of provisioning,
regulating and cultural services without destroying©2012 AIRIES214

M. WATANABE et al.

biodiversity. It would also allow the satoyama andsatoumi to maximize those values which cannot be
assessed by the market economy, including regulating
and cultural services.

2. Methodology
The following four exogenous drivers have significant impacts on ecosystem services: (1) export/importation of goods from/to foreign countries, (2) consumer
orientation (desire to consume high value-added goods),(3) pressure for urbanization and changes in land use, and(4) ensuring a strong labor force. There is a need for ananalysis technique for comprehensively assessing theselection of policies such as one for enhancing the market
value of satoyama and satoumi areas based on theirlocation, according to changes in exogenous drivers, or
one for sharing environmental conservation costs acrossthe entire society. This study has adopted a computable
general equilibrium model as an analysis technique.
Computable general equilibrium models are very commonly used for policy analysis in the context of international trade and the environment. Traditionally, thesemodels have tended to deal with Japan as a single country.
The model developed by Takeda and Ban (2010), however, constitutes a multi-regional computable generalequilibrium model that enables the representation oftransactions between regions by dividing Japan into eightareas. It was established on the basis of the model
developed by Ban (2007) with reference to the MonashMRF (Multi-Regional Forecasting) invented by Peter,
et al., (1996). This model makes it possible to conduct a
Table 1 Classification of sectors and goods.
SymbolDescription
1
agr
Agriculture2
frs
Forestry3
fshFisheries
4
minMining5
fue
Coal,crude petroleum and natural gas
6
foo
Food, tobacco and beverage
7tex
Textile products
8
wap
Wearing apparel and other textile products
9woo
Timber, wooden products and furniture
10 pppPulp, paper and publishing
11 chmChemical products
12
13
14
15
16
17

pc
scp
fem
nfm
met
mac

Petroleum and coal products
Stone and clay products
Iron and steel
Nonferrous metals
Metal products
Machinery

18
19
20
21

tmc
oip
cns
egw

Transportation equipment
Miscellaneous manufacturing
Construction
Electricity, gas, water supply

22
23
24
25
26

trd
fin
trn
pse
ser

Commerce
Financial and insurance
Transport
Personal services
Other services

detailed analysis of the impact of policy changes such as
tariffs on regional economies. The fact that this model
incorporates land as a production element conforms to
the purposes of analyzing ecosystem services in thesatoyama and satoumi. The current study selected themodel developed by Takeda and Ban (2010) as the basicmodel and extended it in order to incorporate (1) ecosystem services into production efficiency, (2) external
economics of ecosystem services, and (3) the shift in
preference from imported agricultural products todomestic agricultural products as a change in brand value(consumers’ preferences).
The 2005 interregional input-output table was divided
into 52 sectors where the agriculture, forestry, andfisheries industries were consolidated into the single
sector of the agriculture-forestry-fisheries industry. On
the other hand, in the 2000 interregional input-output
table, the single sector of the agriculture-forestry-fisheries industry was divided into separate sectors of agriculture, forestry and fisheries (Arai and Masayuki, 2006).
Then, an aggregate calculation was performed according
to this categorization. For this reason, in this analysis, theratio of agriculture, forestry and fisheries in 2000 was
applied to the 2005 data in order to recalculate the figures
for agriculture, forestry and fisheries. As a result, thefollowing 26 industrial sectors have been included in our
analysis, as shown in Table 1. In addition, in order tobuild a benchmark dataset and perform a policy analysis,
Japan was categorized into eight geographical divisions:
Hokkaido, Tohoku, Kanto, Chubu, Kinki, Chugoku,
Shikoku and Kyushu/Okinawa.

Sectors in the original IO table (52 sectors)
Agriculture
Forestry
Fisheries
MiningCoal,crude petroleum and natural gas
Food, tobacco and beverage
Textile products
Clothing and other textile products
Timber, wooden products and furniture
Pulp, paper, paperboard, paper products + publishing and printing
Basic chemical products + synthetic products + final chemical products +medications + plastic products
Petroleum and coal products
Stone and clay products
Iron and steel
Nonferrous metals
Metal products
General machinery + office and service industry machinery + household
electronic and electric appliances + electric computing equipment +communication equipment + other electronic and communicationequipment + heavy electrical equipment + other electrical machinery +precision instruments
Transportation equipment
Miscellaneous manufacturing products and recycled products
Construction and repairs + public construction + other construction
Electricity + gas and heat supply + water supply and waste management
services
Commerce
Financial and insurance, real estate + house rental services and real estateTransport
Personal services
Communication and broadcasting + public administration + other public
services + research and information services + other business services +other services

Economic Assessment of Ecosystem Services Provided by the Satoyama and Satoumi

215

2.1 For the agriculture, forestry and fisheries industries that utilize water resources for production, water resources have been incorporated as a
production element.

if the qualitative level of the satoyama increases, theproductivity of each sector will rise. At the benchmark
equilibrium, it is assumed that the activity cost is 0.5 yen
per increase of satoyama service by 1 yen.

2.2 Satoyama services have been incorporated into
production efficiency, and efficacy of external
economies has been introduced.
An increase/decrease in satoyama services (ecosystem services provided by the satoyama) in satoyama,satochi and satoumi areas (sites of production) results in
an increase/decrease in production efficiency. Due toeach industrial sector benefiting from satoyama services,
an increase/decrease in the amount of satoyama services
leads to an increase/decrease in productivity in each sector. This study assumes that satoyama services depend on
the quality of the satoyama (when this value = 1 forbenchmark equilibrium, there has been no decline insatoyama services; when this value > 1, it indicates anincrease in satoyama services and production; when thisvalue < 1, a decline in satoyama services is indicated) .
Net production from sector i has been defined as the
production from sector i subtracting the loss incurred by
sector i as the result of a decline in satoyama services.
The external economies have been defined as losses incurred by each sector which depends on the total value
and share of satoyama services. Assuming that the shareof satoyama services and value of the same are fixed,with benchmark values, the qualitative level of thesatoyama determines the loss incurred by each sector.

2.4 Introduction of trade liberalization
In this model a small country assumption is applied
and the terms of trade are exogenously constant, as in the
Ban model (2007). Trade liberalization means the removal of import tariffs.
For trade, the Armington assumption is applied.
Goods from eight domestic regions are aggregated with
the CES function. Then, domestic goods and imported
goods are aggregated. In regard to elasticity of substitution, there is an assumption that it is easier to substitutedomestic goods for domestic goods than to substituteimported goods for domestic goods. Armington goods
where domestic goods and imported goods have been
aggregated are used for consumption, investment,
government expenditure and Intermediate Input in theregion.
In the analysis of trade liberalization, there is apostulation that the qualitative level of the satoyamachanges in proportion to production from the agricultural
sector. Trade liberalization exerts the following effects:– Liberalization → Expansion of manufacturing production + Decrease in agricultural production → Changes
in GDP and income (direct effect);– Decrease in agricultural production → Decline in thequalitative level of the satoyama → Decline in productivity in each section → Decrease in GDP andincome (external effect).
Usually, only the effects of liberalization itself areconsidered, but this model also incorporates the external
effect on the satoyama.

2.3 Introduction of satoyama stewardshipThis study has introduced an activity for enhancing
the quality of the satoyama, called “satoyama stewardship.” For example, traditionally the forest in satoyama
areas was maintained in good condition at the originallevel of the satoyama by collaborative labor shared bycommunity members in the village. In this model, thisactivity is initiated by inputting labor and capital at a
fixed ratio (Leontief production function). The costs of
the activity are collected from households in each region
as a form of lump-sum tax.
The net production in sector i () can be expressed
as follows,
(1)

1

(2)

where Yir is production in sector i, Dsir is loss due todegradation of satoyama service S, εr is the qualitative
level of the satoyama (initial value = 1), θsir is the shareof satoyama service S received by sector i, Vrs is the total
value of satoyama service S. If θsir and Vrs are fixed as
benchmark values, Dsir is determined by the qualitative
level of the satoyama. According to formulas (1) and (2),2.5 Introduction of brand value as a result of anincrease in satoyama services
The introduction of brand value (consumers’ preference) has been dealt with in a scenario in which a rise inbrand values of domestic agricultural products results ina shift in preference from imported agricultural products
to domestic agricultural products. In this model, theArmington assumption has been made and domestic
goods and imported goods are aggregated through the
CES function.
The study performed the brand value (consumers’
preference) simulation based on a scenario in whichbrand values of domestic agricultural products had beenenhanced, shifting consumers’ preference from imported
agricultural products to domestic agricultural products.
Specifically, the brand value of agricultural products wasincorporated by changing the weight parameters of theArmington aggregation functionand. Decreasing(increasing AD ) led to an increase in the purchase of domestic goods (Table 2).
This study examined the following three scenarios:(1) the value offor agricultural products is decreased

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by 10% from the benchmark value, (2) it is decreased by
20%, and (3) it is decreased by 30%.
2.6 Ecosystem service value assessment data
This study considered only flood control services andtemperature adjustment services among the ecosystemservices assessed by Okadera and Watanabe (2012). Thisis because the values of other services are so small that itis difficult to interpret them in the model. These flood
control and temperature adjustment service data represent the value of services that are provided to the entire
region. This value is indicated as total value of satoyama
services in each region and allocated to each sector
according to the share of the monetary amount of
production to obtain the amount of satoyama services
provided to each sector in each region (Table 3: unit 10
billion yen).

3. Results
3.1 Efficacy of a satoyama stewardship policy on theconservation and utilization of the satoyama andsatoumiThis study introduces an activity for enhancing thequality of the satoyama, called “satoyama stewardship.”This model assumes that an input of labor and capital at a
Table 2 Benchmark values of
Hokkaido
0.43

Tohoku0.43

fixed rate generates this activity (Leontief production
function). The cost of the activity is collected fromhouseholds in the form of a lump-sum tax. An increase in
the quality of the satoyama results in an increase inproductivity in each sector. As a standard case, an increased rate of satoyama services has been set at 30%,
assuming that an increase of satoyama services by 1 yen
costs 0.5 yen as an activity cost. For satoyama services,
this study examined the following three scenarios: (1)only the flood prevention function has increased by 30%,
(2) only the temperature adjustment function has increased by 30%, and (3) both functions have increased by
30%. The introduction of satoyama stewardship increases GDP while the equivalent variation becomes
negative (Fig. 1). It is thought that the negative equivalent variation results from costs of stewardship that arecollected from households.
Furthermore, this study also examines the case inwhich the cost of enhancing satoyama services throughsatoyama stewardship is changed (increase of 30%). The
study compares the situation of the cost of the standard
case with one in which the cost is reduced to 1/2 times thestandard case and one in which the cost is twice thestandard cost. As a result, this analysis reveals that
reducing the cost of enhancing satoyama services (which
are increased by 30%) by one half leads to a positive

for agricultural products.
Kanto
0.45

Chubu
0.45

Kinki
0.45

Chugoku
0.44

Shikoku
0.43

Kyushu0.44

Table 3 Economic value of ecosystem services in the form of flood prevention and temperature adjustment in each region ofJapan (unit: 10 billion yen).
Flood
prevention
Temperatureadjustment

Hokkaido

Tohoku

Kanto

Chubu

Kinki

Chugoku

Shikoku

Kyushu

Total

2

13

25

2

18

7

9

76

153

1

2

6

2

2

2

1

2

17

Fig. 1 Increase in GDP (monetary amount) and equivalent variation for satoyama stewardship (standard case). (Flood prevention only:
only the flood prevention function has increased by 30%; temperature adjustment: only the temperature adjustment function has
increased by 30%; both functions: both functions have increased by 30%.)

Economic Assessment of Ecosystem Services Provided by the Satoyama and Satoumi

equivalent variation (Fig. 2). On the other hand, doubling
the cost gives a significantly negative equivalentvariation.
This indicates that if the cost effectiveness ofsatoyama enhancement is 1:4 or more, an increase in
GDP and a positive equivalent variation will be achievedat the same time. Thus, this study has demonstrated that it
is possible to propose an optimal solution for the effectiveness of the satoyama stewardship policy in terms ofconservation and utilization as well as effective investment.
3.2 Efficacy of an import tariff abolition policy on theconservation and utilization of the satoyama andsatoumiIn the case of the abolition of import tariffs, this study
has examined the following scenarios: the case in which
the effect of satoyama services is not considered (noexternal effect) and the case in which an external effect,i.e., “trade liberalization → change in agricultural production → change in the level of the satoyama → change
in satoyama services → change in productivity in othersectors,” is considered (with external effect). In the caseof “no external effect,” there is an increase in GDP ineach region, with an increase of 682.3 billion yen indicated for all regions (Fig. 3). The equivalent variation
also increases by almost the same amount. However, insome regions, it decreases. In the case of “with external
effect,” tariff abolition results in a decline in the qualityof the satoyama, negatively affecting production in otherregions. Therefore, the benefit of tariff abolition(increase of 670.7 billion yen) is smaller than in the caseof “no external effect.” As a result, the external effect of adecline in the quality of the satoyama is extremely small
compared to the benefit of tariff abolition. This resultsfrom the fact that the original value of satoyama services(flood control and temperature adjustment) is not highand the produced capital over which the ripple effect ofthe decline in satoyama services has been evaluated islimited, indicating the possibility of an underestimatedresult. This indicates that the value of satoyama services
tends to be high if the ripple effect of decline in satoyama

217

services propagates to other production sectors. As has
been observed through the disruption of automobile parts
supply caused by the Great East Japan Earthquake andthe interruption of the parts supply in Japanese companies due to the large flood in Thailand, in parallel witheconomic globalization, damage to supply chains causedby the ripple effect of decline in satoyama services has
become incomparably greater than ever. In the future, inorder to assess the ripple effect of a decline in satoyama
services, extensive discussion will be necessary thatincorporates produced capital, including impacts on
global supply chains. In addition, it will be necessary toassess impacts on social capital as well to evaluate an
external economy that better reflects reality.
3.3 Efficacy of a policy for enhancing brand values ofdomestic agricultural products for consumers on
the conservation and utilization of the satoyama
and satoumi
This study has simulated a scenario in which thebrand value of domestic agricultural products is increased, resulting in a shift in consumers’ preferencesfrom imported agricultural products to domestic agricultural products. The weighting parameter regarding
imports of agricultural products in each region in thestandard case is set at 0.43-0.45. In this scenario, theweighting parameter regarding imports of agricultural
products is reduced from the standard case by 10%-30%.
As a result, in the 30% case, the average GDP per
capita in Japan increases by 16,600 yen (Fig. 4).
Particularly, a significant increase is indicated for
Hokkaido, Tohoku and Kyushu/Okinawa, with theamount of increase slightly more than 30,000 yen. It has
been revealed that an increase in brand values ofdomestic agricultural products among consumers (shift
in preference toward domestic agricultural products)
brings greater benefits particularly to Hokkaido, Tohoku
and Kyushu/Okinawa which are the major regions
supplying domestic agricultural products.

Fig. 2 GDP and equivalent variation due to a change in the cost of satoyama enhancement (1/2 of the standard case: cost of 1/2 times
that of the standard case; standard case: situation the same as in the standard case; 2 times the standard case: cost twice that of thestandard case).

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Fig. 3 GDP and equivalent variation due to trade tariff abolition (comparison between the case of “no external effect” and the case of“with external effect”).

Fig. 4 Change in GDP and increased amount of GDP per capita due to an increase in brand value.

4. Discussion
With the objective of promoting the conservation andutilization of the satoyama and satoumi, this study performed a quantitative evaluation of the value of ecosystem services provided by the satoyama by applying theMillennium Ecosystem Assessment technique. This
study also analyzed the efficacy of the following threepolicies on the conservation and utilization of thesatoyama and satoumi while incorporating economic
ripple effects, including external economies and the impact of consumers’ choice: (1) a policy for collecting thecosts of the activity for enhancing the level of thesatoyama (i.e., satoyama stewardship) from households
in each region as a lump-sum tax, (2) a policy forabolishing trade tariffs, and (3) a policy for enhancing
brand values of domestic agricultural products. As aresult, this study proposes a policy that clarifies thedesign of a satoyama stewardship program for implementing policies for promoting the conservation andutilization of the satoyama and satoumi, the financial costof the program and the cost effectiveness as well as
burdens to the shift of consumers’ preferences toward
domestic agricultural products. This would make itpossible to implement a strategy for conserving andutilizing the satoyama and satoumi based on theassessment of the economic value of ecosystem services
provided by the satoyama and satoumi.
This study has demonstrated the high degree ofeffectiveness on the conservation and utilization of thesatoyama and satoumi that is exerted by a satoyama
stewardship policy that generates cost effectiveness forincreasing satoyama ecosystem services at 1:4 or more. It
has also demonstrated the high degree of effectiveness ofa policy that enhances brand values of domestic agricultural products. However, the current assessment of theeconomic value of ecosystem services poses the risk ofunderestimation and furthermore, as the greatest damage
has been incurred by social capital, it is possible that thelack of the assessment of impact on social capital has
induced some degree of underestimation. Thus, the futurenecessity has been raised for developing a practical wayof assessing the economic value of ecosystem services
provided by the satoyama and satoumi by incorporating
more extensive impacts on produced capital and social
capital.

Economic Assessment of Ecosystem Services Provided by the Satoyama and Satoumi

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219

Masataka WATANABE
Dr. Masataka WATANABE is a Professor at theGraduate School of Media and Governance, Keio
University, Japan. He is also a Visiting Professor
at the Institute of Advanced Studies, United
Nations University. He has been Chairman of the
UNEP Asia Pacific Adaptation Network since
October 2009. Prior to joining Keio University, he was Director of theDivision of Water and Soil Environment at the National Institute forEnvironmental Studies, Japan, and was also appointed Professor at theGraduate School of Agricultural and Life Sciences at the University ofTokyo. He participated in the UN Millennium Ecosystem Assessment from2000 to 2004 as Coordinating Lead Author of the Sub-Global Assessment.
He is a member of numerous National Councils and Committees in theJapanese Government. He was awarded the Tien Shan Prize from theGovernment of China in 2003 for his scientific contributions. He received
his PhD in Civil and Environmental Engineering from the Massachusetts
Institute of Technology. He has authored more than 120 peer-reviewed
international journal articles and two books.

Shiro TAKEDA
Shiro TAKEDA is a Professor at Kyoto Sangyo
University. His research field is Environmental
Economics, with a particular emphasis on climatechange policy, such as emissions trading andcarbon taxation. He is developing computable
general equilibrium models for quantitativeevaluation of the impacts of climate policies

Tomohiro OKADERA
Tomohiro OKADERA is a researcher at the Center
for Regional Environmental Research, National
Institute for Environmental Studies (NIES). He
specializes in environmental economics withspecial interest in the interrelationship between
socio-economic activities and water ecosystems.
He has developed a water inventory method for the Yangtze River andTokyo Bay area using input-output analysis models, water footprint
analysis of energy production in Japan and China, and valuation of water
ecosystems in Japan to date. At present he is attempting to apply theseapproaches to other Asian countries such as Mongolia and Thailand.

Kazunori TANJI
Dr. Kazunori TANJI is Assistant Professor at theFaculty of Environment and Information Studies,
Keio University in Japan. He is also an Visiting
Researcher at the Institute of Advanced Studies,
United Nations University. He participated to a
scenario writing project of Tokyo Bay Basin inorder to realizing Symbiosis between Ecosystem Services and Human wellbeing. He also participated to Satoyama Satoumi Sub-Global Assessment
by United Nation University. He received his PhD degree in Environmental Engineering from Osaka University.

(Received 15 August 2012, Accepted 3 September 2012)