Ecosystem Valuation - Value of Ecosystem Services

Value of Ecosystem Services

The simplest form of ecosystem valuation for economists is to hold that an ecosystem has a value equivalent to its ecological yield valued as it would be on commodity markets: for the value of water, wood, fish or game, that is purified or nurseried or generated or harboured in that ecosystem. Thus, a price can be put on the natural capital of an ecosystem based on the price of natural resources it yields each year.

More complex arguments in ecosystem valuation regard environmental ethics and deep ecology. Economists and some ecologists concentrate on ecosystem services and the assignment of values in a service economy to all that Nature does "for humans". Studies compiled by ecologist Robert Costanza in the 1990s argued strongly that even just considering the most basic seventeen of these services, the combined value of the ecosystems of the earth was worth more (US$33T) each year than the whole human exchange economy (US$25T) at that time (1995). Other studies have focused on the marginal value of ecosystem changes, which can be used in cost-benefit analysis of environmental policies.

In Natural Capitalism, 1999, Paul Hawken, Amory Lovins and Hunter Lovins advanced an argument to assign the value of Earth in current currency. See value of Earth article for that and other examples of this extreme case of ecosystem valuation - biosphere valuation.

Economists assign several types of values to ecosystems:

• direct use value attributed to direct utilisation of ecosystem services;
• indirect use value attributed to indirect utilisation of ecosystem services, through the positive externalities that ecosystems provide;
• option value attributed to preserving the option to utilise ecosystem services in the future;
• existence value attributed to the pure existence of an ecosystem
• altruistic value based on the welfare the ecosystem may give other people
• bequest value based on the welfare the ecosystem may give future generations

Methods to place a monetary value on ecosystem services where there are no market prices include "stated preference" methods and "revealed preference" methods. Stated preference methods, such as the contingent valuation method ask people for their willingness to pay for a certain ecosystem (service). Revealed preference methods, such as hedonic pricing and the travel cost method, use a relation with a market good or service to estimate the willingness-to-pay for the service. Applying such preference based approaches has been criticised as a means of deriving the value of ecosystems and biodiversity and for avoiding deliberation, justification and judgment in making choices.