Can valuation save ecosystems and the services that they provide? By K.N.Ninan

photograph: David Maclennan

Ecosystems and the services they provide are valued at trillions of dollars. But is viewing ecosystems as a financial asset the best way to protect biodiversity? Professor K.N. Ninan looks at the challenges faced by ecosystem service valuation.

Can valuation save our ecosystems and the essential services that they provide? This issue has demanded the attention of researchers and policy makers, especially after the publication of a seminal paper by Costanza et al in Nature in 1997,that estimated the annual value of the world’s ecosystem services at approximately US$ 33 trillion. Their study attracted wide attention (and criticisms), and it led to an exponential growth in studies over the last two decades that have tried to estimate the value of services of different ecosystems, covering a cross-section of sites in different countries and regions. An underlying premise behind economic valuation is that if those biodiversity and ecosystem services which are not traded in conventional markets or which are difficult to value could be valued, then it would lead to better informed decisions concerning the protection of biodiversity.


Limitations of economic valuation

Critics, however, have pointed out the limitations of economic valuation and the market. They advocate relying on plural approaches to conserve ecosystems and ecosystem services, such as multi-criteria analysis (MCA), as an alternative to conventional cost-benefit analysis (CBA) and deliberative processes and stakeholder approach to valuation, in addition to economic valuation. However, each of these methods has its advantages and disadvantages. For instance although multi-criteria analysis, unlike CBA, uses both quantitative and qualitative data, a disadvantage is that when conflicting evaluation criteria are considered, an MCA problem may be mathematically ill-defined, making a complete axiomisation and hence a simple decision criteria difficult to arrive at. Deliberative processes are considered to be a more inclusive method of decision-making through consultations with locals and stakeholders. However, in highly stratified and traditional agrarian societies the voices of the poor and marginalized sections may go unheard, while those of the rich and powerful interest groups may dominate.

Those who support the case for economic valuation are not denying the need for relying on plural approaches to protect the environment. Rather, because biodiversity and ecosystem services are not traded in markets or difficult to value does not mean that they have no value. If these values could be captured and internalised in decision-making it could lead to better conservation outcomes. For instance, a proposal to construct a dam that is shown to be viable when only the tangible benefits of a forest such as timber and non-timber forest products which the dam may submerge are accounted for, may turn out to be non-viable when intangible benefits such as soil and water conservation functions and carbon sequestration are taken note of. Ecological economists who are critical of valuation argue that in the presence of uncertainties and irreversibilities that are characteristic of ecological processes, relying on the precautionary principle to protect the environment is prudent. Designating forests as protected areas is considered to be an example of this. However, maintaining protected areas is not a cost-free activity and requires money. Moreover available funds have to compete with other pressing demands. Policy makers have to evaluate whether the available resources should be invested in a biodiversity conservation project or a rural water supply project or a poverty alleviation project. This is where the importance of economic valuation arises.


Methodological Issues and Challenges

Although economic valuation techniques have been widely used to value the environment, they have also been criticised on various grounds. For instance, critics point out that the contingent valuation method that has been widely used to value biodiversity, habitats and ecosystem services has problems such as hypothetical bias, which can impact the estimated values. Similarly, benefit transfer approach is an inexpensive method that has been used to transfer values from a study site where a primary valuation study had been conducted, to a policy study where values are to be estimated. While there are issues with this approach, such as transfer errors, scaling up values and similarities between the policy and study sites, recent advances in research have found ways of tackling some of these problems. Spatial heterogeneity is another issue to confront while estimating values.


Case Studies

These are all important issues that we try to address in Valuing Ecosystem Services: Methodological Issues and Case Studies. Leading experts from around the world discuss the key methodological issues and challenges in valuing ecosystem services. The volume also presents a range of case studies covering a cross-section of ecosystems and services in different sites, countries and regions. Valuation would be meaningless exercise unless it has policy relevance. Initiatives such as Payment for Ecosystem/Environmental Service (PES) are examples of attempting to translate valuation into policy. The book usefully presents case studies that value ecosystem services and experiences with operationalising valuation into policy.


ninanProfessor K.N.Ninan is Chairperson, Centre for Economics, Environment and Society (CEES), Bangalore, India and Co-Chair, Panel on Methodological Assessment of Scenarios and Modelling of Biodiversity and Ecosystem Services, Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES), United Nations, Bonn, Germany. He was previously Professor of Ecological Economics at the Institute for Social and Economic Change, Bangalore, India. He has also been a Visiting Professor or Fellow at: University of Cambridge, UK; University of California, Santa Barbara, USA; The University of Tokyo, Japan; University of Versailles, France; Maison Des Science De L’Homme, Paris, France; Institute of Development Studies, Sussex, UK and the Institute of Developing Economies, Tokyo, Japan. His recent books include: The Economics of Biodiversity Conservation-Valuation in Tropical Forest Ecosystems (Earthscan, London, 2007) and Conserving and Valuing Ecosystem Services and Biodiversity-Economic, Institutional and Social Challenges (Earthscan, London and Washington, 2009 and 2011)

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