Ecosystem Services for Economic Analysis : Conceptual Issues

Dr Pushpam Kumar Institute for Sustainable Water, Integrated

Management and Ecosystems Research ( SWIMMER),

University of Liverpool, UKpushpam@liv.ac.uk

What are Ecosystem Services?

Answer depends on the purpose!

If the purpose is mass awareness and education, MA’s classification and purpose are most relevant .

If the purpose is valuation, accounting, executing PES Scheme etc, then a different approach would be needed

Ecosystem Services

•Regulating•Benefits obtained from regulation of

ecosystem processes

CulturalNon-material benefits from ecosystems

ProvisioningGoods produced or

provided by ecosystems

Photo credits (left to right, top to bottom): Purdue University, WomenAid.org, LSUP, NASA, unknown, CEH Wallingford, unknown, W. Reid, Staffan Widstrand

fodder production tourist attraction

pollination

carbon sequestrationflood protection

water purification

slope stability

Beauty

recreation

Biodiversity

fibre production

food production

stabilising micro-climate

recreation

shelter for life stockgame reserve

Established Fact-Ecosystem Services are like any other Capital Assets!

Economics of Ecosystem Services

Ecosystem Services• Benefits people obtain from

ecosystems

Conceptual Lenses of Economics

Stock Vs Flow Metrics of ES- Stocks

(ecological) and flow (ecosystem services)

ES are flow on DD and SS side and imbalance would affect the stock!

Contd..

Ecosystem Services• Timber, water, fodder

Lenses of Economics

The equivalent economic value of a stock that underlies a flow can be estimated from the present and assumed time course of ecosystem services flows by applying appropriate discount rate (natural capital)

Contd

Ecosystem Services• Charachteristics

Lenses of Economics• ES can have consumptive vs

productive

• ES can have private good or

public good features

Fiber

Food

Freshwater

Genetic Resources

Aesthetic

Insurance Value

Spiritual & religious

Recreation & tourism

Economic Value ($)

Economic Valuation

Difficult or impossible

Easy

Private Benefit Capture

Difficult

Easy

?

?

?

?

?

?

?

Many BENEFITS of ES are public goods (Rivalness and Excludability, Spatial and Temporal Dynamics

Joint Production, Complexity, Resilience and Interdependence of the Benefit )

Contd.

Ecosystem Services Lenses of Economics• vector of services produced

by a vector of inputs

• intermediate / final goods

• externalities over space and time (soil erosion and flooding)

Evapotranspiration(E)

Wetland Area (e.g. Floodplain)

Soil Moisture(SM)

Outputs(O)Inputs(I)

The semantics of ‘intermediate / final’ good differs for ecologist and economist !

I=O+ESM

Water Recharge Function in a wetland as ‘Outputs’

Structure of typical SAM

Activity Commodity Factor Agent Accumulation Trade TOTAL

A N ES? A N ES ? K L Z OEA

Activity

A X X X

N X X X

ES ? ? ? X

Commodity

A X X X X

N X X X X X

ES ? ? ? ? ? X

Factor

K X X ? X

L X X ? X

Z X ? X

OEA ? X

Agent

HH X X X ? X

Accumulation X X

Trade X X ? X

TOTAL X X X X X X X X X ? X X X

Ecosystem Accounting: Basic Structure

Resilience and Thresholds of Ecosystems: Possible Approach of

Valuation

The biggest perturbation, the ecosystem can absorb without being in another state is RESILIENCE

the system Resilience in several contexts may be treated as CAPITAL stock

Estimate the accounting price (Maler, 2008)

Accounting price here is changes in the expected change in net present value of expected future ecosystem services resulting from a marginal change in the resilience

Ecosystem Services require Indicators

• Indicators about the physical extent, condition and productivity of resources (e.g. size of fish stocks, soil organic matter levels, etc)

• rate of resource degradation (e.g. rate of forest land conversion)

• level of vulnerability to natural disasters

Variables should not be automatically used as Indicators!!

Valuation of Ecosystem Services

Agreements already on

• Joint effort (ecology and economics)

• Need to know initial condition of Ecosystems

• Need to know the flow of ES (ecological production function) etc. etc.But

Valuation must have a Purpose (resolving trade off, sectoral accounting, CBA, etc.)