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THE VALUE OF NATURE & THE NATURE OF VALUE

Many of Nature's services are literally priceless - we cannot live without them and they have no known substitutes. "Pricing" these services can focus attention on the importance of healthy ecosystems for sustained development and poverty alleviation. But what's behind the price tags?

Pollination, by for example butterflies, has been estimated to be worth about 400 billion US dollars annually.

The world's ecosystems provide a flow of vital services, like the generation of fertile soils, purification of air and water, the mitigation of floods and drought, pollination and pest control. The world economy would crash without this "natural capital." In this sense, the value of nature's services is infinite - we simply cannot live without them. Unfortunately, "infinite" often becomes "zero" in the economic calculations that guide land-use and policy decisions. In this respect, human societies indirectly assign values to Nature every time a land use decision is made - whether we like it or not.

Getting the prices right
An ecosystem's services can be even more valuable than its goods. For instance, the value of forest services, like flood control, recycling of rainfall and carbon dioxide uptake, can be several times more valuable than its timber yield. So even if forest clearcutting is profitable for a logging firm, it might involve large costs for society at large. This is what economists call a "market failure," when market prices do not reflect the full social costs or benefits of a good or service. Another example is the price of gasoline, which many argue does not reflect the full costs of emissions.

Therefore, many argue that the value of ecosystem services must be incorporated into market prices so nations can make rational, environmentally sustainable, economic choices. This is of special importance to developing countries as poor people are generally more directly dependent on the benefits provided by their local natural systems and vulnerable to the effects of environmental hazards.

Economists assign values to non-marketed ecosystem services using several valuation methods such as calculating the cost of replacing them with technology, or assessing how much people would be willing to pay for them (see box).

In 1997, Robert Costanza of the University of Maryland and twelve co-authors estimated the annual value of the world's ecosystem services at US$33 trillion. It was more than the value of the global gross national product (GNP) that year. Although the study was widely criticised, many considered it a valuable tool in efforts to focus attention on the importance of maintaining healthy natural ecosystems. According to Costanza, most economists would have guessed that the value of ecosystem services would only be 1 percent of global GNP or less.

Valuation drawbacks
Some criticise these types of studies, arguing that the true value of these services comprises much more than their importance to the world economy; there are moral, ethical, and aesthetic reasons to protect nature. Others note that ecosystem services could never be traded in open commerce, which is how prices of conventional goods and services are determined. Moreover, basically all available valuation methods are based on human preferences and are therefore unreliable when applied to environmental services with which the public is unfamiliar. Some also claim that it is not the role of science to determine what is right or wrong or to assign values based on human preferences at all.

Another major criticism is that no economic analysis can put a value on the capacity of ecosystems to withstand stresses and shocks - its resilience. The value of biodiversity in this broader sense - that it is a prerequisite for the ecosystem's long-term survival - is much higher than the value that can be assigned to the current production of goods and services. Many ecologists have emphasised this wider insurance value of diversity, but it is extremely difficult - not to say impossible - to capture in economic valuations.

A new economy and a new model of development
There are several signs that a new economy that values natural systems is beginning to take shape. Lester Brown, former president of the Worldwatch Institute, is among those arguing for such an economy. The needed restructuring of the global economy has already begun, reports Brown in his book Eco-Economy. The past decade witnessed a 25 percent annual increase in the use of wind power, a 20 percent increase in solar cell use, and a 4 percent increase in geothermal energy use. Oil consumption increased by only one percent a year and coal use declined by one percent annually over the same period, Brown notes.

Another interesting contribution is The New Economy of Nature, by Stanford ecologist Gretchen Daily and Pulitzer Prize winning journalist Katherine Ellison. The book highlights several new approaches to ecosystem conservation that recognise the economic benefits of protecting them. Examples are taken from both rich and poor countries. In China's Yangtze River basin, 85 percent of the original forest cover had been lost by 1998. When flooding of the river basin displaced 120 million people, causing US$30 billion worth of damage, Chinese officials argued that standing trees were worth many times more than felled trees and banned logging in the upper reaches of the basin.

New York City spent US$1.5 billion to protect the upstate watershed by buying land and upgrading polluting sewage treatment plants. This saved the city the potentially enormous cost of an artificial water filtration plant, estimated at US$6-$8 billion, plus US$300-$500 million in yearly maintenance expenses.

This new focus on the value of nature and calls for a shift to a more sustainable economy has also been called "natural capitalism." In their book of the same name, Paul Hawken, Amory Lovins and Hunter Lovins describe the "next industrial revolution" in which business and environmental interests increasingly overlap. This revolution, however, will require abandoning assumptions that guided the first industrial revolution. These assumptions were valid when natural resources were abundant and labour was the limiting factor of production. Today the opposite is true - there is a global surplus of labour while natural resources and ecosystem services are dwindling, expensive and often irreplaceable.

More at:
General information about ecosystem services:
Issue 2 of ESAs Issues in Ecology: www.esa.org/sbi/issues.htm

On valuation:
www.ecosystemvaluation.org/
www.wri.org/wr-98-99/ecoserv.htm
R. Costanza and others. 1997. "The Value of the World's Ecosystem Services and Natural Capital," Nature (Vol. 387) can be found at: www.uvm.edu/giee/publications/Nature_Paper.pdf

About "natural capitalism":
www.natcap.org/

A RECIPE FOR RESILIENCE MANAGEMENT

Resilience is the capacity of an ecosystem to cope with disturbance (like storms, fire and pollutants) without shifting into a qualitatively different state (see SDU 2, 2002). Earlier issues of SDU describe the strong connections between resilience, diversity, and sustainable use of ecosystem goods and services. This resilience is of special importance to poor people, who have few or no possibilities to alternative food or income sources if local ecosystem goods and services are degraded. Whereas most current western resource management focuses on only one or a few species in the ecosystem, resilience theory emphasises management of entire natural systems and humanity as "social-ecological systems." But, what is resilience in practice? Who can identify it, and how?

In a recent article, Professor Brian Walker and colleagues within the Resilience Alliance propose a resilience management strategy. They provide examples of how collaboration between researchers, agency managers, and involved stakeholders has been used to identify resilience and use it in practise to manage ecosystems. Their resilience management-recipe (see box) is a step-by-step process involving identifying of key issues, constraints, and stakeholders, developing scenarios and models of various outcomes, and evaluating results. The strategy emphasises cooperation among scientists, managers and local users.

Cecilia Holmlund

More at:
Walker, B. and others. 2002. "Resilience management in social-ecological systems: a working hypothesis for a participatory approach." Conservation Ecology 16(1), available online at: www.consecol.org/vol6/iss1/art14/main.html

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ENVIRONMENTAL GOVERNANCE FOR PEOPLE & ECOSYSTEMS WITH EQUITY

The World Resources Institute, together with UNEP, UNDP and the World Bank, has released a summary of their report World Resources 2002-2004. The subject of this year's report is "environmental governance" - how environmental decisions are made and by whom.

The focus is on sustainable governance to "match human needs with Earth's biological capacities - with equity and balance." The report discusses how to increase public empowerment and participation, especially among indigenous groups and the poor who are frequently denied property rights and negotiation authority. An ecosystem approach to environmental governance is suggested to represent the interests of both affected communities and ecosystems.

This year's report deals with international governance institutions and treaties such as the Convention on Biological Diversity and the Kyoto protocol. It also discusses corporate and individual environmental governance. The report argues that an institutional structure for environmental governance should be determined by the scale and dynamics of the natural system to be managed. A small forest can often be managed by surrounding local communities, while managing river basins or mitigating acid rain require cooperation across national borders. For complex environmental issues like global warming, the most effective recipe for environmental governance is to find a balance between authorities from the local to higher levels. The report discusses a variety of new institutional and economic arrangements that link users with the ecosystems upon which they depend.

More at:
www.wri.org
(The full report "World Resources 2002-2004: Decisions for the Earth: Balance, voice, and power" will be released in February 2003.)

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BOX: Valuation methods

Productivity Method: (sometimes called the net factor income or derived value method): estimates the value of ecosystem goods or services used, along with other inputs, to produce a marketed good. For example, the economic benefits of improved water quality can be measured by valuing improved crop quality and agricultural productivity.

Hedonic Pricing Method: estimates values for ecosystem or environmental services that directly affect market prices, e.g. variations in housing prices reflecting local air and water quality or noise.

Travel Cost Method: estimates the value of ecosystems that are used for recreation, based on how much people are willing to pay to visit the site.

Damage Cost Avoided: estimates the value of ecosystem services based on the costs of avoiding damages due to lost services.

Replacement and Substitute Cost Method: estimates values of ecosystem services based on the cost of replacing them, or the cost of providing substitute services, e.g. valuing the water purification services of a wetland by comparing it to the cost of filtering and chemically treating water.

Contingent Valuation Method: estimates values by asking people to directly state their willingness to pay for specific ecosystem services, based on a hypothetical scenario.

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BOX: Resilience management

1) Identify spatial boundaries of the social-ecological system.

2) Identify the key ecosystem services used.

3) Identify key human impacts on the ecosystem and the different stakeholders including their preferences and future expectations.

4) Identify key, often slow, controlling variables (e.g. climate, technological change etc.) that influence the production of ecosystem goods and services.

5) Make a historical profile of the system, including major changes (ecological, technological, social, and economic). The description should be made at local, regional and multi-regional scales.

6) Identify the institutional arrangements (property rights, power, access to information etc.) regarding the main ecosystem goods and services.

7) Identify uncertainties about how the system will respond to change.

8) Develop a number of scenarios, in collaboration with the involved stakeholders, based on their experiences, preferences and visions, and discuss possible outcomes.

9) Use various forms of modelling tools to identify and discuss possible driving variables and processes that control the most desired ecosystem goods and services.

10) Finally, scientists, managers and local stakeholders, together evaluate the above-described process.

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