Regulating and supporting services and disservices: Customary approaches to valuation, and a few surprising case-study results

Abstract

For economists, what matters is not how ecosystem services are classified, but what change in human well-being results from increasing, reducing or qualitatively varying their supply. Eight general approaches are available for valuing non-market effects: marketable benefits may be generated or lost elsewhere in the economy; costs may be imposed or alleviated elsewhere; costs willingly incurred by past decision-makers may be taken as indicating their valuation; sufficiently similar services may be traded elsewhere; consumers may voluntarily support “good causes”, including through price premia for environmentally friendly production; individuals may be asked their hypothetical willingness to pay for change in an environmental condition; experts may estimate what a reasonable willingness to pay might be; market products may exist which give access to ecosystem services or escape from disservices. All approaches have drawn criticism, which itself has drawn rebuttal and improvement from their proponents. All approaches have been applied to the regulating and supporting effects of forests on the qualities of land, watercourses, atmosphere and biological resources. Enormous valuations may be given when consumers attribute symbolic significance to or derive a “warm glow” from favouring a particular ecosystem. This may arise in response to questionnaires or by paying premia for certified goods. But directly elicited or implicitly accepted willingness to pay for ecosystem services requires consumers to have improbable understanding of processes: willingness to pay for final products, services or disservices delivered to the consumer is a more appropriate basis. Planted forests may have adverse as well as beneficial effects on watercourses, e.g. by reducing hydroelectricity output. With rapidly rising carbon prices, the carbon transactions of a single commercial forest cycle may have negative overall value. These examples illustrate that results may be surprising, but all of them are context dependent. Foresters should not regard economics as intrinsically hostile to ecosystem service provision, nor assume that forestry is always favoured by economic valuation of those services.