Economic analysis for ecosystem service assessments

Abstract

The crucial role which natural systems play in underpinning economic activity and human wellbeing is of growing concern as evidence mounts of the increasing human pressures upon such systems (GEF, 1998; Chapin et al., 2000; MA, 2005; CBD, 2006; Loreau et al., 2006). One reflection of that concern is the recent undertaking of major global assessments of the status of the services provided by ecosystems (see MA, 2005; TEEB, 2009). Economic analysis is an increasing feature of such undertakings and has prompted a rapidly expanding literature regarding the implementation of such analyses (see, for example, Bockstael et al., 2000; Balmford et al., 2002; De Groot et al., 2002; Howarth and Farber, 2002; Heal et al., 2005; Barbier, 2007; Boyd and Banzhaf, 2007; Finnoff and Tschirhart, 2008; Fisher et al., 2008; Mäler et al., 2008; Turner et al., 2010). This chapter proposes a general framework and nomenclature for integrating economic analyses within ecosystem service assessments. After reviewing some fundamental principles of economic analysis we address certain key challenges which economists will have to face in order to adequately represent the complex nature of ecosystem service provision within economic analyses. This chapter provides much of the economic methodology underpinning the ongoing UK National Ecosystem Assessment (UK NEA).