Valuation of Biodiversity Benefits (OECD)

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“willingness to pay” surveys; and people’s “willingness to pay” for some services can be imputedbased on the costs they would incur if the services were not provided.Box 7.3 Three accepted approaches for estimating economic valueRevealed willingness to pay - (e.g., market prices). – When people purchase something (e.g., a home near awetland) or spend time and money to get somewhere (e.g., a fishing spot or bird watching dependent on anearby wetland) they reveal that they are willing to pay at least what they actually spend; they may be willing topay more.Expressed willingness to pay, (e.g., survey results). – Many ecosystem services are not traded in markets(e.g., a scenic view or a day of bird watching) so people may never “reveal” what they are willing to pay forthem. Simply asking them what they would be willing to pay can sometimes yields useful results. Surveys of“willingness to pay” are expensive and controversial and usually yield results that are reliable only whenquestions are asked about specific wetland services provided in specific contexts.Derived willingness to pay (e.g., circumstantial evidence). – This method involves tracing and measuring thefunctions provided by an ecosystem (e.g., retaining floodwater, reducing wave energy, maintaining waterquality) and estimating what people would be “willing to pay” to avoid the adverse effects of losing them. Thedollar value of flood and siltation damage avoided because of a wetland is an example of derived willingness topay for ecosystem services.Convincing arguments can be made that it does not make sense to try to assign economicvalues to ecosystems using these three generally acceptable methods because: a) most importantecosystem services are not traded in markets so people cannot reveal the dollar value they place onthem; b) people do not know about or appreciate the many functions and services that ecosystemsprovide and therefore will not express that they are willing to pay as much as they should to protectecosystems; and c) ecosystems generate so many diverse functions, services, and products that the costof tracing and measuring all of them to impute their economic value is prohibitive.For example, consider what would be involved in developing a comprehensive estimate ofthe economic value of just one type of ecosystem, a wetland, that could provide nearly all of theservices depicted in Box 7.2. Measuring the flow of some services would require tracing biophysicallinkages across vast distances in space and time and assigning values to them using a host of differentvaluation studies. The dollar value of next year’s catch of flounder off the central Atlantic coast of theU.S., for example, depends in critical ways on conditions in spawning and feeding areas supported bywetlands hundreds of miles to the north in the North Atlantic. Moreover, the effects of changing fishspawning and nursery conditions in the North Atlantic may take several years to affect fishery valuesfurther south. Countless other examples of indirect and induced ecosystem benefits could be used toillustrate the difficulty of estimating the overall value of ecosystems in terms of dollars. In fact, afterabout twenty years of applied research the literature on ecosystem valuation still consists primarily ofconceptual and theoretical papers and partial estimates of ecosystem values associates with a fewspecific services. Box 7.4 provides brief descriptions of nine ecosystem valuation methods. Detaileddescription of the pros and cons of each of these methods and illustrations of how they have been usedare available in many recent texts and are available on line. 3333The authors are in the process of constructing a website, which describes ecosystem valuationmethods and contains links to other related sites. A prototype of that website can be accessed at:http://cbl.umces.edu/~dkingweb126
Box 7.4 Dollar-based ecosystem valuation methodsMarket price method: Estimates the economic value of commercially traded products and services fromwetlands (e.g. peat, hay, hunting rights) on the basis of their market prices. Does not deduct market value ofother resources used to bring wetland products to market.Net factor income method: Estimates the value of wetland resources in commercial production by estimatingthe profits of wetland-dependent commercial activities after payments are made for other factors of production.Travel cost (TC) method: Used to estimate the value of recreational benefits generated by wetlands. Assumesthat the value of a site is reflected in how much people are willing to pay to get there.Hedonic pricing - Property value (PV) analysis: Hedonic techniques assume that the price paid for acommodity is directly related to the supply of the commodity’s attributes. Most common is the PV approach,which uses variations in property values to reveal implicit values and demand for environmental amenities.Contingent valuation (CV) method: The only available technique for estimating most non-use (CV) values.Questions are posed to individuals directly about their willingness to pay (WTP) or willingness to accept (WTA)payment. Controversial and expensive; often impractical.Valuation transfer: the activity day method: simple transfer: an activity day valued at one site is used to valuethe same activity at the study site. Values are usually site/location/user specific, but transfers can be useful forgross estimates of recreational values.Replacement cost (RC) method: Estimates the value of a non-market service based on the cost of substitution.This involves three steps: estimate level of service provided, identify least cost alternative, and establish publicdemand for this alternative.Damage cost (DC) method: Estimates the value of a service based on the cost of damage that may result fromits loss. Steps include assess service level, estimate potential damage, translate to dollar terms, and identifypossible substitute.Opportunity cost (OC) method: Proxy value for uncertain wetland functions/services calculated on the basis ofthe cost of foregone development values and appropriate least-cost substitutes.The difficulties associated with dollar-based ecosystem valuation do not end even whenresearchers have generated dollar estimates and made them available to policy makers. Box 7.5 isprovided as a warning to those who decide to use dollar-based ecosystem valuation to influenceenvironmental policy without understanding how the numbers were generated or how they can beabused. It contains brief case summaries of “valuation backfires” based on experiences of the authors.In each case dollar estimates of wetland value were offered in an attempt to influence wetland policy,but did not have the intended outcome. Some of the situations described took place in unofficialhearings and conference settings where actually they had very little impact on wetland policy. Theyare presented here as they would unfold if they took place in more formal legal or administrativeproceedings where they would have a more direct impact on the fate of wetlands.127
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«ENVIRONMENTValuation ofBiodiversi
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ORGANISATION FOR ECONOMIC CO-OPERAT
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TABLE OF CONTENTSPART 1 ...........
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PART 4 ............................
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Why value biodiversity?There are th
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Figure 1.1 Total economic value: us
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from biodiversity at the local leve
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in the database and also for undert
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in the policy context. This is high
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Table 1.3 Policy Options for the Cl
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Box 1.2 Value of Turkey’s Forests
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of the most important implications
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Additionally, valuation does not ju
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value is the habitat, many differen
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are very modest. More recently, new
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Table 2.2 Estimates of the Medicina
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The importance of indirect use valu
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pharmaceutical use, although the li
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McAllister, D., (1991). Estimating
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Simpson, D and Craft, A.. (1996).
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practice, the overlap between these
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aimed at giving more precise quanti
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structural values. There are a numb
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Reid (forthcoming) discusses the po
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Ecotourism as a Way to Generate Loc
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endangered Indian rhino and other t
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ReferencesBann, C., and M. Clemens
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PART 261
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many European countries, CBA has a
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(1) Cost and time constraintsThe co
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activity day, there is greater vari
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added independent variable C s= cha
Page 67 and 68: error in valuing respiratory sympto
Page 69 and 70: ReferencesArrow, K.J., R. Solow, E.
Page 71 and 72: OECD (1995). The Economic Appraisal
Page 73 and 74: CHAPTER 5:by José Manuel LIMA E SA
Page 75 and 76: linkages usually lead to diverse co
Page 77 and 78: A discrete choice approach to quest
Page 79 and 80: Table 5.2 Model-based point estimat
Page 81 and 82: is potentially very large for multi
Page 83 and 84: P3 is already in the mix is 2.51, s
Page 85 and 86: PART 391
Page 87 and 88: measures of value. An appendix to t
Page 89 and 90: features (such as parks, beaches or
Page 91 and 92: included in cost-benefit analysis o
Page 93 and 94: A Discussion of Past Efforts to Dev
Page 95 and 96: Satellite AccountsIn addition to th
Page 97 and 98: which many people argue are associa
Page 99 and 100: approach to competing uses of water
Page 101 and 102: Figure 6.2 Trade-Off AnalysisEnviro
Page 103 and 104: However, the farmers need not bear
Page 105 and 106: Appendix 1: Theory and Application
Page 107 and 108: iwhere C is the income adjustment n
Page 109 and 110: complete. If there are more than on
Page 111 and 112: Horowitz, Joel. L. and Jordan. J. L
Page 113 and 114: CHAPTER 7:by Dennis M. KING and Lis
Page 115 and 116: Box 7.1 Definition of terms related
Page 117: Box 7.2 Categories of Ecosystem Ser
Page 121 and 122: Non-monetary indicators of ecosyste
Page 123 and 124: Figure 7.1 Effects of Wetland Locat
Page 125 and 126: description, and that the usefulnes
Page 127 and 128: 2) Service capacity sub-indexIndica
Page 129 and 130: wetlands, for example, results in F
Page 131 and 132: (1) Functional CapacityIndexFigure
Page 133 and 134: constituents of runoff can be predi
Page 135 and 136: Service(on or off site)Recreational
Page 137 and 138: Table 7.3 Service Risk Sub-index De
Page 139 and 140: Measuring Service Preference Weight
Page 141 and 142: Table 7.4 Illustration of Paired Co
Page 143 and 144: PART 4151
Page 145 and 146: Ecological foundations for biodiver
Page 147 and 148: Phenotic diversity is a measure bas
Page 149 and 150: Operationalisation of the biotic-ri
Page 151 and 152: ten attributes that could score a m
Page 153 and 154: The choice of the scale relates to
Page 155 and 156: Nature measurement methodIn 1995, t
Page 157 and 158: Table 8.4 Value orientations and en
Page 159 and 160: Table 8.5 Identification of monetar
Page 161 and 162: Table 8.6 Valuation studiesSingle s
Page 163 and 164: in waterway systems for nine impact
Page 165 and 166: to other contexts, conditions, loca
Page 167 and 168: ReferencesAkcakaya, H.R. (1994).
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de Groot, R.S. (1994). “Environme
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Mace, G. M. & S. N. Stuart. (1994).
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Turner, R.K., Perrings, C. and Folk
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John A. DixonJohn A. Dixon is Lead
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Robert O’NeillDr. O’Neill recei
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Steven StewartSteven Stewart is Ass
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OECD PUBLICATIONS, 2, rue André-Pa
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