Magazine
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Essay

Ecosystem
services
Heather Tallis1 and Peter
Kareiva2

Humans have always depended
on nature for environmental assets
like clean water, nutrient cycling
and soil formation. These have
been called by different names
                    The Indonesian mangrove habitats shown above are relatively low in biodiversity
through human history, but are
                    (compared to other tropical habitats), yet are among the world’s most valuable
presently gaining global attention
                    ecosystems when one accounts for their storm protection, fisheries production, and
as ‘ecosystem services’. Gretchen   water supply. In fact mangroves are estimated to provide ecosystem services at a per
Daily defines ecosystem services    hectare rate ($9,900 per year) nearly five times higher than the per hectare rate for
as “the conditions and processes    tropical forests, which are noted for their high biodiversity. Thus, at a global scale,
through which natural         high biodiversity does not necessarily correspond to the greatest ecosystem services
                    — a reality that may cause conservation efforts to broaden their goals beyond simply
ecosystems, and the species that
                    maximizing biodiversity.
make them up, sustain and fulfill
human life”. Until recently, we
have tended to take ecosystem     importance of ecosystem           Millenium Ecosystem Assessment
services for granted, as they have   processes and other forms of         identified functions as
generally been ‘free’, despite their  capital (physical, social, cultural,     provisioning (food, water, fuel,
obvious economic value to       intellectual). Economic valuation      fiber), regulating (prevention of
humans. In fact, a recent global    need not cover all values of         soil erosion, flood control), cultural
analysis by the Millenium       ecosystems; progress is made         (recreation, spiritual value, sense
Ecosystem Assessment          simply by capturing values that       of place) or supporting (soil
concluded that well over half of    are presently egregiously          formation, nutrient cycling, oxygen
the world’s ecosystem services     overlooked. As a society, the        from photosynthesis).
are being degraded or used       modern world routinely uses           Regardless of the ways they can
unsustainably. With a global      cost–benefit analyses to judge        be grouped, ecosystem services
population soon to number nine     between alternative pathways.        have been brought into the
billion people, ecosystems       The valuation of ecosystem          limelight largely due to interest
services are becoming so        services facilitates difficult        from multiple, usually disparate,
degraded that many regions in the   decisions about how to proceed        sectors. Corporations and private
world risk ecological collapse. It   with development to keep up with       land owners have begun to
may be time for the era of free    ever-expanding human             recognize that their resource
ecosystem services to come to an    populations. Without economic        bases are finite and are, in some
end. The idea of paying for      valuation, decision-makers and        cases, factoring ecosystem well-
ecosystem services is causing     governments implicitly assign        being into the corporate or
corporations, private land owners,   ecosystem processes a value of        individual balance-sheet. For
conservation organizations and     zero and, not surprisingly, then       instance, British Petroleum gained
governments to take note. Even     select actions that reap rewards       support from the public, and even
prominent business-oriented      according to values everyone         some conservation organizations,
magazines such as The Economist    already understands (like a new       in their bold move to break from
have recently featured ecosystem    factory). Hence valuation, even if it    the fossil fuels industry by publicly
services on their cover (see the 21  is flawed, may get ecosystem         recognizing the association
April 2005 issue).           processes on the table and lead to      between fossil fuels and climate
  If we are to start paying for    more sustainable policies.          change, and then selecting a
ecosystem services, we have to      Several attempts have been        corporate strategy that reflected
know how much to pay.         made to classify and exhaustively      the role of carbon sequestration
Economists and ecologists are     list ecosystem services. There is      and reduced emissions in climate
just beginning to credibly assign   no present consensus on a useful       control. On a less grand, but
economic value to ecosystem      taxonomy, though de Groot and        equally relevant scale, cattle
processes, transforming these     coworkers and the Millenium         ranchers and foresters may use
processes into tradable,        Ecosystem Assessment have both        ecosystem services as another
marketable services. This       established groupings that align       commodity that can be sold
approach gives us a common       ecosystem functions with goods        beyond beef or timber, as long as
currency to assess the relative    and services. For example, the        they can find someone willing to
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                                                    thinking about nature, differences
 Box 1                                                 of opinion can be dramatic. For
                                                    example, some scientists suggest
 Mangroves: from $2000 shrimp to tsunami protection
                                                    a virtual one-to-one mapping
                                                    between ecosystem services and
 Mangroves have long been the poster child of    Mangroves have also illustrated the
                                                    biodiversity. Others point out that
 ecosystem services. The list of the services    importance of understanding what ecosystem
                                                    there are many cases where low
 provided by mangroves is long and well       characteristics are necessary for particular
 appreciated by subsistence communities       services. The recent Indian Ocean tsunami     diversity systems can provide
 globally. Many of these services have already   provided a textbook example of the role of
                                                    tremendous ecosystem services,
 been targets of valuation studies, including    mangroves in coastal protection. Most areas
                                                    and that modest losses of
 finfish and non-finfish commercial and       in Sri Lanka with relatively good mangrove
                                                    biodiversity may not substantially
 subsistence fisheries, timber and firewood,    status before the tsunami were protected and
                                                    undermine ecosystem services.
 dyes, tourism, medicinal remedies, education,   received little wave damage as expected, but
                                                    Many conservationists also fear
 physical coastal protection, carbon storage,    some were severely damaged. In other
                                                    that placing values on ecosystem
 and even existence and option values. The     words, the mangroves acted like an
                                                    services will lead to the loss of
 power of such valuations was shown early      insurance policy against storm damage
                                                    appreciation of species for their
 on, when the Fijian government temporarily     nature s insurance policy, with no premiums
                                                    own sake. History has shown that
 stopped mangrove reclamation in the 1960 s     charged to anyone. Of course, if all of the
 and 1970 s after seeing the results of a partial  coastal regions bludgeoned by the tsunami     markets are generally unkind to
 valuation study.                  had recognized the value of mangroves,
                                                    natural systems. Others see
                           much damage and suffering could have been
                                                    markets as tools that can instill
 A later case study showed the economic and
                           averted.
 ecological perils of neglecting the value of                             conservation value into lands
 mangroves. A large mangrove area on India s    Interestingly, just as is the case with regular
                                                    under human use that would
 east coast houses a shrimp farming industry    insurance policies, the details matter. A
                                                    traditionally not be valued if the
 that relies on wild brood shrimp. But,       closer look at the patterns of damage and the
                                                    only measure were biodiversity.
 mangroves were cleared for new farms        coastal vegetation showed that the damaged
                                                      Possibly the boldest move to
 subsidized by the government and the        areas had dominant mangrove trees like
                                                    embrace and understand
 remaining mangrove area is half of that      Rhizophora sp. in good condition, but had
                                                    ecosystem services to date is the
 required just to provide enough wild brood     understories dominated by less typical
                                                    Millennium Ecosystem
 shrimp for existing farms. Overdevelopment     mangrove associates (species not always
                                                    Assessment, mentioned above.
 has led to a wildly fluctuating brood shrimp    found in mangroves). This detail of forest
 market where a single shrimp can sell for as    character, not visible from satellites, made all  This assessment of the status of
 much as $2000 USD. Analyzing the partial      the difference. If mangrove restoration efforts
                                                    the earth’s ecosystems was
 value of mangroves for brood shrimp        spurred by the recent disaster focus on
                                                    requested by the United Nations
 provision alone would have clearly identified   expanding the extent of major mangrove
                                                    Secretary General, Kofi Annan. As
 the optimal number of farms, saving subsidy    species while ignoring understory species,
                                                    stated in the report: “the objective
 money, providing a sustainable industry and    the region could face an equally grave threat
                                                    of the Millenium Ecosystem
 retaining more mangroves.             from the next tsunami.
                                                    Assessment was to assess the
                                                    consequences of ecosystem
                                                    change for human well-being and
pay for clean watersheds or             interested in ecosystem services.         to establish the scientific basis for
erosion control.                   Private donor dollars presently          actions needed to enhance the
  Ecosystem services have also           pay for most domestic and             conservation and sustainable use
piqued the interest of the public          international conservation             of ecosystems and their
sector and national governments.           activities. Though these funds           contributions to human well-
For example, several agencies            have set aside vast tracts of           being”. The assessment cost over
within the US government               pristine systems, they alone will         $20 million and involved 1300
(USEPA, USACE, USDA) recently            not be enough to protect the            scientists who volunteered their
showed their interest in               majority of the earth’s ecosystems         time synthesizing and analyzing
ecosystem services when they             and the species they house. In           data and models.
commissioned the National              comparison, realization of the            All of this interest is derived
Research Council to produce a            market worth of ecosystem             from a healthy base of theory and
report on the topic and the status          services has the potential to           only a few real-world examples
of aquatic ecosystem services in           increase conservation funding by          that scratch the surface of
the US. These government               orders of magnitude. Ecosystem           possible tools for the sticky
agencies recognize the utility of          services also have the possibility         business of assigning values to
ecosystem service valuation for           of aligning conservation value and         ecosystem functions. The point of
its potential to inform policy            poverty alleviation. Functioning          economic valuation is to estimate
decisions that include                ecosystems provide clean,             the importance of changes in
consideration of trade-offs, for           disease-free water, fertile soil and        ecosystem services to human
providing damage assessments             numerous other basic human             welfare. There is an active
and for incorporating                needs.                       movement to formalize ecosystem
environmental assets and services            The paradigm of ecosystem            service values in public and
into national income accounts.            services is not accepted by            private sectors by creating
  Conservation organizations            everyone, and even among those           markets for ecosystem services,
have several reasons to be              who champion this new way of            and at a minimum changing
Magazine
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                                             Fish    for   personal
policies away from perverse
                                             consumption caught by net
subsidies.
                                             from a coral reef in
  The most common and most
                                             Indonesia. Although the
appropriate approach to non-                               importance of coral reefs
market valuation is called total                             for fisheries is well-known,
economic value (TEV). This                                unsustainable    practices
                                             such as blast fishing
approach does not necessarily
                                             commonly squander these
assess the total value of an
                                             ecosystem services, and
ecosystem, but rather allows
                                             leave future generations
changes to be calculated for all                             deprived. In this Indonesian
values (use and non-use values)                             community, blast fishing
associated with one or several                              had been halted, and local
                                             people enjoy a bountiful
ecosystem functions. Any
                                             harvest of fish. If blast
calculation of TEV will depend
                                             fishing yields too much
heavily on the spatial and
                                             short-term economic gain
temporal scales being assessed,                             due to exports to Japan or
so analysts must be clear about                             elsewhere, the wisdom of
the intended scope of their study.                            sustainable practices does
                                             not so easily triumph.
TEV can be assessed as
willingness to pay (WTP) or
willingness to accept (WTA)
payment. WTP is the more       service, or some other form of     potential may be even riskier as
common method, as more tools     incentive. Some payment systems    species continue to blink out of
for estimating economic value are  are already established and      existence and ecosystems
relevant to this approach and    functioning for selected        continue to collapse around us.
WTP can usually be considered a   ecosystem services. For example,
conservative estimate in cases    there are at least five active     Further reading
                                       Costanza, R., d’Arge, R., de Groot, R.,
where WTA would be preferred.    carbon markets in the world, and
                                         Farber, S., Grasso, M., Hannon, B.,
The recent NRC report reviews    farmers in parts of the US are
                                         Limburg, K., Naeem, S., O’Neill,
the many methods for calculating   subsidized to leave fields fallow      R.V., Paruelo, J., et al. (1997). The
WTP and should be consulted for   for several years to encourage soil     value of the world’s ecosystem
                                         services and natural capital. Nature
details and guidelines.       formation and retention. The
                                         387, 253–259.
  Many problems must be solved   Perrier bottled water company
                                       Daily, G.C. ed. (1997). Nature’s
before the valuation of ecosystem  pays fees to landowners in         Services: Societal Dependence on
services can become a        watersheds upstream of their        Natural Ecosystems (Washington:
                                         Island Press).
mainstream activity. Primarily, we  springs to retain forests,
                                       Millennium Ecosystem Assessment.
need to acquire sufficient      guaranteeing a clean, reliable
                                         (2005). Ecosystems and human
information about ecosystem     water source. But even these        well-being:synthesis (Washington:
processes to make valuation     tools will be difficult to apply in     Island Press).
possible. Beyond that basic     non-capitalist countries or       Postel, S., and Thompson, B.H. (2005).
                                         Watershed protection:capturing the
biophysical information, we also   developing regions with minimal
                                         benefits of nature’s water supply
lack an understanding of how     infrastructure. Economists and       services. Nat. Resour. Forum 29,
economic value scales with      multilateral international agencies     98–105.
ecosystem processes. For       will need to apply creative       Valuing Ecosystem Services. (2004).
                                         Towards better environmental
instance, a single wetland grass   thinking in impoverished countries
                                         decision making (Washington:
plant does not cycle enough     to help the value of ecosystem
                                         National Academies Press).
nutrients to be of value to an    services be realized in places     www.ecosystemservicesproject.org
upland cattle farmer. But how    where no one can afford to pay for     (CSIRO initiated project studying
                                         ecosystem services and how to
many plants are considered      much of anything.
                                         consider these services in land
valuable? 100 plants? One hectare    Valuation of ecosystem services
                                         management decisions)
of wetland? And how does this    is but one of many tools that will   www.ecosystemvaluation.org/(funda-
answer change with seasons,     be used in the continual struggle      mentals of dollar valuation, with
                                         links to indicators of ecosystem
climate fluctuations and land use  to allow coexistence of humans
                                         value)
change in the watershed?       and the suite of species and
                                       http://esd.uvm.edu/ (NSF funded
  Another challenge lies in our   ecosystems that make our lives       ecosystem services database and
ability to devise pragmatic     possible. Ecosystem services and      search tool)
programs for the monetization of   their dollar value is one of the few  www.actionbioscience.org/environ-
                                         ment/esa.html (Ecological Society
services. Hardest of all may be   ideas that resonate in corporate
                                         of America factsheet on ecosystem
finding someone willing to pay,   and governmental board rooms,        services with links)
when the tradition has been to    on stock exchanges and in farm
receive these services for free.   houses, mud huts, eco-tourist     1Biology, University of Washington,
Ecosystem service valuation will   lodges and palm palapas.        Seattle, Washington 98195, USA.
                                      2The Nature Conservancy, 4722 Latona
only achieve its promise if there  Investing in ecosystem services is
                                      Avenue NE Seattle, Washington 98105,
are markets and buyers for the    a risky business. Ignoring their
                                      USA.