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The Economic Geography of Ecosystem Goods and Services USA-China Biocomplexity Workshop Beijing, May 2004 Matthew A. Wilson PhD The Gund Institute for Ecological Economics & School of Business Administration University of Vermont, USA. Email: Wilson@bsad.uvm.edu Website: http://ecovalue.uvm.edu

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OUTLINE of TALK Philosophy of Environmental Economic Values The Concept of Ecosystem Goods and Services Methods for Measuring Ecosystem Service Values Some Examples of Ecosystem Service Valuation and Analysis using WWW technology Observations and Conclusions

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Key U.S. Collaborators and Students Wilson, Matthew A, Austin Troy, and Robert Costanza 2003. The Economic Geography of Ecosystem Goods and Services: Revealing the Monetary Value of Landscapes through Transfer Methods and Geographic Information Systems. In Dietrich and Van Der Straaten (eds.) Cultural Landscapes and Land Use. Kluwer Academic Publishers (In Press). New Book Chapter:

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Social Choices and Tradeoffs “Societies must often choose between competing uses of the environment and the goods and services provided by healthy, functioning ecosystems....Should this shoreline be cleared and stabilized to provide new land for development, or should it be maintained in its current state to serve as a wildlife habitat? Should that wetland be drained and converted to agriculture or should more wetland area be created to provide freshwater filtration services? Should this coral reef be mined for building materials and for the production of lime, mortar and cement or should it be sustained to provide renewable sea food products and recreational opportunities?”* *Wilson, Costanza, Boumans and Liu (2004) “The Assessment and Valuation of Ecosystem Services provided by Coastal Systems” Proceedings of the Royal Irish Academy, Dublin Ireland.

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From What do Natures Values Derive? When we claim that a living plant or animal or habitat is worth something, what is the basis of that claim? Philosophical Questions

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Competing Approaches in Western Philosophy Anthropocentric—elements of nature are valuable insofar as they serve human beings in one way or another. Utilitarianism asserts that we can assign “value” only insofar as human beings take satisfaction from doing so. Here, the notion of satisfaction is interpreted broadly to encompass both mundane enjoyments (I.e., consuming plants and animals for food) and more lofty pursuits (such as marveling at the beauty of an eagle). Economists endorse the utilitarian viewpoint. Biocentric—Species and other natural things have intrinsic rights to exist and prosper, independent of whether or not human beings derive satisfaction from them. Neo-Kantian theory asserts that human beings should only act in ways that are able to be universalized in the sense that they would seem appropriate for other beings in comparable situations. Thus, neo-Kantian theory gives rise to certain rights and obligations, including duties to other life forms (and the planet).

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Economic theory assumes that individual people are the best judges for making the tradeoffs that are most valuable to them, “value” is therefore reflected by two theoretically commensurate measures. Measuring Economic (Utilitarian) Value Willingness to pay (WTP)--the amount of money people are willing to pay for specific improvements in a good or service. Willingness to accept compensation (WAC)-- the minimum amount an individual would need to be compensated to accept a specific degradation in a good or service. Simply put, an ecosystem service value is the amount of money a person is willing to give up in order to get the service, or the amount of money required to give up that service. To date in the Ecosystem Service Valuation literature, WTP has been the dominant measure of value.

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Limitations of Economic (Utilitarian) Value Protecting natural and cultural landscapes is clearly important for non-economic, ecological and even spiritual reasons. The economic valuation of landscapes is not presented as an alternative to democratic environmental decision making—economic valuation does not, and cannot replace open value-oriented dialogue among concerned stakeholders. Economic valuation is a complimentary approach, one that explicitly takes into account the simple reality that many day-to-day land use decisions are based on market economics. Landowners, business leaders and local politicians are influenced by land prices as well as property tax assessments which value land based on its “highest and best" economic use.

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Ecosystem Service Valuation "Ecosystem goods (e.g. food) and services (e.g. nutrient cycling) represent the benefits human populations derive, directly or indirectly, from ecosystem functions". Costanza et. Al. (1997) Helps to bring together key ecological and economic concepts Makes use of available tools and methods for concept integration (i.e., value transfer methods) Can be used to by scientists and politicians to evaluate tradeoffs between land use development and conservation alternatives. Advantages of the Ecosystem Service Concept:

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Framework for Integrated Assessment and Valuation of Ecosystem Functions, Goods and Services* *Adapted from DeGroot, Wilson and Boumans 2002 “A typology for the description, classification, and valuation of ecosystem functions, goods and services” Ecological Economics 41(3) pp. 393-420. Land Use Management & Policy Ecosystem Goods & Services Human Value Goals Biophysical Drivers Ecosystem Structures & Processes Individuals Social Institutions Income Maximization, Life Expectancy, Health, Recreational Opportunities Aesthetic Needs etc.

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Quantifying Ecosystem Goods and Services Across a Range of Engineered and Designed Ecosystems

Ecosystem Goods and Services : 

Ecosystem Goods and Services ECOSYSTEM SERVICES Gas and Climate regulation Disturbance regulation Water regulation and supply Soil formation Nutrient cycling Waste Assimilation Habitat Refugia Food production Recreation Cultural EXAMPLES Regulation of atmospheric chemical composition. Capacitance, damping and integrity of ecosystem response to environmental fluctuations such as sea level. Storage and retention of freshwater. Soil formation processes. Storage, internal cycling, processing, acquisition of nutrients. Assimilation of unhealthy compounds in air and water. Habitat for animal and plant populations. That portion of gross primary production extractable as food. Providing opportunities for recreational activities. Opportunities for cultural and spiritual enhancement.

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Avoided Cost (AC): services allow society to avoid costs that would have been incurred in the absence of those services; flood control (barrier islands) avoids property damages, and waste treatment by wetlands avoids incurred health costs. Replacement Cost (RC): services could be replaced with man-made systems; natural waste treatment can be replaced with costly treatment systems. Factor Income (FI): services provide for the enhancement of incomes; water quality improvements increase commercial fisheries harvest and thus, incomes of fishermen. Travel Cost (TC): service demand may require travel, whose costs can reflect the implied value of the service; recreation areas attract distant visitors whose value placed on that area must be at least what they were willing to pay to travel to it. Hedonic Pricing (HP): service demand may be reflected in the prices people will pay for associated goods: For example, housing prices along the shore of pristine freshwater lakes tend to exceed the prices of inland homes. Contingent Valuation (CV): service demand may be elicited by posing hypothetical scenarios that involve some valuation of alternatives; people would be willing to pay for increased water quality in freshwater lakes and streams. Marginal Product Estimation (MP): Service demand is generated in a dynamic modeling environment using production function (i.e., Cobb-Douglas) to estimate value of output in response to corresponding material input. Group Valuation (GV): This approach is based on principles of deliberative democracy and the assumption that public decision making should result, not from the aggregation of separately measured individual preferences, but from public debate. Techniques for Valuing Ecosystem Services

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Benefits transfer is an economic methodology which obtains an estimate for the economic value of non-market goods or services through the analysis of a single study, or group of studies, that have been previously carried out to value similar goods or services. The ‘transfer’ itself, refers to the application of economic values and other information from the original ‘study site’ to a ‘policy site’. The critical underlying assumption of the value transfer approach is that the economic value of ecosystem goods or services at the study site can be inferred with sufficient accuracy from the analysis of existing valuation studies. Clearly, as the level of information increases within the source literature, the accuracy of the value transfer likewise improves. Benefits Transfer Methodology

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Assessing the Total Value of Ecosystem Goods and Services STRUCTURE PROCESSES GOODS SERVICES DIRECT USE INDIRECT USE NON USE TOTAL ECONOMIC VALUE Goods and Services Biomass, water/salt supply, Minerals, land/water patterns Hardbottom/softbottom Distribution Etc. Primary production, organic Matter decomposition, nitrogen and phosphorous cycling, coastal- offshore transport of nutrients Etc. Fisheries, aquaculture, energy resource exploration and development, recreation, land reclamation, trade medium (navigation), Etc. Storm/Sea rise buffering, nutrient cycling and waste disposal, wildlife habitat, carbon sequestration, Aesthetic scenery Etc. Market analysis, Avoided Cost, Hedonic Pricing, Travel Costs, Factor Income, Replacement cost, Contingent Valuation Hedonic Pricing, Travel Cost, Replacement Costs, Avoided Cost, Contingent Valuation, Group Valuation Contingent Valuation, Group Valuation Land Cover Values *Wilson, Costanza, Boumans and Liu (2002) “The Assessment and Valuation of Ecosystem Services provided by Coastal Systems” Royal Irish Academy, Dublin Ireland.

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From: Costanza et. Al. (1997) “Pricing the Planet” Nature vol 387 15 May.

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Delivering Results on the World Wide Web

Benefits Transfer and GIS : 

Benefits Transfer and GIS MS Access Database ArcGIS System Client Admin GIS Data Input Valuation Data Entry Database Methodology Ecosystem Services Map

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Microsoft Access Data Entry Form

MS Access Relational Database Schematic: 

MS Access Relational Database Schematic

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“Total Value” of Ecosystem Services ($ ha-1 per year): ESVt = Where LC = Land Use/Land Cover and ES = Ecosystem Service. Once we have selected empirical valuation studies, inputted them into the relational database, and standardized estimates for value transfer, we assign the resulting value estimate to the appropriate land cover categories in a spatially explicit manner.

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GIS Land Cover Types

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Ecosystem Services broken down by Land Cover Types

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WWW USER INTERFACE: An Example from The State of Maryland, USA

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Baltimore Ecosystem Study Metropolitan Region and Watersheds Hierarchical Arrangement of Watersheds and Sub-watersheds for Valuation Analysis 8 digit Watershed 6 digit Watershed

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Jones Falls Watershed Total Value: $17,513,521 per year Gwynns Falls Watershed Total Value: $15,780,444 per year Ecosystem Service Value Comparison EconomicValue

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Linking Science and Decision Making Economic Science Decision Making Monitoring & Assessment Value

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MassAudubon’s Losing Ground Report (2003) Download at: www.massaudubon.org/losingground

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Some Observations 1. Ecosystem goods and services form a key link between economic and ecological systems. 5. New technologies (GIS, Relational Databases, WWW) offer a powerful way to make ecosystem values transparent to people and bring them to bear on real world decisions 4. Since economic markets do not currently exist for many ecosystem goods and services, it will be necessary to employ new methods for assessment—i.e., benefit transfer. 3. Determining the economic value of goods and services is a key challenge for scientists and decision makers around the world but we recognize that economic values are only one way to measure people’s values for ecosystem goods and services. Not the only way. 2. People are dependent on ecosystem goods and services provided by healthy, functioning systems (i.e., food, soil and clean water).

Thank You!: 

Thank You! Matthew A. Wilson PhD The Gund Institute for Ecological Economics & School of Business Administration Email: Wilson@bsad.uvm.edu Gund Institute Website: http://www.uvm.edu/giee EcoValue Website: http://ecovalue.uvm.edu