Introduction

Ecosystems provide important commodities and environmental benefits to society. As such, the management of ecosystems is an economic, social, and political issue encompassing all sectors of an economy. It involves trade-offs between competing uses and users, as well as between additional economic growth, ecosystem protection, and further natural resource depletion and degradation. Any particular use of ecosystems has its opportunity costs, consisting of the foregone benefits from possible alternative uses of the resource, including non-use. Decision-makers are faced with balancing these varied resource uses, for example, between freshwater demands from agricultural irrigation on the one hand, and the desire to protect rivers for fish and wildlife habitat on the other hand. Striking a balance between the trade-offs of economic growth and ecosystem resource use, possibly leading to their degradation and depletion, is crucial for the sustainable management of our natural resources. Economic valuation contributes to an improved natural resource allocation by informing decision-makers on the full social costs of ecosystem exploitation and the full social benefits of the goods and services that healthy ecosystems provide. This chapter addresses the various dimensions of economic and social value, before explaining the different valuation and evaluation techniques in Chapters 6 and 7, respectively.

Introduction

Various valuation methods exist and have been applied to estimate the values of different ecosystem services. The methods reflect the extent to which the services provided by ecosystems touch on the welfare of society either as direct determinants of individuals’ well-being (e.g. as consumer goods) or via production processes (e.g. as intermediate goods). The aim of this chapter is to provide an overview of available valuation methods, to discuss their advantages and disadvantages, and to provide guidance on when to use which method. In doing so we do not aim to be comprehensive; extensive details of the underlying theory and on the actual practice of applying the valuation methods are provided in general texts, including Braden and Kolstad (1991), Freeman (2003), Bateman et al. (2002), Mitchell and Carson (1989), Champ et al. (2003), Bockstael and McConnell (2007), and Kanninen (2007).

A number of economic valuation methods have been developed to estimate the value of changes in ecosystem services. An important distinction is between market-based and non-market-based valuation methods. Market-based valuation means that existing market behavior and market transactions are used as the basis for the valuation exercise. Economic values are derived from actual market prices for ecosystem services, both when they are used as inputs in production processes (production values) and when they provide direct outputs (consumption values). By observing how much of an ecosystem service is bought and sold at different prices, it is possible to infer directly how people value that good. Examples of market-based methods are the use of direct market prices, net factor income and production function methods, and the calculation of replacement costs, defensive expenditures, and avoided damage costs.

Introduction

Making decisions between alternative investments, projects, or policies that affect the provision of ecosystem services often involves weighing up and comparing multiple costs and benefits that are measured in different metrics and are incurred at different points in time. For example, the establishment of a new protected area might involve costs in terms of the purchase of land, compensation of local communities, and ongoing maintenance and enforcement costs; and benefits in terms of biodiversity conservation, recreational use, and improved watershed services. These costs and benefits are likely to be measured in different units, incurred by different groups and have different time profiles. Organizing, comparing, and aggregating information on such a complexity of impacts, and subsequently choosing between alternative options with different impact profiles require a structured approach. Methods for evaluation or appraisal of complex decision contexts provide systems for structuring the information and factors that are relevant to a decision.

Benjamin Franklin’s description of his own approach to making complex decisions sets out the intuition behind evaluation methods (Franklin, 1772):

Introduction

Ecosystem services are hot, and they have been hot for a while. In 1998, Costanza et al. published their famous article about the societal value produced by ecosystems through ecosystem service delivery, an article which at the time this introduction was written had been cited more than 10 000 times. In 2005, the Millennium Ecosystem Assessment (MEA) framed the need to protect biodiversity and the world’s ecosystems in terms of ecosystem services (MEA, 2005). In 2009, “The economics of ecosystems and biodiversity” (TEEB) followed up by presenting an approach to help decision-makers recognize, demonstrate, and capture the values of ecosystem services and biodiversity. And by now, most (inter)national policies in the field of nature conservation refer to ecosystem services when explaining the need for nature conservation, biodiversity protection, and sustainable resource use.

Despite the popularity of the concept of ecosystem services, policy-makers and practitioners are struggling to implement the concept in practice. An important reason for this science–policy divide is the lack of an interdisciplinary framework that guides policy-makers through the definition and measurement of ecosystem services to their valuation and the translation of these values into effective policy instruments and governance arrangements (see also Daily et al., 2009).

Marine-related ecosystem services

Coastal regions are special in many ways. First, coastal ecosystems are among the most productive systems in the world. These ecosystems produce disproportionately more services relating to human well-being than most other systems (MEA 2005). Second, 60% of the world’s population lives in coastal zones. The total number of people living in coastal areas has doubled in the last 20 years (Goudarzi 2006). Coastal regions are home for more than 250 million poor people around the world (Brown et al. 2008). Therefore, coastal and marine resources are of increasing importance for human well-being in various ways (e.g. food, employment). Third, coastal ecosystems experience the heaviest impacts from human uses and environmental changes (Adger et al. 2005, Donner and Potere, 2007, Jackson et al. 2001). Future pressures from climate change, population increases in coastal areas, pollution, aquaculture development, greater human mobility and the spread of invasive species are likely to further exacerbate these trends (Brown et al. 2008). As a result, these characteristics of coastal ecosystems pose crucial challenges for the maintenance of ecosystem services and poverty alleviation.