Managing Ecosystem Services for Human Benefit: Economic and Environmental Policy Challenges

In the Millennium Ecosystem Assessment (2005), ecologists identified and pointed out a multitude of environmental and other benefits obtained by human-beings from ecosystem services. Frequently, these benefits are not fully recognized and they are not adequately taken into account in decision-making in contemporary economic and political systems for reasons outlined in this contribution. In particular, this adversely affects the optimal conservation of natural, near natural and unmanaged ecosystems. The human benefits from ecosystem services as set out in the Millennium Ecosystem Assessment are summarized and this assessment is examined critically. Economic views about the economic value of different types of ecosystems and forms of biosphere use are outlined and assessed. Determining the economic value of alternative forms of land-use (more generally biosphere-use) is extremely difficult because of knowledge constraints. Often the biophysical consequences, that is, variations in the supply of ecosystems services resulting from alterations in ecosystems, are poorly known. The economic valuation of changes in ecosystems (alterations in biosphere-use) is also hampered by poor information about the demand for these services (for example, the willingness of beneficiaries to pay for their supply) and the cost of replacing these services if they are lost (or diminished in availability) as a result of ecosystem change. While this limits the scope for economic valuation, it does not mean the rational valuation of biosphere use is impossible. It has been suggested that the supply of ecosystem services can be managed optimally, in some cases, if private landholders are paid for supplying these services. The benefits and drawbacks of this approach are discussed. China’s policies to restore the supply of particular ecosystem services, for example, its Grain-for-Green program, are used to illustrate some of these matters.