Assessing the Economic Value of Ecosystem Conservation

Valuation studies have considerably increased our knowledge of the value of ecosystems. Their usefulness has often been undermined, however, by a failure to properly frame them so as to address the specific question of interest. Valuation is not a single activity, and the seemingly simple question ‘how valuable is an ecosystem?’ can be interpreted in many different ways. This paper seeks to clarify how valuation should be conducted to answer specific policy questions. In particular, it looks at how valuation should be used to examine four distinct aspects of the value of ecosystems: (1) Determining the value of the total flow of benefits from ecosystems. This question typically arises in a ‘national accounts’ context: How much are ecosystems contributing to economic activity? It is most often asked at the national level, but can also be asked at the global, regional, or local level. (2) Determining the net benefits of interventions that alter ecosystem conditions. This question typically arises in a project or policy context: Would the benefits of a given conservation investment, regulation, or incentive justify its costs? It differs fundamentally from the previous question in that it asks about changes in flows of costs and benefits, rather than the sum total value of flows. (3) Examining how the costs and benefits of ecosystems are distributed. Different stakeholder groups often perceive very different costs and benefits from ecosystems. Understanding the magnitude and mix of net benefits received by particular groups is important for two reasons. From a practical perspective, groups that stand to ‘lose’ from conservation may seek to undermine it. Understanding which groups are motivated to conserve or destroy an ecosystem, and why, can help to design more effective conservation approaches. From an equity perspective, the impact of conservation on particular groups such as the poor, or indigenous peoples, is also often of significant concern in and of itself. (4) Identifying potential financing sources for conservation. Knowing that ecosystem services are valuable is of little use if it does not lead to real investments in conserving the natural ecosystems that provide them. Simply knowing that a protected area provides valuable watershed protection benefits, for example, does not pay the salaries of park rangers. Yet experience has shown that relying solely on government budget allocations or external donors for the necessary funding is risky. Valuation can help identify the beneficiaries of conservation and the magnitude of the benefits they receive, and thus help design mechanisms to capture some of these benefits and make them available for conservation. These four approaches are closely linked and build on each othe, often using similar data. They use that data in very different ways, however, sometimes looking at all of it, sometimes at a subset, sometimes looking at a snapshot, and sometimes looking at changes over time. Each approach has its uses and its limitations. Understanding under what conditions one approach should be used rather than another is critical: the answer obtained under one approach, no matter how well conducted, is generally meaningless when applied to problems that are better treated using another approach. In particular, using estimates of total flows to justify specific conservation decisions—although commonly done—is almost always wrong. Properly used, however, valuation can provide invaluable insights into conservation issues.