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Fall/Winter 2004 Vol. 4 No. 3

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©Photodisc Putting a
Price Tag on Ecosystems

Assigning a dollar figure to the commercial, recreational, or even aesthetic value of a crystal clear river, or to the value of preserving an endangered species, is no easy task, but a new report from the National Research Council says that such calculations are a must to accurately weigh the trade-offs among environmental policy options. Too often, the report says, goods and services provided by an ecosystem are overlooked in the decision-making process because they are assigned a value of zero in the all-important cost-benefit analyses that form the basis for many environmental policies.

Some ecosystem commodities are more tangible than others. While the market sets a price on fish sold in stores or on real estate located next to a Superfund site, for instance, it is harder to put a price on fish caught for fun or on the scenic worth of an undisturbed wilderness. A value for recreational fishing could be determined, however, using a "travel-cost" model based on anglers' responses to questions about how many more days they would fish if the stock were bountiful and edible, and how much they might spend at local restaurants, hotels, and tackle shops.

The report identifies several methods for applying value to ecosystem goods and services that are not easily quantifiable, often because there is no obvious market for them, but that affect other things with definite market values. For example, the "production function" method looks at whether a change in the health of an ecosystem improves or diminishes the services it provides. Along the Florida and Louisiana coasts, this technique has been used to measure if the expansion of wetland marshes has increased the size of the crab population and therefore the value of the fishery. "Hedonic" methods can be employed to detect fluctuations in real estate value due to area pollution levels or the ability of nearby dunes or river banks to control floods.

Bayou Chevee, Ponchartrain, La., photo by Anne Marino, U.S. Army Corps of EngineersIn other cases, surveys can determine how willing people are to give up property rights for conservation purposes or how much they are willing to pay for an environmental improvement that may be of no direct use to them. After the Exxon Valdez disaster, surveys revealed that Americans were willing to spend an average of $33 each on efforts to prevent a similar tragedy in Prince William Sound, even though most of them would never see the Alaska coastline.

Measuring so-called non-use values, including perceived aesthetic and intrinsic values, is important because they may be the largest source of an ecosystem's worth to society, the report says. It also recommends that the "total economic value" framework, which incorporates non-use values, be applied in environmental cost-benefit analyses. Appraising multiple ecosystem services is more difficult, the report adds, but doing so provides a better picture of the importance of the entire ecosystem.

The use of surveys to calculate the value of ecosystem services has been criticized because it relies on stated preferences rather than observed behavior. Techniques to determine values not founded on market pricing also are subject to uncertainty and bias. Nevertheless, the report concludes that based on the scientific literature, valuation methods are sufficiently mature to support environmental decision-making. Additional funding is needed to foster collaborations between ecologists and economists on ways to better integrate the study of ecosystems and their worth to society.   -- Bill Kearney

Valuing Ecosystem Services: Toward Better Environmental Decision-Making. Committee on Assessing and Valuing the Services of Aquatic and Related Terrestrial Ecosystems, Water Science and Technology Board, Division on Earth and Life Studies (2004, approx. 313 pp.; ISBN 0-309-09318-X; available from the National Academies Press, tel. 1-800-624-6242; $45.00 plus $4.50 shipping for single copies).

The committee was chaired by Geoffrey M. Heal, Paul Garrett Professor of Public Policy and Business Responsibility and professor of finance and economics, Graduate School of Business, and professor of international and public affairs, School of International and Public Affairs, Columbia University, New York City. The study was funded by the U.S. Environmental Protection Agency, U.S. Army Corps of Engineers, and U.S. Department of Agriculture.

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Copyright 2005 by the National Academy of Sciences