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The providence of nature Valuing ecosystem services


									International Journal of Environmental Science & Technology
Vol. 1, No. 2, pp 151-163, Summer 2004

                                                                                                      Review Paper

                The providence of nature: Valuing ecosystem services
                                          R. A. Voeks and 2M. Rahmatian
                         Environmental Studies Program, California State University, Fullerton, USA
                            Department of Economics California State University, Fullerton, USA

    Natural ecosystems provide an array of critical but largely undervalued goods and services. Because these
are seldom included in benefit-cost calculations of land use change, the value of wild land development nearly
always appears greater than protecting wild nature. The following paper introduces a theoretical framework
within which environmental economists evaluate ecosystem services. This is followed an assessment of three
types of ecosystem services with particular relevance to the developing world pharmaceutical drug development
from native plants, the economics of non-timber product extraction, and the benefits and costs of ecotourism as a
development strategy. We conclude with an overview of recent attempts to provide a global estimate of the value
of nature’s services.
Key words: environmental economics, ecosystem services, pharmacopoeia, non-timber products, ecotourism
*Corresponding Author, E-mail:

    Ecosystem services include those processes                   assigning an economic value to many of these
and conditions within which nature sustains                      life-support systems may seem too ‘trivial’ for
and otherwise meets the needs material and                       consideration how meaningful, for example, is
otherwise of humankind. These include                            it to identify the value of oxygen production by
tangible goods, such as timber, fiber, fuel                      plants to human life? Moreover, unlike
wood, foods, and medicines, as well as the                       traditional goods and services whose values are
array of environmental services that support                     captured in commercial markets, many
life on earth, such as water purification, carbon                ecosystem services seem to defy rational
dioxide absorption, biogeochemical cycling,                      accounting. For example, in South America
and many others. In spite of the obvious value                   the iroko tree is considered the ‘sacred’
of these goods and services in supporting and                    dwelling place of an ancient forest god (Voeks,
improving the human condition, many of these                     1997). Is it a useful endeavor to attempt to
values are customarily ignored in the course of                  monetize the value of people’s religious
development projects. Even when cost-benefit                     beliefs? Economic evaluations of nature are
analyses are incorporated into planning and                      seen by others, particularly those that ascribe
decision-making, many of the less tangible                       to a ‘deep ecology’ view, as part and parcel to
services provided by ecosystems are omitted                      the problem, rather than the solution. Is it
from the calculus. The result of these                           acceptable to value the existence of a
omissions is that the economic benefits of                       nondescript species, such as a spider or flea,
development, such as replacing forest with                       over a more visually and emotionally
pasture, or draining wetland for agricultural                    appealing species, such as a tiger or elephant?
expansion, nearly always appear to outweigh                      In spite of these conflicting issues, these
the costs of environmental protection.                           authors contend that the gravity of the
    In recent publications, (Daily, 1997)                        environmental problem demands, at least, that
attempted to correct this omission by                            an attempt be made at quantifying these
synthesizing the vast array of scattered                         benefits at the global level.
publications dealing with the economic valuing                       The objectives in this paper are to introduce
ecosystem services. They recognize, however,                     the concept of valuing ecosystem goods and
that this endeavor is fraught with difficulties                  services. After examining the theoretical
(Gatto and DeLeo, 2000). For example,                            framework within which environmental goods
R. A. Voeks and M. Rahmatian

and services are valued, we review three areas              pain and suffering from illness, cleaner
of nature valuation with relevance to the                   environment, etc,).
developing world. These include:                               In this paper the value of environmental
• The value of folk medicinal plants in                    goods and services is frequently expressed as a
 pharmaceutical drug development;                          percentage of GDP in order to provide a sense
• The value of petty resource extraction from              of magnitude. It is also often useful to
 natural landscapes;                                       compare these values to GDP in order to assess
• The value of ecotourism as a development                 their relative magnitude over time. If the value
 strategy for developing countries; and                    of environmental benefits as a percentage of
• Finally, summarizing the work of (Daily,                 GDP is growing over time, it suggests that the
 1997), an estimate of the combined global                 welfare      increase    from     environmental
 value of ecosystem goods and services is                  improvement is growing faster than GDP.
 provided.                                                     The environmental benefits are valued
                                                           conceptually since there are no explicit
Theoretical framework                                      markets for environmental quality. Thus, we
    In order to evaluate environmental goods               need to draw inferences about how society
and services, the key is to recognize that the             derives value or utility from the environmental
relevant measure is the change in damage                   goods. From a purely conceptual point, it is
reductions brought about by a policy. These                generally recognized that the society derives
changes are called incremental benefits and                utility from environmental quality through two
can be defined as the reduction in health,                 sources of value, user value and existence
ecological, and property damages associated                value.
with an environmental policy initiative. To                    User value is the utility or benefit derived
identify these incremental benefits, the analyst           from physical use or access to an
must compare the actual or expected benefits               environmental well which consists of direct
to society after some policy is implemented to             user value and indirect user value. Direct user
a baseline of current conditions.                          value is derived directly from consuming
    These benefits are of two kinds primary and            services provided by an environmental good.
secondary. A primary environmental benefit is              Indirect user value is derived from indirect
a damage reducing effect that is a direct                  consumption of an environmental good.
consequence        of      implementing        an          Existence value on the other hand is the utility
environmental policy.        Examples include              or benefit received from an environmental
human health benefits, a more stable                       good through its continuance as a good or
ecosystem, and improved aesthetics where they              service. Total valuation of environmental
all are direct outcome of environmental policy.            quality is the sum of User Value and Existence
Secondary       environmental     benefits    are          Value, which is referred to as “Preservation
characterized as providing an indirect gain to             Value”.
society associated with the implementation of
environmental policy. Examples could include               Methodological Approaches to
higher worker productivity resulting from the              Measuring Environmental Benefits
primary benefit of improved health.                            The process of estimating the value of
The overall environmental benefits evaluations             environmental amenities involves a three-step
include (but are not necessarily limited to):              process:
• Economic values (e.g.: improved soil                     • Quantification of environmental amenities
 productivity and increased value of other                  (e.g.: monitoring of ambient air quality,
 natural resources, increase in international               river/lake/sea water quality, soil pollution),
 tourism),                                                 • Quantification of the consequences of a
• Environmental         opportunities       (e.g.:          change in the amenities (e.g.: changes in soil
 increased recreational values of lakes, rivers,            productivity,      changes         in      forest
 beaches and forests for the population), and               density/growth, reduced natural resource
• The value of healthy life and well being of               based recreational activities, reduced tourism
 the population (e.g. life saved, avoidance of              demand, health impacts of air pollution); and

                                                                                 The providence of nature…
                                              International Journal of Environmental Science & Technology
Vol. 1, No. 2, pp 163-176, Summer 2004

• Monetary valuation of the consequences                   incremental benefit, the analyst must monitor
 (e.g.: estimating the cost of soil productivity           voter's reaction to a series of proposals that
 losses reduced recreational values, ill health).          will convey how changes in environmental
    Environmental science, natural resource                quality are valued. This method is often used
science, health science and epidemiology,                  to confirm findings of other estimation
economics (and frequently other sciences) are              approaches or to test the predictive power of
often used to quantify environmental                       methods that use hypothetical markets.
degradation/conditions and its consequences.
For     valuation    of      the    consequences,             2.   The contingent valuation method (CVM)
environmental economics and natural resource                    Economists consider the appropriate value
economics are applied.            This paper has           of environmental amenities to be what an
attempted to collate available information on              individual would be willing to pay to preserve
the quantification of environmental valuation              it. This should reflect the value of foregone
in the world, and information that has been                consumption and leisure time and the loss of
available on the consequences of degradation.              contact with loved ones. Willingness to Pay
    In order to materially estimate the                    (WTP) can be estimated using the contingent
environmental qualities of various areas of the            valuation method (CVM). CVM estimates the
environment, the analysis and estimates are                WTP or willingness to accept (WTA) for a
generally organized by means of the following              change in the quantity and/or quality of a good
categories: water; air; soil; waste; coastal zones         by using survey techniques (Mitchell and
and cultural heritage and the global                       Carson, 1989 and Hoevenagel, 1994). In the
environment.                                               questionnaire a hypothetical change is
    Techniques      that      assess    responses          described and the respondents are asked
immediately related to environmental changes               directly for their WTP or WTA for the
are broadly categorized as Direct and Indirect             proposed change.
Methods. The Direct Method uses Political                      The CVM is used when the market data are
Referendum and Contingent Valuation                        unavailable or unreliable.         Surveys are
Methods.      Indirect methods are those that              employed to inquire about individual’s
examine      responses        not    about     the         willingness to pay for some environmental
environmental good itself, but about some set              policy initiative. This method is favored by
of market conditions related to it. This method            researchers of its applicability to variety of
uses Averting Expenditure, Travel Cost, and                environmental goods and services because of
Hedonic Pricing Methods.                                   its capacity to assess existence value as well as
                                                           user value. The following are some of the
Direct estimation methods under the behavioral             applications of CVM.
linkage approach                                           • Measures society's WTP for water quality
   The Behavioral Linkage approach is based                 improvements
on the observations of behavior in the markets             • Incremental benefits from air quality
or consumer responses about hypothetical                   • Value ecological benefits, such preventing
markets for environmental goods.           This             endangered species.
method estimates the environmental benefits                    Because CVM is a costly and complex
according to responses or observed behaviors               method, studies have been conducted in only a
directly tied to environmental quality. There              limited number of countries for a limited
exist two broad categories in this approach:               number of environmental goods and services.
                                                           In the United States and Europe numerous
   1.   The political referendum method                    CVM studies have been conducted on the
   This method uses voter responses to                     WTP for whole array of environmental
political referenda on environmental issues to             amenities. Where WTP/WTA are not available
make inferences about society's valuation of               for a particular country, one can estimate these
the associated benefits. Inferences drawn from             values for risk reduction through "benefit
a single referendum provide only a qualitative             transfer" of WTP studies performed outside
assessment about environmental benefits. To                that country.
use the political referenda data to quantify
R. A. Voeks and M. Rahmatian

     Benefit transfer is an application of                estimates of the value of environmental
monetary values from a particular valuation               amenities are being presented.
study in one area to a policy decision setting in
another geographic area (Navrud, 1999).                   Indirect estimation methods         under    the
When transferring values it is important to               behavioral linkage approach
know when data from other studies can be used             The Behavioral Linkage approach explores the
and under what conditions. The value that                 relationship that exists between the implicit
people attach to environmental improvement                prices of environmental characteristics that
depends on the type and magnitude of risk                 differentiate closely with related products.
(low probability, high impact), the extent to             There are several methods where the marginal
which the risk is experienced voluntarily, on             implicit price of environmental goods or
cultural settings, income, and the futurity of            services can be estimated.
the risk. The most important factors for
                                                             1.   Averting expenditure method (AEM):
applying benefit transfer are the level of real
                                                              The AEM method uses changes in an
per capita income, represented by purchasing
                                                          individual's spending on goods that are
power parity (PPP) per capita income, and the
                                                          substitutes for a cleaner environment to
income elasticity of WTP. Where estimates of
                                                          estimate the value of environmental qualities
WTP for environmental amenities are not
                                                          and services. The motivation here is that
available, it is therefore necessary to transfer
                                                          exposure to pollution causes damages that
these estimates from countries where WTP
                                                          negatively affect an individual's utility. There
studies have been conducted. When
                                                          are two critical assumptions:
extrapolating estimates of WTP from one
                                                          a) A systematic relationship can be identified
country to another, adjustments must be made
                                                               between the quality of the overall
for the effect of income on WTP. For instance,
                                                               environment and that of an individual's
in transferring estimates from country A to
                                                               personal environment.
country B the formula used is:
                                                          b) Goods may act as substitutes for
WTPB = WTPA [IncomeB/IncomeA]
                                                               environmental quality.
                                                              One drawback of AEM is joint-ness of
Where       represents the income elasticity of
                                                          production.      Whereas     some      averting
WTP (the percentage change in WTP
                                                          expenditures yield benefits beyond those
corresponding to a one percent change in
                                                          associated with a cleaner environment.
income). It should be acknowledged that there
                                                          Although there are some disadvantages of
is considerable uncertainty regarding estimates
                                                          using AEM, this approach has been used to
of the income elasticity of WTP, as well as
                                                          value statistical life of wearing seat belts in
uncertainty regarding the estimates of WTP
                                                          automobiles in an effort to reduce mortality
themselves. This uncertainty can be handled in
two ways. First, several estimates of the
income elasticity of WTP such as 1.0, and 0.4                2.   Travel cost method:
are used. Holding WTPA constant, the 0.4                      Travel Cost Method (TCM) uses the
elasticity results in a larger WTP estimate for           complementary relationship between the
the country in question than the 1.0 elasticity.          quality of a natural resource and its
Indeed, when WTP estimates from the United                recreational use value. A disadvantage of
States are transferred to another country using           using TCM is that it is capable of estimating
Purchasing-Power-Parity adjusted Income; an               only user value and not existence value. Due
income elasticity of 0.4 implies a very large             to this limitation, the TCM is commonly used
WTP for that country that is about the size of            only to estimate the value of improvements to
WTP in the US. Therefore WTP estimates                    water bodies used mainly for recreational
based on an income elasticity of 0.4 as upper             activity.
bound estimates, and estimates based on an
income elasticity of 1.0 as central case                     3.   Hedonic pricing method (HPM):
estimates. Second, to handle uncertainty about               HPM uses the estimated hedonic or implicit
the size of WTP, a conservative, lower bound              price of an environmental attribute to assign
                                                                                The providence of nature…
                                             International Journal of Environmental Science & Technology
Vol. 1, No. 2, pp 163-176, Summer 2004

value to policy driven improvements in the                pharmaceuticals. Quinine derived from the
environment. It is based on the theory that a             bark of the Peruvian cinchona tree (Cinchona
good or service is valued for the attributes or           ledgeriana) is used to treat malaria.
characteristics that it possesses. HPM uses               Pilocarpine from the Brazilian herb (Pilocarpus
regression analysis to determine the implicit             jaborandi) is used to treat glaucoma. Diosgenin
price of any environmental variable. Hedonic              from Mexican yams (Diascorides ssp.) is used
pricing estimates the WTP/WTA through;                    as a female contraceptive.         In the most
• The difference in the value of the same                 celebrated example, the alkaloids vincristine
 property located in different areas with                 and vinblastine derived from the Madagascar
 different environmental risks (property value            periwinkle (Catharanthus roseus) were
 differential); or                                        developed into a cure for Hodgkin’s disease
• The wage differential people are willing to             and childhood leukemia (Balick and Cox, 1996
 pay (or accept) for a decrease (or increase) in          and Soejarto and Farnsworth, 1989). More
 risk of death related to a job.                          recently, several plant derived products,
    This method of evaluation is used only due            including the protein MAP30 from the bitter
to the fact that it approaches the problem of             mellon (Momordica charantia) and prostratin
monetizing incremental benefits in a logical              from the Samoan mamala tree (Homalanthus
way,      directly    using      market   prices.         nutans) have shown anti-HIV activity in in–
Unfortunately it relies on a fairly complicated           vitro studies Cox (2000); Kell (2001) and
empirical model. Also the model calls for                 Myers (1997) estimates that 30,000 American
extensive data or product characteristics, which          lives are saved each year by anti-cancer drugs
are often unavailable or incomplete. HPM has              derived from plants.
been used for estimating a variety of pollution               The developing world represents a
control benefits.                                         particularly rich source of potential medicinal
    In the following sections we present several          species. Secondary compounds are more
approaches to estimating the value of                     concentrated in tropical regions, as is the
environmental goods and services in global                biological diversity of plant species (Levin,
production. Our purpose is to present some                1976 and Pitman and Jorgensen, 2002). Just as
economically logical valuations that might be             important, the traditional societies that sustain
included in future green GDP accounts. Most               these cognitive relations with nature are much
of the estimates are based on the assumption              more likely to survive in developing as
that a hypothetical market exists where these             opposed to industrial countries.
environmental amenities are exchanged and                     Economic projections of the potential value
the population is being charged for its use.              of medicinal plant resources, both to private
Zero on the lower end and gross world output              pharmaceutical corporations and to society in
at the upper end bound all of these estimates             general, underscore the value of this endeavor
logically. The underlying message of this                 (Adger, et al., 1995 and Myers, 1997).
calculation is clear; including the value of              According to (Soejarto and Farnsworth, 1989),
ecosystem goods and services would                        twenty five percent of all prescription drugs
dramatically alter current GDP estimates.                 sold in the U.S. in the 1980s contained
                                                          compounds that were extracted from plants,
Valuing local plant pharmacopoeias                        totaling over US $8 billion in annual retail
    In the last few decades there has been a              sales. A few years later recalculated this figure.
renewed interest in the healing properties of             Noting again that one-quarter of drugs
nature, in particular the social and economic             currently on the US market were originally
benefits of bioprospecting for pharmaceutical             derived from plant compounds, and
drug plants. It is well known that plants                 multiplying this by the current prescription
maintain a host of defensive secondary                    sales in the US (US $62 billion/yr), he
compounds saponins, phenols, terpenes,                    estimated that the value of plant-derived drugs
alkaloids, and others and that many are                   averages US $15.5 billion/yr.
bioactive in humans. Over the centuries, many                 Principe    (1991)     reconsidered      these
plant compounds have been tested and                      calculations in terms of societal benefits of
ultimately      developed      into    modern             potential new plant-derived drugs. First, he
R. A. Voeks and M. Rahmatian

estimated that roughly 500,000 Americans                    general figure of roughly 375 commercially
contract cancer per year. He then notes that                valuable species waiting to be discovered.
anti cancer drugs, of which 40% are of plant-               There have, however, already been 47 drugs
derived origin; cure about 15% of these cases.              produced from tropical species. Subtracting
This yields about 30,000 Americans per year                 these previous discoveries from 375 yields an
who owe their continued existence to plant-                 estimated 328 yet to be discovered
derived drugs. He then considered the “value                pharmaceuticals.      Including the cost of
of life” of each of these individuals, and used             research     and development,         marketing,
the average figure of US $8 million.                        distribution, and interest rates, the estimated
Multiplying this figure by the 30,000 saved                 economic value of each of these undiscovered
lives yields a total economic value to                      species is US $ 94 million (Mendelsohn and
American individuals of US $ 240 billion per                Balick, 1995).
year.                                                           As noted by many ethnobotanists, these
    The economic value of potential drug plants             potential drug discoveries are threatened by an
can be examined as well by considering                      array of factors. Habitat loss has been linked to
individual drug discoveries. In the 1960s, the              decreasing access to traditional plant
Eli Lilly Pharmaceutical Corporation began                  medicines in Samoa, Kenya, eastern Brazil,
examining the pharmacological properties of                 (Cox, 1999; Jungerius, 1998; Voeks, 1997). In
the Madagascar periwinkle (Catharanthus                     other locations, such as Sierra Leone,
roseus). The discovery of the efficacy of two               Cameroon, and India, valuable medicinal taxa
of its 76 alkaloids vincristine and vinblastine in          are declining due to excessive plant extraction
the treatment of acute lymphoblastic leukemia,              to supply national and international markets
lymphosarcoma, Hodgkin’s disease, and other                 (Anyinam, 1995; Lebbie, and Guries, 1995;
tumors, was a major catalyst for renewed                    Pandey and Bisaria, 1998). The most pressing
interest by pharmacological companies in plant              threat to medicinal plants and their knowledge
derived medicines. The idea to explore the                  profiles, however, appears to be declining
medicinal properties of this particular species             medicinal       knowledge       among       rural
was provided by a traditional healer, who                   communities       (Cox,      2000).    Religious
recommended its use to treat diabetes (Balick               conversion (Caniago, and Siebert, 1998; Voeks
and Cox, 1996). Sales from this single drug by              and Sercombe, 2000), entrance of western
Eli Lilly are estimated to generate US $100                 medicine (Milliken, et al., 1992; Urgent,
million per year.                                           2000), economic improvement (Benz, et al.,
    Finally, what is the potential value of the             2000; Voeks and Nyawa, 2001), and enhanced
many as yet undiscovered drug plants? The                   access to formal education (Voeks and Leony)
case of tropical forests species is instructive. It         have all been linked to declining knowledge of
is estimated that there are between 310,000 and             nature.
422,000 plant species on Earth (Pitman and
Jorgensen, 2002). Of this total, roughly                    Economics of petty resource extraction
125,000 are thought to inhabit tropical forest                  Petty resource extraction represents one of
landscapes. On average, three plant parts                   the least explored land use options for
(usually leaves, bark, and roots) per species are           developing countries. It is based on the idea
tested. There are, on average, 2 extraction                 that collection of wild, non-timber products by
methods used for each plant part, yielding a                rural people fruits, nuts, latex, fibers, rattans,
total number of plant extractions of 750,000                medicinal, and others represents a viable
total extractions (125,000 X 2 x 3).                        alternative for natural area protection. Long
Pharmacological screens of plant extractions                perceived       as       a     symptom          of
average between 50 and 75. This produces 38                 ‘underdevelopment’, and reflective of past
to 56 million possible screens from the total               boom-and-bust economic cycles, petty
tropical flora of the world. On average,                    extractive activities are most often viewed by
between one in 50,000 and one in one million                the developing world as a form of economic
screens produces a commercial drug.                         retardation and backwardness.
Applying this success rate to the total number                  Beginning in the 1980s, environmental
of possible screens (38-56 million) yields a                scientists and economists began to reconsider
                                                                                The providence of nature…
                                             International Journal of Environmental Science & Technology
Vol. 1, No. 2, pp 163-176, Summer 2004

the possible value of the “extractive option”                Today there are four other rubbers
for nature conservation. Most of these efforts           extractive reserves, where latex and extractive
have been directed at tropical countries, where          products continue to support the local
traditional extractive activities have a long            population, but where forest removal is
pedigree, and where ongoing environmental                prohibited. There are a limited number of
destruction is acute. The reasoning is that,             economic studies on the viability of extractive
under the best of circumstances, petty                   economies. In a classic study carried out in
extraction:                                              Peru, Peters, et al., (1989) and censuses the
• Generates revenue at the local and national            economically valuable extractive products in a
 level,                                                  one-hectare plot of forest. Seventy-two species
• Leads to minimal levels of environmental               had market value 60 timber species, 11 food
 damage,                                                 species, and one latex species. Utilizing the
• Maintains and supports the traditional                 mean retail value of the non-timber extractive
 livelihoods of local rural populations, and             products, including the cost of labor and
• Encourages local people to serve as de facto           transportation, they calculated that the net
 nature stewards.                                        present value (NPV) of fruit and latex
    An example of this activity comes from the           collection was US $6,330 per hectare of forest.
eastern forests of Brazil, where Voeks (1996a)           Although the immediate value of timber
investigated the ecology and extractive                  extraction was higher, the long recovery time
economy of the piassava palm (Attalea                    necessary for forest trees to grow back to
funifera). This species has supplied durable             harvestable size translated to a relatively low
leaf fiber for the production of ropes, roofing          NPV of US $ 490. Although there were
thatch, and brooms and brushes for at least two          methodological errors in this calculation, and
centuries. Although originally collected by              non-use ecosystem good and services were
cutting and killing the palm, during the 20th.           omitted from the calculation, it suggests
century forest collectors switched to a                  nevertheless that extraction should be
sustainable method of removing fiber on an               considered as an economic option to habitat
annual basis. This activity appears to have              destruction.
minimal impact on forest diversity. A study                  In another economic analysis, this in Belize
carried out in a single piassava extractive area         Balick and Mendelsohn (1992) examined the
Voeks (1996b) revealed a high level of floristic         extractive value of plants used by locals in
diversity (Simpson Ds = 0.78). Moreover,                 traditional healing and sold in local markets.
economic revenue had steadily climbed over               They collected the medicinal species in two
most of this century. From a low of roughly              small plots, one of 0.28 ha, the other of 0.25
US $200,000 in sales in 1910, passive                    ha. The two sites yielded 86.4 kg and 358.4 kg
production had climbed to nearly US $ 20                 (dry weight biomass), respectively. Projecting
million by 1990.                                         this to a full hectare yielded 308 kg and 1433
    The most successful example of the role of           kg, respectively. The estimated gross revenue
extraction in nature conservation comes from             from these two sites was US $ 864 and $
Amazonian Brazil.          Since the mid-19th.           4,014, respectively. Including estimated labor
century, this region has been prized for its             and transportation costs into the calculation
natural population of Brazilian rubber trees             yielded values of US $ 564 and $ 3,054 per
(Hevea brasiliensis). Many thousands of rural            hectare. The authors compared these values to
rubber tappers base their livelihoods on the             alternative land uses clearance for agriculture
collection and sale of latex from the forest.            (corn, beans, and squash), and pine plantation
Responding to increasing levels of forest                development, which were estimated to yield
removal for the creation of cattle ranches,              US $339 and $3184 per hectare, respectively.
rubber     tappers     and     environmentalists         The results of this study suggest that allowing
encouraged the Brazilian government to                   natural areas to be deployed as medicinal plant
establish ‘extractive reserves’. This proposal           extraction zones compares favorably with
was finally given serious attention after the            more destructive forms of land use. Godoy,
assassination of Chico Mendez, leader of the             et al., (1993) reviewed economic analyses of
rubber tappers, by a local cattle rancher.               extractive enterprises done to date, and found
R. A. Voeks and M. Rahmatian

them lacking in several ways. They note that                Ecotourism and nature’s economic services
each study uses different economic assessment                   Ecotourism is widely touted as a viable
methods, none includes the value of both                    development strategy for the developing world.
animals and plants, and all assume without                  It can be defined as “responsible travel to
evidence       that    these     activities     are         natural areas that conserves the environment
environmentally sustainable. They suggested                 and sustains the well-being of local people”
the following methods: randomized village                   (Honey, 1999). In addition to appreciating the
samples, accurate biomass weighing systems,                 natural qualities of the region dramatic
photographing species that cannot be collected,             landscapes, native wildlife, and endemic plants
and using GPS and GIS techniques for field                  visitors are often drawn as well to observe
mapping of extractive zones.            Regarding           local cultural traditions. While often based on
economic         analysis     methods,        they          romanticized notions of the relations between
recommended: using actual local market value                rural people and nature, ecotourists
of     goods      (including    barter      value),         nevertheless often wish to observe how
distinguishing goods that are consumed in the               traditional societies live with nature their
village from those transported to markets,                  subsistence agricultural methods, hunting and
adjusting for relevant taxes and subsidies,                 fishing techniques, religious ceremonies, and
including cost of material, labor, and discount             healing practices.
rate, and including value of nonuse ecosystem                   The allure of ecotourism for developing
services in the calculation.                                countries is that:
    In a later publication, incorporated most of            • It     requires      minimal      infrastructural
these suggestions in a study of extraction in                investment,
rural Honduras villages. They worked in two                 • It causes limited environmental impact
villages, identifying the value of fish, game,               compared to other options, and
and other forest products gathered in the                   • It generates significant foreign exchange.
vicinity.    The two villages averaged US                   Indeed, the tourist industry has exploded in
$91,041 and $ 3,920, respectively, per year in              recent decades. In 2000, there were an
extractive products. Calculating this per unit              estimated 702 million international tourists,
hectare yielded figures of US $ 2.50 and $                  generating an estimated US $ 621 billion in
9.05. These values are much lower that those                revenue. Roughly 8% of the world’s
achieved in earlier studies, suggesting that                population is employed, directly or indirectly,
other studies may have over-valued the                      in tourism-related activities.        Ecotourism,
extractive enterprise in their respective areas.            which represents the fastest growing tourism
It also underscores the economic motivation                 sector, generates an estimated US $ 50 billion
for local populations to switch to more                     in global revenue in 2000 (Fennell, 1999). In
destructive land uses, such as agriculture and              Tanzania, where ecotourism represents the
forestry, which produce higher immediate                    largest source of revenue, gross receipts totaled
economic returns.                                           US $ 322 million in 1996. Kenya realized $
    Whether or not petty extraction represents a            502 million in gross receipts in 1997, while
viable alternative to destructive land use is               South Africa received $2.2 billion in earnings
problematic.      Research on the topic has                 in 1995 (Honey, 1999). Clearly, there is a
produced mixed results. Importantly, none of                significant economic motive to embrace
these studies incorporated ecosystem values,                ecotourism development.
such as carbon sequestration, erosion control,                  Under the best of circumstances,
and others, that tend to benefit the global rather          ecotourism provides benefits at the local,
than local community. If non-use ecosystem                  regional, national, and international levels. At
values are to be incorporated into rural                    the local level, people benefit as visitors
economic assessment, it seems clear that                    purchase locally produced foods and crafts,
global stakeholders, who are likely to accrue               lodge in locally owned hostels, employ local
most of its benefits, must bear some of the                 guides, and otherwise encourage local people
costs of protecting rural ecosystems in the                 to remain in rural settings rather than migrating
developing world.                                           to cities. At the regional level, jobs are
                                                            produced and locally produced goods are
                                                                                 The providence of nature…
                                              International Journal of Environmental Science & Technology
Vol. 1, No. 2, pp 163-176, Summer 2004

marketed. At the national level, tax revenues              taxes, and donations. Bhutan, for example,
and user fees are collected, foreign exchange is           charges US $200 per day for foreign visitors,
generated, and capital investment is captured              and limited annual visitation to only 5,000
rather than exported to the developing world.              visitors. Rwanda charges a flat rate of US $
Finally, because ecotourism encourages nature              250 for a sixty-minute visit to their mountain
protection in the developing world, globally               gorilla preserve. But these extreme models are
significant ecosystem services are protected               not likely to be repeatable in less sought-after
rather than destroyed.                                     locales.
    In spite of these potential economic                       The small Central American nation of
benefits, ecotourism development is also                   Costa Rica has banked heavily on ecotourism
accompanied by a host of social and economic               as a means of advancing nature protection and
challenges. For example, Costa Rica                        generating sorely needed foreign revenue.
established the Tortugeira National Park in the            Possessing a high degree of natural values,
1970s in order to stimulate ecotourism and to              from coral reefs and beaches to tropical
protect rare and endangered sea turtles that               rainforests and highland cloud forests, Costa
nest along the immediate coast. Although                   Rica also has the burden of a high level of rural
these      environmental       and      economic           poverty and unemployment. Since the 1990s,
expectations were realized, the impact on local            the principal national revenue has shifted from
communities was mostly negative.             Land          coffee cultivation to ecotourism. With a total
speculation and the rising cost of living forced           population of only three million people, Costa
most of the original local population to migrate           Rica now hosts over one million tourist visitors
away from the area (Place, 1991). In India,                per year (Honey, 1999).
natioal park expansion to meet the needs of                    The evolution of one of its various parks,
ecotourists has occurred at the expense of local           Monteverde National Park, underscores the
farmer access to land.                                     economic impact of tourist development. With
    Moreover, ‘leakage’ or revenue plagues                 on 471 visitors in 1974, the park had increased
many ecotourism efforts. While the host                    visitation to 26,600 by 1990. Utilizing the
country bears most of the costs of ecotourism,             travel cost method to measure the economic
it is often foreign companies that realize most            value of ecotourism, Menkhaus and Lober
of the profits. This is particularly true as more          (1996) determined that the cost of travel for
and more ecotourists opt for package tours                 ecotourists ranged from a low of US $800 to a
organized in their home country staying in                 high of $ 8,000. Multiplying the average travel
foreign-owned hotels, eating and drinking                  cost to ecotoursts, US $1150, and assuming
imported luxury goods, and employing foreign               that ecotourists visited other areas of Costa
guide services. Culture change can be a                    Rica, the determined that the value of
particularly insidious dimension of ecotourist             ecotourism to Monteverde National Park was
development.         Malaysia, Thailand, and               on the order of US $ 4.5 million per year.
elsewhere, tourist attraction to more exotic                   In the Cuyabeno Wildlife Reserve in
elements of the local religion and culture has             Ecuador, Wunder (2000) examined economic
led a form of ‘cultural co modification’. Tribal           benefits to various local communities.
societies in Thailand dress up in traditional              Presently, about 5000 ecotourists arrive at the
attire to meet the expectations of visitors, while         protected area per year. Using semi-structured
in Malaysia and Brunei Darussalam the interior             interviews, demographic studies, and cash and
tribal groups perform dances and other cultural            subsistence evaluations, Wunder (2000)
activities at times and place to meet the needs            examined the relative success of five separate
of tourists. Over time, the cultural significance          ethnic groups in capturing capital. Unlike other
of long-established rituals and ceremonies is              studies, this author discovered that significant
defined more by its attraction for visitors than           economic benefits were accrued by the various
by its original cultural meaning.                          local groups. One group realized US $49,430
    National efforts to better capture foreign             during a single year, representing 100% of
revenue include: collection of user fees (e.g.             their total cash income, while another group
park entrance), concession fees charged to tour            received $ 31,753, representing 97.5% of their
companies, royalties from souvenir sales,                  cash income for the year. In this case,
R. A. Voeks and M. Rahmatian

ecotourism development led to positive                    • Soil formation (e.g. rock weathering);
economic benefits for the local communities.              • Nutrient cycling (e.g. nitrogen fixation);
   As a strategy for developing countries,                • Waste treatment (e.g. pollution control);
ecotourism provides divergent prospects and               • Pollination (e.g. crop reproduction);
problems. In many cases, significant levels of            • Biological control (e.g. sustaining keystone
foreign revenue are realized at the local and              species);
national level. Nevertheless, strategies need to          • refugia (e.g. waterfowl habitat);
be pursued in order to diminish the effects of            • Food production (e.g. fishing);
revenue leakage. The social and cultural
                                                          • Raw materials (e.g. lumber);
Nature’s goods      and   services:   A   global          • Gene resources (e.g. locally-endemic
assessment                                                 cultigens);
   Economic assessment of the global                      • Recreation (e.g. ecotourism); and
significance of ecosystem services requires a             • Cultural (e.g. aesthetics).
division of the Earth’s ecosystems into a
logical set of geographical units. To simplify                What follows is a sample of the ecosystem
the bewildering diversity of ecosystems,                  goods and services that are rendered by nature,
aquatic and terrestrial, the approach taken in is         a sample of the threats to these values, and an
to work at the biome level.                               attempt at economic valuation of each.
Coastal and marine biomes include:
• Open ocean,                                             1. Open oceans
• Estuaries,                                                  Open oceans represent the largest of Earth’s
• Sea grass beds,                                         biomes, with an area of 33,200 ha x 108.
                                                          These areas are particularly important on a
• Coral reefs, and
                                                          global scale in regulating gas exchange. This
• Continental shelves.
                                                          includes especially the production of oxygen
Terrestrial biomes included:
                                                          from surface plankton; as well a sink for
• Tropical forest,                                        carbon dioxide, the principal compound
• Temperate/boreal forest,                                involved in anthropogenically forced global
• Grassland/rangeland,                                    warming. Open oceans also provide important
• Wetlands,                                               zones of nutrient cycling, particularly for
• Lakes/rivers,                                           nitrogen and phosphorus. Of course, the ocean
• Deserts, and                                            is also a major contributor of fish to the global
• Tundra.                                                 market place. The estimated economic value
Some of these ecosystems have been the                    of these goods and service is US $252/ha/yr.
subject of environmental economic analysis;               Multiplied by the total area of open oceans;
others have received no attention whatsoever.             this translates to an annual value of US $8.3
This obviously biases the final results, and              billion.
should serve as motivation to expand research
efforts into these underrepresented subsets of             1.   Coastal marine environments
nature.                                                       The interface between land and water
   Although ecosystem services overlap                    represents an especially important resource and
considerably, for convenience these are                   ecosystem service zone. Upwelling zones, such
reduced to seventeen classes of goods and                 as off the coast of Peru, Namibia, and
services. These include:                                  California provide the most productive
• Gas regulation (e.g. maintaining the                    commercial fish resource zones in the world.
 CO2/O2 balance);                                         These zones are also noted for their
• Climate regulation (e.g. precipitation                  recreational value to boating, swimming,
 regimes);                                                surfing, and sport fishing. Coral reefs likewise
• Disturbance regulation (e. g. flood control);           represent a high value material and cultural
• Water regulation (e.g. irrigation);                     resource in the coastal zone.         They are
                                                          important sources of waste treatment,
• Water supply (e.g. access to potable water);
                                                          biological control, recreation, and research.
• Erosion control (e.g. loss of topsoil);
                                                          They are also important sources of commercial
                                                                                The providence of nature…
                                             International Journal of Environmental Science & Technology
Vol. 1, No. 2, pp 163-176, Summer 2004

fish and lobster, including aquarium fish.                year. This figure included willingness to pay
Although often harvested by unsustainable                 figures for recreational forest habitat.
means using dynamite and cyanide poisoning,               determined, for example, that the average
the aquarium fish trade is estimated to yield             California resident was willing to pay US $73
between US $20-40 million dollars in revenue              to protect the forest habitat of the northern
per year (Hoagland, et al., 1995). Summing                spotted owl. This translated to a statewide
the value of these and other coastal                      figure of US $760 million, far more than the
environments yields an estimated value of US              estimated market value of the timber. In this
$ 4,052/ha/yr, or a total of US $12.3 trillion            case, endangered species protection appears to
dollars per year for all coastal marine                   outweigh the public’s interest in raw materials.
ecosystem goods and services.                             Taking into consideration all of the economic
                                                          goods and services provided by temperate zone
 2.   Tropical forests                                    forests, their global value is placed at US $ 894
    Tropical forests cover roughly 1,900 ha x             billion per year.
108. Given their high levels of plant
productivity and extreme levels of biodiversity,           4.   Grasslands/Rangelands
this biome generates significantly valuable                   Grasslands and associated shrub lands
ecosystem services.       They are especially             comprise roughly 3,989 ha x 108. These are
important in terms of climate regulation,                 located mostly between 200 and 450 north and
erosion control, nutrient cycling, raw materials          south latitude. Their principal ecosystem
(especially    hardwoods),      and     tourism.          services include erosion control, food
Deforestation in the tropical zone has been               production, waste treatment, and nature
implicated in global warming, due to release of           tourism (in Africa). Given the high
carbon dioxide from burning, as well as                   productivity of the soils, mostly moll sols, this
regional shifts in rainfall, evapo-transpiration,         biome represents the breadbasket of many
and temperature. Krutilla (1991) used the                 civilizations. Burke, et al., (1989) examined
replacement cost method to estimate the                   the economic value of grasslands as sinks for
economic value of tropical forests as sinks for           carbon dioxide. They determined that the
carbon dioxide. He determined that                        average grassland that was converted to
replacement costs for all tropical forests would          agriculture lost the ability to absorb 1.0 kg/m
run to about US $223 billion per year.                    of carbon dioxide. Assuming a cost of CO2
Combining these values with the plant and                 emissions (as a factor in global warming) of
animal existence values, tropical genetic                 US $ 0.10/ha, they estimated the global value
resources are estimated to be worth US $41                of CO2 fixation by grasslands at US $7 billion
billion dollars per year. The total economic              per year. Including all relevant ecosystem
value of all tropical forest goods and services           services, grasslands are valued at US $906
averages US $3.8 trillion per year.                       billion per year.

 3.   Temperate/Boreal forests                             5.   Wetlands/Floodplains
    Temperate forests occur from subtropical                  Wetlands and floodplains represent a
zones to the edge of the arctic. They cover an            particularly important source of nature’s
estimated 2,955 ha x 108. Primary ecosystem               services. Although constituting only 165 ha x
services include climate regulation, waste                108 ha in area, these ecosystems provide a host
treatment, food production, recreation, and               of essential environmental values. These
                                                          include gas regulation, waste treatment,
forest raw materials. Although often managed              environmental disturbance regulation, water
under conditions not considered to be                     supply, wildlife refugia, recreation, and others.
sustainable on a long-term basis, most                    The presence of riparian vegetation along
temperate forests are managed with this                   streams and rivers, for example, dramatically
objective. On a global scale, the economic                diminishes the impact of natural flood cycles.
value of timber resources alone is estimated at           In the United States, the estimated economic
between US $10 and $73/ha/yr. Calculated for              value of the avoided costs of flood control
all timberlands, the global economic value of             damage reaches US $7,240/ha/yr. Wetlands are
timber harvest is roughly US $ 26 billion per             equally important as sources of natural
                                                          pollution control, and as refuges for
R. A. Voeks and M. Rahmatian

endangered and threatened plants and animals.               Abbaspour and Dr. Farideh                Atabi    for
Pollution control services of wetlands in the               organizing the workshop.
United States are estimated at US $1,659/ha/yr.
The total global value of wetlands and
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R. A. Voeks and M. Rahmatian


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