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Ecosystem services




Heather Tallis1 and Peter

Humans have always depended
on nature for environmental assets
like clean water, nutrient cycling
and soil formation. These have
been called by different names
through human history, but are         The Indonesian mangrove habitats shown above are relatively low in biodiversity
presently gaining global attention     (compared to other tropical habitats), yet are among the world’s most valuable
                                       ecosystems when one accounts for their storm protection, fisheries production, and
as ‘ecosystem services’. Gretchen      water supply. In fact mangroves are estimated to provide ecosystem services at a per
Daily defines ecosystem services       hectare rate ($9,900 per year) nearly five times higher than the per hectare rate for
as “the conditions and processes       tropical forests, which are noted for their high biodiversity. Thus, at a global scale,
through which natural                  high biodiversity does not necessarily correspond to the greatest ecosystem services
ecosystems, and the species that       — a reality that may cause conservation efforts to broaden their goals beyond simply
make them up, sustain and fulfill      maximizing biodiversity.
human life”. Until recently, we
have tended to take ecosystem          importance of ecosystem                      Millenium Ecosystem Assessment
services for granted, as they have     processes and other forms of                 identified functions as
generally been ‘free’, despite their   capital (physical, social, cultural,         provisioning (food, water, fuel,
obvious economic value to              intellectual). Economic valuation            fiber), regulating (prevention of
humans. In fact, a recent global       need not cover all values of                 soil erosion, flood control), cultural
analysis by the Millenium              ecosystems; progress is made                 (recreation, spiritual value, sense
Ecosystem Assessment                   simply by capturing values that              of place) or supporting (soil
concluded that well over half of       are presently egregiously                    formation, nutrient cycling, oxygen
the world’s ecosystem services         overlooked. As a society, the                from photosynthesis).
are being degraded or used             modern world routinely uses                     Regardless of the ways they can
unsustainably. With a global           cost–benefit analyses to judge               be grouped, ecosystem services
population soon to number nine         between alternative pathways.                have been brought into the
billion people, ecosystems             The valuation of ecosystem                   limelight largely due to interest
services are becoming so               services facilitates difficult               from multiple, usually disparate,
degraded that many regions in the      decisions about how to proceed               sectors. Corporations and private
world risk ecological collapse. It     with development to keep up with             land owners have begun to
may be time for the era of free        ever-expanding human                         recognize that their resource
ecosystem services to come to an       populations. Without economic                bases are finite and are, in some
end. The idea of paying for            valuation, decision-makers and               cases, factoring ecosystem well-
ecosystem services is causing          governments implicitly assign                being into the corporate or
corporations, private land owners,     ecosystem processes a value of               individual balance-sheet. For
conservation organizations and         zero and, not surprisingly, then             instance, British Petroleum gained
governments to take note. Even         select actions that reap rewards             support from the public, and even
prominent business-oriented            according to values everyone                 some conservation organizations,
magazines such as The Economist        already understands (like a new              in their bold move to break from
have recently featured ecosystem       factory). Hence valuation, even if it        the fossil fuels industry by publicly
services on their cover (see the 21    is flawed, may get ecosystem                 recognizing the association
April 2005 issue).                     processes on the table and lead to           between fossil fuels and climate
   If we are to start paying for       more sustainable policies.                   change, and then selecting a
ecosystem services, we have to            Several attempts have been                corporate strategy that reflected
know how much to pay.                  made to classify and exhaustively            the role of carbon sequestration
Economists and ecologists are          list ecosystem services. There is            and reduced emissions in climate
just beginning to credibly assign      no present consensus on a useful             control. On a less grand, but
economic value to ecosystem            taxonomy, though de Groot and                equally relevant scale, cattle
processes, transforming these          coworkers and the Millenium                  ranchers and foresters may use
processes into tradable,               Ecosystem Assessment have both               ecosystem services as another
marketable services. This              established groupings that align             commodity that can be sold
approach gives us a common             ecosystem functions with goods               beyond beef or timber, as long as
currency to assess the relative        and services. For example, the               they can find someone willing to
Current Biology Vol 15 No 17

                                                                                                        thinking about nature, differences
  Box 1                                                                                                 of opinion can be dramatic. For
  Mangroves: from $2000 shrimp to tsunami protection                                                    example, some scientists suggest
                                                                                                        a virtual one-to-one mapping
  Mangroves have long been the poster child of       Mangroves have also illustrated the                between ecosystem services and
  ecosystem services. The list of the services       importance of understanding what ecosystem         biodiversity. Others point out that
  provided by mangroves is long and well             characteristics are necessary for particular       there are many cases where low
  appreciated by subsistence communities             services. The recent Indian Ocean tsunami          diversity systems can provide
  globally. Many of these services have already      provided a textbook example of the role of
                                                                                                        tremendous ecosystem services,
  been targets of valuation studies, including       mangroves in coastal protection. Most areas
                                                                                                        and that modest losses of
  finfish and non-finfish commercial and             in Sri Lanka with relatively good mangrove
  subsistence fisheries, timber and firewood,        status before the tsunami were protected and
                                                                                                        biodiversity may not substantially
  dyes, tourism, medicinal remedies, education,      received little wave damage as expected, but       undermine ecosystem services.
  physical coastal protection, carbon storage,       some were severely damaged. In other               Many conservationists also fear
  and even existence and option values. The          words, the mangroves acted like an                 that placing values on ecosystem
  power of such valuations was shown early           insurance policy against storm damage              services will lead to the loss of
  on, when the Fijian government temporarily         nature s insurance policy, with no premiums        appreciation of species for their
  stopped mangrove reclamation in the 1960 s         charged to anyone. Of course, if all of the        own sake. History has shown that
  and 1970 s after seeing the results of a partial   coastal regions bludgeoned by the tsunami          markets are generally unkind to
  valuation study.                                   had recognized the value of mangroves,
                                                                                                        natural systems. Others see
                                                     much damage and suffering could have been
  A later case study showed the economic and                                                            markets as tools that can instill
  ecological perils of neglecting the value of       averted.
                                                                                                        conservation value into lands
  mangroves. A large mangrove area on India s        Interestingly, just as is the case with regular
                                                                                                        under human use that would
  east coast houses a shrimp farming industry        insurance policies, the details matter. A
                                                                                                        traditionally not be valued if the
  that relies on wild brood shrimp. But,             closer look at the patterns of damage and the
  mangroves were cleared for new farms               coastal vegetation showed that the damaged
                                                                                                        only measure were biodiversity.
  subsidized by the government and the               areas had dominant mangrove trees like                Possibly the boldest move to
  remaining mangrove area is half of that            Rhizophora sp. in good condition, but had          embrace and understand
  required just to provide enough wild brood         understories dominated by less typical             ecosystem services to date is the
  shrimp for existing farms. Overdevelopment         mangrove associates (species not always            Millennium Ecosystem
  has led to a wildly fluctuating brood shrimp       found in mangroves). This detail of forest         Assessment, mentioned above.
  market where a single shrimp can sell for as       character, not visible from satellites, made all   This assessment of the status of
  much as $2000 USD. Analyzing the partial           the difference. If mangrove restoration efforts
                                                                                                        the earth’s ecosystems was
  value of mangroves for brood shrimp                spurred by the recent disaster focus on
                                                                                                        requested by the United Nations
  provision alone would have clearly identified      expanding the extent of major mangrove
  the optimal number of farms, saving subsidy        species while ignoring understory species,
                                                                                                        Secretary General, Kofi Annan. As
  money, providing a sustainable industry and        the region could face an equally grave threat      stated in the report: “the objective
  retaining more mangroves.                          from the next tsunami.                             of the Millenium Ecosystem
                                                                                                        Assessment was to assess the
                                                                                                        consequences of ecosystem
                                                                                                        change for human well-being and
pay for clean watersheds or                          interested in ecosystem services.                  to establish the scientific basis for
erosion control.                                     Private donor dollars presently                    actions needed to enhance the
   Ecosystem services have also                      pay for most domestic and                          conservation and sustainable use
piqued the interest of the public                    international conservation                         of ecosystems and their
sector and national governments.                     activities. Though these funds                     contributions to human well-
For example, several agencies                        have set aside vast tracts of                      being”. The assessment cost over
within the US government                             pristine systems, they alone will                  $20 million and involved 1300
(USEPA, USACE, USDA) recently                        not be enough to protect the                       scientists who volunteered their
showed their interest in                             majority of the earth’s ecosystems                 time synthesizing and analyzing
ecosystem services when they                         and the species they house. In                     data and models.
commissioned the National                            comparison, realization of the                        All of this interest is derived
Research Council to produce a                        market worth of ecosystem                          from a healthy base of theory and
report on the topic and the status                   services has the potential to                      only a few real-world examples
of aquatic ecosystem services in                     increase conservation funding by                   that scratch the surface of
the US. These government                             orders of magnitude. Ecosystem                     possible tools for the sticky
agencies recognize the utility of                    services also have the possibility                 business of assigning values to
ecosystem service valuation for                      of aligning conservation value and                 ecosystem functions. The point of
its potential to inform policy                       poverty alleviation. Functioning                   economic valuation is to estimate
decisions that include                               ecosystems provide clean,                          the importance of changes in
consideration of trade-offs, for                     disease-free water, fertile soil and               ecosystem services to human
providing damage assessments                         numerous other basic human                         welfare. There is an active
and for incorporating                                needs.                                             movement to formalize ecosystem
environmental assets and services                       The paradigm of ecosystem                       service values in public and
into national income accounts.                       services is not accepted by                        private sectors by creating
   Conservation organizations                        everyone, and even among those                     markets for ecosystem services,
have several reasons to be                           who champion this new way of                       and at a minimum changing

policies away from perverse                                                              Fish       for      personal
subsidies.                                                                               consumption caught by net
                                                                                         from a coral reef in
   The most common and most
                                                                                         Indonesia. Although the
appropriate approach to non-                                                             importance of coral reefs
market valuation is called total                                                         for fisheries is well-known,
economic value (TEV). This                                                               unsustainable       practices
approach does not necessarily                                                            such as blast fishing
assess the total value of an                                                             commonly squander these
                                                                                         ecosystem services, and
ecosystem, but rather allows
                                                                                         leave future generations
changes to be calculated for all                                                         deprived. In this Indonesian
values (use and non-use values)                                                          community, blast fishing
associated with one or several                                                           had been halted, and local
ecosystem functions. Any                                                                 people enjoy a bountiful
calculation of TEV will depend                                                           harvest of fish. If blast
                                                                                         fishing yields too much
heavily on the spatial and
                                                                                         short-term economic gain
temporal scales being assessed,                                                          due to exports to Japan or
so analysts must be clear about                                                          elsewhere, the wisdom of
the intended scope of their study.                                                       sustainable practices does
TEV can be assessed as                                                                   not so easily triumph.
willingness to pay (WTP) or
willingness to accept (WTA)
payment. WTP is the more             service, or some other form of         potential may be even riskier as
common method, as more tools         incentive. Some payment systems        species continue to blink out of
for estimating economic value are    are already established and            existence and ecosystems
relevant to this approach and        functioning for selected               continue to collapse around us.
WTP can usually be considered a      ecosystem services. For example,
conservative estimate in cases       there are at least five active         Further reading
where WTA would be preferred.        carbon markets in the world, and        Costanza, R., d’Arge, R., de Groot, R.,
                                                                                 Farber, S., Grasso, M., Hannon, B.,
The recent NRC report reviews        farmers in parts of the US are
                                                                                 Limburg, K., Naeem, S., O’Neill,
the many methods for calculating     subsidized to leave fields fallow           R.V., Paruelo, J., et al. (1997). The
WTP and should be consulted for      for several years to encourage soil         value of the world’s ecosystem
details and guidelines.              formation and retention. The                services and natural capital. Nature
   Many problems must be solved      Perrier bottled water company               387, 253–259.
                                                                             Daily, G.C. ed. (1997). Nature’s
before the valuation of ecosystem    pays fees to landowners in                  Services: Societal Dependence on
services can become a                watersheds upstream of their                Natural Ecosystems (Washington:
mainstream activity. Primarily, we   springs to retain forests,                  Island Press).
need to acquire sufficient           guaranteeing a clean, reliable          Millennium Ecosystem Assessment.
                                                                                 (2005). Ecosystems and human
information about ecosystem          water source. But even these                well-being:synthesis (Washington:
processes to make valuation          tools will be difficult to apply in         Island Press).
possible. Beyond that basic          non-capitalist countries or             Postel, S., and Thompson, B.H. (2005).
biophysical information, we also     developing regions with minimal             Watershed protection:capturing the
                                                                                 benefits of nature’s water supply
lack an understanding of how         infrastructure. Economists and              services. Nat. Resour. Forum 29,
economic value scales with           multilateral international agencies         98–105.
ecosystem processes. For             will need to apply creative             Valuing Ecosystem Services. (2004).
instance, a single wetland grass     thinking in impoverished countries          Towards better environmental
                                                                                 decision making (Washington:
plant does not cycle enough          to help the value of ecosystem
                                                                                 National Academies Press).
nutrients to be of value to an       services be realized in places
upland cattle farmer. But how        where no one can afford to pay for          (CSIRO initiated project studying
many plants are considered           much of anything.                           ecosystem services and how to
valuable? 100 plants? One hectare       Valuation of ecosystem services          consider these services in land
                                                                                 management decisions)
of wetland? And how does this        is but one of many tools that will
answer change with seasons,          be used in the continual struggle           mentals of dollar valuation, with
climate fluctuations and land use    to allow coexistence of humans              links to indicators of ecosystem
change in the watershed?             and the suite of species and                value)
                                                                    (NSF funded
   Another challenge lies in our     ecosystems that make our lives              ecosystem services database and
ability to devise pragmatic          possible. Ecosystem services and            search tool)
programs for the monetization of     their dollar value is one of the few
services. Hardest of all may be      ideas that resonate in corporate            ment/esa.html (Ecological Society
                                                                                 of America factsheet on ecosystem
finding someone willing to pay,      and governmental board rooms,               services with links)
when the tradition has been to       on stock exchanges and in farm
receive these services for free.     houses, mud huts, eco-tourist          1Biology, University of Washington,
Ecosystem service valuation will     lodges and palm palapas.               Seattle, Washington 98195, USA.
only achieve its promise if there    Investing in ecosystem services is     2The Nature Conservancy, 4722 Latona

are markets and buyers for the       a risky business. Ignoring their       Avenue NE Seattle, Washington 98105,

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