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COASTAL ECOSYSTEMEVALUATION

Saraswati – W. Neka – Sasanti S.S. – S.Sastro – Soemarno

PMPSLP – PPSUB 2010

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ECOSYSTEM SERVICES VALUE

The simplest form of ecosystem valuation is to hold that an

ecosystem has a value equivalent to its ecological yield (HASIL

EKOLOGIS) valued as it would be on commodity markets (pasar

komoditi) : for the value of water, wood, fish or game, that is purified

or nurseried or generated or harboured in that ecosystem.

Thus, a price can be put on the natural capital (modal alamiah) of an ecosystem based on the price of natural resources (sumberdaya

alam) it yields each year.

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Bagaimana valuasi jasa-jasa ekologis dari RTH Kawasan

pantai?

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VALUATION OF ECOSYSTEM

Ecosystem valuation is a widely used tool in

determining the impact of human activities on

an environmental system, by assigning an economic value to an

ecosystem or its ecosystem services.

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More complex arguments in ecosystem valuation regard

nature's services and the assignment of values in a

service economy to all that nature does "for humans".

Studies compiled by Robert Costanza in the 1990s

argued strongly that even just considering the most basic

seventeen of these services, the combined value of the

ecosystems of the earth was worth more (US$33T) each year than the whole human

exchange economy (US$25T) at that time (1995).

Other studies have focused on the marginal value of

ecosystem changes, which can be used in cost-benefit analysis of environmental

policies.

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In Natural Capitalism, 1999, Paul Hawken, Amory Lovins and

Hunter Lovins advanced an argument to assign the value of

Earth in current currency.

See value of Earth article for that and

other examples of this extreme case of

ecosystem valuation - biosphere valuation.

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Four types of values can be assigned to ecosystems (Pearce and Turner, 1990):

1. direct use value is the value attributed to direct utilisation of ecosystem services;

2. indirect use value is the value attributed to indirect utilisation of ecosystem services, through the positive externalities that ecosystems provide;

3. option value is the value attributed to preserving the option to utilise ecosystem services in the future;

4. non-use value is the value attributed to the pure existence of an ecosystem and consists of three components: Value based on the welfare the ecosystem may give other people; Value based on the welfare the ecosystem may give future generations; and Value based on knowing that the ecosystem exists.

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WTP = WILLINGNESS TO PAY

Methods to estimate the value of ecosystem services which cannot be derived from market prices include "stated

preference" methods and "revealed preference" methods.

Stated preference methods, such as the contingent valuation method ask people for their willingness to pay

for a certain ecosystem (service).

Revealed preference methods, such as hedonic pricing and the travel cost method, use a relation with a market good

or service to estimate the willingness-to-pay for the service.

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VALUATION ECONOMICS vs

ECOLOGY

Such valuation, and that of the effectiveness of various

environmental health measures that affect the

value of life and quality of life, are usually thought to

be part of economics.

Natural capital and individual capital are

studied ecology as living systems, however, this does not extend to the economics of valuation by which they

are related:

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Considering "valuation" as an "economic not

ecological issue" reflects the way these fields divide of the activities of humans

versus non-humans in "making a living".

When humans go out to get food or homes, that is

studied in "economics", but when non-humans do it,

that is "ecology", though it is clear that there are

motivations, methods and certainly bodily needs in

common.

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Since animals do not put explicit prices on ecosystems they use, but do behave as if

they are valuable, e.g. by defending turf or access to

water,

it is mostly a matter of definition whether ecology

should include valuation as an issue.

It may be anthropocentric to do so, since "valuation" more clearly refers to a human

perception rather than being an "objective" attribute of the

system perceived.

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FOOD CHAINSEcology itself is also human perception, and such related concepts as a food chain are

constructed by humans to help them understand ecosystems.

In many cases by those who hold that markets and pricing exist

independently of any individual human observers and "users",

and …..

….especially those who deem markets to be "out of control",

ecosystem valuation is considered a (marginal, ignored)

part of economics.

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Some versions of conflict theory focus on

the role of resource scarcity in sparking or

propagating human conflicts - in effect

holding that the resources or ecosystems they fight over are being held so valuable that they

are worth considerable risk of harm to control.

This is at least a relative notion of value and

value at risk applied to ecosystem.

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Until the economic value of ecosystem goods and services is acknowledged in environmental decision-making,

they will implicitly be assigned a value of zero in costbenefit analyses, and policy choices will be biased

against conservation.

The National Research Council report, Valuing Ecosystem Services: Toward Better Environmental Decision-

Making, identifies methods for assigning economic value to ecosystem services—even intangible ones—

and calls for greater collaboration between ecologists and economists in such efforts.

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Bagaimana valuasi

ecological-economics

untuk Agro-ekosistem kebun kelapa

yang produktif ?

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The millions of miles of rivers, streams, coastline, and acres

of estuaries, wetlands,lakes, and reservoirs throughout the

United States host a vast array of aquatic ecosystems that

provide many benefits to humans.

These ecosystems produce not only goods such as lumber and fish,

but they also provide a number of important

functions or services that play crucial roles in supporting human, animal, and plant

populations.

These services include nutrient recycling, habitat for plants

and animals, flood control, and water supply.

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Human activities often compete with ecosystemsurvival. For example, should a wetland be drained

for suburban housing?

Although the economic value of the new houses may be known, it is not as easy to quantify the value the lost ecosystem services of

the wetland that would affect plant and animal life, alter storm runoff patterns, and interfere with water reclamation, among

other impacts.

Likewise, the decision to build a dam to meet drinking water and electricity needs could have dramatic consequences on

downstream ecosystems.

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In order to appropriately assess environmentalpolicy alternatives and

the decisions that follow, it is

essential to consider not only the value of the

humanactivity, but also to

consider the value of the ecosystem

service that could be compromised.

Despite a growing recognition of the

importance of ecosystem services, their value is often

overlooked in decision-making, and, to date,

that value has not been well quantified.

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Valuasi harus mengukur pengorbanan

The Catskills/Delaware watershed provides 90percent of the drinking water for the New York City

metropolitan area.

Historically, the watershed has produced high quality water with little contamination,

but increased housing developments, septic systems,and agriculture caused water quality to deteriorate.

By 1996, New York City had two choices: build awater filtration system at an estimated cost of up to

$6 billion or protect its major watershed.

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Box 1. Examples of Services from VariousAquatic Ecosystems

Wetlands transform inputs (nutrients, energy)into valuable outputs (fish, crustaceans, and

mollusks).Floodplains along rivers and coasts provideflood protection, water reclamation, pollutionabatement, underground water recharge, and

recreation.Mountain watersheds provide water supply,recreation (e.g., hiking, camping, and fishing).

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When possible in environmental decision-making,

policymakers should use economic valuation as a way

to quantify the trade-offs in a policy choice.

In order to protect the Catskills watershed, measures weretaken to help limit further

development, improvesewage systems, and reduce the

impact of agricultureby using less fertilizers and building

up riparian zonesalong river banks at a total projected

investment ofabout $1 to $1.5 billion.

New York City water managers chose to protect the

watershed.

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Link Economic and Ecological Models

In the Hadejia-Jama’are floodplain in NorthernNigeria, economists and hydrologists worked togetherto estimate both upstream benefits and downstream

consequences of several proposed dam and waterdiversion projects.

A 1998 study showed that the benefit of the project was $3 million in irrigation and potable water, but that downstream

floodplain losses would result in about $23 million dollars in costs; an estimated net loss of $20 million.

A study in 2001 found that a one meter drop in groundwater would result in an estimated $1.2 million loss in dry season agriculture and a $4.8 million loss in domestic water consumption for rural

households.

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Economists already produce estimates of value for

environmental decision-making. However, the

strength of their analysis depends in large part on how well the underlying ecology of

an ecosystem is understood and measured.

Ecologists are challenged because ecosystems are

complex, dynamic, variable, interconnected, and nonlinear,

and because our understanding of the services

they provide and how they are affected by human actions are

imperfect and difficult to quantify.

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ANALYSIS OF ECOSYSTEM OUTPUTS

In an analysis, it is important to ensure that theecosystem is well understood and also that the studyis designed so that output from ecological models canbe used as input to the economic models so that the

two can be linked effectively.

The example of the Nigerian floodplain also illustrates the importance of measuring expected changes in

the ecosystem for a given ecological impact.

Other changes that could be measured include stream flow, water temperature, and changes in the plant

life and fish of the floodplain.

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Consider All Ways Ecosystems are Valued

Clean drinking water, food production, andrecreation are all services of a lake ecosystem, but it

is not easy to measure each one separately or toresolve conflicting views on which is more or less

important to a management decision.

Many economists use the Total Economic Valuation (TEV)

Framework to incorporate the multiple ways thatindividuals or groups could value an ecosystem—most

of which have no market or commercial basis .

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Elements of the ecosystem framework include:

Use and Nonuse Values: Although different TEV frameworks are used to assess value, most of them include both “use”

and “nonuse” values. For example, an oil spill on a popular beach that prevents

people from using it represents lost use value.

Alternatively, if the oil spill did not disrupt beach use, but damaged plant and animal life offshore, this would

represent a lost nonuse value. Use values can be further divided into consumptive uses

(goods, water supply) and nonconsumptive uses (recreation, habitat support, flood control).

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Willingness to Pay and Willingness to Accept:

If the quality of a freshwater lake were improvedto enhance sportfishing, the economic measure

of the value of such an improvement to arecreational angler would be measured by his

willingness to pay for such a change.

If however the quality of a lake was worsened from its current level, then the economic measure to a recreational angler

would be his willingness to acceptcompensation for the damage, or the minimumamount of money the angler would accept as

compensation.

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Figure 1. The figure shows the multiple types of values from ecosystem goods and services that are considered within a total economic valuation (TEV)

framework.

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Box 2. Assigning a Dollar Value:Nonmarket Valuation Methods

Following are some of the most common methods that are used to measure the economic value of ecosystems services.

Household Production Function Methods model consumer behavior based on the assumption that ecosystem services can be substitutes for or complementary to a marketed commodity.

Travel cost models infer the value of an ecosystem according to the travel time and costs needed to visit it.

Averting behavior models quantify what people would spend to avoid a negative impact on health, for example installing a filter if water quality is poor.

Hedonic methods analyze how characteristics, including environmental quality, alter how much people would pay for something.

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Production Function Methods model the behavior of producers and their response to changes in environmental quality that influence production. These methods have been applied to explore the habitat-fishery, water quality-fishery linkages, and erosion control and storm protection.

Stated-Preference Methods are commonly used to measure the value people place on a particular environmental item. Examples include how much people would pay annually to obtain swimmable, fishable, and drinkable freshwater, or to protect

Pooling Revealed- and Stated-Preference Methods uses combined data from different valuation methods to estimate a single model of preferences.

Benefit Transfer Methods estimate the value an ecosystem based on existing studies of a roughly similar ecosystem.

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Quantify Ecological Impacts

How can a dollar amount be applied to ecosystem changes?

There are several economic methods that can be used to place a value on ecosystem services.

These methods base values on various aspects of consumer and producer behaviors, and draw on stated

or revealed individual preferences. In the Great Lakes, policymakers conducted a complex

analysis to decide whether and how to control the sea lamprey, an invasive species that preys on the native lake trout, sturgeon, salmon, and other large fish.

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One study polled 2,000 Michigan anglers to estimate the value to them of a higher catch rate at various fishing

sites, taking into consideration distance and travel costs to those sites.

The study showed that even a 10% increased catch rate would have a value of about $3.3 million to fisherman.

This value was compared against the cost of various methods to control the sea lampreys, for example

using a lampricide treatment, so that an appropriate decision could be made.

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Specific attention should be paid to pursuingresearch at the “cutting edge” of the valuation field to

support this type of analysis.

Because they are time consuming, project-specific valuations have sometimes been replaced by the

benefits transfer method, which assesses value based on an existing study of a similar ecosystem.

However, benefit transfer methods should be considered second best to careful analysis of the specific

ecosystem in question.

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Incorporating Judgment and Uncertainty

Perhaps the most important choice in any ecosystem valuation study is how the initial question is framed.

In the Catskills/Delaware watershed, policymakers made the critical decision early on that it was not necessary to value all

the services of the watershed, but instead to focus only on water quality.

Other judgments may be necessary in framing an issue, for example the choice between using the concept of willingness

to pay or willingness to accept in an analysis.

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Uncertainty can arise at many steps in an analysis. For ecosystem valuation, one of the biggest sources of

uncertainty is the lack of probabilistic information about the likely magnitudes of some variables.

Other sources of uncertainty arise from models or parameters used. Economic factors can introduce uncertainty as well. For example, how does the degree of visible cleanliness or

the degree of development and crowding affect the value of a popular recreational watersite?

Although uncertainty and judgment are inevitable, they are not debilitating to ecosystem valuation and do not undermine

the validity of the analysis. It is only necessary to provide a clear explanation of how judgments were made and how uncertainties were accounted

for.

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Overarching Recommendations

When faced with environmental policy decisionsthat seek to balance human activity and conservation,the process of valuing ecosystem services can informthe policy debate and lead to better decision-making.

The report makes the following recommendations forhow policymakers should conduct ecosystem

valuations:

• Frame the valuation appropriately: Measure changes in ecosystem services, rather than the value of an entire

ecosystem.

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• Seek to evaluate trade-offs: where possible, value should be measured in a way that makes analysis of trade-offs possible. If the benefits and costs of an environmental

policy are evaluated, then the benefits and costs associated with the changes in an ecosystem service

must be evaluated as well.

• Delineate all sources of value from the ecosystem and determine whether they are captured in the valuation.

• Quantify ecological impacts where possible beyond a simple listing and qualitative description of affected

ecosystem services.

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• Make sure that economic and ecological models are appropriately linked. The output from ecological modeling must be in a form that can be used as an input to economic

analysis.• Seek to value the goods and services most important to a

particular policy decision.

• Base economic valuation of ecosystem changes on the total economic value framework. Include both use and nonuse

values.• Consider all relevant impacts and stakeholders in the scope of

the valuation.• Scrutinize any extrapolations made across space (from one

ecosystem to another), time (from present to future impacts), and scale (from small to large changes) to avoid

extrapolation errors.

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Menilai jasa-jasa EKOSISTEM

Capturing the true value of nature’s capital

Forest ecosystems are human life-support systems.

They provide a suite of goods and services that are

vital to human health and livelihood—natural assets called

ecosystem services.

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JASA-JASA EKOSISTEM

Trees and forests are valued for basic goods, such as food and wood fiber, but they deliver other important services that are often perceived to be free and limitless—air and water purification,

flood and climate regulation, biodiversity, and scenic landscapes are just a few.

Taken for granted as public benefits, ecosystem services lack a formal market and are traditionally absent from society’s

balance sheet. As a result, their critical contributions are overlooked in public,

corporate, and individual decisionmaking.

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Putting a “price” on natural assets—recognizing the environmental,

economic, and social values of forest

ecosystem services— ….

….. is one way to promote conservation and more responsible

decisionmaking.

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HUMAN IMPACTS

Growing human needs and demands have led to

greater global consumption of natural resources and a

significant decline in ecosystem services.

Over the next three decades, the United States

is likely to experience a loss of unfragmented forest

due to dramatic housing development increases and

the conversion of private forest land to urban use.

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COSTAL FOREST

Private forests constitute nearly 60 percent of the Nation’s total

forest land and provide the majority of ecosystem services

to the public. The loss or decline of forests,

our ecological life-support systems, causes significant

harm to the Nation’s economy and to public health and well-

being.

Forests that are healthy and capable of adapting to major change will continue to be undervalued without public recognition of the important

ecosystem services they provide, now and into the future.

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Markets and payments for ecosystem services

Private investments in conservation can financially compensate landowners for protecting and enhancing ecosystem services,

particularly in places where these services are degraded or scarce.

In some cases, markets and payments for ecosystem services are a means of capturing the financial value of well-managed

forests.

Payments for carbon sequestration, watershed management, ecotourism, and a host of other services may supplement

traditional forest revenues and promote good stewardship, especially when used together with other conservation tools.

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Examples of market-based conservation exist throughout the world.

In France, Perrier Vittel S.A., one of the largest bottlers of mineral water in the world, pays upstream landowners to

follow prescribed management practices and use less intensive dairy farming techniques.

In northeastern Paraguay, the U.S.-based AES Corporation invested $2 million in the purchase and management of an

important protected area of dense tropical forest. The project served as a greenhouse gas investment for AES,

an international power producer interested in mitigating its carbon dioxide emissions.

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The largest payment program in the United

States is the U.S. Department of

Agriculture Conservation Reserve Program (CRP).

The CRP provides annual rental and cost-

share payments to farmers and ranchers to

reduce soil erosion, reduce sedimentation in

lakes and streams, improve water quality,

establish wildlife habitat, and enhance forest and

wetland resources.

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There isn’t a single best approach to market-based

conservation.

A variety of compensation mechanisms are often used

jointly with traditional regulation to successfully

achieve conservation objectives.

The most appropriate approach will depend on the ecosystem services of concern, potential buyers and sellers, the legal

and regulatory climate, institutional capability, and

local and regional conditions.

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The introduction of payment mechanisms where none

existed before involves the creation of new institutional

arrangements and the involvement of new

stakeholders…energy should be directed to building a

combination of market, cooperative and regulatory arrangements that suit local

conditions.

Landell-Mills, N.; Porras, I. 2002. Silver bullet or fool’s gold.

London: International Institute for Environment and

Development (IIED). 272 p.

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The Forest Service is working to advance market-based approaches to

conservation and stewardship on private and community lands. Valuing

ecosystem services presents an opportunity to:

Promote public awareness of the importance of forests and grasslands to

human well-being.Provide an economic incentive for

private landowners to own and sustainably manage forests and

rangelands.Encourage ecological restoration and

support the partnerships and innovative solutions needed to finance restoration

activities.Inspire individual efforts to reduce

consumption of natural resources and minimize human impact on ecosystems.

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Capturing the value of nature’s capital will help

protect the Nation’s private

forests and grasslands and the

essential public benefits they

provide.

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Payments in Costa Rica

Costa Rica presents one of the first national efforts to value forestecosystem services. In 1996, Costa Rica adopted Forestry Law No.

7575, recognizing four critical services provided by the nation’s forests:

Carbon sequestration, hydrological services, biodiversity protection, and scenic beauty.

The Forestry Law establishes a framework for payments to landowners for ecosystem services, set forth in a program

entitled PSA (Pagos por Servicios Ambientales) that is administered by the National Forestry Fund, FONAFIFO.

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LANDOWNER PAYMENT

Landowners are compensated for providing ecosystem services via reforestation, sustainable management, preservation, and

regeneration activities.

Payments to landowners are made over a 5-year period—during this time they relinquish their ecosystem service rights.

Under contract, landowners agree to manage or protect their forests for 20 years in accordance with a management plan, an obligation that is

written into a conservation easement and applies to all future purchasers of the land.

The Government of Costa Rica acts as an intermediary, or broker, between the landowner and potential buyers. It sells carbon offsets and

watershed protection to domestic and international buyers in order to compensate its landowners.

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The main source of funding, however, is a tax on fuel sales—5 percent of fuel sales is earmarked to

forestry through FONAFIFO.

The Forestry Law also prohibits forest conversion and

requires all working forests to be placed under an

approved management plan.

From Chomitz et al. 1998. Financing Environmental

Services: The Costa Rican Experience.

Publication Number 10. Washington, DC:The World

Bank: 157-169.

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What are Mother Nature's lifesupport services

worth? In one sense, their value is

infinite. The Earth's economies

would soon collapse without fertile soil,

fresh water, breathable air, and an

amenable climate. But "infinite" too often

translates to “zero” in the equations that guide land use and policy decisions.

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healthy natural ecosystems

Practitioners in the young field of ecological economics believe that more concrete numbers are required to help nations avoid unsustainable economic choices that degrade both their

natural resources and the vital services that healthy natural ecosystems generate.

In one of the first efforts to calculate a global number, a team of researchers from the United States, Argentina, and the

Netherlands has put an average price tag of US$33 trillion a year on these fundamental ecosystem services, which are

largely taken for granted because they are free.

That is nearly twice the value of the global gross national product (GNP) of US$18 trillion (Costanza et al. 1997).

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ENVIRONMENTAL-ECONOMICS

Even those involved in the study admit their number is a first

approximation, but they consider it an essential starting point for further analysis and debate that will help nations overhaul their economic and environmental

decisionmaking.

Not everyone agrees with this approach, however. Some critics believe the effort to assign prices

to ecosystem services is fundamentally flawed since these services can never be traded in open commerce, which is how

prices of conventional goods and services are determined.

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PRICE OF ECOSYSTEM SERVICES

Others believe that, even if such prices can be reasonably

calculated, they cannot reflect the full value of these services,

which reaches well beyond their importance to the world

economy.

In fact, the study team also readily acknowledged that there are moral, ethical, and aesthetic

reasons to value and protect nature quite apart from its

benefits to humanity . But the reality is that human societies put price tags on

nature every day.

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ECONOMIC VALUE OF LAND

Every land use decision involves implicit assumptions about value, even when no dollar figure is assigned.

The problem is that the value of services provided by the Earth's ecological infrastructure does not fit into current economic equations, partly because

most of the benefits fall outside the marketplace.

Such services are public goods that contribute immeasurably to human welfare without ever being drawn into the money economy.

For instance, the cycling of essential nutrients like nitrogen and phosphorus, which is not reflected in any nation's GNP, accounts for

US$17 trillion of the US$33 trillion in annual ecosystem services, according to the study team's estimate (Costanza et al. 1997).

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Indeed, economic indicators such as GNP are increasingly recognized as flawed measures of both economic progress and sustainability,

because they do not explicitly account for the degradation in ecological services that industry and commerce causeS.

For example, valuing forests only for the marketable timber they produce, which is as much as the GNP can conveniently measure, ignores the

many indirect costs that society bears when forests are logged:

Soil erosion, Nutrient loss,

Increased flooding, Declines in fisheries and water quality,

Reduced carbon storage capacity, Changes in regional temperature and rainfall, and

Diminished wildlife habitat and recreational opportunities.

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ECONOMIC VALUE OF ECOLOGICAL SERVICES

There have been many attempts in the past few decades to estimate the value of various separate ecological services.

The US$33 trillion calculation is a synthesis of results from more than 100 published studies using a variety of different valuation

methods.

In synthesizing these results, the research team looked at the value of 17 categories of services such as waste treatment, pollination,

climate regulation, food production, and recreation in each of 16 types of ecosystems, from coastal estuaries to tropical forests,

rangelands, lakes, and deserts.

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They calculated an average dollar value per hectare for each type of service in each ecosystem, then multiplied

that dollar value by the total area each ecosystem type

occupies on the globe.

This exercise clearly highlighted areas where

much more work is needed.

For some types of ecosystems, such as deserts, tundra, and croplands, so little is known that the valuation columns

under nearly every ecological service remain blank

(Costanza et al. 1997).

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SCARCITY OF ECOLOGICAL SERVICES

That is one reason the study team considers the US$33 trillion a minimum value; it will likely increase as more ecological services are studied and the complex interactions among

ecological processes are better understood.

Values are also likely to increase as these services become more degraded and scarce in the future.

Whatever the eventual number, ecological economists consider the

global dollar figure itself less important to policy than to the potential application of this valuation concept to local and

regional land use decisions.

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Although the average value of wetland services may not be the same per hectare in Brazil, Indonesia, or Uganda, the very existence of the global estimates calculated in the study should broaden the

context of local decision making (Pimm 1997:232).

In fact, in a small but growing number of cases around the world, the benefits of proposed projects are being weighed against the social

costs of lost ecosystem services.

In some parts of the United States, for instance, attention is now focused on the benefits of protecting natural watersheds to assure

safe and plentiful drinking water supplies, rather than on building expensive filtration plants to purify water from degraded

watersheds.

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ECONOMIC VALUE OF WATER RESOURCES

New York City recently found it could avoid spending US$6-8 billion

on the construction of new water treatment plants by protecting the

upstate watershed that has traditionally accomplished these

purification services for free.

Based on this economic assessment, the city invested

US$1.5 billion in buying land around its reservoirs and instituting other protective measures, actions that

will not only keep its water pure at a bargain price but also enhance

recreation, wildlife habitat, and other ecological benefits .

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In the traditionally prosperous Hadejia-Jama'are flood plain region in northern Nigeria, where more than one half of

the wetlands have already been lost to drought and upstream dams, ecosystem valuation has been used to

weigh the costs and benefits of proposals that would divert still more water away for irrigated agriculture.

The net benefits of such a diversion were priced at US$29 per hectare. Yet, the intact flood plain already provides

US$167 per hectare in benefits to a wider range of local people engaged in farming, fishing, grazing livestock, or gathering fuelwood and other wild products—benefits

which would be greatly diminished by the project.

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Thus, even without accounting for such services as wildlife

habitat, the wetland is far more valuable to more

people in its current state than diverted for irrigation

Although ecological valuations like these are

still rare, further development of the

concept promises to provide a powerful tool

for protection and sustainable use of natural ecosystems and the vital

services they provide.

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Multifunctional attributes of agriculture and ecosystems valuation

Pattanayak, S.K., and Kramer, R.A. (2001). “Worth of Watersheds: a Producer

Surplus Approach for Valuing Drought Mitigation in Eastern Indonesia,”

Environment and Development Economics, 6, 123-146.

Uses producer surplus approach to estimate the value of forested watersheds in terms of drought mitigation by estimating the

impact of a change in base-flow on agricultural profit through increased production of coffee and rice. Their analysis requires

that the environmental service be used in the production of a market-valued good. Their key assumption is that the market for

that good must be complete.

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Bagaimana menilai output ekosistem kebun campuran di kawasan pantai

seperti ini ?

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The policy implication is that there are other factors that go into increasing base flow (climate, etc),

and that policy-makers should target specific watersheds with

those characteristics for conservation.

This can be applied to other resource management problems as

long as there is a final market good.

“A watershed service can be defined as the improvement or maintenance of the ecological

characteristics of the watershed that results from soil and water

conserving land uses.”

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Peterson, J.M., Boisvert, R.N., and de Gorter, H. (2002). “Environmental Policies for a Multifunctional Agricultural Sector

in Open Economies,” European Review ofAgricultural Economics, 29(4), 423-443.

THREE causes of jointness: (i) technical interdependences in production processes,

(ii) nonallocable inputs, where inputs are devoted to a process that produces more than one output and the input’s separate

contribution to each output cannot be determined,

(iii) allocable fixed factors, were outputs are produced in separate processes and inputs can be allocated across the processes, but

they compete for inputs that are fixed at the firm level (e.g. producing several crops on a fixed land base).

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SUBSIDY FOR PUBLIC OUTPUT

Output subsidy only efficient if all multi- goods have positive social values, and production of non-commodity outputs is fixed in

proportion to production of commodity outputs.

Decoupled policies only work if every input can be allocated separately in

the production of either public or private goods.

“Because the public outputs themselves are generally

unobservable, the optimal policy scheme is necessarily a complex set

of input taxes, subsidies or regulations that must be chosen jointly in a way that takes their

interactions into account”.

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Randall, A. (2002). “Valuing the Outputs of Multifunctional Agriculture,” European Review of Agricultural Economics, 29(3), 289-307.

Overestimation of multi- outputs transfers too much money to farmers and causes overproduction of those outputs, but it also distorts commodity markets

(reduce/increase imports/exports, and perhaps depress world prices). “The right green prices…are particular and contextual to an extent that is difficult to comprehend, and must be estimated on a national or continental scale, but

implemented farm by farm”. Generally, for green products whose production is complementary to commodity production, green payments will increase domestic

production and reduce imports, or, if they are competitive with commodity production (e.g. pollution reducing techniques, or pre-modern technologies), they

will reduce production and increase imports.

“The blunter the green pricing instrument – in the extreme, all farmers would receive identical green payments per hectare or per unit of commodity production – the

more the whole enterprise looks like (and probably is) a crude attempt to subsidize domestic farming regardless of the impacts on international trade.”

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Includes description of various valuation methods reviewed above.* Perhaps under current policies, there is an excess supply of conservation in

southwestern Iowa, where farmers are low-cost producers of conservation and public expenditures for conservation are targeted to reflect soil

characteristics but not demand for conservation services.

The two proposed strategies:1. CV estimate of holistic WTP as upper bound to sum of all local component

values (estimated with decomposition CV procedures) and tested using convergent validity and RP techniques.

2. Contingent choice experiments and RUM w/ CJ analysis, with a large number of respondents addressing only a small sample of array of alternatives, can

estimate local virtual prices.Value of a green output should be f(quality, sub/comp, size/demog characteristics

of demanders, other).

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Babcock, B.A., Lakshminarayan, P.G., Wu, J., and Zilberman, D. (1997). “Targeting Tools for the Purchase of Environmental

Amenities,” Land Economics, 73(3), 325-339.

Examines implications of using alternative decisions rules that do not maximize total environmental benefits (cost, benefits, and C/B

ratio targeting).

“…the wrong targeting mechanism can lead to increasing returns to public expenditures, and…the magnitude of the difference in total environmental benefits from alternative targeting criteria

depends upon the relative variability of costs and benefits and the correlation between them” .

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If cost variability > benefit variability, then acreage maximization is more consistent with envir max than

enrolling based on benefits, particularly if benefits and costs positively correlated. If opposite, then enrolling land on basis of benefits offered more consistent with envir max than acreage max, particularly when B and C positively

correlated.

The appropriate target varies by which amenity is most important (groundwater vulnerability, water erosion, wind

erosion, or wildlife habitat). However, benefit ranking is superior to cost ranking for all four because var of B > var of C on current CRP land (b/c program rules limit amt of

cost var by setting an upper limit on CRP bids).

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Antle, J., and Capalbo, S. (2002). “Agriculture as a Managed Ecosystem: Policy Implications,” Journal of Agricultural and

Resource Economics, 27 (1), 1-15.

The environmental and health impacts of agricultural systems have been neglected in analysis of returns to ag research or in evaluation of ag technologies, because appropriate data and

methods were lacking. Current ability to link disciplinary models is limited because of their design. “…an integrated system would have a single set of

drivers and endogenous variables for all disciplinary components.” It also “incorporates all of the feedback loops

associated with the relevant processes; therefore, the integrated system does not impose arbitrary constraints on the dynamic

properties of the system caused by incomplete linkages between the processes.”

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Argue that these types of models will be particularly useful in the case where systems are pushed

beyond range of observed behavior.

Uses Ecuador example to demonstrate the limitations of

using economic decision models that are not integrated with biophysical processes “By integrating ecosystem and

economic models, it would be possible to investigate the

properties of these systems, taking into account the dynamics

and feedbacks both within and between systems.”

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Farber, S.C., Costanza, R., and Wilson, M.A. (2002). “Economic and Ecological Concepts for Valuing Ecosystem Services,” Ecological Economics, 41(3), 375-392.

Overview of special issue on valuation:“Values ultimately originate from within the constellation of shared

goals to which a society aspires – value systems – as well as the availability of ‘production technologies’ that transform things into

satisfaction of human needs.” Economic valuation versus ecological valuation: ecology relies on

energy theory of value. Also addresses critical zones/threshold conditions for ecosystems – non-linear relationship. This leads to idea

that there is an insurance premium that society will pay to avoid a natural catastrophe. In non-linear, non-marginal region,

sustainability values are more important than efficiency values. Uncertain critical thresholds require valuation under uncertainty.

Depends on how risk-averse people are.

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WTP and WTA are important valuation concepts for social value of services. Six major techniques:

1. avoided cost2. replacement cost3. factor income4. travel cost5. hedonic pricing6. contingent valuation

Small group deliberation has gained recognition in the literature. Does not involve aggregation of separately measured individual preferences, but comes from open public debate. Establishes two validity criteria: “decentralized forms of environmental policy formulation, and direct involvement of non-experts in small decision-making groups.”

Assumes that citizens can render informed judgments about environmental goods for society as a whole. Treats small group deliberation not as a diagnostic tool, but as an explicit mechanism for value elicitation.

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Bockstael, N., Freeman, A., Kopp, R., Portney, P., and Smith, V. (2000). “OnMeasuring Economic Values for Nature,” Environmental Science and

Technology, 34(8), 1384-1389.

Value must be state in comparative terms – the answer to a question with two clearly defined alternatives. “Compensation measures cannot be defined in isolation. They are entirely dependent on the context and may change as there is change in one or

more elements of that context.” Therefore, need to be specific about both the default and changed situation. Individuals

WTP or WTA measures are affected by endowments of wealth – can’t aggregate.Problem with Costanza, et al. – study based on other studies that value small changes in

ecosystem, holding all else constant. You cannot multiply these out to estimate the value of the loss of the global environment, “failure of additivity” . Also, person’s

WTP cannot conceptually be greater than what they have to give, unless the alternative state of nature is “nothingness,” in which there is no finite compensation

for ecosystem services. Replacement cost is only valid under three assumptions: human-engineered system is least cost, equivalent in quality and magnitude to natural

system, and individuals would incur these costs in the absence of natural function (Critique Kaiser’s use of desalinization to value groundwater).

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Buatlah uraian (maksimum 50 kata) tentang makna Pembangunan Keberlanjutan

(sustainable development) berdasarkan Gambar di samping:

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REFERENCES

Barbier, E.B., W.M. Adams, and K. Kimmage. 1993. An economic valuation of wetland benefits. In The Hadejia-Nguru Wetlands: Environment, Economy, and Sustainable Development of a Sahelian Flood Plain Wetland, G.E. Hollis, W.M. Adams, and M. Aminu-Kano, eds. Gland, Switzerland: World Conservation Union-IUCN.

Costanza, R., R. d'Arge, R. de Groot, S. Farber, M. Grasso, B. Hannon, K. Limburg, S. Naeem, R.V.O'Neill, J. Paruelo, R. G. Raskin, P. Sutton, M. van den Belt. 1997. The value of the world's ecosystem services and natural capital. Nature, 387(6230):255.

Goodland, R. and H. Daly. 1996. Environmental sustainability: Universal and nonnegotiable. Ecological Applications, 6(4):1002.

Pimm, S.L. 1997. The value of everything. Nature 387 (1997):232.Sagoff, M. 1997. Can We Put a Price on Nature's Services? The Institute for Philosophy and

Public Policy. Available online at: http//www.puaf.umd.edu/ippp/nature.htm (viewed, November 28, 1997).

Stapleton, R.M. 1997. Protecting the Source: Land Conservation and the Future of America's Drinking Water. San Francisco: The Trust for Public Land.

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ReferencesHanley, N. and C. L. Spash (1993). Cost-benefit analysis and the environment. Edward Elgar,

Cheltenham. Pearce, D.W. and R.K. Turner, 1990. Economics of natural resources and the environment. BPCC

Wheatsons Ltd., Exeter, UK. 378 pp.