8.) a. What is ecosystem service valuation? How does it work? b. Why is ecosyste

Question

8.) a. What is ecosystem service valuation? How does it work?

b. Why is ecosystem service valuation used in Cost Benefit Analysis (CBA)?

c. Give an example of how ecosystem service valuation could be used in Cost Benefit Analysis. In your example, clearly state the (a) the cost-benefit analysis scenario you are using, (b) the good or service you are valuing, (c) the valuation method you would use, and (d) how the end result would be used in this CBA.

d. Given the following ecosystem goods and/or services, for each one explain the type of value (use, non-use, etc.) and a method you could use to value it.

Good or service

Type of value

Valuation method

A whole salmon

Surfing

Water purification

O2

Good or service

Type of value

Valuation method

A whole salmon

Surfing

Water purification

O2

Explanation / Answer

1) Ecosystem valuation is to unravel the complexities of socio-ecological relationships, make explicit how human decisions would affect ecosystem service values, and to express these value changes in units (e.g., monetary) that allow for their incorporation in public decision-making processes

Economic decision-making should be based on understanding the changes to economic welfare from small or marginal changes to ecosystems due to, e.g., the logging of trees in a forest or the restoration of a polluted pond. Value thus is a marginal concept insofar that it refers to the impact of small changes in the state of the world, and not the state of the world itself.

2.Irrigated agriculture in many parts of the world is under threat from rising salinity. Indeed, many erstwhile productive regions are now salinized and have little value to agriculture. The cause is rising water tables which are brought about through a combination of land clearing and irrigation. The rising water table brings with it salt from deeper layers in the soil up to the surface. An example in South East Australia shows that original water tables were very deep (30 m) (Walker et al., 2009). Fluctuations in rainfall caused variations in water table depth, but these were not problematic. However, there is a critical threshold in the depth of the water table – ca. 2 m, depending on soil type. Once the water table reaches this level, the salt is drawn to the surface by capillary action. When the water table is 3 m below the surface the top meter of soil – the “stock” of top soil that determines agricultural production – is the same as when the water table was 30 m below. But it is much less resilient to water table fluctuations and the risk of salinization increases. Resilience, in this case, can be estimated as the distance from the water table to 2 m below the surface. As this distance declines, the value of the stock of productive top soil diminishes. Therefore any valuation exercise that includes only the status of the top soil stock and ignores its resilience to water table fluctuations is inadequate and misleading. Walker et al. (2009b) have estimated a value of the resilience stock „salinity, which reflects the expected change in future social welfare from a marginal change in resilience as given by small changes in the water table today. Resilience (X) is equal to the current distance of the water table to the threshold, i.e., 2 m below the surface. Let 0 F X t ( , ) be the cumulative probability distribution of a flip up to time t if the initial resilience is X0 based on past water table fluctuations and environmental conditions (ie. rainfall, land clearing etc.). It is assumed that the flip is irreversible or at least very costly to reverse. Walker et al. (2009b) define 1 U t( ) as the net present value of all ecosystem service benefits at time t if the system has not shifted at that time and 2 U t( ) as the net present value of ecosystem service benefits in the alternate regime if the system has shifted before (or at) t. It can then be shown that the expected social welfare of resilience W( X0 ) is W(X ) [S(X ,t)U (t) F(X ,t)U (t)]dt 0 2 0 0 0 1 The Economics of Ecosystems and Biodiversity: The Ecological and Economic Foundations 44 The current regime is one of agriculturally productive land (non-saline) and its ecosystem service value was estimated as the net present value of all current land under production (estimated market value). The alternate regime, saline land, was assumed to yield a minimal value for the land (i.e. U2 is a small fraction of U1) as it will loose all agricultural productivity, which is the basis for current regional social and economic conditions. The probability that the current agricultural regime will continue, S(X0,t), was estimated from past water table fluctuations and known relationships with agricultural practices now and into the future. Estimations showed significant expected loss in welfare due to salinity. This formulation of resilience is specific to the case study but can be generalised. It may be easily extended to deal with reversible thresholds, multiple regimes (more than two), different denominators (i.e. monetary, etc.) and more than one type of resilience. The challenge lies in determining the accurate ecological and economic data that can be used to estimate probability functions, costs, discount rates, etc which are relevant to management decisions.

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