Humankind benefits from a multitude of resources and processes that are supplied by healthy, intact natural ecosystems.
Collectively, these benefits are known as ecosystem services and include products like clean drinking water and processes such as the decomposition of wastes.
24 specific ecosystem services were identified and assessed by the Millennium Ecosystem Assessment, a 2005 UN-sponsored report designed to assess the state of the world's ecosystems.
The Report defined the broad categories of ecosystem services as food production (in the form of crops, livestock, capture fisheries, aquaculture, and wild foods), fibre (in the form of timber, cotton, hemp, and silk), genetic resources (biochemicals, natural medicines, and pharmaceuticals), fresh water, air quality regulation, climate regulation, water regulation, erosion regulation, water purification and waste treatment, disease regulation, pest regulation, pollination, natural hazard regulation, and cultural services (including spiritual, religious, and aesthetic values, recreation and ecotourism).
Notably, however, there is a “big three” among these 24 services which are currently receiving the most interest worldwide.
These are climate change mitigation, watershed services and biodiversity conservation.
Assessing your Ecosystem Services
An economic valuation of ecosystem services involves social communication and information, areas that remain particularly challenging to many large industries and organisations.
In general, the idea is that although an organisation may make decisions regarding the management of ecosystems services for any variety of reasons, trends reveal that it is the aggregative preferences of a society, from which the economic value of services can be inferred and assigned.
The six major methods for valuing ecosystem services in monetary terms are:
Avoided cost - Services allow society to avoid costs that would have been incurred in the absence of those services (e.g. waste treatment by wetland habitats avoids health costs)
Replacement cost - Services could be replaced with man-made systems (e.g. restoration of the Watershed cost less than the construction of a water purification plant)
Factor income - Services provide for the enhancement of incomes (e.g. improved water quality increases the commercial take of a fishery and improves the income of fishers)
Travel cost - Service demand may require travel, whose costs can reflect the implied value of the service (e.g. value of ecotourism experience is at least what a visitor is willing to pay to get there)
Hedonic pricing - Service demand may be reflected in the prices people will pay for associated goods (e.g. coastal housing prices exceed that of inland homes)
Contingent valuation - Service demand may be elicited by posing hypothetical scenarios that involve some valuation of alternatives (e.g. visitors willing to pay for increased access to national parks)
The opportunity of an effective ecosystem management approach
The opportunity and value of assessing ecosystem services of relevance to a project or product may be both direct (able to be traded as Payment for Ecosystem Services (PES)) and indirect (of use in supporting understanding of overall value of operating environment).
There are a wide range of policy options for sustaining and benefitting from ecosystem services.
Of this list, PES programs which are also known as "green" markets, are gaining particular attraction.
PES is the practice of offering incentives to farmers or landowners in exchange for managing their land to provide some sort of ecological service.
These programs promote the conservation of natural resources in the marketplace.
Sources of funding include fees, such as on users of services like water; taxes, for example on fuel earmarked for conservation; and direct funding by government or NGOs.
PES programs offer payments to those who provide ecosystems services, conditional upon them exhibiting acceptable conservation performance.
The past successes of regulated carbon and other markets for environmental commodities (eg water, SO2 and NO2) have demonstrated the potential for using investment-based solutions to internalise the external costs of pollution, natural resource exploitation, and unsustainable development.
The international carbon market (under both the Kyoto and the various voluntary schemes) is already creating a market through services associated with the sequestration of carbon in existing and new forests under programs such as REDD (Reducing Emissions through Deforestation and Land Degradation).
The old adage “you can’t manage what you don’t know” is certainly true of ecosystem services.
However, in many cases organisations and landholders are already employing a range of management practices that are preserving and maintaining healthy ecosystems and the services they support.
An effective ecosystem management process needs to commence with a review and assessment of these practices, and the development of a management approach that best maintains ecosystem services.
The IUCN's (the International Union for Conservation of Nature) Commission for Ecosystem Management (IUCN-CEM) defines ecosystem management as “a process that integrates ecological, socio-economic, and institutional factors into comprehensive analysis and action in order to sustain and enhance the quality of the ecosystem to meet current and future needs.” (http://www.iucn.org/).
The core objective of ecosystem management is the sustainable, efficient and equitable use of natural resources.
It is through these practices that landholders will be in a position to preserve necessary ecosystem services and benefit from the emerging PES markets and programs.
In many cases an effective process of understanding and evaluating ecosystem services may provide support for communities in communicating the benefits of existing practices to policy makers and markets.
Revenue generated through PES can also be targeted at assisting funding of ongoing management of ecosystem services.
SKM is working with both public and private sector clients, many of whom are asset owners or ecosystem stewards seeking to manage their lands for the best return, to develop projects as part of emerging markets in PES.
Would you like to know more? You might like to read the following Case Studies
© Sinclair Knight Merz
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