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date: 14 December 2017

Ecosystem Services

Summary and Keywords

The concept of ecosystem services considers the usefulness of nature for human society. The economic importance of nature was described and analyzed in the 18th century, but the term ecosystem services was introduced only in 1981. Since then it has spurred an increasing number of academic publications, international research projects, and policy studies. Now a subject of intense debate in the global scientific community, from the natural to social science domains, it is also used, developed, and customized in policy arenas and considered, if in a still somewhat skeptical and apprehensive way, in the “practice” domain—by nature management agencies, farmers, foresters, and corporate business. This process of bridging evident gaps between ecology and economics, and between nature conservation and economic development, has also been felt in the political arena, including in the United Nations and the European Union (which have placed it at the center of their nature conservation and sustainable use strategies).

The concept involves the utilitarian framing of those functions of nature that are used by humans and considered beneficial to society as economic and social services. In this light, for example, the disappearance of biodiversity directly affects ecosystem functions that underpin critical services for human well-being. More generally, the concept can be defined in this manner: Ecosystem services are the direct and indirect contributions of ecosystems, in interaction with contributions from human society, to human well-being.

The concept underpins four major discussions: (1) Academic: the ecological versus the economic dimensions of the goods and services that flow from ecosystems to the human economy; the challenge of integrating concepts and models across this paradigmatic divide; (2) Social: the risks versus benefits of bringing the utilitarian argument into political debates about nature conservation (Are ecosystem services good or bad for biodiversity and vice versa?); (3) Policy and planning: how to value the benefits from natural capital and ecosystem services (Will this improve decision-making on topics ranging from poverty alleviation via subsidies to farmers to planning of grey with green infrastructure to combining economic growth with nature conservation?); and (4) Practice: Can revenue come from smart management and sustainable use of ecosystems? Are there markets to be discovered and can businesses be created? How do taxes figure in an ecosystem-based economy? The outcomes of these discussions will both help to shape policy and planning of economies at global, national, and regional scales and contribute to the long-term survival and well-being of humanity.

Keywords: Ecosystem, ecosystem services, natural capital, biodiversity, economic and cultural valuation, policy instruments

Introduction

Concept and Definition

The importance of nature to human well-being has long been recognized by people worldwide, most likely already when early Stone Age men and women hunted and gathered their food on the plains of Africa. Most people acknowledge that human life is impossible without the biosphere, which implies for some that nature has unlimited value. Others realize that humans have multiple needs and objectives, which lead to differentiated values. Poetic references to nature focus on the inspiration from the diversity of life, and prosaic references to nature highlight the natural resources that allow modern humankind to develop food security, safe shelter, and material welfare and even the luxury of vacations in places of our choice. Important aspects of ecosystems are the biological diversity of and the mechanisms in these ecosystems, which have a role in delivering goods and services that contribute to human well-being. In summary, nature is clearly of utmost importance to people, or, as a natural scientist would formulate it, ecosystems are essential to the human species.

This article is about the concept ecosystem services, which has become a preeminent, but still widely debated, way to capture the various notions of nature being important to the well-being of humans. The term ecosystem service is in fact a contraction of the more descriptive, but less convenient, term ecosystem-based goods and services. It is the label for the useful things ecosystems produce for people, by delivering goods such as food and timber, and do for people, by generating information for inspiration and providing recreational environments and by reducing environmental extremes (heat, floods) to tolerable levels, respectively.

Natural scientists may focus on the complex thermodynamic, chemical, and geophysical processes that exist in nature where living (biotic) organisms interact with nonliving (abiotic) environments and produce biomass in a great variety of forms. Biomass may include individual plants and animals with their products, such as fruits, roots, leaves, eggs, and pelts, to complex communities of plant and animal populations. Social scientists, and especially economists, have historically focused on nature’s value in use, and somewhat later on its value in exchange. In contemporary discussions, nature is placed in economic language by referring to it as natural capital and the flows of goods and services that society extracts from nature as interest. Nowadays much attention is given to governance processes and the roles of stakeholders in these.

Human species populations, in their specific way of dealing with the challenges of life, have organized themselves into tribes, communities and societies that over time formed economies, i.e., structured ways to obtain and distribute nature’s products such as biomass for consumption and to build shelter and generate heat for cooking. Throughout history, these economies developed ever-more complex ways to obtain control over the ecological production processes that were clearly recognized as valuable for survival, material welfare, and general well-being. This exploitation of the natural environment had few risks for both sides, the producing ecological systems and the consuming human societies, as long as the human populations and their economies were relatively small. However, after humans had discovered and learned to exploit the stocks of biomass, which had turned into fossil fuels over geological time, the rates of converting ecosystems into agricultural and urban land and using services increased so rapidly that the human economies created resource shortages and broad-scale pollution.

The term ecosystem services was coined by Paul and Anne Ehrlich in 1981, but there were many earlier references to the notion of useful work and benefits from ecosystems (see History). It was, however, not until the publication of the Millennium Ecosystem Assessment (MA, 2005) that the concept of ecosystem services and the implicit utilitarian approach to ecosystems and biodiversity became a recognized argument in the political arenas. In view of the clear signs of loss of biodiversity and degradation of ecosystems, blamed on the uninhibited use of natural resources and pollution of natural ecosystems, the utilitarian approach was heavily criticized by those who focused on the so-called intrinsic value of nature. This has been a widely supported stance in the nature conservation communities, which made it clear that there was a need for the utilitarian movement to focus on a sustainable use strategy. This is where the economic view of nature has met the ecological view of human society.

The definition of the concept of ecosystem services has evolved through research, debates, and publications, with attention to either the ecological basis, including the role of biodiversity and functional traits of ecosystems, or the economic use, which includes the demand from human needs and wants, the benefits, and the various types of values to humans (see Braat & De Groot, 2012). The present article takes as its starting point the definition developed in the The Economics of Ecosystems and Biodiversity project (TEEB, 2010a) but adds the role of humans in the production of the services: ecosystem services result from the work and products of systems of biotic and abiotic components, structures, and processes, possibly but not necessarily together with contributions of work, technology, institutions, energy, and materials from the human system. Figure 1 presents a conceptual model of the ecological-economic system, visualizing this definition, with ecosystem services as a bridge between the science domains of ecology and economics, between nature conservation and economic development, and between public and private policy.

Ecosystem ServicesClick to view larger

Figure 1. Ecosystem services as the bridge between ecological and human systems.

(Source: Adapted from Figure 2 in Braat & de Groot, 2012.)

A major debate in the professional literature on ecosystem services has been whether ecosystem services should be defined to include human contributions or only refer to the contributions of ecosystems in the flows of goods and services inside human economies. Both approaches are of course in principle valid. It is my choice to follow the meaning of ecosystem services as ecosystem-based goods and services and thus employ the definition given above. If we define ecosystem services this way, the difference between ecosystem services and services generated solely by humans (often called economic or social services) can easily be clarified by the following examples.

The harvested flow of intensively produced food crops is an ecosytem service according to the above definition. The human labor– plus fossil fuel–based contribution to the energy content of, for instance, potatoes has been reported to go up to more than 90% (see Perez-Soba et al., 2014), but without the ecosystem’s contributions there would be no potatoes. On the other hand, caretaking of humans by other humans, at home or in the professional health sector, would be a social or socio-economic service, respectively, in this approach. The transaction of services is between people. Similarly, the transaction of food products between a farmer and a food processing company is an economic transaction. Of course, in a thermodynamic sense, nothing happens in the human world that cannot be traced back to the work of ecosystems, except maybe direct enjoyment of solar radiation. Major challenges in ecosystem services studies are therefore to identify the biophysical basis of the interactions between humans and ecosystems and where and under which conditions these take place. Other challenges pertain to the way people can develop social, economic, and institutional systems to use ecosystems and their services sustainably.

An important distinction, shown in Figure 1, is that between ecosystem services and ecosystem functions. The latter are defined as aggregate dynamics, resulting from structure and processes in ecosystems, which produce new structure and adapted processes as ecosystems evolve. The definition of ecosystem services given above implies that only when ecosystem functions are used by humans are they called ecosystem services. Humans consciously or unconsciously use (the rest of) nature as a system to feed, comfort, and inspire them, which in ecosystem service language would be as provider of provisioning, regulating, and cultural services, respectively (see Characteristics of Ecosystem Services for elaborate definitions and classifications). Ecosystem functions were called supporting services in the Millennium Ecosystem Assessment, which is not consistent with the definition of services, which implies use, and may cause double counting in valuation (see Economic Assessment of Ecosystem Services). Ecosystem functions are also said to generate a capacity to provide services and are often named potential ecosystem services.

In this conceptual model of ecosystem services in Figure 1, the natural science domain is positioned on the left side and the human, social, and economic domain on the right side. While recognizing that the human species, and thus human society, is an intricate part of the global ecosystem, the diagram highlights the particular position of humans and places the human system virtually outside the rest of nature, only for analytical purposes. The ecosystem services flow from left to right. Ecosystem services are thus a linking pin between the natural and human systems. The benefits for people follow from goods and services delivered by ecosystems. Benefits are recognized when services provide satisfaction of human (basic) needs and (not basic) wants. The benefits are then assigned value by humans, either explicitly or implicitly. One could argue that even intrinsic values are formulated by people as satisfaction of psychological human needs. The conceptual model also includes an enhancing feedback structure of control and investment through institutions, policy and ecosystem management, and a negative feedback of pollution and destruction, which are all energies from human society that flow from right to left in the diagram.

History

A brief overview of the history of the ecosystem services concept is of course based on a subjective selection of key persons and key events. A detailed textbook is still missing, but a rather extensive historical analysis is given by Gómez-Baggethun et al. (2010). Documented ideas about the value of nature may be found already with the Greek philosophers, but the origins of the modern history of the concept are in the late 1970s (Westman, 1977). The development of the concept continued throughout the 1980s in the sustainable development debate (WCED, 1987) and into the 1990s with the elaboration of the concept in the professional literature (e.g., Costanza and Daly, 1992; Daily, 1997) and with increased focus on their economic value (Costanza et al., 1997).

The Ecological Roots

Early authors pointing at the economic and cultural values of nature include Marsh (1864) and Leopold (1949). The concept of ecosystem services thus builds on early publications highlighting the value of nature’s functions to human society (see also Carson, 1962; Ehrlich, 1968; Meadows et al., 1972). The term ecosystem function was originally used to refer to the set of ecosystem processes operating within an ecological system no matter whether or not such processes are useful for humans (Odum, 1957). In the late 1960s and early 1970s, some authors started referring to functions of nature to denote the work done, environments provided, and goods delivered to human societies (Helliwell, 1969; Odum, 1971). This did cause some confusion as the term function was also still in use in a strictly ecological sense.

A lot of energy and matter transformations take place in ecosystems, before what is recognized as goods and services are provided. If sustainable development is the societal objective, decision-makers need to understand what is required for that in terms of extent and condition of ecosystems. As stated in TEEB (2010a), it is important to distinguish functions from the fundamental ecological structures and processes because the concept of functions represents the potential that ecosystems have to deliver a service. The quantitative relationship between aspects of biodiversity, ecosystem components and processes, functions and services is increasingly better understood (see Harrison et al., 2014).

The Economic Roots

From an economic point of view, the useful things ecosystems do or produce for people may be called services and goods, respectively. One should realize that what people regard as useful may, however, change over time. Some of the Classical Economists recognized the contribution of the services by nature. However, they recognized only their value in use but generally denied nature’s role in exchange value because they were at the time—the end of the 18th and the beginning of the 19th century—considered free gifts of nature. In contrast to the Physiocrats’ belief (in the early 18th century) that land was the primary source of value, the Classical Economists began to emphasize labor as the major force backing the production of wealth. Marx considered, at some point in his work, value to emerge from the combination of labor and nature (see Martínez-Alier, 2005). In the 19th century, industrial growth, technological development, and capital accumulation led to a series of changes in economic thinking that caused nature to lose importance in economic analysis. By the second half of the 20th century, land, or environmental resources, had completely disappeared from the production function. The shift from land and other natural inputs to capital and labor and from physical to monetary economics was complete (see Hubacek & Van der Bergh, 2006). In the second half of the 20th century, some economists became interested in environmental problems. The undervaluation of the contributions by ecosystems to welfare in public and business decision-making was partly explained by the fact that they are not adequately quantified in terms comparable with economic services and manufactured capital. From this perspective, nonmarketed ecosystem services are viewed as positive externalities that, if valued in monetary terms, can be more explicitly incorporated in economic decision-making (see, e.g., Pearce, 1993).

In the 1980s some economists moved away from neo-classical environmental and resource economics (see Jansson, 1984) and joined with ecologists to found the Society and Journal of Ecological Economics (see Costanza, 1991). Ecological economics sees the economic system as an open subsystem of the ecosphere, exchanging energy, materials, and waste flows with the social and ecological systems with which it co-evolves. The focus on market-driven efficiency, typical for neo-classical economics, is expanded with the issues of equity and scale in relation to biophysical limits and to the development of methods to account for the physical and social costs involved in economic performance, using monetary along with biophysical accounts and other nonmonetary valuation languages (Martínez-Alier, 2002). A major issue in the debate between neo-classical and ecological economists is the sustainability concept. The so-called weak sustainability approach, which assumes substitutability between natural and manufactured capital, has been embraced by most neo-classical environmental economists. Ecological economists have generally advocated the so-called strong sustainability approach, which maintains that natural capital and manufactured capital are in a relation of complementarity rather than of one of substitutability (Costanza and Daly, 1992).

Synthesis: Ecosystem Services

From an ecological point of view, the rationale behind the use of the ecosystem service concept was mainly to demonstrate how the disappearance of biodiversity directly affects ecosystem functions that underpin critical services for human well-being. For ecological economists it is a concept that marries ecology to economics in policy and practice and brings nature back into the economic production function. The paper by Costanza et al. (1997) on the total value of the global natural capital and ecosystem services was a milestone in mainstreaming ecosystem services. The monetary figures presented had a high impact in both science and policy circles, both in terms of criticism of concept and methodology and in the further increase in the development and use of monetary valuation studies. The Millennium Ecosystem Assessment (MA, 2005) constitutes a landmark that firmly placed the ecosystem services concept on the policy agenda in some places (EC, 2006). International studies addressing the economics of ecosystems, their services and management include the Stern Review on the Economics of Climate Change (Stern, 2006) and the Cost of Policy Inaction study initiated by the European Commission (Braat & Ten Brink, 2008). The TEEB study, building on these initiatives, has added a clear economic connotation to the work of the Millennium Ecosystem Assessment (TEEB, 2010a). Part of the ecological economics view is that, although obviously no money is paid to ecosystems for their work, money does flow from consumers of goods and services (the beneficiaries) to the owners and managers of the ecosystems that co-produce the goods and services. In case monetary values are assigned to ecosystem services, they should, independent of how they are estimated, therefore reflect (1) the private and/or public costs for co-producing ecosystem services (labor, technology); and (2) the private and/or public costs of maintaining the quantity and quality of the ecosystems (natural capital), which are the other co-producers of ecosystems (see Figure 2).

Ecosystem ServicesClick to view larger

Figure 2. Energy, materials, and money flows in an ecological economic system.

(Source: Adapted from Figure 3 in Braat & de Groot, 2012.)

The Characteristics of Ecosystem Services

Humans in the hunter-gatherer period lived in an environment of natural ecosystems and could, to a large extent, be considered an integral part of those systems; like deer and wolves, they used a variety of ecosystem functions while being part of them. Around 5,000 years ago in northwest Europe, and earlier in the river deltas in China, India, and Mesopotamia, humans, using natural ecological processes in soils and vegetation, created their own ecosystems with domesticated plants (crops) and animals (livestock), later called agro-ecosystems. Early farming communities were still mainly dependent on the direct supply of goods and services from local ecosystems. Later there was trade of raw materials and commodities over thousands of kilometers (McNeill & McNeill, 2003). Industrialization came when human society started to use fossil fuels on a large scale; these are in fact fossilized biomass, and thus embodied sunlight energy. The physical and mental distance between humans and nature, and thus between socio-economic and ecological systems, started to become larger and is now greater than ever before as today the majority of the people in the world lives in cities (Odum, 1983).

Classification of Ecosystem Services

As indicated in the Introduction, there is a large variety of goods and services produced by ecosystems. For scientific analysis, economic valuation, and policymaking, elaborate classification systems were developed (MA, 2005; TEEB, 2010a; Haines-Young & Potschin (CICES), 2013; Landers & Nahlik (FEGS), 2013). An important difference between TEEB and the MA is that in the TEEB project the MA category of Supporting Services, such as nutrient cycling and food-chain dynamics, was redefined as ecosystem functions (TEEB, 2010a), with the major argument that these processes were not directly being used by people, and if included in valuations would lead to double counting. The Common International Classification of Ecosystem Services (CICES) was developed to provide a hierarchically consistent and science-based classification (e.g., to be used for natural capital accounting purposes; Haines-Young & Potschin, 2013). The FEGS classification was developed by the U.S. Environmental Protection Agency, and although generally similar to CICES, it differs in a number of details. Table 1 shows the relationships between the different classifications of the MA, TEEB, and CICES.

Table 1 Classification Systems of Ecosystem Service. Source: Maes et al. (2013).

MA Categories

TEEB Categories

CICES v4.3 Group

Food (fodder)

Food

Provisioning services

Biomass [Nutrition]

Biomass (Materials from plants, algae, and animals for agricultural use)

Fresh water

Water

Water (for drinking purposes)[Nutrition]

Water (for nondrinking purposes) [Materials]

Fiber, timber

Raw Materials

Biomass (fibers and other materials from plants, algae, and animals for direct use and processing)

Genetic resources

Genetic resources

Biomass (genetic materials from all biota)

Biochemicals

Medicinal resources

Biomass (fibers and other materials from plants, algae, and animals for direct use and processing)

Ornamental resources

Ornamental resources

Biomass (fibers and other materials from plants, algae, and animals for direct use and processing)

Biomass based energy sources

Mechanical energy (animal based)

Air quality regulation

Air quality regulation

Regulating services (TEEB)

Regulating and supporting services (MA)

Regulating and maintenance services (CICES)

[Mediation of] gaseous/air flows

Water purification and water treatment

Waste treatment (water purification)

Mediation [of waste, toxics, and other nuisances] by biota

Mediation [of waste, toxics, and other nuisances] by ecosystems

Water regulation

Regulation of water flows

[Mediation of] liquid flows

Moderation of extreme events

Erosion regulation

Erosion prevention

[Mediation of] mass flows

Climate regulation

Climate regulation

Atmospheric composition and climate regulation

Soil formation (supporting service)

Maintenance of soil fertility

Soil formation and composition

Pollination

Pollination

Life cycle maintenance, habitat and gene pool protection

Pest regulation

Biological control

Pest and disease control

Disease regulation

Primary production

Nutrient cycling

(supporting services)

Maintenance of life cycles of migratory species (incl. nursery service)

Life cycle maintenance, habitat and gene pool protection

Soil formation and composition

Maintenance of genetic diversity (especially in gene pool protection)

[Maintenance of] water conditions

Life cycle maintenance, habitat and gene pool protection

Spiritual and religious values

Spiritual experience

Cultural services

Spiritual and/or emblematic

Aesthetic values

Aesthetic information

Intellectual and representational interactions

Cultural diversity

Inspiration for culture, art, and design

Intellectual and representational interactions

Spiritual and/or emblematic

Recreation and ecotourism

Recreation and tourism

Physical and experiential interactions

Knowledge systems and educational values

Information for cognitive development

Intellectual and representation interactions

Other cultural outputs (existence, bequest)

MA provides a classification that is globally recognized and used in subglobal assessments

TEEB provides an updated classification, based on the MA, which is used in ongoing national TEEB studies across Europe

CICES provides a hierarchical system, building on the MA and TEEB classifications but tailored to accounting

(*) Explanatory information from CICES division level [between squared brackets] and from CICES class level (between parentheses).

Provisioning Services

This class of services contains (1) the biomass products from natural and agricultural systems, as well as from forestry and aquaculture; (2) water from surface or underground systems; and (3) energy from biomass as well as from animal work. Natural ecosystems have always produced biomass in forms that humans could directly consume (fruits, roots, animal meat) or use as medicine, food flavor, and for ornamental uses. With the development of agriculture, humans selectively modified plant and animal species with breeding programs, and with genetic modification, biomass production has been fine-tuned to cater to the diversity of human needs and wants. Even a basic provisioning service, such as delivery of biomass in fruits, game, and crops, requires human labor in the form of gathering, hunting, and harvesting work, respectively. Industrialized agriculture applies fossil fuel–based technology (mechanical harvesters) and products (fertilizers and pesticides) to produce great quantities of desired, specialized forms of biomass (see Figure 3).

Ecosystem ServicesClick to view larger

Figure 3. The energy flows involved in food/feed biomass production. Solid lines indicate energy flows: red lines, human activity; yellow lines, environmental/ecosystem processes; other colors, energy flows resulting from interaction of (natural) ecosystem and human flows.

(Source: Figure 1.3 in Pérez-Soba et al., 2014.)

The contribution of the renewable energies and ecological processes, when all inputs are expressed in solar equivalent joules, may be less than 5% (Perez Soba et al., 2014). Nonetheless, following the definition given in the Introduction, such a co-production of biomass with direct input from ecosystems and humans produces an ecosystem service. When the harvested biomass is processed to produce, for example, canned foods and is transported from production to retail to consumer sites, we call it an economic good and service.

Regulating Services

The class of regulating services is diverse in mechanisms within ecosystems and with respect to the role of humans. They all are forms of work by ecosystems that contribute to a geophysical-chemical and hydrological environment in which humans (and many other species) can live (e.g., climate regulation by carbon sequestration; pollution capture from air or streams). With their structure (e.g., trees on slopes or in floodplains), ecosystems can buffer extreme events (erosion and floods, respectively) or store water (in vegetation and soils), which can be viewed as buffers against droughts. Humans have always used this capacity to buffer and regulate fluctuations in the supply of clean air, water, and soils but only became aware of these services when they became scarce or degraded. The sequestration of carbon by plants into biomass and soil organic matter and by plankton in the sea happens continually, but this useful regulating service is offset by large-scale harvesting of forests and bogs on land and pollution of the sea.

Pollination was classified as a regulating service in MA, TEEB, and CICES. This may need to be changed. In natural pollination processes, insects such as honey bees and bumblebees pollinate natural vegetation as well as commercial crops and foster reproduction which may lead to non-commercial and commercial fruits respectively. In these situations, the bees are comparable to soil organisms which contribute to the growth of plants, and which are considered part of the ecological functions of the ecosystem. In commercial pollination, beehives are moved around to allow pollination of crops (e.g., almonds in California), and the bees are then comparable to cows, which are fed grass to produce an edible product for humans. In this case pollination is part of the provisioning services system. Humans may harvest honey as a direct product from the bees (i.e., a provisioning ecosystem service) and fruits from pollinated plants as an indirect product (with the bees being part of ecosystem functions).

Cultural Ecosystem Services

This class of ecosystem services is currently receiving much attention in the scientific literature. One may approach these services, following the model in Figure 1, from the ecosystem side, adopting a natural science perspective, or from the human system side, adopting a social science perspective.

In the three classification systems mentioned above, cultural ecosystem services include a great variety of types of services, ranging from spiritual and religious values (MA) via recreation and tourism (TEEB) to intellectual and representational interactions (CICES). Table 1 illustrates that this area in the classification and description of ecosystem services is still developing. Following the model in Figure 1, the ecosystem contribution to cultural ecosystem services consists of (a) information and (b) a physical environment. The human co-production contribution consists of (a) perceiving and processing that information and (b) modifying and being active in that physical environment.

Ecosystems are structures in landscapes with spatial and temporal dimensions that can be visited and experienced by people. These ecosystems deliver information from their structure and dynamics to observers. Following information theory and various indices that measure aspects of information, the more (bio)diverse the source system observed (e.g., in structure, horizontal and vertical patterns, color, smell, sounds), the more information is available to be perceived. People use their sensory organs to absorb and and brains to process the information provided by the ecosystem components, structure, and dynamics. When a group of humans is exposed to a single forest ecosystem, they experience different aspects of that system: they perceive a different subset of the available information flows. So, artists, priests, professional biologists, and outdoor recreationists who all visit one particular ecosystem can see in principle the same components and structure and thus obtain the same information with their eyes or other sensory organs. In each person the brains include filters which define the information that is actually processed and therefore determine the benefits they receive. The mental filters reflects the culture, or personal history, of the individual humans, which include education, social environment, religion, and economic condition (see Figure 4). The results of these filtered information flows, in terms of the products and (human) services, inspired and informed by ecosystems may be the paintings, the sermons, or the teachings of an artist, priest, or biology teacher, respectively, which become elements of an individual or group or societal culture.

Ecosystem ServicesClick to view larger

Figure 4. Schematic representation of information flows as basis for cultural ecosystem services.

(Source: Braat, 2015, original drawing.)

The classification systems have grouped outdoor recreation in the class of cultural services. When humans recreate in nature (a night at the opera is not included as an ecosystem service), they use ecosystems in a number of ways and in most cases simultaneously. The ecosystem may be the physical environment where they rid themselves of excess energy and at the same time absorb information from that environment, which mobilizes mental energy. This type of activity may be individual or occur in groups, where it may be called social cultural services. To access the recreation landscapes, roads and parking places may be built, part of the co-production effort. To transform the potential information service of ecosystems to an actual cultural ecosystem service and generate benefits, humans spend physiological energy to obtain the information, consciously or unconsciously, and develop infrastructure for access and facilities (see Braat, 2014).

A somewhat different aspect of cultural services is mentioned in the literature, which refers to accumulated traditions of humans interacting with their cultivated landscapes, meaning landscapes transformed by humans for human use. This is a much broader concept, where all previous types of ecosystem services may be present and produced by landscapes characterized by a strong human influence (Tengberg et al., 2012). These may be agricultural as well as urban landscapes.

With this view of cultural services it may also be clear that there are always cultural aspects to all other ecosystem services, for example, in the production of foods and wine, which are specific to particular landscapes. It also shows up in archeological finds, which to some extent are the remains of historical use of ecosystem services.

Abiotic Ecosystem Services

The classifications of ecosystem services produced by the Millennium Ecosystem Assessment (MA, 2005) and The Economics of Ecosystems and Biodiversity (TEEB, 2010a) projects have not explicitly addressed the position of services produced from abiotic structures and processes in ecosystems. The Common International Classification of Ecosystem Services (CICES; Haines-Young & Potschin, 2013) at first did not specify the position either, but the authors propose defining a separate but complementary classification that covers abiotic outputs. In the development of the concept of Natural Capital, abiotic assets (structures) and flows have been incorporated (Obst et al., 2015). There is still debate about the inclusion and position of energy sources (assets) and flows, such as the sun and solar radiation, respectively, but the relevant point is that abiotic aspects of ecosystems are recognized as being part of the wider concept of ecosystem services and thus potentially relevant for human welfare and well-being.

The question whether sun-based energy flows (sunlight, wind, rain), moon-based (tidal energy) energy, and geothermal energy should be included in the concept of ecosystem services is relevant as well. They are of course not produced by what is defined in ecological textbooks as ecosystems, but their contributions to human well-being are to some extent modified by the ecological structure in the biosphere and by humans, e.g., via decisions on land use. The debate has only just started (see also Armstrong et al., 2012).

Some abiotic aspects were already explicitly recognized in the classifications, for example, in provisioning service water production (drinking, irrigation or industrial) from surface or groundwater sources. They were also explicitly present in ecosystem functions such as nutrient cycling and soil formation, which involve interactions between microorganisms and geochemical materials and processes. Some ecosystem services even are identified by the abiotic or combined biotic–abiotic processes they counter, mitigate, or (dis)solve: protection against floods, erosion, avalanches, and reduction of air and water pollution.

The combined forces of sun, wind, and rain not only produce biomass via the plant photosynthetic processes but, often modulated by biotic structures and processes, also produce flows of useful abiotic material in sediments (sea-, river-, or airborne) and soil formation. In addition, there is also the role of land and water as carriers of human activities. Carrier services include, for example, the role of rivers for transportation and the capacity of the geological substrate for carrying buildings. This role of land and water in human economies has been historically recognized, as is evident from legal and economic debates about public and private land (and water). It is now captured in natural capital accounting via the changes in land use and land cover, for example, land converted from natural and agricultural use to urban and transportation use. Finally, there is a whole different category of abiotic sources to economies via the contribution of volcanic eruptions bringing new loads of useful chemicals to the world’s ecosystems and humans to work with.

To make integrated valuations (see Economic Assessment of Ecosystem Services) across all relevant factors contributing to economic or cultural values, abiotic factors should thus not be excluded. The relative size of the contribution of these factors to values produced in landscapes can be considerable in production services (e.g., the chemicals in soils for agricultural production), regulating services (sandbars in estuaries to mitigate tidal flows extremes), and cultural services (landscape diversity by geomorphology).

Bundles of Ecosystem Services

Much of the early research on ecosystem services was focused on individual services of particular ecosystems (see, e.g., Daily, 1997). It was clear, however, from the beginning that ecosystems at any particular location have the capacity to generate multiple services at the same time. The term to identify this phenomenon is bundle. Illustrative examples of these bundles, and of the analysis of specific bundles of ecosystem services actually being used simultaneously, are given by Raudsepp-Hearne et al. (2010). In practice, intensively managed ecosystems such as cropland, timber plantations, and aquaculture ponds maximize the biomass flow through a single species. To achieve such channeling, the managers remove most of the other species (except from the soils). With the decrease of biodiversity and the reduction of the structure in such ecosystems, a shift in the bundles is taking place from regulating services to provisioning services.

Disservices

Some ecosystems are viewed as providing disservices, for example, when they facilitate reproduction and dispersal of species that damage crops or human health and thus cause economic and social costs. Shapiro and Báldi (2014) observe that in spite of the image of ecosystem services as a positive factor in producing welfare and well-being, one should realize that ecosystems are not entities that exist for human benefit; they are complex evolutionary systems that generate functions that do not provide benefits to humans. In fact, the same provider (e.g., a forest) may provide services (timber, water storage) and what is called disservices (fire hazard, habitat for pest species).

It should be realized that some of the disservices are the result of abuse, bad planning, or ineffective management and thus often man-made. Examples are normalizing rivers (leading to floods), clear-cutting forests on hill slopes (causing erosion and landslides), and disturbing natural food webs (leading to outbreaks of pests). In trade-off analysis, the social costs must be considered, and, ultimately, the notion of benefits and dis-benefits (i.e., costs) should be included in a consistent ecosystem accounting framework (Villa et al., 2014). In developed economies with intensive ecosystem exploitation and management in agriculture, forestry and fisheries, with pollution, overexploitation, and destruction as side effects, people have often reduced the capacity of ecosystems to perform regulating services. Targeted restoration and management are necessary to re-establish, maybe not the exact ecosystem, but at least some of the capacity for regulating services (see EC, 2011).

The Relationship Between Biodiversity and Ecosystem Services

There is clear evidence for a central role of various features of biodiversity, including abundance of different gene pools and of populations of key species, of functional traits, and spatial heterogeneity of habitat structure, in the delivery of some—but not all—services (Harrison et al., 2014; Science for Environment Policy, 2015). Maintaining functioning ecosystems capable of delivering bundles of ecosystem services therefore requires political will and consistent policies aiming at sustaining a considerable level of these (and other) aspects of biodiversity both in natural and in agricultural ecosystems.

Most of the current indicators of biodiversity status and trends were not developed for economic assessment. They are therefore not always able to show clearly the relationships between features of biodiversity and the benefits they provide to people. A reliance on existing indicators will capture the value of only a few species and ecosystems relevant to, for example, food and fiber production, and will miss the role of the biological diversity in food webs, nutrient-processing chains, and ecosystem productivity in supporting the full range of benefits, as well as their resilience in dealing with human-induced stress by regulating services.

Next to the role of biodiversity features within the ecosystem, many of them are also part of the observable information in ecosystems and as such contribute to the cultural ecosystem services as defined above. A set of indicators is therefore needed that not only is relevant and able to convey the message of the consequences of biodiversity loss but must also reflect the aspects of biodiversity relevant to the ecosystem service of interest and capture the often nonlinear and multi-scale relationships between ecosystems and the benefits that they provide, which can be converted into economic terms.

Economic Assessment of Ecosystem Services

Valuation

The Oxford Dictionary defines valuation as “An estimation of the worth of something.” To estimate worth is a mental process that involves the assessment of situations, comparing it to some reference value and making decisions on whether to act or refrain from action. All people, and many animals, do it all the time, mostly unconsciously, in view of so-called desirable ends (Farley, 2012). Most of the assigned values to goods, services, people, or cultural achievements have to do with the survival of humans as individuals, many with the well-being of individuals and social groups, and some with the ethical considerations humans make about other people’s and other species’ rights to live. When major changes in ecosystems and ecosystem services are at stake with intended or expected change in well-being, for example, as a consequence of land use change or economic or environmental policy, then structured and transparent valuations are appropriate, also in view of desirable ends, but at a societal rather than individual level and in the proper temporal and spatial contexts.

The term valuation is also used by people to express their appreciation without having as a consequence making a trade-off or decision. For example, when museum visitors use the term value in appreciating a painting, they generally do not intend to put a quantitative or monetary value on that painting, aside from whether it is for sale or not. Similarly, people may use the term value for appreciating a nice landscape view, while this does not reflect any intention to make a trade-off in terms of giving up some of their income to conserve that landscape. On the other hand, appreciation may be the first step in what is called an economic valuation, when options are traded off and decisions on allocation of (financial) resources are made.

Economic value is defined in strict economic terms as aggregate willingness-to-pay for the stream of services (e.g., from a ecosystem). The economic value can be expressed in a monetary value or in relative terms using a variety of indicators. These indicators can be used to prioritize and compare ecosystems and their services on the basis of their relative contribution to individual or social objectives. The indicators may include the number of people who benefit from these service, their preferences, the cost of gaining/keeping access to the service, and the availability and cost of substitutes. Preferences are subjective values expressed in relative terms such that one thing is deemed to be more desirable or important than another. In natural sciences the term valuation is also used in combination with the term numerical, and then it is no more, and no less, than quantifying, for example, ecosystem structures or dynamics in such measures as kilograms, hectares, and seconds.

Until recently, policy proposals such as construction and land use change were formally evaluated based on a financial cost-benefit analysis only, in which the costs of development as well as the benefits recognized in the market were included. Informally, other values often played a role as well, but in most of these cost-benefit analyses, costs of loss and benefits of conservation of nonmarket benefits, as most regulating ecosystems services produce, were ignored.

New formal valuation approaches are now being developed that acknowledge the variety of individual and group dimensions on the valuator side and incorporate the dynamics of natural capital and ecosystem services at multiple geographical and temporal scales. This type of policy or project assessment generally includes identifying and mapping the properties and values of landscapes and ecosystems, eliciting social preferences, deliberative processes, ranking, quantifying, and, in many cases, monetizing of potential benefits of the proposed policy. This so-called total system approach implies estimating the value of ecosystems and their services, including the causal mechanisms in the service-producing ecological systems and the contributions by human action to make potential services actual and in the appropriate spatial and temporal scales (see Gómez-Baggethun et al., 2014; Braat et al., 2015).

Most formal valuations in decision processes so far have focused on single benefits, at single scales, single levels of organization, and monodisciplinary perspectives; existence of multiple values has mostly been acknowledged only theoretically. The understanding of the complexity of economic, cultural, and social values is increasing but still not generally embedded in decision-making. The broader approach, which explicitly includes the nonmarket values, mostly from regulating and cultural services, is now being elaborated in many places with the aim to integrate the objectives of ecological sustainability, social justice, and economic efficiency into the public and private decision-making process (Farley, 2012; Kovács et al., 2015).

In mainstream economics it is common to view added value as the result of a causal production chain. In such a view, the value assignment takes place at the end of the chain, based on the preferences of consumers, stakeholder groups, or representative governments. The end-of-the-chain valuation is by definition subjective in that it reflects to what extent individual or group needs and wants are satisfied, or policy objectives are achieved, in the perception of the valuators.

The complementary assessment to this subjective valuation process is an explicit objective recognition of the essential role of the inputs into the value production chain: (1) the biophysical inputs derived from ecosystems, in this context often referred to as natural capital, and (2) the human-based inputs such as financial capital, labor, and technology. In a complex policy or project assessment, it is essential to quantify both types of input and include the objectively obtained numbers in the input (or economic cost) side of the valuation process, but it would be unscientific and economically incorrect to subjectively rank or price the inputs and add such values to the output values, because double counting would then occur. This value production chain model also shows that it makes no sense to trade off ecosystem features, such as biodiversity against economic profits, when these are causally dependent on that biodiversity (see Table 2).

Table 2 The Value Production Chain. Source: Braat (2015).

Value Source

Value Production (with human inputs)

Experience of Value

Value Types

Natural capital

Ecosystem function

Ecosystem services

Benefits (satisfaction of needs & wants)

Economic

Cultural

Social

Biomass, nutrients

Photosynthesis biomass production

Provisioning: grain

Satisfaction of hunger & appetite

Contribution to W&W: food

Way of preparation

Valued by more people/shared value

Biomass, tree structure, leaves

Capturing pollutants

Regulating: purification of air

Satisfaction of breathing need

Contribution to W&W: healthy air

In landscape context

Valued by more people/shared value

Species, structural diversity

Color, smell, movement

Cultural: information from forest

Satisfaction of information needs

Contribution to W&W: education

Inspiration, stress relief

Valued by more people/shared value

The importance of the role that ecosystems and biodiversity can play in society in buffering shocks is being examined through the notion of insurance value, a metaphor for the need to conserve nature to maintain resilience in ecological-economic systems. Keeping an ecosystem in a desirable condition helps to prevent catastrophic and irreversible reductions in ecosystem service flows (Baumgärtner & Strunz, 2014). Thus, the insurance metaphor points to additional reasons for acting as good stewards of ecosystems.

A Typology of Values

The notion of value pluralism stems from the observation of differences in value perceptions of different beneficiaries, namely the ones that assign the values. It implies that a single ecosystem or service may be assigned different types of values at the same time, even by one individual, often related to institutional contexts or stages in one’s life. This notion has led to a number of different classifications of values of ecosystem services (see, e.g., Gómez-Baggethun et al., 2014). Here a very basic one is offered, which can of course be further elaborated to fit special cases (see Braat et al., 2015). When we look at “what” is valued, we may distinguish between economic and cultural values:

  1. 1. Economic value: This is the most frequently used term for the values assigned to benefits of goods and services and often expressed by what people are willing to give up or pay (in time, energy, or money) in exchange for. It is most often defined in terms of material welfare but increasingly also in terms of well-being; in neo-classical economics these values are assigned by an individual person, e.g., in terms of physical wealth, financial assets, buying power, income flows, or by an individual company; in ecological economics, economic values refer to the benefits contributing to the well-being of groups and whole societies.

  2. 2. Cultural value: When people express value for contributions from ecosystems, via goods and services, to (define, support, enhance) the culture of a society, the term cultural value may be used. Culture refers to the set of historically embedded and generally appreciated customs, including architecture and art, and cultural (human-designed and -managed) landscapes. The latter is often linked to the notion of cultural identity.

When we look at “who” is doing the valuation, then both economic and cultural values may be assigned by individuals or by groups, which is then called social valuation. The term social value may have two quite different meanings. It is sometimes used to describe the sum of individual economic (or cultural values) for a group of people, for example, stakeholders or even for the whole of society. Other authors use it to refer to shared preferences among a group, which may follow from a shared cultural background or from deliberative processes (see Kenter et al., 2014). When these group valuations are implied, the resulting values are often referred to as socio-economic and socio-cultural values to distinghuish them from individual-based values.

The term ecological value is assigned by some authors (see, e.g., De Groot et al., 2002) to features (or abstractions of such features) of ecosystems (e.g., species diversity or stability). This value type dates back to the 1970s when the importance of protecting natural systems against rapidly expanding economies and associated urbanization became paramount in political debates. It was useful and to some extent effective in policy to employ terminology that suggests an equivalent position of ecological systems, species, and environmental quality in economic decision-making, next to profits and fair distribution of income. It appears to have helped to create a place for rare species and species-rich ecosystems in environmental impact assessment legislation. It may be interpreted in two different ways:

  1. 1. An expression by individual (or groups of) people of the importance of particular features of nature to those people. This may reflect an appreciation of those features (e.g., a bird species) or an expression of their moral stance on the right to live of species in nature and often translates into a willingness of these people to contribute to the preservation of natural systems irrespective of direct benefits. A range of motives may be behind such subjective assignments of value: ethical, moral, religious imperatives, buy-off of guilt, or conformation to a social group behavior.

  2. 2. An expression of the recognized importance of ecosystems and their biodiversity as contributing factors in the production of economic or cultural benefits. In a formal decision context, where values may be traded off against each other or summed to obtain a total value estimate, the expression of appreciation or importance should not be included as a separate category of value, as one would be double counting, since the contributions from the ecosystems to the benefits for humans are already included in the economic or cultural values (see Table 2).

Valuation Methods

A structured valuation process should begin with a clear and structured overview of the benefits (and costs) in the reference situation and those in one or more alternative situations. In mainstream economics, valuation in a decision-making context has traditionally been approached via monetary methods, but nonmonetary considerations have always been part of political decision-making. There is basically one approach to define the total value of alternative plans or projects (the reference state compared to future alternative state). This is to have the relevant community of valuators determine their individual values and, with some transparent method, combine these individual values into shared, joint, group, stakeholder, community, or society values. A crucial challenge here is to define the relevant community of valuators. Who is involved as producer of value, as beneficiary, now or in the future? What is, for example, the spatial extent of the value production processes and of the benefits and costs of land use change? There are several government and nongovernment handbooks and technical papers available presenting and discussing monetary and nonmonetary valuation methods (see Pagiola et al., 2004; EFTEC, 2005; EPA-SAB, 2009; WBCSD, 2011; Bateman et al., 2013).

Two groups of subjective valuation methods are distinguished. There are the traditional and well-developed methods that use money as a common denominator to sum, compare, and trade off values assigned by individuals or groups. A range of alternative nonmonetary methods has been developed, either from critiques of the monetary approaches (see Spangenberg & Settele, 2010; Spash, 2013) or from social science principles. In addition, a set of methods is distinguished in the valuation literature called biophysical valuation methods. They seek a common denominator in the energy (and/or material) cost of producing value in an ecological-economic production chain (Odum, 1996). This focus on the input (or cost to produce benefits) is relevant in assessing the physical feasibility of (sustainably) producing the benefits for which a demand has been determined and thus constitutes a real-world constraint on the decision-making process, which limits the range of options in planning and needs to be contrasted with what individuals, groups, and society prefer. The results of such exercises, as indicated above, should not be added to the results of the subjective methods, as double counting will occur.

Non-Monetary Valuation Methods

Nonmonetary valuation explores the importance (including cognitive, emotional, and ethical arguments), preferences, needs, or demands expressed by people, in this case toward ecosystems and their services (TEEB, 2010a; Chan et al., 2012; Castro et al., 2014). The term refers to a broad and heterogeneous collection of approaches and methods based on different conceptual and philosophical foundations (Christie et al., 2012). In spite of the growing number of scientific papers that present assessments based on nonmonetary methods (e.g., Martín-López et al., 2012), this type of valuation does not yet constitute a formalized methodological field in the context of ecosystem services. A number of synonymously used terms in the scientific literature are applied to distinguish specific methodological approaches from monetary valuations, such as noneconomic and nonmonetary (Christie et al., 2012), deliberative (Kenter et al., 2011), discourse based (Wilson & Howarth, 2002), psycho-cultural (Kumar & Kumar, 2008), social, and sociocultural valuation (Martín-López et al., 2014). These different terms often refer to different theoretical backgrounds and apply diverse techniques, but they all focus on the process of preference formation and aim to understand how values and preferences are formed and attributed to ecosystem services.

The research methods employed include surveys, interviews, participatory and deliberative tools such as focus groups, citizens’ juries, Delphi panels, and time use studies (Christie et al., 2012; Castro et al., 2014). Some studies also consider the spatial representation of demand (Milcu et al., 2013) and analytic tools rooted in biophysical approaches, for instance, energy analysis (Odum, 1996). A first attempt to divide this large and heterogeneous methodological field into formalized and more homogenous groups of methods is represented by Figure 5.

Ecosystem ServicesClick to view larger

Figure 5. Subgroups of nonmonetary valuation techniques according to methodological similarities in data collection (edited by the authors).

(Source: Kelemen et al., 2014.)

In the OpenNESS project the focus is especially on two subgroups of NMV techniques:

  1. 1. Predominantly quantitative and consultative methods, especially preference assessment, photo-elicitation and time-use studies.

  2. 2. Deliberative (discourse-based) methods:

    • Preference assessment is a direct and quantitative consultative method for analyzing perceptions, knowledge, and associated value of ecosystem services demand or use (or even social motivations for its maintenance). It could be used with an emphasis on individual perceptions or collective preferences (Castro et al., 2014). Preference assessment could be a useful approach for identifying relevant services from different stakeholder perspectives with diverging interest or needs. As a consequence, its application could help to uncover trade-offs or/and synergies on the ecosystem service demand, as well as the motivations behind these preferences.

    • Photo elicitation survey is a method to translate people’s experiences of landscapes in terms of ecosystem services (García-Llorente et al., 2012). It can be used to assess a range of landscape views at the same time. It has limited relevance for the less tangible regulating services. It appears to be quite suitable to assess cultural services, with potential to assess a range of values (e.g., spiritual, heritage, aesthetic).

    • Time use study is an innovation of the contingent valuation approach. In this case, the measure is labor hours rather than monetary units (Kenter et al., 2011). Willingness to give up time (WTT) could be understood as a useful nonmonetary technique, particularly in areas with economic limitations, avoiding equity problems (Higuera et al., 2013). Time use studies through WTT could be an appropriate indicator for uncovering socio-cultural factors behind consumer preferences, but they can also be used to understand social demands and priorities for conservation.

    • Deliberative methods invite stakeholders to form their preferences to ecosystem services together in a transparent way through an open discourse (Kelemen et al., 2013). It may combine different social techniques, e.g., interviews, focus groups, in-depth groups, citizens’ juries, etc., to be able to flexibly adapt to local contextual factors and stakeholder needs. Deliberative valuation allows consideration of ethical beliefs, moral commitments, and social norms beyond individual and collective utility (Aldred, 1997) and helps respondents articulate a wide range of nonutilitarian values together with utilitarian ones (Satterfield, 2001). Furthermore, deliberative valuation gives voice to marginalized stakeholder groups and often sheds light on social conflicts that accompany ecosystem service trade-offs. The results of the valuation process are socially accepted arguments about ecosystem services and their importance.

Contextual factors (e.g., capabilities and cultural characteristics of the communities involved, the value system held by stakeholders, institutional processes and characteristics) can remarkably influence the process and the results of nonmonetary valuation. A key step toward the applicability of nonmonetary valuation of ecosystem services is, thus, to provide guidance on which valuation contexts enable the use of which methods (and which methods cannot be used reliably in certain contexts).

Monetary Valuation Methods

Monetary valuation of ecosystem services involves estimating the amount of some currency associated with benefits provided by ecosystems. The monetary valuation may be based on market transaction of ecosystem goods or services or involve a nonmarket valuation. The provisioning ecosystem services (e.g., food, timber, fish, drinking water, medicinal plants) and some of the cultural services (outdoor recreation) are traded in physical and virtual markets; regulating services are generally not traded in real markets (the carbon market is an artificial, policy-based market) and therefore do not have market prices to reflect people’s willingness to pay for them. Governments step in to pay for the provision of regulating services based on tax money. Monetary valuation methods and techniques are often used to evaluate the effect of a change in ecosystem services on components of human well-being. Whatever the method used, all have flaws and not one is exempt from criticism.

Direct Valuation Methods

  • Market price methods use observed market prices to assign value to ecosystem services. They use little or no information about ecosystem dynamics.

  • Avoided damage cost: where an ecosystem service is the main mechanism of avoiding damage to property or economic production, the financial value at risk, estimated via market prices, can be used as the value of the ecosystem service.

  • Prevention and mitigation cost: the costs of actions in preventing or mitigating damage caused by the loss of ecosystem services constitute a conservative estimate of the monetary value of the ecosystem service.

  • Replacement or restoration cost: removed or degraded ecosystems may in some cases be restored or replaced or with more or less artificial ecosystems. The costs associated with restoration are a conservative estimate of the value of the original bundle of services from that ecosystem.

  • Substitute cost: when an ecosystem service is lost it may be substituted by some other, technological, means of providing the service.

  • The production function method: where ecosystem services result from a combination of ecosystem and human work, the approach estimates the contribution of the ecosystem relative to human input into the overall service flow, which may be monetized with any of the above methods.

  • Government spending: a special case of cost-based methods is public spending on damage avoidance, prevention, mitigation, restoration of ecosystems. Governments, in democratic political systems, are considered to represent the preferences of the people, and as such the decisions on how to spend public money (tax revenues) can be seen as an aggregate willingness to pay.

Revealed Preference Methods

Revealed preferences estimate the value of a given ecosystem service without market price through the observation of substitute markets related to the service.

  • Travel cost: The TC is used to estimate monetary values of the contribution that ecosystems make to recreation experience by humans via the distance people are willing to travel for the experience.

  • Hedonic pricing: The HP method can be used to estimate monetary values for ecosystem services that directly affect the prices of goods not necessarily produced by the ecosystem in question, e.g., houses in green urban areas.

  • Opportunity costs: Governments, businesses, land owners, and agents in general may forgo income streams from land uses when undertaking conservation actions. The forgone net income from such opportunities is called “opportunity cost.”

Stated Preference Methods

Stated preference methods are techniques that use individual respondents’ statements about their willingness to pay (WTP) for a benefit. The two most common forms of stated preference methods are contingent valuation (CV) and choice experiments (CE). A CV ask respondents directly their WTP for the change in the ecosystem service(s). In a CE respondents face a number of choice sets with different combinations of physical attribute levels combined with a cost attribute. The advantage of stated preference methods is that they can be used in any situation where there is limited data of people’s actual behavior. The main disadvantage is that the data collected are hypothetical in nature.

Value Transfer Methods

Value transfer refers to the use of secondary estimates of ecosystem services values from a “study site” to a new “policy site” for which the original valuation estimates were not originally intended. Value estimates may be assumed to be correct “on average” and transferred without any form of adjustment or transferred with simple adjustments using value-functions to derive an adjusted WTP figure for the policy site. A meta-analytic function transfer is similar to value function transfer but is generated from a meta-analysis of many valuation study sites.

Challenges in Valuation

The valuation methods discussed in this section, monetary or nonmonetary, have been used in the past in a somewhat haphazard way, using whatever method was either considered politically correct or technically feasible with the data available, within the time frame allowed for the assessment and decision process. A transparent valuation process would require that the participants recognize the complexities of the interactions between ecosystems and human systems, including the great variety in value references in the relevant population of actors and beneficiaries.

The major methodological and practical challenges in valuation processes can be summarized as:

  1. 1. Selection of the representative human population to elicit preferences and willingness to pay from.

  2. 2. Time and space dependency of the preferences assigned: differences due to phases of people’s life; differences across regions and countries.

  3. 3. Synchronization of the temporal and spatial scales of the ecological dynamics of the service providing ecosystems with the temporal and spatial scales of the social and economic dynamics of the community of people that strive to satisfy their human needs.

  4. 4. Matching the valuation method with the ecological, social, economic context; both nonmonetary methods and monetary methods are very diverse, and in some contexts the needs of the decision-makers and of the community may receive due consideration if monetary and nonmonetary techniques are combined in a valuation exercise.

Finally, to paraphrase Costanza et al. (1997), even without assigning ecosystems and their services a specific (monetary) value, our economic decisions carry an implicit valuation.

Policy and Practice

Ecosystem Services in International Policy Processes

With the publication of the Millennium Ecosystem Assessment (MA, 2005), the ecosystem services concept was launched into international biodiversity and ecosystem policy processes. Inspired by the approach developed in the The Economics of Ecosystems and Biodiversity project (TEEB, 2010a), the European Union designed parts of its new Biodiversity Strategy in 2011 (EC, 2011) along the three-step procedure for economic development based on sustainable use of ecosystems and their services outlined in the TEEB synthesis report (TEEB, 2010b). The EU chose this procedure to implement the agreed ecosystem services targets in the Strategic Plan for Biodiversity 2011–2020 of the Convention on Biological Diversity, which was defined in the 10th Conference of Parties in Nagoya (CBD, 2010). The procedure involves a natural science-based assessment step, followed by a social science–based valuation of natural capital and ecosystem services, and is concluded with a mix of policy instruments to capture the values of these ecosystems and services. (The steps are elaborated in A Procedure for Ecosystem Services Assessment and Decision Making.) At the global level, in 2012 the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) was founded, which aims to bring together knowledge and experience for assessments and valuation processes and support to public and private decision-making (see Diaz et al., 2015).

At the local level the crucial questions in economic development within the constraints of sustainable use of ecosystems are traditionally divided in: (1) natural science (ecological) questions, e.g., how to manage ecosystems for optimal sustainable use of bundles of services; (2) social science questions, e.g., how to optimally distribute the benefits of ecosystems across multiple stakeholders; and (3) policy questions, e.g., how to organize the process of local sustainable development within regulatory and legal frameworks and the objectives of higher administrative policy levels (Braat, 2013). Increasingly, as illustrated in TEEB country studies (see Hedden-Dunkhorst et al., 2015) and IPBES activities, these questions are addressed in integrated policy processes, using interdisciplinary teams and systems assessment methods.

A Procedure for Ecosystem Services Assessment and Decision-Making

In this section the three-step assessment procedure designed in the TEEB project is summarized.

Identify and Assess: Indicators, Mapping, and Quantification

A so-called integrated policy assessment requires a spatially and temporally explicit assessment of the condition of the services providing ecosystems at scales that are scientifically adequate and meaningful for policy interventions, acknowledging that both ecosystem services and economic values are contextual, anthropocentric, and place and time specific. It is therefore essential to map the spatial location and extent of the ecological supply side and the human demand side in the landscapes where ecosystems are to be managed. Without precise delineations of system boundaries, the quantification of natural capital stocks and ecosystem service flows will be unspecific and unreliable, and ultimately the legal implementation of policies requires precise property boundaries. The biophysical mapping and assessment actions are beginning to be perceived as a necessary first step toward economic and cultural valuations of ecosystem services, at least across the European Union (Braat, 2014b). Mapping ecosystem services is rather more complicated than mapping the dominant land cover or land or sea use, mostly because ecosystems produce bundles of services. In assessing trade-offs between alternative uses of ecosystems, the total bundle of ecosystem services provided by different management states should be included in the assessment and should therefore be mapped. The definition of ecosystem services (see Introduction) implies the actual use of ecosystem functions by humans (see Introduction and Characteristics of Ecosystem Services). In many of the mapping and assessment projects, actual use is, however, often proxied by estimates of potential supply or demand for services. Maes et al. (2012), Crossman et al. (2013), and Willemen et al. (2015) give introductions to and overviews of the challenges of mapping ecosystem services. They describe the search for appropriate indicators, mapping methods and techniques, and data sources and propose best practices.

Estimate and Demonstrate: Valuation

Environmental impact assessment reports do not provide direct insight in welfare gains and losses by plans and projects. This was considered to be obtained from the cost-benefit analyses usually done in such situations. However, in the last few years a broader approach, such as presented in Economic Assessment of Ecosystem Services, is being promoted (see TEEB, 2010b), explicitly including the nonmarket ecosystem–based contribution to material welfare and general well-being. If small, marginal, changes in land (or sea) use are expected, scenario comparison is considered particularly important for monetary valuation. When, however, the proposed change involves nearly complete loss of biodiversity and disappearance of ecosystem services, marginal value changes are in fact irrelevant. Since most ecosystems provide bundles of services and the use of one service generally affects the availability of other services, economic valuation should thus not only consider marginal values from changes in flows of individual services but also take into account the change in the value of the entire bundle of services. A major challenge is to implement the economic (monetary and nonmonetary) and cultural valuation as described in Economic Assessment of Ecosystem Services, in a geographically explicit way, building on the biophysical maps of ecosystem services. There are issues to be addressed of spatial differences in actual supply of services (relative scarcity) and distance between supply and demand locations, which affect relative value and prices. Lessons from disciplines such as economic geography may be useful but need to be reformulated in view of the traditionally ignored dynamics of ecosystems and the modern technology of computerized geographical information systems.

Capture and Manage the Values

Step 3 in the TEEB procedure is about capturing the values of ecosystems for a sustainable society (TEEB, 2010b; TEEB, 2011). To a large extent the third step is represented in Figure 1 via the feedback loop from the human system box via the institutional and policy box to the ecosystem box and the services flows. Protective legislation or voluntary agreements can be effective responses where biodiversity values are generally recognized and accepted. In TEEB (2010b) the capture message is summarized as providing information about benefits, creating a common language for science, policy, businesses, and citizens, identifying the opportunities of sustainable use of ecosystems, and generating information about value for designing policy incentives. This step is thus about the introduction of mechanisms that incorporate the values of ecosystems into decision-making through incentives, social arrangements, and price signals and, in some cases, to make the services cashable and accountable. It also includes mechanisms like payments for ecosystem services, reforming harmful subsidies, tax breaks for conservation, and biodiversity offsets. An essential challenge is the adjustment of the legal system with respect to rights over ecosystems and liability for damage to ecosystem service potential (TEEB, 2011). Under the supervision of the United Nations Statistics Office, a global effort is now being developed to store values of ecosystems and their services in Natural Capital Accounts (see Obst et al., 2015). The objective is to have these values readily available for use or reference in future decision processes involving expected changes in ecosystems and their services.

Practice

Stakeholders

Support of stakeholders is crucial for successful implementation of policies, and they should therefore be involved already in the design phase. Stakeholders often have specific place-based and traditional knowledge that adds new and useful information and new aspects to the process (Hauck et al., 2013). In the past many decisions have been made which can, in retrospect, at least partially be blamed on ignorance regarding the potential benefits of particular policy plans. In a democratic process aimed at sustainable development, one needs to recognize not only one’s own stakes but also the stakes of other people and to learn to negotiate, preferably under the umbrella of relevant and reliable scientific information. The three-step TEEB procedure may work well in stakeholder meetings to clearly define the perimeter of the possible solutions in deliberative processes and negotiations. Those who have to give up benefits due to a policy could be compensated by those who would receive extra benefits. This may create more feasible outcomes.

Short-term benefits for some groups often cause losses to future generations or social groups across the border of the pertinent region. Protecting ecosystems today will have costs and benefits today as well as for future generations. In mainstream economics, discounting (generally with a fixed discount rate) is a common practice to compare these future costs and benefits with current values. An important issue is therefore the selection of the most appropriate discount rate in different decision-making contexts; in general, the values of ecosystem services, which are expected to be also relevant for future generations, should not be discounted. Inflexible discount rates stimulate short-term unsustainable exploitation of services at the cost of natural capital. Scenarios with variable discount rates and different weights for different stakeholder interests may elucidate the sustainability of possible outcomes and distribution of future well-being (see Parks & Gowdy, 2013).

Instruments Based on the Ecosystem Service Concept

An important step toward the conservation and sustainable use of biodiversity and ecosystem services lies in accounting for the positive and negative externalities associated with human activities and taking action, either by governments or in the market. There are many different legal, economic, and social instruments that can be integrated with the ecosystem services concept, for example, price signals and nonmarket-based mechanisms such as awareness raising and changing social norms (as effects of education and public deliberation). One particular instrument that has become very popular in ecosystem services management worldwide is payments for ecosystem services (PES) (see, e.g., Wunder, 2005; Sattler & Matzdorf, 2013). PES aims to connect service providers, such as ecosystem owner or managers, to the direct or indirect beneficiaries of these services in contract-like arrangements. A real or virtual market is created where the services, previously unpriced, obtain a price and are valued as a commodity in exchange. Originally the PES idea was promoted for developing countries. More recently, the idea has also been applied to environmental externalities in industrialized countries (see Schomers & Matzdorf, 2013).

The efficiency paradigm of neo-classical economics dictates that PES should achieve the same level of ecosystem-based benefits at lower costs than regulatory policies. The PES idea is closely linked to the assumption that the problems of external effects of human actions can be overcome through private negotiation directly between the affected parties regardless of the initial allocation of property rights (Coase, 1960). The result of the negotiation in this model is assumed to lead to improved economic efficiency. In practice, obstacles to efficient bargaining such as high transaction costs, power imbalances, or poorly defined property rights can complicate matters. In response to such criticism, the PES concept was further developed to allow government interventions, for example, environmental taxes and subsidies for the correction of negative externalities. In Coasean-type PES, the beneficiary directly pays the ecosystem services provider with private money on a purely voluntary basis, which is the outcome of a private negotiation, while in the Pigouvian type (after Pigou, 1920), the government intervenes and either pays itself or makes others pay on behalf of the direct beneficiaries to promote ecosystem service production (Suhardiman et al., 2013). Furthermore, in the latter situation, the agreement is not necessarily completely voluntarily, as it can be driven by compliance regulation, both on the demand and the supply side.

The challenge for successful introduction of the concept ecosystem services in local policy is summarized in questions such as: Can revenue come from smart management and sustainable use of ecosystems? Are there markets to be discovered, and can businesses be created? How do taxes figure in an ecosystem-based economy? First, revenue is possible when ecosystem services are brought into payment schemes, not necessarily the free market, as described above under the Pigouvian PES approach. Second, markets and businesses can be created to generate benefits for people, but under the constraint of sustainable use, quick profits are not to be expected as ecosystems need time to produce services and sustainable rates. And third, taxes are a way to pay for management of natural capital and regulating and cultural ecosystem services that are not in the market. In practice, PES arrangements are not always easy to implement and do not always improve overall sustainability, but they illustrate well how the ecosystem services concept may be integrated in economic instruments.

Concluding Remarks

Although by now the general principles of ecosystem services as the bridge between ecosystems and human systems have become clear to many professional scientists and policymakers as well as entrepreneurs and stakeholders, there are still many aspects to be clarified. On the ecological side, the quantitative relationships between biodiversity, ecosystem components and processes, functions and services, via concepts such as the service providing unit and functional traits, are still a research challenge. Economists are challenged to concentrate on optimal sustainable use of ecosystems and their services via recognition of the benefits of ecosystems to individuals, groups, and society, developing integrated valuation methods. In addition, there is a need for further development of policy instruments that incorporate the dynamics of ecosystems as well as those of social-economic systems and institutions, such as market-based instruments, stakeholder involvement via deliberative valuation, and legal structures.

In making decisions at any level (private, corporate, or government), decision-makers are still often thinking, or led to believe, that they face the recurring and apparently unavoidable dilemma of weighing investment in economic revenue against the conservation of ecosystems. This article about ecosystem services and the studies it is based on illustratesthat this is in fact a false dilemma, because many of the economic, social, and cultural objectives depend directly on managing sustainably those ecosystems. There is a growing awareness of the need for changes in policy, practice, and law to support the pursuit of sustainable use of ecosystems and their services. Yet most countries in the world run their 21st-century economies on paradigms developed between the end of the 18th and the first half of the 20th century. The world was relatively empty in that period in terms of people, and still full of resources. The current world, on the contrary, is full of people and rapidly becoming empty in terms of resources. In view of this, it would seem that future generations would benefit greatly from decision-makers who are educated to deal with the complexities of ecological-economic systems and to recognize successful management approaches to sustainable development. It seems to be high time to move to a new paradigm, ecological-economics, which includes the sustainable use of ecosystem services, and learn to live well within the limits of a finite planet!

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Ecosystem Valuation.

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Science for Environment Policy (2015). Ecosystem services and the environment. In-depth Report 11 for the European Commission, DG Environment. Bristol, UK: Science Communication Unit, UWE.Find this resource:

TEEB. (2010). The economics of ecosystems and biodiversity: Ecological and economic foundations (P. Kumar, Ed.). London: Earthscan.Find this resource:

TEEB. (2011). TEEB—the economics of ecosystems and biodiversity for national and international policy makers. (P. ten Brink, Ed.). London: Earthscan.Find this resource: