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International Water Management Course 5-10 July 2003, Kastanienbaum, Switzerland A Sharing Solutions initiative by Swiss Re WATER MANAGEMENT: VALUES, POLICIES, INSTRUMENTS AND APPROACHES Joel D. Scheraga, Ph.D. Valuation of Ecosystem Services : Presentation Overview

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International water management course l.jpg
International Water Management Course

5-10 July 2003, Kastanienbaum, Switzerland

A Sharing Solutions initiative by Swiss Re

WATER MANAGEMENT:

VALUES, POLICIES, INSTRUMENTS

AND APPROACHES

Joel D. Scheraga, Ph.D.


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Valuation of Ecosystem Services : Presentation Overview

  • Water is a scarce resource

    • competing demands

    • challenge for policy makers

  • Ecosystems:

    • rely on water

    • provide valued services

  • Problem: How to value ecosystem services?

  • Different disciplines have differing methods of valuation

    • ecologists, biologists & natural scientists

    • economists

  • Economic valuation

    • one approach for providing useful insights

    • informed by ecological assessments

    • market values

    • non-market values


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Ecosystem Services

Ecosystem services refers to how humans benefit from ecosystems:

“…a wide range of conditions and processes through which

natural ecosystems, and the species that are part of them, help

sustain and fulfill human life”

- Daily et al., 1997


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Ecosystem Services

Ecosystem services relevant to freshwater ecosystems include:

  • recreation (including hunting and fishing)

  • intrinsic or existence values (value of something irrespective of any human use)

  • amenity functions

  • wildlife viewing

  • maintenance of biodiversity and landscape diversity

  • water quality protection and regulation of water flows

  • genetic material and maintenance of a gene pool

  • amelioration of weather and climate regulation


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Ecosystem Services

Ecosystem services (cont.):

  • pest control

  • fisheries

  • soil retention (erosion control), formation, and maintenance of fertility

  • storm protection, flood control and regulation of hydrologic cycles

  • nutrient cycling

  • cultural (e.g., aesthetic, artistic, spiritual, scientific values)

  • food and fiber production

  • medicines and pharmaceuticals


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Purpose of Ecological Assessment

  • Evaluate how human activities affect ecosystems

  • Evaluate which of these changes are important

  • Provide decision makers with information about tradeoffs involved in their decisions

    • in ecological terms

    • in economic terms


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Challenge for Policy Makers

  • How to value and manage scarce water resources?

  • Must balance competing interests

  • Must make decisions despite scientific uncertainty


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Example of Difficult Tradeoff for Decision Makers

Use of water to sustain ecosystems

vs.

Use of water for food production


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Differing Methods of Valuation

  • Different disciplines have differing methods of valuation

    • Ecologists, biologists & natural scientists

    • Economists

  • Potentially inconsistent water management recommendations emerging from different approaches


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Economic Valuation

  • One approach for providing useful insights

  • Informed by ecological assessments


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Fundamental Problem of Economics

  • The allocation of scarce physical and human resources among competing and unlimited human wants and desires

  • Key concept: Scarcity

    • desired

    • limited in quantity

  • Water can be a scarce resource


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Challenge for Policy Makers

  • Decide which use of scarce resources (e.g., water) is valued higher

    • Societal decision

  • Assessors can inform: Values human place on different resources,

    e.g.,

    • survival of wildlife

    • ecosystem functions/services

    • adequate human nutrition

  • We can facilitate: Understanding of tradeoffs (nature & magnitude) inherent in any decision

  • Assessors’ job is not to make policy decisions


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Need to Focus on Changes in Ecosystems

  • Humans depend upon ecosystems for their fulfillment and survival.

    • Without ecosystems, no living things could exist.

  • Valuation of total systems, however, is generally irrelevant to decision making.

    • Most decisions neither eliminate nor destroy complete ecosystems.


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Important Caveat

There are aspects of ecosystems that are valuable but may not be amenable to economic analysis

Such circumstances may require:

  • other analysis and communication tools

  • other decision-making frameworks


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Measuring the Economic Value of Ecosystem Services

  • Economic definition of value:

    the amount of compensation required to make individuals

    as well off after a change as before the change.

  • Value to society:

    determined by the sum of individual values when there is a

    marginal change in an ecological service (e.g., recreational

    fishing)


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Values for Ecological Services: Categories and Examples

  • Market Use Values:

    • food, building materials (e.g., gravel), fuel, drinking water supplies, electric power generation, transportation of coal, tourism

  • Nonmarket Use Values:

    • recreation, fishing, swimming, boating, hunting, bird-watching, hiking, camping, sight-seeing, transportation and fuel;

    • flood control, mitigation of drought, stormwater treatment and/or retention, partial stabilization of climate, water purification, cycling of nutrients and minerals, flow of energy

  • Nonmarket Nonuse Values:

    • habitat value, scarcity value, option value, existence value, cultural value, historical value, biodiversity, intrinsic value, bequest value, philanthropic value


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Valuing Changes in Ecological Services

  • Economists use several methods to measure people’s willingness to accept tradeoffs…

    • whether they are ecologists, economists, bird watchers, hikers, carpenters, baseball players, ballerinas, musicians, etc.

  • Prefer methods based on how people behave when faced with real-world tradeoffs

    • e.g., between ecological services and other goods

    • revealed preference approaches

  • When observed behavior does not reveal preferences:

    • survey techniques

    • stated-preference approaches


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Methods for Valuing Changes in Ecological Services

Revealed Preference

  • (Hedonic) Property Value

    • uses changes in private property values to estimate an implicit price for changes in ecological services

    • relies on “natural experiments”

  • Travel-Cost Method

    • observes recreators’ observed pattern of trips among available sites

    • accounts for observed variations in site characteristics, including ecological services


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Methods for Valuing Changes in Ecological Services

Stated Preference

  • Contingent Valuation

    • involves direct survey of individuals to elicit their “willingness to pay” for different levels of services

  • Stated Choice

    • Involves survey in which respondents are asked to express preferences among attributes that include specific ecological services (e.g., fish catch; protecting an endangered species)

    • Strength: respondents think in terms of tradeoffs

    • Researchers can identify equivalent tradeoffs by analyzing series of responses


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Challenges in Translating Ecological Value to Economic Value

  • Conditions ideal when:

    • possible to describe or predict the ecological change accurately,

    • nature of ecological good/service that is lost/gained is understood, and

    • importance of the change can be quantified (e.g., monetized) or ranked

  • These ideal conditions seldom are met.

  • Three major challenges:

    • uncertainty

    • irreversibility and cumulative effects

    • issues of fairness (e.g., intergenerational equity, discounting, and environmental justice)


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Policy-focused Assessment

  • Policy-focused assessments provide timely and useful

  • information to decision makers and resource managers:

    • about potential consequences of climate change

    • about possible adaptation strategies

  • Analytic process

  • Engages both analysts and end-users

    • issues, questions and outcomes of greatest concern are elicited

    • from stakeholders


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Policy-focused Assessment (cont.)

  • Necessary because often can’t/shouldn’t wait for science to

  • be “perfect”

    • Example: Design & construction of expensive new sewers that

    • account for risks of “combined sewer overflow” and effects of

    • climate change on precipitation

    • An informed decision is better than uninformed decision

    • No decision is equivalent to a decision

  • Multidisciplinary activity


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Example: EPA’s TEAM Web-based Decision-Support Tool

  • TEAM: Tool for Environmental Assessment and Management

  • Interactive, web-based tool

  • Purpose: Help water resource managers include considerations of climate change in their day-to-day decision making

  • Employs multi-criteria decision making approach

    • Decision criteria defined by user

    • Objectives defined by user


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