Ecosystem Services for Economic Analysis : Conceptual Issues

1. Ecosystem Services for Economic Analysis : Conceptual Issues Dr Pushpam Kumar Institute for Sustainable Water, Integrated Management and Ecosystems Research ( SWIMMER), University of Liverpool, UK pushpam@liv.ac.uk

2. What are Ecosystem Services? • Answer depends on the purpose! • If the purpose is mass awareness and education, MA’s classification and purpose are most relevant . • If the purpose is valuation, accounting, executing PES Scheme etc, then a different approach would be needed

3. Ecosystem Services • Regulating • Benefits obtained from regulation of ecosystem processes Provisioning Goods produced or provided by ecosystems Cultural Non-material benefits from ecosystems Photo credits (left to right, top to bottom): Purdue University, WomenAid.org, LSUP, NASA, unknown, CEH Wallingford, unknown, W. Reid, Staffan Widstrand

4. fodder production slope stability tourist attraction recreation water purification Beauty pollination fibre production food production flood protection carbon sequestration Biodiversity recreation stabilising micro-climate game reserve shelter for lifestock Established Fact-Ecosystem Services are like any other Capital Assets!

5. Economics of Ecosystem Services Ecosystem Services Conceptual Lenses of Economics Stock Vs Flow Metrics of ES- Stocks (ecological) and flow (ecosystem services) ES are flow on DD and SS side and imbalance would affect the stock! • Benefits people obtain from ecosystems

6. Contd.. Ecosystem Services Lenses of Economics The equivalent economic value of a stock that underlies a flow can be estimated from the present and assumed time course of ecosystem services flows by applying appropriate discount rate (natural capital) • Timber, water, fodder

7. Contd Ecosystem Services Lenses of Economics ES can have consumptive vs productive ES can have private good or public good features • Charachteristics

8. Private Benefit Capture Difficult Economic Valuation Difficult or impossible Easy Easy Many BENEFITS of ES are public goods (Rivalness and Excludability, Spatial and Temporal Dynamics Joint Production, Complexity, Resilience and Interdependence of the Benefit ) Spiritual & religious Insurance Value ? Aesthetic ? Freshwater ? Genetic Resources ? Recreation & tourism ? Fiber ? Food ? Economic Value ($)

9. Contd. Ecosystem Services Lenses of Economics vector of services produced by a vector of inputs intermediate / final goods externalities over space and time (soil erosion and flooding)

10. Outputs(O) Inputs(I) Soil Moisture(SM) Water Recharge Function in a wetland as ‘Outputs’ I=O+ESM Evapotranspiration(E) Wetland Area (e.g. Floodplain) The semantics of ‘intermediate / final’ good differs for ecologist and economist !

11. Ecosystem Accounting: Basic Structure

12. Resilience and Thresholds of Ecosystems: Possible Approach of Valuation • The biggest perturbation, the ecosystem can absorb without being in another state is RESILIENCE • the system Resilience in several contexts may be treated as CAPITAL stock • Estimate the accounting price (Maler, 2008) • Accounting price here is changes in the expected change in net present value of expected future ecosystem services resulting from a marginal change in the resilience

13. Ecosystem Services require Indicators • Indicators about the physical extent, condition and productivity of resources (e.g. size of fish stocks, soil organic matter levels, etc) • rate of resource degradation (e.g. rate of forest land conversion) • level of vulnerability to natural disasters Variables should not be automatically used as Indicators!!

14. Valuation of Ecosystem Services • Agreements already on • Joint effort (ecology and economics) • Need to know initial condition of Ecosystems • Need to know the flow of ES (ecological production function) etc. etc. But Valuation must have a Purpose (resolving trade off, sectoral accounting, CBA, etc.)