Accounting for the diversity of natural capital values
Updated: Oct 22, 2019
Economic values have an important role to play in the management of our natural environment, but not a singular one. Dr Craig Bullock explains why it can be useful to value aspects of nature. He highlights some of the challenges we must overcome in order to make these valuations more reliable and useful, and explores how the concept of ecosystem services is bringing about more meaningful and comprehensive definitions of value.
Recent discussion on the Forum’s website has highlighted the importance of the range of values attached to ecosystem services and natural capital.
Up to now, it has been economic or monetary values that have received most attention. These have been controversial in some quarters on the basis that they appear to reduce the value of the natural environment to euros and cent. In this blog, I argue that economic values have an important role in the management of our natural environment, but not a singular one, and that other types of value will need to be taken into account in environmental assessment and policy.
What's useful about valuing nature?
The 1997 paper by Costanza et al, published in Nature, on the value of the world’s ecosystems and natural capital, arrived at an estimated average of US$33 trillion per year. The figure received much attention, some of which overlooked the detail of the paper and criticised its attempt to “price” nature. In fact, the study focused on the value of 17 key ecosystem services of benefit to human beings and was underpinned by a detailed synthesis of previous studies.
At the very least, the Costanza et al paper helped to inform the Millennium Ecosystem Assessment (2005) which has done much to draw world attention to the deteriorating state of the natural environment and its diminishing capacity to support our own existence. Such absolute estimates of economic value have the merit of demonstrating that the living, natural environment is a resource that contributes hugely to human wellbeing, even though most environmental goods have no market and no evident price. This, in itself, is a step forward from former presumptions that the environment had little or no value and so could be ignored in the decision-making process and in plans for economic development.
"Economic values have an important role in the management of our natural environment, but not a singular one"
Absolute measures of value are of little practical use in themselves. Of more importance are marginal economic values that can be used to demonstrate the value of incremental changes in the natural environment at any one time. In principle, this information helps policy makers to make informed trade-offs between competing policy goals such as, for example, the need to develop land for built development or agriculture, or to protect it for other purposes such as wildlife conservation. We would expect that if a marginal value for ecosystem services can be identified, then this value will rise if the stock of natural capital is under pressure and is diminishing in quantity or quality.
How reliable are economic values? Recent years have seen much attention being given to ecosystem services, reflected in policy initiatives and the huge increase in the volume of academic papers on the subject. The ecosystem services concept has been a very useful for communicating the need to protect biodiversity, although, of course, we still need to see a commensurate increase in the resources made available to this end. For some us, it is a little bemusing in that environmental economists have been estimating values for nature since the late seventies.
Conventional economic valuation assumes that people only recognise and value the things that provide satisfaction for themselves as individuals. As most of us know, this is not entirely true. People do value their communities and do tend to consider the welfare of future generations. Values can also be informed by non-use benefits associated with altruistic motivations or the very existence of popular species or natural environments. The issue is that economic theory assumes that value is ultimately rooted in individual utility. Ecosystem services can be related to this conceptualisation of value in that it can be used to draw people’s attention to the benefits that they themselves receive from the natural world.
The notion of ‘cultural ecosystem services’ has necessarily forced economists to acknowledge alternative concepts of values if they are to not to fall by the wayside in the development of the ecosystem services concept. In reality, people hold a wider range of values than utility alone, such as values guided by social, cultural or ethical principles, including with regard to the wider community of which they are a part.
Values also vary greatly within the population, including at local, regional and national level. It has been argued that there exists a range of values extending from utility-based motivations that permit trade-offs between environmental and other goods, to values that are incommensurable with purely individual motivations (Martinez-Alier et al., 1998). These incommensurable values may be attached to aspects of the natural environment that people are unwilling to trade-off or price (Sagoff, 1994). They could, for instance, be much loved species such as whales or polar bears, or natural capital whose loss could threaten a person’s livelihood or survival.
"The concept of ecosystem services is forcing us to arrive at more meaningful and comprehensive definitions of value"
In truth, most economists have always recognised other concepts of value. It is simply that utility values are so easily ubiquitous and recognisable. They are a persuasive mechanism around which to build incentives for the protection of biodiversity, for example taxes and penalties or, conversely, payments for ecosystem services (PES) such as agri-environment compensation to landowners.
These incentives are often very effective, but at some risk of commodifying nature and of rewarding those who have already, or might otherwise, damage the natural environment. If only we can identify the workings of wider socio-cultural values that lie behind cultural ecosystem services then we can design better incentives and policies. It is just difficult! While once environmental economists spent much time attempting to remind people of why they might value certain ecosystem services before asking for willingness-to-pay monetary amounts, now we engage people in protracted workshops exploring the range of fundamental values they possess without any firm prospect of a single or agreed outcome. Nevertheless, progress is being made, for example in the EU OPERAs and OPENness projects (i), for instance with group deliberation or multi-criteria analysis. However, we still have a way to go.
Towards meaningful and comprehensive values
Furthermore, we can only use these approaches to value final ecosystem service benefits. This requires that people are aware of the benefits. We can inform them of the supporting or regulating services that might indirectly contribute to these final services, but this is difficult process and risks guiding people to particular answers. Very many of these supporting and regulating services are little understood but are critical to our survival and quality of life as, indeed, the Millennium Ecosystem Assessment made clear. Unfortunately, we often know very little about the biodiversity and ecosystem processes behind key services that determine, for example, soil fertility or water quality. Economists have often made a simplistic interpretation of these processes. Natural scientists, have often been motivated to investigate the response of ecosystems to specific external pressures within limited bounds and without consideration of their contribution to human wellbeing (IPBES, 2015).
Fortunately, the very concept of ecosystem services is forcing branches of the social and natural sciences to work together to arrive at more meaningful and comprehensive definitions of value. Progress is being made in Ireland with various EPA funded projects on freshwater and coastal ecosystems (ii). These collaborative and interdisciplinary projects are helping economists to learn more about how ecosystems function so as to arrive at plausible marginal estimates of social and economic value. Natural scientists too are increasingly directing their science to demonstrate the contribution that the natural environment makes to human wellbeing. There is a long way to go and we can only hope that the evidence will be forthcoming to convince those who claim to govern in our interests, that the full range of environmental values will be considered, and the goals of the Millennium Ecosystem Assessment ultimately realised.
References COSTANZA, R., D'ARGE, R., DE GROOT, R., FARBER, S., GRASSO, M., HANNON, B., LIMBURG, K., NAEEM, S., O'NEILL, R., V, PARUELO, J., RASKIN, R., G, SUTTON, P. & VAN DEN BELT, M. 1997. The Value of the World's Ecosystem Services and Natural Capital. Nature, 387, 7. IPBES 2015. Preliminary guide regarding diverse conceptualization of multiple values of nature and its benefits, including biodiversity and ecosystem functions and services. . Bonn, Germany: Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. MARTINEZ-ALIER, J., MUNDA, G. & O'NEILL, J. 1998. Weak comparability of values as a foundation for ecological economics. Ecological Economics, 26, 277-286. MEA 2005. Ecosystems and Human Well Being: Synthesis Report. Millennium Ecosystem Assessment Washington, USA. SAGOFF, M. 1994. Should preferences count? Land Economics, 70, 127-144. [i] www.operasproject,eu, www.openness-project.eu,