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public to evaluate the economic costs and benefits of any proposed change in an ecosystem and to facilitate comparison with other aspects of the economy. Economic valuation is just one way of assessing tradeoffs. It is especially useful in the context of economic arguments favoring actions leading to ecosystem degradation that fail to take full account of the eco- nomic costs. Ecosystem valuation assists in the efficient allocation of resources, enhances the scope for market creation, and can reduce the magnitude of market failures.

Total economic value (box 6.12) has become a widely used framework for identifying and quantifying ecosystem services (Balmford and others 2002; MEA 2005c). It consid- ers the full range of ecosystem characteristics together—resource stocks or assets, flows of environmental services, and attributes of the ecosystem as a whole. It covers direct and indirect values and option and nonuse values.

box 6.13

Commonly used valuation tools

A wide array of methods can be used for economic valuation of ecosystems. Some of the most com- mon are:

  • Replacement costs. Even where ecosystem services have no market value themselves, they often have alternatives or substitutes that can be bought and sold. These replacement costs can be used as a proxy for ecosystem resources, although they usually represent only partial estimates or are underestimates.

  • Effects on production. Other economic processes often rely on ecosystem resources as inputs or on the essential life support provided by these services. Where they have a market, it is possible to look at the contribution of the services to the output or income of these wider production and consumption opportunities in order to assess their value.

  • Damage costs avoided. The reduction or loss of ecosystem services frequently incurs costs in terms of damage to or reduction of other economic activities. The damage costs that are avoided can be taken to represent the economic losses forgone by conserving ecosystems.

  • Mitigative or avertive expenditures. It is almost always necessary to take action to mitigate or avert the negative effects of the loss of ecosystem services so as to avoid economic damage. These costs can be used as indicators of the value of conserving ecosystems in terms of expenditures avoided.

  • Hedonic pricing. Hedonic methods look at the differentials in property prices and wages between locations and isolate the proportion of this difference that can be ascribed to the existence or quality of ecosystem services.

  • ravel costs. Many ecosystems typically hold a high value as a recreational resource or destina- tion. Although in many cases no charge is made to view or enjoy less human-dominated eco- systems, people must still spend time and money to reach them. This expenditure—on transport, food, equipment, accommodations, time, and so on—can be calculated, and a demand function can be constructed relating visitation rates to expenditures made. These travel costs reect the value that people place on the leisure, recreational, or tourism aspects of specied ecosystems.

  • Contingent valuation. Even where ecosystem services have no market price and no close replace- ments or substitutes, they frequently have a high value to people. Contingent valuation techniques infer the value that people place on these services by asking about willingness to pay for them (or willingness to accept compensation for their loss) under the hypothetical scenario that they would be available for purchase.


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