What’s nature worth?

By Bill Kaye-Blake 04/09/2012

At last week’s NZARES conference, Brent Clothier, Estelle Dominati, and Alec Mackay presented work on ecosystem services. Clothier has been doing work in this area for a while and is an effective science communicator on the issue. For example, he and I were both at the Royal Society Ecosystem Services workshop last year and did a Science Media Centre briefing on the topic. Dominati, IIRC, did her doctoral work on creating a framework for valuing ecosystem services and applied it to New Zealand soil services. Mackay works with the other two on soil ecosystem services and does research and extension in the pastoral sector.

The most famous valuation of ecosystem services is a 1997 article in Nature by Costanza and a cast of thousands. They said (from the abstract):

We have estimated the current economic value of 17 ecosystem services for 16 biomes, based on published studies and a few original calculations. For the entire biosphere, the value (most of which is outside the market) is estimated to be in the range of US$16–54 trillion (1012) per year, with an average of US$33trillion per year.

This $33trillion has become famous or infamous, depending on your POV.

The research on ecosystem services organises the services that nature provides humans and their economy into four categories:

  • provisioning
  • regulating
  • supporting
  • cultural.

Dominati has a lovely diagram (pdf) that helps organise thinking about the services that soil provides and the cycles that provide them. It talks about things that economists can understand: stock and flows, manageable versus inherent properties, and human needs. It lends itself to thinking about marginality, although I’m not sure how much of that she has done.

The ecosystem services approach is one way to think about the value of nature to humans. I have worked with a different approach: willingness to pay. It struck me at the conference that the two methods arrive at quite different numbers.

For example, let’s take the $33trillion number. World population in 1997 was roughly 6 billion; inflation in North America has been roughly 40% since then. Carry the one…and per capita ecosystem services are about USD 7,700 in 2012. That’s nearly NZD 10,000 per capita, or NZD 25,000 per household.

By contrast, Peter Clough at NZIER calculated what we are willing to pay for our clean, green assets. He found:

the nationwide total for annual willingness to pay for biodiversity and landscape protection in 2007 dollars is about $433 million on annual expenditures, or almost double that at $828 million per year in total including opportunity cost of public conservation land.  Averaged across Census 2006 counts, this is around $104 per person or $292 per household in expenditure, or $200 per person and $560 per household in total cost.

That’s roughly $650 per household in 2012. It’s also a far cry from $25,000.

At first, I thought this might be a stocks-vs-flows problem, but the Costanza work is clearly a per-year calculation. Therefore, both calculations are looking at flows.

It might also be a question of marginals versus totals (or averages). The ecosystem services approach gives the total services being provided; the Clough-type calculation (or other non-market valuations) is more about marginal payments to maintain the flow of services. That is, Clough is calculating the cost of maintenance on the house, while ecosystem services are valuing the housing services provided to owner-occupiers.

There might also be an information problem. Economists are asking people, ‘how much do you value clean water, or biodiversity, or landscape amenity values?’ People give us their responses, based on their knowledge. Maybe they don’t really understand the extent of the services being provided, and provide a low estimate as a result.

The $650 represents the amount we are currently paying to ensure that we keep receiving ecosystem services. The $25,000 represents the value of the services we are actually receiving. The difference between the two suggests that — if we need to — we could legitimately put a lot more money into the environment, that it could be money wisely spent.

I should note, too, that these are all BOTE calculations. Luckily, we have the likes of Clothier, Dominati, and Mackay filling in the details.