Economic value of ecosystems

Ecosystem, according to the Encyclopedia Britannica is “the complex of living organisms, their physical environment, and all their interrelationships in a particular unit of space”. In every ecosystem energy flows and matter circulates through the three main groups of organisms – autotrophs, consumers and decomposers.

To calculate how much the ecosystem is worth, we need to consider what are the benefits of using the environment. Most often used for this purpose, the classification of services presented in the Millennium Ecosystem Assessment in 2005.

  1. Supporting services:
  2. Provisioning services:
  3. Regulating services:
  4. Cultural services:
  • soil formation and retention
  • photosynthesis and primary production
  • nutrient cycling
  • water cycling
  • food (plant and animal products, honey, herbs)
  • water
  • fibre and fuel
  • genetic information used for biotechnology
  • climate regulation
  • bioremediation of waste
  • erosion control
  • pollination
  • recreation and ecotourism
  • social relations
  • aesthetic values
  • inspiration for art or architecture

If we know the types of services provided by ecosystems, we can find a way of their valuation. This allows us to assess the benefits of nature protection and also economic justification for these actions. Some services can be measured easily, eg. we know exact price of wood or honey. A different approach is used for other services, eg. clean air or aesthetic values. The following valuation methods, direct or indirect, are used (selected):

  • travel cost method (TCM) – estimates economic values of ecosystems that are used for recreation and assumes that the value of a site is reflected in how much people are willing to pay to travel to visit, the distance and cost of journey
  • hedonic price method (HPM) – estimates economic values for ecosystem or its services that directly affect market prices of some other good, e.g. variations in housing prices that reflect the value of local environmental attributes
  • contingent valuation method (CVM) – estimates economic values for virtually any ecosystem or environmental service during the test, when one person presents a scenario of delivering the goods and asks how many would tested person be able to pay for it
  • substitute cost method (SCM) – estimate economic values based on costs of avoided damages resulting from lost ecosystem services, costs of replacing ecosystem services, or costs of providing substitute services.

The quality and range of services offered by the ecosystems is dependent on the condition. The richer (more varied) is an ecosystem, the more people can benefit from it. Based on calculated value it is also easier to make decisions about environmental transformations. We assess whether short-term profit is greater than the losses resulting from the destruction of the ecosystem. In addition, measurable benefits better appeal to the public, and thus it becomes more involved in nature protection.

Properly functioning ecosystem with high biodiversity generate profits for the community. A global study, TEEB (The Economics and Ecosystems and Biodiveristy), on the economics of biodiversity loss was launched by Germany and European Commission. TEEB has three core principles: recognizing, demonstrating and capturing value provided by ecosystems.

How these calculations look? The UK’s parks, lakes, forests and wildlife are worth billions of pounds to the economy, says a major report. The health benefits of merely living close to a green space are worth up to £300 per person per year, it concludes. ( One notable example of nature’s economic value that they cite is the purification of New York City’s water supply by microorganisms as the water percolates through the soil of the Catskills. The city plans to spend $660 million to preserve that watershed in good health; the alternative, a water treatment plant, would have cost $4 billion to build. (