Valuation of Ecosystem Services


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The source for this entire article is the Nature Valuation website

The importance (or ‘value’) of ecosystems is roughly divided into three types: ecological, socio-cultural and economic value. It is reasoned here that the concept of ecosystem goods and services is inherently anthropocentric: it is the presence of human beings as valuing agents that enables the translation of basic ecological structures and processes into value-laden entities.


Ecological value of ecosystems

This is based on ecological sustainability.

The Ecological value or importance of a given ecosystem is therefore determined both by the integrity of the provisioning and regulation functions of the ecosystem and by ecosystem parameters such as complexity, diversity, and rarity. Since most functions and related ecosystem processes are inter-linked, sustainable use levels should be determined under complex system conditions, taking due account of the dynamic interactions between functions, values and processes.

Socio-cultural value of ecosystems

This is based on equity and cultural perceptions.

The Socio-cultural value in addition to ecological criteria, social values (such as equity) and perceptions play an important role in determining the importance of natural ecosystems and their functions, to human well being. Social reasons are frequently mentioned as playing an important role in identifying important ecosystem functions. Natural systems are thus a crucial source of cultural and Spiritual (or non-material) wellbeing and indispensable for a sustainable society.

Economic value of ecosystems

This is based on efficiency & cost-effectiveness.

The Economic value can be assessed by valuation methods which fall into four basic types each with its own repertoire of associated measurement issues: (1) direct market valuation, (2) indirect market valuation, (3) contingent valuation, (4) group valuation. The uncertainties in economic methods regarding non-linear interactions and complexities such as ecological thresholds, socio-dynamics and irreversibilities require considerate application in decision-making.

Finance Mechanisms

What are finance mechanisms?

A "financial mechanism" or "payment mechanism" can be defined as a mechanism to calculate the unitary charge of a service provider to a service buyer in return for the service. Related to ecosystem services, it can be defined as a tool to capture the value of an ecosystem good or service in monetary terms. A set of rules and procedures is usually used to effect the movement of money or a payment instruction from a service buyer to a service seller.


The financial mechanism webpage on the Nature Valuation and Financing Network website

Valuation and Decision-Making

Choices with consequences for the earth’s resources are taken daily all over the world. There is therefore a need to understand the variety of aspects that characterize the decision-making process in order to constantly improve the quality of the choice, especially in terms of its environmental impact. Considering and analyzing various possible alternatives, before actually implementing a policy or a project, can provide the necessary support for making a responsible choice. The alternatives should take into account the short and long term impacts on the environment and society. It is also useful to evaluate the effect of already applied strategies in order to learn from past experience.

Some Tools for Decision Making

  1. Cost-Benefit Analysis (CBA)
  2. Net Present Value (NPV)
  3. Benefit Cost Ratio (BCR)
  4. Internal Rate of Return (IRR).
  5. Multi-Criteria Analysis (MCA)
  6. Cost Effectiveness Analysis (CEA)
  7. Risk-Benefit Analysis (RBA)
  8. Environmental Impact Assessment (EIA)
  9. Strategic Environmental Assessment (SEA)
  10. Life Cycle Analysis (LCA)


See also

External Resources

Value - Counting Ecosystems as Water Infrastructure

Valuing wetlands: guidance for valuing the benefits derived from wetland ecosystem services

IUCN's Commission on Ecosystem Management (IUCN-CEM)

The Nature Valuation website by Nature Valuation and Financing Network


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