Understanding, Modeling and Valuing Ecosystem Services

Ecosystem services (ES) are the direct and indirect contributions of ecosystems (in combination with other inputs) to human well-being. An ES-based approach can assess the trade-offs inherent in managing humans embedded in ecological systems. Evaluating trade-offs requires both an understanding of the biophysical magnitudes of ES changes that result from human actions, as well as an understanding of their impact on human well-being, broadly conceived. This talk discusses the state of the art of ES assessment, valuation, and modeling, including the potential of integrated ecological economic modeling. Valuation is about assessing trade-offs – not necessarily about trades (exchanges) in markets for money. Since ecosystem services are largely public goods, market exchanges are not (and should not be) present. This does not mean that trade-offs are not present. Conversely, expressing trade-offs in money does not imply that market exchanges are possible or desirable. Finally, the appropriate uses of economic incentives in managing ecosystem services are discussed. Because many ecosystem services are public goods (non-rival and non-excludable) they cannot (or should not) be privatized – a prerequisite for trading in conventional markets. The solution is to recognize the value of these public goods and modify market and other incentives to communicate that value to private decision-makers. Systems such as ecological taxes and subsidies, government mediated systems of payment for ecosystem services (PES - like the system in Costa Rica), and common asset trusts are some of the tools that are useful for incorporating the value of ecosystem services into private decision-making.