Towards defining and accounting for ecosystem services

James Boyd Spencer Banzhaf

Professor – Dept of Economics at Georgia State University

Ph.D. Duke University

Environmental Economics

Senior Fellow/Director – Resources for the Future

Ph.D. University of Pennsylvania

Ecosystem Services, Ecological Benefit Assessment

Ecosystem Services are the benefits of nature to households

Woodland Trust 2014

Problem Statement: “The development and acceptance of welfare accounting and environmental assessment are hobbled by lack of standardized ecosystem units.”

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Green GDP vs. ESI (Ecological Services Index)

GDP is the market value of all officially recognized final goods and services produced within a country in a year.

“Green GDP” = GDP + non-market ecosystem values

ESI is the market and non-market ecosystem service values

Public policy demand for standardized units of ecosystem measurement

Club Good

Common PoolPrivate Good

Non-excludable

Public Good

Rival

Non-rival

Excludable

Final Ecosystem Services: components of nature, directly enjoyed, consumed, or used to yield human well-being

(Definable Unit)Ecosystem Service

Quantity Value or Price

** Key assumption: social policy goal is to maximize human well being

A = A(M,N)A = commodityM = marketed goodN = Non-market Ecological input

Production Theory Perspectives

The value can be derived from the input’s productivity times the value of the final commodity:

PN = (∂A/∂N)PA

Non-market input’s value can be derived from the value of the market input and the substitutability of the market and non-market inputs:

PN = (∂A/∂N)/(∂A/∂M)*PM

3 definitions of the measure of non-market service are referenced:

• dN (the change in non-market input)• (dA/dN)dN (change in the final commodity)• pNdN (the shadow value of the change)

Inventory of services

Critiques

• TFP on the market goods side- is there an equivalent on the non-market goods side?

• Services vs. goods; pg 620 capital stock as a proxy?

• Based on human well-being rather than the intrinsic values of ecosystem integrity

• Does this fully motivate society to protect the necessary components of the ecosystem?

Measurement should be focused on the flow of final current services as well as capital depreciation

• q = quantity• p = price