Non-monetary benefits without apologyThe economic theory and practice of ecosystem service benefit indicators
Marisa Mazzotta, Ph.D.U.S. EPA Office of Research and DevelopmentAtlantic Ecology DivisionNarragansett, Rhode Island
Presented at ACES 2014, December 11, 2014
The views expressed in this presentation are those of the author and they do not necessarily reflect the views or policies of the
U.S. Environmental Protection Agency
Environmental decisions require
tradeoffs
Which of these sites should we spend money on?
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http://backpacker.web1.ec2.aimstaging.com/media/originals/NewYorkCityLibertyStateParkLoop110448.jpeg
http://ecosystems.mbl.edu/sippewissett/images/sippewissett2.jpg
Ecological information alone is not
enough to evaluate tradeoffs
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Benefits to people
matter!
Illustration adapted from Dennis King, 1997
Why not evaluate all benefits using monetary measures?
Photo: unep.org
Dollar values are only one part of
the story• distribution of benefits
• environmental justice
• precautionary or safe minimum standards
6http://sewagesludgeactionnetwork.com/
Is some number better than no
number?
How should we interpret “the value of everything?”
7
http://www.lucrorfx.com/forex-market-2/best-forex-indicators.html
Values can be assessed using indicators
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What are indicators?
• Indicators simplify complexity to inform decisions and actions.
• They selectively represent a real system.
• They bridge science and policy.
• Value indicators are developed based on economic models and empirical evidence of factors that affect value.
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What are value indicators?
• functional assessment
• “reliability” assessment
• complements assessment
• substitutes assessment
• quantity and quality of valued ecological outputs (potential EGS)
• persistence of supply into the future
• complementary inputs
• natural and technical substitutes
• strength of preferences
• number of beneficiaries
The Socio-Ecological System Types of Assessments Value Indicators
Other Ecosystems
and
built environment
People
Ecosystem
Value indicator framework
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• demand assessment• beneficiary assessment
• scarcity assessment • supply vs. demand
What determines a good set of
indicators?
• understandable
• provide essential information about the system
• policy relevant
• feasible to measure
• simple but not too simple
• scale-appropriate
• based on valid models and assumptions
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What does economic theory say that is relevant to value indicators?
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Value indicator theory
13
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
FUNCTIONAL ASSESSMENT:
supply of ecological outputs
ecological production function:
q = q[E, A(G)]
sufficient quantity
q ≥ q*
sufficient quality
b ≥ b*
The Socio-Ecological System Types of Assessments Value Indicators
Photo: savebay.org
Photo: 4.bp.blogspot.com
Value indicator theory
14
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
RELIABILITY ASSESSMENT:
How sure are we that benefits will continue?
More reliable --> Greater expected value
Probability that ecological outputs
will persist
Pt(qt)=f(·)
The Socio-Ecological System Types of Assessments Value Indicators
Source: NOAA.gov
Value indicator theory
15
DEMAND ASSESSMENT:
demand for ecological outputs as inputs to valued experiences
household production function:
z = z(cX, bQ)
demand exists
D(Q) > 0
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
The Socio-Ecological System Types of Assessments Value Indicators
Photo: nhdfl.org
Photo: newstimes.com
Value indicator theory
16
PREFERENCE ASSESSMENT:
utility function and elasticity of demand
utility from EGS
u = u(bQ, z(cX, bQ))Higher utility --> Greater value
Less elastic --> Greater change in value for a given change in Q
strength of preference and
elasticity of demand
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
The Socio-Ecological System Types of Assessments Value Indicators
photo: greatescape.net.au/
Value indicator theory
17
BENEFICIARIES ASSESSMENT:
"extent of the market"How many people value the EGS?
More beneficiaries --> Greater total value
Sum of demand over number of
beneficiaries
∑kD(Q)will determine total demand
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
The Socio-Ecological System Types of Assessments Value Indicators
Photo: nhdfl.org
Photo: newstimes.com
Value indicator theory
18
COMPLEMENTS ASSESSMENT:
complementary inputs –capital and labor
z = z(cX, bQ)Value is not received without
all necessary inputs
sufficient quantity
x ≥ x*
sufficient quality
c ≥ c*
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
The Socio-Ecological System Types of Assessments Value Indicators
Photo: outboardmotoroilblog.com
Photo: kayakspots.com
Value indicator theory
19
number and quality of natural and technological
substitutes
SUBSTITUTES ASSESSMENT:
Number and quality of natural and technological substitutes
Fewer substitutes or lower quality substitutes --> Greater value
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
The Socio-Ecological System Types of Assessments Value Indicators
Q
P
D0
D1
(fewer substitutes)
S
Value indicator theory
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SCARCITY ASSESSMENT:(supply relative to demand)
Does demand exceed supply?
By how much?
S ≈ D (low scarcity)
S < D (high scarcity)
Other Ecosystems
and
built environment
EcosystemE = stock of natural capitalA = ecosystem attributes
People G = human interventions
and impactsk = beneficiaries
X = complementary inputsS = substitutes
Dollar values not always
best
A place for robust value
indicators
Consider how to develop indicators
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Summary
Thank You!
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Marisa MazzottaU.S. EPA Office of Research and Development
Atlantic Ecology [email protected]
Thanks to:Lisa WaingerKristen HychkaJustin BousquinWalter BerryClaudette Ojo