Eco-system and its economic evaluation : A new approach
- Part 2 -

Lakshmi Dhar Hatai *

Production function examines the relationship between an ecosystem service and the production of a market good. Value is inferred by considering changes in a production process that would result from an environmental change. This approach can capture indirect use value. Hedonic pricing presupposes that environmental characteristics are reflected in property pricing.

The environmental components value is captured by modelling the impact on property prices. Hedonic pricing can be used to measure direct and indirect use value. Averting behaviour focuses on the price paid by individuals to mitigate against detrimental environmental impacts (i.e., cost of water filtration could be used as a proxy for the value of water pollution).

Travel cost method is a survey-based technique that uses the costs incurred by individuals travelling to a recreation site as a proxy for a sites recreational value. Whilst this method captures the use value some visitors may hold non-use values, which cannot be ascertained using this technique. Random utility models test the potential effects of altering environmental characteristics at a particular site.

Only direct use value can be captured using these models. Stated Preference methods Stated preference technique involves asking people hypothetical questions to ascertain how individuals respond to a range of choices. This method establishes the extent of collective willingness to pay for particular benefits, or willingness to accept compensation in exchange for bearing a loss.

Stated preference contrasts with revealed preference, which deduces people's willingness to pay from observations of responses to real choices. contingent valuation adopts a survey-style approach which constructs hypothetical markets via a questionnaire. A participant's response reveals their willingness to pay for a particular environmental change.

In theory this method can capture all elements of total economic value, but in practice it is hard to assess the complexities of various use and non-use values. Choice modelling is a survey-style approach that focuses on individual attributes of a particular ecosystem. Participants are presented with combinations of attributes and asked to decide upon their preferred combination or rank the alternative combinations.

Each combination of attributes has a price associated with it and therefore the respondents reveal their willingness to pay or willingness to accept each attribute. This method is able to ascertain all elements of total economic value.

Cost Based Approaches

These consider costs related to the provision of environmental goods and services. Cost-based approaches infer a value of a natural resource based upon how much it would costs to restore or replace it. opportunity cost assesses the value relinquished in order to protect, enhance or create an environmental asset (i.e., loss of revenue caused by protecting a forest from clearance for agricultural production)

Cost of alternatives or substitute goods consider the cost of providing an alternative or substitute good that possesses similar function of a particular environmental good (i.e., cost of building man-made flood defences could be used as a proxy for the value of wetlands providing natural flood prevention). As some ecosystems provide a range of services it is important to recognise that some valuations will only provide a minimum estimated value.

0 Replacement cost method (shadow project costs) gauges the cost of restoring or replacing a damaged environmental asset to its original state. This method uses the replacement cost as a measure of the value of restoration and is commonly applied as estimates for such costs are easily obtainable.

Methods for Obtaining Non-economic Values

People also value biodiversity through non-use (or passive-use) benefits. An example of this may be the well-being an individual gain from the knowledge that the environment is being preserved for future generations to enjoy. There are a number of methods to determine non-economic values of ecosystems.

Focus groups determine the position participants hold on particular issues and create discourse on a specific topic are. Theoretically, focus groups can capture any value but are most often employed to assist participants select between conflicting objectives or decide upon particular outcomes. Focus groups can contribute to economic valuation research as they can be used to contextualise work and identify potential questions.

Citizens' Juries obtain public opinion on single issue, alternative scenarios, or sets of societal choices that are provided by experts and stakeholders. Via a discussion process decision can be made based upon social equity and sustainability by assessing the views expressed by a jury who represent a cross section of the community. Theprocess aims to capture societal values, as opposed to individual values, which are expressed qualitatively.

Citizens' juries are able to capture all values via a process of deliberation which builds up an indication of informed preferences through dialogue betweenthepublic, experts and politicians. Health-based valuation determines factors related to the quality and length of human life and assesses how individuals value the health benefits that are realised from health interventions that improve environmental quality.

This method also has the potential to ascertain how society's values can change as the quantity of quality of ecosystem services decline. Value is based on the idea that healthy years are more valuable than unhealthy years.

Techniques used to measure this include: quality-adjusted life years, which combines the degree of improvement or deterioration in human health and life expectancy and the time over which this occurs; disability-adjusted life years, which estimate the total loss of healthy life from premature death, disability or impairment, and healthy-years equivalent, which assess the health profileof life under varying health states, which may show temporal change.

EQ-methodology is used to identify ways in which humans perceive environmental issues. Although it can potentially determine any type of value it does not quantify values, instead it encapsulates societies comprehension of environmental issues and potential solutions. By analysing perceptions of different societal groups, it can be possible to identify key dimensions that represent the response of a particular individual in relation to wider society and can indicate areas of commonality and conflict.

Delphi surveys and systematic reviews summarise evidence and expert opinion, but employ different methods. Delphi surveys mainly rely on expert opinion, whereas systematic reviews focus upon objective date. Whilst they are not valuation methods in their own right they can ascertain what information is available for certain goods. These methods can also be used for capturing values by asking increasingly refined questions to experts about the results obtained from all individuals included in the survey.

Conclusion

Overall, the ecosystem approach promotes the integrated management of land, water and living resources in a way that achieves mutually compatible conservation and sustainable use, and delivers equitable benefits for people and nature. It is absolutely essential to improve the livelihoods of the poor and create an inclusive economy through participatory and responsible management of ecosystems.


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CAU Imphal

Concluded....