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The Environment has an Economic Value!

Introduction

In this post I wanted to discuss the approach to putting financial value on the services that the environment provides.

This might seem odd at first in some ways, but everything has a financial value and the services (sometimes known as ecosystem services) that the environment provides are no exception. If such services are not present or are damaged or destroyed they would have to be provided by humans at a significant financial cost. Ecosystem services may also provide ways to make money for example people go on holiday to national parks and spend money on food, accommodation etc. They would not be doing this if the national park was not present.

Ecosystem Service Categories

Ecosystem services are commonly placed into the following four categories:

  • Provisioning services – products are obtained from the environment such as crops, timber, fish, pharmaceutical products etc.
  • Regulating services – the environment has an ability to regulate –such as trees reducing rainwater that would otherwise run-off and cause flooding and erosion of fertile agricultural soils.
  • Cultural services – tourism and recreation provide significant financial benefits.
  • Supporting services – these allow the other services to occur, examples include the formation of soils and nutrient cycling.

More specifically, let’s take a look at the example of forests. They provide provisioning services such as timber, cultural services such as walking, mountain biking and other forms of recreation and regulating services – they store carbon from the air and take up water from the ground reducing the changes of flooding. All these have a financial value.

Valuation

Ecosystems services can be quantitatively valued. For example the UK national ecosystem assessment has estimated the following:

  • The services provided by honey bees in pollinating plants have been estimated to be around £200m per year with the value of the plants they pollinate being around £1bn.
  • The value of UK fish caught  is estimated to be about £600 million per annum (p.a.)
  • Timber is valued at just under £100 million p.a.
  • Net carbon sequestered currently by UK woodlands is estimated at to have a value of around £680 million p.a.

Damage to Ecosystem Services is Costly

If we deforest a river catchment and this leads to flooding (trees soak up water that might otherwise run into a river and cause it to flood) then an extensive flood protection scheme would be needed to be designed and built that would cost millions of pounds, dollars, yen or whatever your currency! In the long term it would have been cheaper to sustainably manage the forest which would provide flood protection and timber, recreation activities etc. for many years.

Final Note

In many ways cost is not something that  in the past has been associated with environmental management. But it is clear to see with a bit of thought that the environment or more specifically the services that it provides must be protected otherwise other means of providing the service or mitigating the effects of the lack of the service will need to be acquired at a significant financial cost.