Download The Value Ecosystem Services: Principles for Valuing Fish Habitat

The Value of Ecosystem
Services: Principles for
Valuing Fish Habitat
Daniel D. Huppert
School of Marine Affairs
University of Washington
Ecosystem Services (and Goods)
Habitats support:
1. Animals used for food, recreation,
education, spiritual renewal
2. Water supply and water quality
3. Flood control and transportation
4. Housing and nice views (sometimes)
5. Protection from various hazards
6. Disease organisms and predators
These services satisfy human
needs and preferences, hence
they have positive economic
“value”.
• A thing has economic value if people
are willing to sacrifice other valued
things to obtain it. Value is relative,
there is no absolute economic value.
Four dimensions of Value
• Total value of a given quantity versus
marginal value of having another unit
(market price)
• Gross value versus value net of costs
• Market versus non-market value
• Direct value in consumption versus
indirect value through enhanced
production
Marginal versus Total Value
• Marginal value as
demand price
• Market price
where quantity
demanded =
quantity supplied
• Total value of
supply is area
under the demand
curve.
Supply
P
Demand
quantity
Example: Alaska Salmon
• Marginal Value is
highly variable
• Price of salmon has
declined recently
• Hence, value of
enhancing habitat
for commercial
salmon is way down.
Annual Average Salmon Price in
Alaska (1996$)
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
1925
1935
1945
1955
1965
Year
1975
1985
1995
2005
Total verus Marginal Value
• When the price is depressed due to
unusually high supply (e.g., salmon)
1. The total value of salmon sold is
greater than when supply is small and
price is high.
2. But, the value of additional habitat
is low because the marginal value of
salmon is low .
Gross Value vs. Net Value
• If fish habitat generates $1 mil. of
gross value per year, we subtract the
cost of maintaining habitat & catching
fish to get the net value created.
• Costs include project expenditures
and foregone value of next best use
for the habitat (agriculture, logging,
harbor, hydroelectricty…whatever)
Market versus non-market
• Markets don’t exist for many
habitats or components of habitats.
• Examples: shorebird habitat on a
mudflat; fish rearing habitat in a
wetland; winter habitat for humpback
whales in Hawiian waters.
• Value for these things must be
inferred from specialized data.
Categories of Non-Market
• Recreational value associated with
fishing, hunting, birding, etc. People
are willing to pay for opportunities to
participate in these activities.
• Existence (or passive use) value of
species or habitats that are prized
for their own sake (whales, Artic
National Wildlife Refuge).
Direct valuevs indirect value
• Direct value is market or non-market
value of final good to consumers.
• Many natural resources and habitats
are indirectly valuable, primarily for
their contribution to production of
final goods or services.
Value of fish habitat is indirect.
Value of farmland is indirect,
depending upon yield/acre & prices.
Habitats with Mixed Uses
• Mudflat has indirect value as habitat
for crabs and oysters and shorebirds.
• Converted mudflat has value as boat
harbor.
• Filled land may be valuable for homes.
• Dredged channels have value as
transportation corridors.
• Mudflat may have direct value as
surroundings for long-term residents.
Measurement
• For small changes in market goods
(e.g. commercial salmon) use market
price times D quantity for gross value.
Subtract enhancement and operating
costs for net value.
• For change in non-market good,
choose a study method appropriate to
the type of good (see next chart).
Valuation Methods
Market Goods
Market Demand, production
costs, project expenditures
Recreational
resources
Estimate recreation demand
via travel cost model, or
random utility choice model
Property attributes Hedonic property valuation
model
Passive Use Values
Contingent valuation –
hypothetical responses
Cautions
• None of the valuation methods deal
with equity and fairness (neither does
ecology).
• Most ecosystem valuations rely
heavily on understanding of
ecosystem functioning.
• Ecosystem values will vary widely
across time and space. There are no
fixed points of reference.
Mistakes to Avoid
• “Economic impact” concerns changes
in local incomes & employment, but
says little about economic value.
• Ratio of GNP to energy use does not
indicate the value of energy & energy
content is not proportional to value.
• Risky projects need to be assessed
for expected values & variances.
Mistakes to Avoid
• Double-counting: the indirect value of
inputs are included in price of final
goods and services. So, don’t add
value of fish habitat to value of
fishing vessels to crew wages to
market value of salmon. Value of
“inputs” are in market value.
• Non-use values are additional to use
values for the same good.
Conclusions
• Habitat values are
ubiquitous and
multi-dimensional
• Careful accounting
is required to avoid
mis-applications.
• Substantial data
collection and
analysis is required.