Ecosystem Services

Compensating Landowners for Nonmarket
Forest Values and Ecosystem Services

(Message originally posted in bionet.agroforestry and saf-news November 5, 1997.  Later published in The Consultant, Summer 1998.)

I've been spending some time lately catching up on research in forest economics.  There's a lot of really interesting stuff going on, particularly in the emerging fields indicated by the terms in the heading above.  Researchers are trying hard to put dollar values on things like wildlife habitats, recreational opportunities and aesthetic amenities.  These are the forest values that don't pass through the market, but that the general public places significant value on.

Assigning values to nonmarket values is inherently difficult, but the method of contingent valuation (CV) has gained enough currency to have been accepted for use in assessing damages or values in court cases.  CV involves asking people questions about their willingness to pay for particular forest benefits under particular circumstances, including constrained government budgets.

CV and other techniques were used in a ground-breaking study on valuing ecosystem services by Costanza et al that was published in the British journal Nature this past May 15.  This study calculated the value of gas regulation, climate regulation, disturbance regulation, water regulation, water supply, erosion control and sediment retention, soil formation, nutrient cycling, waste treatment, pollination and genetic resources--in addition to wildlife, recreation and aesthetic values.

The researchers came up with annual per hectare values and total global values for all ecosystems, including open oceans; coastal estuaries, seagrass/algae beds, coral reefs and shelf; tropical and temperate/boreal forests; grass and rangelands; wetland tidal marshes, swamps and floodplains; lakes and rivers; tundra; desert; ice/rock.  The global total was over $33 trillion per year.  The per hectare temperate/boreal forest value was $277 ($112 per acre per year). 

One may dispute the validity of the specific calculations in this study, but the point remains that forest landowners (and owners of other ecosystems) are providing significant values to the general public for which they don't receive any compensation.  If owning forest land is viewed as an investment choice, this lack of compensation appears especially unfair when one considers that other investment choices such as some corporate stocks and government bonds do not benefit the general public, and in fact may significantly hurt the general public.

Consider the pollution that flows from ownership of oil, chemical, or pesticide company stocks.  Consider the exploitation of labor that flows from ownership of some garment and toy company stocks.   Consider the military destruction and income redistribution that can flow from owning government bonds.   The list could go on and on.

Of course some timber companies and some landowners are guilty of ecosystem destruction, but even they are probably doing less long-term damage than a pesticide company for example, because the ecosystem recovers in time whereas many pesticides persist in the environment practically forever.  There would be a baseline ecosystem service value for even a clearcut forest.  And there would be a high end value for old growth forests.

Most forest properties would have mid-range ecosystem service values.  Forests managed for a diversity of habitats and products would be closer to the high end.  Therefore it is possible to manage for greater ecosystem service value.  Since managing for that high end benefits society, shouldn't the owners who do so be compensated or rewarded in some fashion? 

Isn't this type of management essentially the same as giving away the development rights to a property?  Doesn't the public benefit in the same manner?  And shouldn't good ecosystem management receive the same type of tax deduction?  Could annual ecosystem services for different forest types be calculated and capitalized for a range of management regimes to facilitate this process?  Could tax losses to governments be offset by additional taxes on corporations that pollute or despoil?

Let's have some discussion on this issue and see if there might be a way of drafting some legislation.  It would benefit landowners, foresters and the general public.  Just getting the issue out there and having some debate would go a long way towards educating people about what good forest management does for us all.

The Costanza, et al paper is on-line at the Nature web site.  Supplementary information is also available at this website.  The published version is referenced below, along with a couple other interesting papers from forestry journals.  Much more information may be found by doing a CAB Abstracts (at most university science libraries) search for forest valuation, contingent valuation, or forest economics.

Costanza, R, et al. 1997. The value of the world's ecosystem services and natural capital. Nature 387:252-259.

Lippke, B and HL Fretwell. 1997. The market incentive for biodiversity.  Journal of Forestry 95(1):4-7.

van Kooten, GC. 1995. Can nonmarket values be used as indicators of forest sustainability? Forestry Chronicle 71(6):702-711.