Ecosystem valuation

Understanding the economic value of nature and the services it provides to humanity has become increasingly important for local, national, and global policy and decision making. It has become obvious that quantifying and integrating these services into decision making will be crucial for sustainable development. Problems arise in that it is difficult to obtain meaningful values for the goods and services that ecosystems provide and for which there is no formal market. A wide range of ecosystem services fall into this category. Additional problems arise when economic methods are applied inappropriately and when the importance of ecosystem maintenance for human welfare is underestimated. In this article we identify a place for monetary valuation within the pluralistic approach supported by ecological economics and assess progress to date in the application of environmental valuation to ecosystem service provision. We first review definitions of ecosystem services in order to make an operational link to valuation methods. We then discuss the spatially explicit nature of ecosystem services provision and benefits capture. We highlight the importance of valuing marginal changes and the role for macroscale valuation, nonlinearities in service benefits, and the significance of nonconvexities (threshold effects). We also review guidance on valuation studies quality assurance, and discuss the problems inherent in the methodology as exposed by the findings of behavioral economics, as well as with benefits transfer--the most common way valuation studies are applied in the policy process. We argue for a sequential decision support system that can lead to a more integrated and rigorous approach to environmental valuation and biophysical measurement of ecosystem services. This system itself then needs to be encompassed within a more comprehensive multicriteria assessment dialogue and process.