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Ecosystem Services Accounting for Development

Ecosystem services are essential to human welfare. These services include the climate control and food and fuel resources provided by forests, waterways, the atmosphere, and biodiverse ecosystems. Yet, the value of ecosystem services is not currently included in national accounts of wealth such as GDP or in related decisionmaking. To address this gap in knowledge, global initiatives to integrate ecosystem services into the National Accounts are currently taking place. One such effort is the development of System of Environmental Economics Accounts- Experimental Ecosystem Accounts (SEEA-EEA).

The ESAForD project is an unprecedented seven-country ecosystem service valuation project developed in collaboration with the EfD centers in Costa Rica, China, Ethiopia, Kenya, Tanzania, South Africa, and Sweden. The broad objective of the effort is to contribute to the development of ecosystem service accounting by enhancing the knowledge and empirical experience of valuing ecosystem services.

To develop ecosystem service valuation methodologies and results that are in line with the national accounting principles, ESAforD develops ecosystem service valuation methodologies and applications simultaneously in all of the above seven countries, together representing different income groups, including low, middle and high income countries.

The studies aim at generating results of practical policy relevance and with impact in each country and more generally. At the country-level, the study generates new information on the economic contributions of forests and other natural environments to human wellbeing. Addressing this currently missing piece of information will help each country better manage its ecosystems. More broadly, the study helps develop valuation results and methodologies that are consistent with the system of national accounts and can contribute to the development of standardized guidelines for the system of national accounts. Accordingly, the results will support the current efforts at UN Statistics Division, the World Bank (WAVES) and in several countries to augment conventional GDP measures to more comprehensively account for the economic contributions of nature. In addition, with the help of directly comparable valuation methodologies and estimates from seven different countries, the study on the whole will generate unique evidence to help better understand the economic, institutional, and ecological drivers of the value of ecosystem services.

Ecosystem Services Assessed

The ecosystem services selected for valuation are crop pollination, water purification and green urban amenities. The criteria for the selection of the ecosystem services are;

  • Relevance for the guidelines in ecosystem service accounting. Valuing regulating services is methodologically challenging and has the least number of case studies to draw experience from. For this purpose, pollination and water quality amelioration were selected. The need for extended experiences in this area was explicitly expressed by WAVES at the World Bank
  • Policy relevance. Many of the regulating services are positive externalities not included in policy decisions. In addition, the valuation of urban green amenities is an area where very little or no research has been carried out in developing countries while at the same time having a good coverage in developed countries. At the same time urbanization in developing countries is rapidly increasing and there is an urgent need for city planners to understand the value of green spaces.  
  • Cost efficiency. Data availability was assessed and it was found that the valuation of the selected ecosystem services could be carried at a relatively low cost, mostly using data already collected or feasible to be collected at moderate costs.
  • Gender perspective. The goods provided by the services i.e. agricultural products and drinking water are important from a gender perspective. The importance of green open spaces for women in developing countries is poorly understood, thus, a relevant study topic. 

Methodological Approaches

Assessments of water purification and crop pollination services take conceptually similar approaches. We determine the economic contributions of different ecosystems (forests, wetland, grasslands etc.)  to the services by compiling spatial and temporal panel data on economic outcomes of interest (water treatment costs, agricultural production outputs and revenues), land cover as a proxy for ecosystems, and other relevant environmental and socioeconomic factors relevant to the outcome of interest. Then, we use statistical estimation methods to identify the marginal contributions of ecosystems to the cost of water treatment and revenue from agricultural production. By measuring land cover (ecosystems) at different distances from the unit of analysis (a water intake or agricultural field), we empirically examine how the proximity of ecosystems to the water treatment plant or agricultural fields affects the value of ecosystem service generated by a specific area of land. The advantage of using panel data estimation methods is that they allow to better control for potential unobservable confounders.

The methodology enables the identification of marginal value of ecosystem services contributed by ecosystems at different distances, for example, from an agricultural field. Our use of spatial and geographically representative data allows the derivation of spatially determined and nationally representative unit values of benefits from the ecosystem services examined.

The above production/cost function method is in line with accounting principles but there have so far been very few empirical experiences in applying the method to ecosystem services.

The valuation of green urban amenities draws mostly from primary data gathered using consistent survey approaches in each country while also considering local and country specific development projects. The survey elicits data on local property prices. Those data are then econometrically examined to reveal the contribution of green amenities to the value of residential properties (hedonic pricing method). With the use of surveys, we also directly elicit local population’s preferences for different types and extents of urban green amenities, such as urban parks and their quality, or urban tree cover. 

ESAfD Activities

The ESAfD Working Group (WG) meets twice every year to update on country studies, to exchange experiences and discuss methodological challenges. Since the group was established in 2014 the WG, consisting of eleven people from eight different countries, have met in a number of workshops: Helsinki and Shanghai 2015, Cape Town and Pucon 2016, and Naivasha and Addis Abeba 2017. Besides in person meetings, the group holds regular virtual meetings, including monthly video meetings and other online meetings as needed. 

Members of the WG have presented 20 papers in international conferences, like the annual conferences of the European Association of Environmental and Resource Economics Conference (EAERE), and the annual meetings of the EfD Initiative. Also, the overall progress of the project has been presented in international meetings, like the London Group Meeting 2017 and meetings at the World Bank.

Coming activities are to hold a WG meeting in Costa Rica in April 2018, present papers at the WCERE conference in Gothenburg in late June 2018, and to hold sessions and present papers at the EfD Annual Conference in Vietnam in October 2018.

Links to ESAfD related newsarticles