Eco-system and its economic evaluation : A new approach
- Part 1 -

Lakshmi Dhar Hatai *

Ecosystem approach is a new concept that integrates the management of land, water and living resources and aims to reach a balance between three objectives:
(i) Conservation of biodiversity;
(ii) Its sustainable use; and
(iii) Equitable sharing of benefits arising from the utilisation of natural resources.

An ecosystem approach takes into account that humans and cultural diversity are an integral element of most ecosystems. It applies appropriate scientific methodologies, focused on various levels of biological organisation, which encompass the fundamental structure, processes, functions and interactions amongst and between organisms and their environment.

It is important to recognise that the ecosystem approach does not provide an all-encompassing solution as its application depends upon local, regional, national or global conditions. An eco-system approach should not be regarded as a strategy that supplants other techniques and tools; wherever possible existing strategies and methodologies should be used in conjunction to address complex problems and issues.

The ecosystem approach is an adaptive management strategy that can be employed to deal with the complex and dynamic nature of ecosystems and counter act the lack of knowledge or comprehension of their functioning. Ecosystem processes are often non-linear, fluctuate spatially and temporally and frequently show time-lags; these discontinues can create a high level of uncertainty which the eco-system approach can help overcome.

Adopting this balanced approach ensures that natural resources and society as a whole are positioned in the centre of the decision making process, ensuring a more equitable and long -term future is tenable.

Ecosystem Approach Principles

1. Recognise objectives as society's choice : Economic, cultural and social perception of ecosystems varies amongst different elements of human society. Human rights, interests and cultural diversity must be taken into account and eco-systems should be equitably managed for their intrinsic, tangible and intangible benefits.

2. Aim for decentralised management (i.e. subsidiarity) : Management should involve all stakeholders, balance local interests and wider public interests, ensure management is close to the ecosystem, and encourage ownership and accountability.

3. Consider the extended impacts, or externalities : Managers should take into account and analyse effects (actual or potential) that activities have on other ecosystems.

4. Understand the economic context and aim to reduce market distortion : Market distortions that adversely affect biodiversity must be avoided. Incentives should support conservation and sustainable use and costs and benefits ought to be internalised within the focal ecosystem.

5. Prioritise ecosystem services : Ecosystem functions and structures that supply services must be conserved.

6. Recognise and respect ecosystem limits : Management strategies must consider environmental conditions that limit productivity, ecosystem structure, functioning and diversity.

7. Operate at an appropriate scale, spatially and temporally : Operational boundaries are defined by users managers, scientists and local peoples. Cross boundary connectivity should be promoted where necessary. Management options must consider the interaction and integration of genes, species and ecosystems.

8. Manage for the long-term, considering lagged effects : Characteristic temporal scales and lag-effects within ecosystems must be taken into consideration. Preference of favouring immediate benefits over future ones should be avoided.

9. Accept change as inherent and inevitable : Adaptive management must recognise the dynamic and complex nature of ecosystem properties and anticipate change. Managers need to avoid decisions that limit future options and actions should consider long-term protracted global change.

10. Balance use and preservation : It is important to adopt a flexible management approach that takes conservation and use into context and apply a continuum of measures from fully protected to sustainably managed ecosystems.

11. Bring all knowledge to bear : Relevant information should be shared with all stakeholders. All assumptions should be made explicit and checked against available knowledge and stakeholder views.

12. Involve all relevant stakeholders : To address management complexities decision making should draw upon necessary expertise and involve relevant stakeholders at all levels. Ecosystem evaluation is an economic process which assigns a value (either monetary, biophysical, or other) to an ecosystem and /or its ecosystem services.

By quantifying, for example, the human welfare benefits of a forest to reduce flooding and erosion while sequestering carbon, providing habitat for endangered species, and absorbing hamiful chemicals, such monetization ideally provides a tool for policy-makers and conservationist to evaluate management impacts and compare a cost-benefit analysis of potential policies.

However, such valuations are estimates, and involve the inherent quantitative uncertainty and philosophical debate of evaluating a range non-market costs and benefits. The value of ecosystems may be comprehended and expressed differently depending upon cultural conceptions, philosophical views and professional disciplines. Various techniques are available to value ecosystem services.

Values can be considered in terms of 'total economic value' which accounts for both the use and non-use values society can gain or lose from changes in ecosystem services. Many ecosystem services are not traded on markets meaning that many services remain unpriced. Therefore, it is necessary to assess the relative value of goods or services using non-market valuation methods.

The valuation technique adopted will depend on which ecosystem service is to be valued, as some methods may be more suited to capturing values of particular ecosystem services. Effective ecosystem valuation tools may help create markets for services, as sound valuations provide evidence that informs the development of economic mechanisms and policy instruments.

The choice of valuation method used is determined by the characteristics of each valuation case and the date which is available. Ecosystem Valuation Methods The key challenges in valuing ecosystem series is assessing how ecosystems interface to provide services and how to deal with the issue of irreversibility and the high levels of uncertainty surrounding ecosystem functioning.

Wile valuation should be deemed as an important tool, it should be regarded as only one of the facets in the decision making process. Revealed preference methods The revealed preference method provides an indirect estimate of the value of non-market goods by using evidence on how individuals respond to real choices.

Revealed prefe3ence methods include: Market pricing approach captures the market value of goods and services being traded. It is important to recognise that prices may need to be adjusted to account for market distortions, such as subsidies. Prices can act as proxies for direct and indirect use values but do not capture non-use values. Market price can also be used as a minimum expression of an individual's willingness to pay for a particular service.

To be continued....