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Ecosystem services are ecological characteristics, functions, or processes that indirectly or directly contribute to human wellbeing and benefits such as food and materials that people derive from ecosystems (Constanza,1997). They are characterised by their amenities, goods, physicalities, or services (Everard, 2017). Created by living organisms interacting within their environment, ecosystems provide both conditions and processes that sustain life. Thus, they are essential to our existence despite being taken for granted. Natural capital, stock that yields service flow over time, interacts with manufactured and human capital, enabling flow to human well-being (Constanza, 2017). This essay will argue that the social and environmental impacts of monetary valuations mean it is unsustainable to implement monetary values on ecosystem services.
It has been argued that ecosystem service valuation is impractical as environmental aesthetics, ecological assets, and human life are invaluable (Constanza, 1997). However, we implicitly assess ecosystem service’s values whenever we use, protect, or degrade the environment. For example, someone may appreciate a display in a museum, and so they value it, albeit not necessarily in monetary terms (Constanza, 2017). Hence, the critical consideration should be whether the valuation of these services is accurate enough to be environmentally and socially beneficial. For instance, provisioning goods such as timber, have a price, but there is no repercussion for the deforestation that occurs. We explicitly value these goods, yet the services generating them typically have no market value (Constanza, 1997). Thus, revealing the perception of natural capital as a free good which single-handedly leads to the over-exploitation of natural assets in the short term (Lant, 2008). Additionally, the ecosystem’s location is significant in determining the distribution of goods and services, as well as those available. Locations alter perceptions of nature and ecosystem services; thus monetary valuations are not always adequate as they do not translate differences in perceptions (Koetse, 2015). For example, local people might pay more for an ecosystem service that provides recreational use, whereas people who live further away might be willing to pay less for the same service. Thus, monetary valuation is not adequate and does not provide a steady starting point for providing a value that different factions of society identify with.
An ideal method to include natural capital in decision-making would be to give local ecosystem services an accurate monetary value, reflecting the benefits delivered to society, and preserving our ecosystem services. Due to their encompassing nature, ecosystem services are not currently involved in policy making (Constanza, 2017). Thus, monetary valuation would provide a way in which ecosystem services could be implemented. However, too many challenges currently exist which prevent governments from executing monetary valuation in practice. Hence, ecosystem services are rarely included in decision making directly. These challenges include: identifying services on a local scale; measuring a precise value; protecting their future value (Constanza, 1997). The complexity of ecosystem services renders existing knowledge inadequate, and so we cannot impose a full economic regime when we do not understand the full extent of its consequences. Thus, as Constanza says, to do nothing would be a problem, but acting blindly is just as illogical as naively treating the earth’s resources as open access and infinite.
While market valuation uses market prices for values of tradable commodities, non-market focuses on social preferences (Miller, k., 2016). The market price method is a direct market valuation which uses values of products already on the market to estimate the value of ecosystem services, and so is easily applicable (Koetse et al, 2015). However, many services are not directly traded on markets. For those which are, subsidies and taxes distort the market, preventing the price from reflecting social and economic values accurately. The cost-based method estimates the value of an ecosystem service based on potential replacement, substitute, and damage costs if the ecosystem was not present (Koetse et al, 2015). If a wetland protects from flooding, then the benefits can be estimated by calculating the damages avoided. Likewise, the value of a wetland acting as a natural reservoir can be estimated by calculating the cost to construct and maintain an artificial reservoir of a similar size. However, this method fails to produce a precise measure of economic value by assuming that the service must be worth the exact cost of replacement. Therefore, the value is likely to be underestimated, and so the practicality of direct market valuation is undermined. The centralisation of limited factors and disregard for non-marketable aspects of ecosystems is problematic and would make this valuation ineffective and an irresponsible choice.
Alternatively, indirect market valuation could be used, such as the travel cost method. Using observations of visitor spending, this estimates the economic benefits provided by a recreational site (Koetse, 2015). The travel expenses that people incur to visit the site represent the implicit price of access to the site, and therefore how much value that ecosystem service must hold. While this is simple and experience-based, it is subject to inaccuracy. For instance, someone who cherishes the site may live near it, and so have cheap travel costs, meaning that this great personal value is not accounted for (Koetse, 2015).
Contrastingly, contingent valuation, a non-market valuation, is based on people’s willingness-to-pay (WTP), or willingness-to-accept (WTA) for an ecosystem service (Everard, 2017). In the Philippines, WTP was used to determine the expense that divers were willing to entail to dive in a marine sanctuary. The results demonstrated a positive WTP among divers with estimated annual revenues ranging between $0.85-1 million on Mactan Island (Arin, 2002). Applicable to any ecosystem and for any good or service, this method appears optimal. However, responses are subjective and theoretical, so may not reflect true behaviour. Additionally, it assumes that the public have enough knowledge about the given ecosystem service to be able to give a price reflecting the true value, which is unlikely, and so limits the application of contingent valuation to ecosystem services.
Ecosystems provide provisional services, which are the material benefits obtained from ecosystems. Water is essential to our survival; however it is distributed unevenly, leading to water scarcity in populous or arid regions. Water scarcity, a natural and human-made phenomenon, is amplifying due to growing global populations and water privatisation (UNDESA, 2014). Privatisation creates inequalities in water accessibility, leaving the poor and minorities struggling with limited or no access to clean water. Conflicts arise in relation to what the water is used for, and by whom it is used. For example, Northern Chile has an arid climate and faces water scarcity due to the proximity of the cold Humboldt current brining dry air to the region (Madaleno, 2017). The Northern territories are rich in minerals, and therefore are exploited by private businesses and mining companies. The 1981 Water Code separated water from land ownership, permitting an undemocratic use of water (Madaleno, 2017). This code has therefore prioritised the fast return of business, favouring the urbanised areas to the scattered rural populations, as well as to the ecosystems that depend on water. Therefore, monetisation of ecosystems and the services they provide, have both social and environmental outcomes which diminish cultures and leads to inevitable inequalities increasing between groups.
Understanding ecosystem services and their valuation helps inform effective policies and natural capital management. Payments for ecosystem services (PES), payments to landowners to provide or protect ecosystem services, contain an implicit recognition of ecosystem service’s values (Constanza, 2017). Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD ) is a popular PES scheme. Guyana, with 18.4 million hectares of forest, is a leading REDD country funded by Norway to preserve forests from further degradation caused by commercial practices such as mining and logging (Goslee, 2020). These schemes create incentives to protect ecosystem services by using valuation to express their worth. However, complexity about policy impacts and uncertainty of who owns or should pay for the services, and for how long, causes complications (Guerry, 2015). For example, in the Scottish National Policy Framework for Goose Management scheme concern has arisen among farmers that once geese populations have been restored, they will be left to deal with destruction caused by these geese without any compensation (Nsoh, 2013). Additionally, PES schemes risk forcing nature to be seen solely through an economical lens, rather than as a common heritage to be cherished. PES may also create perverse incentives and discourage natural phenomena. If someone is paid based on their forest cover, they are likely to use harmful chemicals to speed-up the process and plant monoculture forests which are less beneficial than natural forests. Therefore, without proper supervision and conservation of ecosystem services, monetary valuation can have negative outcomes, and so is unwarranted without a careful, integrated approach (Ferraro, 2011).
Monetisation indirectly leads to deterritorialization of indigenous populations. The Amazon is home to indigenous groups, including some of the world’s last uncontacted people living in voluntary isolation (Finer, 2008). Involving ecosystem goods such as oil, in the global market, means natural capital is exploited excessively. While large, outsider companies are economically benefitted, the indigenous groups living there are unlikely to economically gain. 180 oil and gas blocks cover 688,000 km2 of the Western Amazon (figure 1). The majority of these overlap with indigenous territories and are leased to companies, meaning that it is currently being done despite the indigenous people who are unable to have their say or to protest. This inequality in ability to speak out and be heard, as well as the monetary valuations, widens the inequality gap further. Resulting in the indigenous groups facing challenges, such as water pollution from oil spills (Finer, 2008). Pollution leads to infertile soils, so local groups will have to relocate in order to grow food. Also pollution brings diseases that the locals are not equipped to deal with. Development projects in Rondônia, one of the most deforested areas in Amazonia, has forcefully driven many indigenous groups of their land (Maruyama, 1998). These projects led to the building of dams for hydroelectric power, which have flooded many homes. Such as those of the Arara group, whose village was flooded by the building of Samuel Dam. Monetary valuation of ecosystem services can therefore lead to further exploitation of these ecosystems, as well as have dire consequences for indigenous groups that depend on these ecosystems that they live in harmony with. Hence, it is not ethical or feasible to implement monetisation of ecosystem services.
While monetary valuation of ecosystem services is an ideal way to involve natural capital more directly in decision-making, it is too inefficient and inaccurate to do so on its own. Nature is too valuable and subjective to put a price on and is inherently entangled with every aspect of life (Constanza, 2017). Therefore monetary valuation has inevitable impacts, both socially and environmentally. Thus, it is too destructive to do while not enough research has been undertaken to make valuation sustainable for all aspects of life.
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