Defining exchange and welfare values, articulating institutional arrangements and establishing the valuation context

for ecosystem accounting

Discussion paper 5.1

David N. Barton (NINA), Bram Edens (UN-DESA), Nicholas Conner (Environment NSW), Alejandro Caparrós (CSIC), Matias Piaggio (CATIE) and Jane Turpie (Anchor Environmental)

Session 3d: Valuation and accounting treatmentsExpert Meeting on Advancing the Measurement of Ecosystem Services for Ecosystem Accounting

June 26-27, 2019Glen Cove, NY

Contents of Discussion Paper 5.1

1 Valuation

principles in the

national accounts

2 Accounts relative to wider

valuation frameworks

3 Value and price concepts

4 Valuation methods

5 Value

transfer

6 Unresolved and emerging issues

1. Final ecosystem services as inputs to firms

2. Final ecosystem services as inputs to households

3. Final ecosystem services with benefits to households co-produced by households and firms

4. Final ecosystem services with benefits to households which are not accounted in the final value of any marketed good or service

1 Valuation principles in the national accounts

BIOSPHERE

PRODUCTION BOUNDARY

FIRMS HOUSEHOLDS

1 2

3

4

Recreation

Regulating services

Amenities

Subsistencecrops, fisheries, timber, water

Non-usevalues

crops, fisheries, timber, water

Regulating services

2 Accounts relative to wider valuation frameworks

Non-anthopocentric

Anthopocentric

Intrinsic

Non-anthropocentric intrinsic valueCulture/spirituality/metaphysicsMeasurement: by definition not relevant (indivisible, intangible, non-exclusive), e.g. ‘Mother Earth’.

Non-anthropocentric instrumental

value

Ecology

Measurement: quantitative, non-

exclusive, e.g. extent and condition

Instrumental

Anthropocentric instrumental value

Economics

Measurement: quantitative, exclusive

e.g. Exchange values, market values

Anthropocentric intrinsic value

‘Weak Intrinsic value’/relational

value - Ethics – Anthropology –

Psychology - Cultural heritage

Measurement: qualitative, non-exclusive., e.g. reciprocity, universal value, human value

SEEA EEA

Exchange values

Market simulationwhere no marketsexist, using the most likely institutionalcontext

Institutional issues:ConsistencyCredibility (likelihood)Comparability

Ease of calculation

3 Value and price concepts in environmental economics

in the context of national accounts

e.g. short-term monopolistic competition with linear site-specific demand and constant costs

4 Assessing valuation methods in the context of national accounts.

Deductive valuation methods

Inductive valuation methods

involve logical processes to reason from general premises to particular conclusions using constructed models comprising a set of behavioral postulates e.g. about input-output relationship, and forecasting of input prices

reasoning from the particular to the general, or from real-world data

to general relationships, using formal statistical or econometric

procedures to infer generalizations from individual observations

4 Assessing valuation methods in the context of national accounts.

4 Assessing valuation methods in the context of national accounts.

Criteria for method selection*1. Compatible with

exchange values 2. Identifies

individual service3. Inductive before

deductive...4. …allows reliable

extrapolation5. …low cost of

input data6. …ease of

computation

*How much of a choicedo we have in practice?

Tier 1

Tier 2

Tier 3

methods

4 Assessing valuation methods in the context of national accounts.

Tier 1

Tier 2

Tier 3 methods

Ranking by use or frequency of recommendationin WG3 discussion paperson ecosystemservices:

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Most efficient?

«Big Numbers»?

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compatible?

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Cost

recovery?

Ass

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How fast

is change?

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Where is

change?

Increasing precision and reliability required

5 Value transfer in accounting – expectations about accuracy

>> purpose >> error tolerance?

Source: Adapted from SEEA EEA Figure 2.4 (UN et al., 2014b). Note that Ecosystem Assets (EA) represent individual, contiguous ecosystems. Ecosystem Types (ET) are EA of the same type.

1

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3 3

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constantincremental

spatial change

5 Value transfer in ecosystem accounting

non-linear change in

substitutesand compl-

ements

fluctuationin values

per ecosysasset unit

6 Unresolved and emerging issues

– marginal versus average?

Marginal prices with non-marginal changes

in ecosystem services?

Problematic interpreting

marginal prices as average prices?

Changes or levels -what are the purposes of accounting?

Using marginal prices for gradually changing

ES across multiple accounting periods?

ES production functions need to be sensitive to changes in ecosystem

condition

6 Unresolved and emerging issues

- plural and incommensurate values?

Is ecosystem accounting a plural

valuation approach?

Satellite accounts for incommensurable

value metrics?

Bridging tables for different

economic value metrics?

6 Unresolved and emerging issues

- credible institutions?

Cost of provision rather than exchange

values?

Credibility of institutional assumptions of cost-based versus simulated exchange

methods?

Use transaction cots to assess the relative credibility

of institutions?

Can we disregard the 3rd party transaction

criterion for ecosystems; for

individuals?

6 Unresolved and emerging issues

- spatially explicit values

Expectations regarding accuracy?

Inductive versus deductive valuation

No single price for ES due to transport costs and resource

immobility?

Typically spatially explicit physical flows combined

with average prices?

..accounts only reliable for

assessing changes (not levels)?

THANK YOU

QUESTIONS

SUGGESTIONS

EXTRA MATERIAL

Ge

ogr

aph

ical

sca

le

Reliability &accuracy

requirement

Property

Subcatchment

Watershed

Region

Source: adapted from Gomez-Baggethun and Barton(2013)

Studyvaluation

frame

Recognizing value

Demonstrating value

Capturing value

6. Ecosystem conditionindicators related

to recreation, but not used in valuation

5. Well-being and healthnon-economic indicators5

4. Economic welfarevalue of recreation

services consumer surplus

(SNA incompatible) 4

3. Exchange value of recreation servicesvia complementary

goods (outside SNA)

3

2. Exchange value of ecosystem services

contributed to recreation

(outside SNA)

How can other values be identified in national ecosystem accounting ?

Cabin timberFirewoodWell waterMushroomsBerries

Travel time & costto reachcabin

Forest cabinrental chargeper night

Willingness-to-payfor cabin stay minus cabin rental

Time spent in forest; stated suitability, subjective health scores…

Old growth forest charistmatic biodiversity…

1. Exchange value of recreation services produced

by economic units (SNA)

Examples:

Source: adapted from Barton et al. 2017a based on observationsby Carl Obst and Lars Hein, gratefully acknowledged.

6

2

1. Exchange value of goods

and services produced by

economic units (SNA)

1. Ecosystem extent account

Information system of biophysical and socio-economic high resolution mapping data with national coverage

2. Ecosystem condition indicators

Ecosystem capacity

indicators

3.Physical ecosystem services

supply and use accounts

pricing of ecosystem services based on exchange value assumptions

4.Monetary ecosystem

services supply and use accounts

5. Ecosystem monetary

asset account

Integrated accounts – System of national accounts (SNA)

ACCOUNTING VALUES

HIG

HER

RES

OLU

TIO

NLO

WER

RES

OLU

TIO

N

Thematic environ-mental

accounts

LandWaterCarbon

Biodiversity

Trend observation, benchmarking, policy ‘distance to target’ assessments

Experimental ecosystem accounts

ACCOUNTS IN PHYSICAL TERMS

Legend:

Local environmental and social impact assessments& landuse planning

based on welfare economic assumptions

Monetary welfare

indicators

ECONOMIC VALUES

Thematic socio-

cultural accountsHealth,

Well-beingEquityJustice

…

SOCIO-CULTURAL VALUES

Parallel thematic

socio-cultural

indicators

based on indicator composition

Parallel thematic

ecosystem indicators

ECOLOGICAL VALUES

based on indicator composition

2

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Purposes of ecosystem accounts