Economic Valuation of Protected Area’s Ecosystem Services ...

Journal of Educational and Human Resource Development 8:45-58 (2020)Southern Leyte State University, Sogod, Southern Leyte, Philippines

Economic Valuation of Protected Area’s EcosystemServices: The Case of Mahagnao Volcano Natural Park

(MVNP) in Burauen and La Paz, Leyte Philippines

1*Lemuel Preciados, 1Rhena Jane Soria, 2Fernando Polenio†

1Department of EconomicsVisayas State UniversityBaybay City, Philippines

2Department of Environment and Natural ResourcesTacloban City, Philippines.

Abstract

Mahagnao Volcano Natural Park (MVNP) provides critically important ecosystem services.The natural ecosystem services of MVNP play an important role in maintaining the well-beingof the families in the protected area through the provision of a wide array of services rangingfrom income support to food and recreation. This resource valuation has helped to put aprice tag on the provisioning ecosystem service of MVNP using the standard approaches ofthe market-based method (MBM) and Contingent Valuation Method (CVM). Results revealthat the annual value of Mahagnao Volcano Natural Park’s (MVNP) provisioning resource forMahagnao is about PhP2,779,963 per year while for Bocawon is PhP645,745 per year, whichtranslated to a total provisioning value for both communities amounting to PhP3,425,708 peryear. On average, each household has benefited PhP90,174 per year. Moreover, surveyresults reveal that on average, each household’s willingness to pay is PhP486 and PhP178.50per year from Mahagnao, and Bocawo, respectively. The net benefit that goes to everyhousehold from protecting MVNP is PhP82.49 per day. Incorporating the benefit-cost principleprovides an alternative practical tool and most relevant approach for measuring both thebenefits gained and the willingness to pay for providing improved protection of livelihood andthe environment for protected areas in the Philippines rural communities.

Keywords: Market-Based; Contingent Valuation; Protected Area

Introduction

Ecosystem services are recognized asthe benefits received by people fromenvironments (Millenium EcosystemAssessment [MEA], 2005). These benefitscan be direct and/or indirect provisionsto human well-being (The Economics ofEcosystems and Biodiversity [TEEB], 2010).Functioning ecosystem services can provide arange of services essential for human survivallike food, while others are more desirable

services for human enjoyment such asrecreation (Small et al., 2017). One accuraterepresentation of an ecosystem is a protectedarea. A protected area is a recognizedpiece of land and water with ecologicalsignificance as it helps preserve and protectbiodiversity (Republic Act 7586, 1992). Thereis a general agreement in the literaturethat protected areas (PA) in most countriesare critical for biodiversity-preservationinitiatives. However, some internationalscientific studies contend that there are also

Correspondence: [email protected]; https://orcid.org/0000-0001-5558-606X ISSN 2545-9759

Preciados, Soria and Polenio JEHRD Vol.8, 2020

PA protection measures that became lesssuccessful because the economic importancefor local people was not clearly understoodand realized (Berghofer, 2010; Gbadegesin& Ayileka 2000; Hoole & Berkes 2010).Oftentimes, the participation of the localcommunities is neglected (Hirschnitz-Garbers& Stoll-Kleeman, 2011). A critical step toaddress this issue on little knowledge of thebenefits of a protected area to local peopleis a resource valuation study for ecosystemservices. Ecosystem valuation is an idea ofputting a monetary value on ecosystem goodsand services that is often used to advocatethe economic importance of the environmentincluding non-marketable benefits with theultimate purpose of encouraging sustainabledevelopment of ecosystems (van Beukeringet al., 2015). These concepts and principleswere also the basis for the conduct of this newresearch study.

This current study is done to identify andmeasure the quantifiable ecosystem servicesderived by people from the Mahagnao VolcanoNatural Park, which is one of the protectedareas in Leyte, Philippines. The park wasdeclared as a National Park by ProclamationNo. 184 on August 27, 1937, to preserveits scenic grandeur and natural features.Certainly, MVNP provides critically importantecosystem services. Some of these arecaptured by markets, but many are not. Thereare positive externalities that are regardedby the beneficiaries as free. However,many of these ecosystem services includingthose from MVNP are likely seen to beboth under-conserved and undervalued. Thenatural ecosystem services of MahagnaoVolcano Natural Park play an important role inmaintaining the well-being of the families in theprotected area through the provision of a widearray of services ranging from income supportto food and recreation. Ecosystem servicesvaluation therefore shall help put a price tagon these natural resources.

The main objective of this study is tomeasure the economic value of identifiedecosystem services provided by Mahagnao

Volcano Natural Park protected area bothin Burauen and La Paz, Leyte. Specifically,this current study aimed to; (1) Profilethe demographic and socio-economiccharacteristics of the communities withinthe protected area; (2) Determine thebenefits derived and the willingness topay by households for the ecosystem servicesprovided by MVNP, and (3) Estimate theresource value (net benefits) derived byhouseholds from the provisioning services ofMVNP.

The natural environment has undoubtinglyprovided benefits to human beings. Itoffers food, different types of crops, water,and shelter – to name a few. It alsofeatures beautiful landscapes such as rainforests, crystal-clear waters, and uniquefeatures of the environment. This enticesa mutual relationship between humans andthe environment to achieve a sustainableand balanced environment. This issue issubstantial since humans need nature tosurvive and its influence on human life (Jeong,1997). Because of the continuous disruptionand exploitation of the environment, thereis a need to assess the economic value ofthese natural resources to provide a clearmechanism for its conservation. However, thebenefits of the natural park as a protected areaare considered intangible, hence economicvaluation is difficult (Predo, 1995).

Over time, resource valuation has beenan effective tool in appraising these naturalresources. Direct and indirect use of theseresources is valued in resource valuation sinceit is recognized that the core reasons forestablishing protected areas are not alwaysbased on economics, but also includesmaintaining of biological diversity and integrityfor the preservation of various species andtheir habitats (Thompson & Peepre, 2000).

A Contingent Valuation Method (CVM),is a non-market valuation technique whererespondents are asked on their ‘willingness topay’ to maintain or improve the quality of theservices provided by a certain site/protectedarea (Brander et al., 2010).

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An ecological feature becomes anecosystem service only if there is somepersons somewhere who benefit from a givenecological process (Olander, 2018). Theincorporation of benefit-cost analysis (BCA)in ecosystem valuation is gaining attention inthe literature. It is being used as a guide forevaluating policies and programs that affectenvironmental services (Wegner & Pascual,2011). They can be used as an effectivetool to choose among policies that involvetrade-offs between ecosystem services,among beneficiaries, and between periods(Pearce et al., 2006; Daily et al.,2009).They can also be used as a guide on theevaluation of proposed projects that aimto provide optimum economic net benefitsfrom the flow of the ecosystem services tosociety (Carpenter et al., 2009; Daily et al.,2009). Hence, the benefit-cost analysis isconsidered as one of the analytical toolsin this economic valuation study for theMahagnao Volcano Natural Park’s ecosystemservices. This research has used resourcevaluation methods already commonly usedin the subject of environmental economicswhich include a market-based method, andcontingent valuation method. These methodswere incorporated into a benefit-cost analysisframework that able to calculate the economicvalue of the ecosystem services in a protectedarea or landscape.

Protected areas are considered to providehuge revenue-earning units and can make asignificant help to local economies. Moreover,investment in protected areas can providea significant benefit to national and localcommunities (Phillips, 2002). The estimatedconsumer surplus and the recreational valueof Mount Pulag Natural Park in the Philippinesfor instance were valued at PHP47,062,560and PHP56,335,590 respectively (Navarroet.al, 2008). These values can determinethe importance of resource valuation to thepotential contribution of natural resources tothe community and stakeholders.

Methodology

Sampling Procedure

The two barangays Mahagnao and Bocawonare situated within the MVNP area. As ofNovember 2017, Barangay Mahagnao andBarangay Bocawon had 165 and 56 registeredhouseholds, respectively. Before the officialconduct of the study in the selected sites,courtesy calls with the LGU officials in themunicipality of Burauen and La Paz weredone to get permission and assistance fromthe local government for data collection andsecurity. A complete enumeration samplingtechnique was employed in the conduct ofthe survey using a structured questionnaire.This implies the collection of data from everyunit of the population and is usually morepreferred for some cases because it canprovide complete statistical coverage (FAO,1999). While complete enumeration is usuallypreferable, they can be a more expensivemethod than the sampling surveys dependingon the local circumstances. However, in thisstudy, given the small number of populationsize, it is more appropriate to use thecomplete enumeration procedure to havegreater accuracy of observations. Hence, allthe households in Burauen and La Paz areincluded in the survey. The conduct of thesurveys was done by well-trained enumeratorswho were graduates from the Department ofEconomics at the Visayas State University.The total number of respondents interviewedduring the conduct of the actual survey forBurauen and La Paz were 119 and 45,respectively.

Market-Based Method

In this study, various resource valuationtechniques are explored depending on theirrelevance. Through the surveys with thehouseholds and focus group discussions withkey barangay officials in the protected areait was found that the most relevant andeasily quantifiable ecosystem service was

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Figure 1. Conceptual framework for measuring provisioning value of MVNP

the provisioning service which is the incomeearned by households from fishing, coconutfarming, and selling of fuel woods. Hence, thisstudy has focused only on the benefit-relevantand quantifiable market-based consumptivevalues of ecosystem services for MVNP(Olander, 2018).

The market-based approach is typicallyused to approximate the value ofenvironmental goods that are bought andsold in the market. In this study, we havetried to estimate the consumptive values ofMVNP’s ecosystem through its provisioningservices as a source of income by householdsthrough fishing from the lake and throughselling timber and forest products from theprotected forest areas. In this study, it isassumed that when the MVNP’s provisioningresource is free (zero price), the householdsin MVNP were able to enjoy huge consumersurplus. However, through this valuationstudy, households’ willingness to pay isdetermined, and that is used as a proxy astheir contribution (as a cost for them) forthe improved maintenance and protectionof the environment (Fig. 1). In MVNP,some households get income from fishingand others are through farming. Withoutthe protection of the resource, the currentincome derived from the protected area wouldbe limited. Therefore, this study quantifiesthe benefits and the costs associated withMVNP’s identified ecosystem resource and

determines the willingness to pay householdsto continue getting the income they currentlyderived from the protected area. The realvalue of the provisioning service of MVNP wasmeasured by calculating the net consumersurplus (benefit per household less WTP perhousehold).

Data Analysis and Interpretation. Giventhe depth and breadth of this resourcevaluation study, this research employedvarious analysis which includes descriptivestatistical analysis and market-basedvaluation. The order of analyses employed inthis evaluation process is the following:

Descriptive Statistics - to analyze thecharacteristics of households involved in theproject. Frequencies, totals, percentages,and averages shall be computed to generallydescribe the households’ socio-demographicand economic profile. Market-BasedCalculation – to estimate the provisioningvalue of MVNP, this study uses themarket-based method which could becalculated as:

Total Provision Value =(Average Income Earned by Fishermen xNumber of fishermen) + (Average Incomeby farmers x Number of farmers) + (AverageIncome by selling wood products x Number ofsellers)

Benefit-Cost Analysis – to compare and

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quantify the monetary impact of the positivecontribution of the ecosystem services tohouseholds such as the income derived fromthe livelihood within the protected area and themonetary values of household’s willingnessto pay which is considered as an outflowfrom them to the ecosystem services. Theobtained monetary values for the benefits andcosts and then aggregated to calculate thebenefit-cost ratio (BCR) that represents animportant decision-making criterion whetherthe willingness to improve the protection ofMVNP delivers higher benefits relative to itscosts. The benefit-cost ratio is calculated bydividing the value of benefits by that of costsor investments as shown below:

If BCR < 1: Investment option generateslosses

If BCR = 1: Investment option is neitherprofitable nor loss

If BCR > 1: Investment option is profitable

The Study Site.Mahagnao Volcano NaturalPark (MVNP) is under the jurisdiction of themunicipalities of La Paz and Burauen ofLeyte, Eastern Visayas. Its location is at124 51’ 30” E longitude and 10 52’ 30”Nlatitude. As of 2012, it was being validatedby the National Mapping and ResourcesInformation Authority (NAMRIA) in which thepark has only 341 hectares, not 635 hectares.The greater portion of the MVNP belongsto the territorial jurisdiction of Burauen withan area of 239.315 hectares, while La Pazhas only 101.91 hectares. MVNP has anelevation of approximately 417 to 620 metersabove sea level. The area is characterizedby mountainous to rolling terrain. About50% moderately sloping and 15% is steep.The classification of soil within the MVNPis roughly mountainous rock. The soiltype at the lower elevation is sandy loamwhile at the higher elevation is clay loamtopped with thick humus layer derived from

decomposed forest litter. The park containsdifferent ecosystem types: forest ecosystem,lake ecosystems, volcanic ecosystem, hotspring, grassland ecosystem, and agriculturalecosystems. It can be generally describedas adequately covered with forest vegetationcomposed mainly of primary and secondarygrowth forest. It exhibits unique bio-physicalfeatures which include a scenic combinationof andesitic volcano peaks and the adjoiningthree (3) lakes, an old dipterocarp forest, anextinct volcano with sulfuric fumaroles, hotsprings and riverine system which need to beconserved and protected in their natural state.MVNP is likewise endowed with a rich floraland faunal composition which includes rareand endangered species needing protection.The park possesses features of significancefor scientific, educational, and recreationalvalues. Lake Mahagnao also provides asustained supply of freshwater fish and otheraquatic resources to nearby communities (Fig.2).

Results and Discussions

Demographic Profile in Mahagnao inBurauen and Bocawon in La Paz,Leyte

The study considered complete enumerationfor the households in Mahagnao, Burauen,Leyte. Of the 165 households, only 72.12%(119) were able to participate in the surveysince some of the respondents were notpresent in their house. The descriptivestatistics below were based on an analysisof the 119 observations. The majority(56.3%) of the respondents or householdheads are between ages 36-65. In thesurvey, there were more females (59.7%)than males (40.3%). Married individualsaccounted for about 65.5% of the percentileof total observations. Residents are typicallycomposed of 4 to 6 members (42.9%). Mostof the respondents are residents of the areafor approximately 24 years now (Table 1).

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Figure 2. MVNP site map (NAMRIA Topomap, 2012)

Table 1. Demographic profiles of Mahagnao and Bocawon in MVNP

Baranggay Bocawon in La Paz, Leyteis a smaller barangay in comparison withBaranggay Mahagnao in Burauen. Theteam was able to interview forty-five (45)respondents out of the 56 households residingin the area. Table 1 also shows that majorityof the respondents or household heads arebetween ages 36-65 which is 37 years oldon average. There were also more females(93%) than males (7%). Married individualsaccounted for about 64.44% of the percentileof the observations, and the family sizesin the area are typically composed of 4 to6 members. Most of the respondents arealready residing in the area for approximately20 years now, on average (see also Table 1).

Economic Profile of theRespondents in Mahagnao andBocawon

Table 2 shows that most of the respondentsattained at least Elementary Level (49.6%)and only one had a Bachelor’s degree.Average monthly income registered at incomebracket less than PHP5,000 or aroundPHP4,365.64. Of the 3 major sources ofincome of the respondents, 61.34% of therespondents have salaries/wages as theirsource of income, 31.09% of them get theirincome from farming, and 19.33% of therespondents have government assistance or4Ps’ beneficiaries. Surprisingly, fishing as a

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source of income is only recorded at 5.88%which contradicts our assumptions since thearea has a vast Lake.

Table 2 also shows that most of theBocawon respondents on average areelementary graduates. The average monthlyincome of all the respondents is registeredat an income bracket less than PHP5,000 or

around PHP3,505.63. Of the 3 major sourcesof income of the respondents, 66.67% of therespondents have salaries/wages as theirsource of income, 44.44% of them get theirincome from farming, and 37.78% of therespondents have government assistance or4Ps’ beneficiaries. Fishing as a source ofincome was not asked since the Bocawon

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part is just far from the lake site.

Benefits Derived from MVNP inMahagnao and Bocawon

Table 3 shows that residents of Mahagnaoalso get benefits from the protected areawhich includes fishes (66.39%), accessto swimming (52.94%), good crop harvest(36.97%), enjoyment from the scenery(33.61%), fuelwood and income from thefishery (30.25%). Table 3 also shows thatresidents of Bocawon also get benefitsfrom the protected area which includesfuelwood (53.33%), fishes (22.22%), accessto swimming (15.56%), and good crop harvest(13.33%). Even if residents get benefits fromthe area, still 26.67% of the responses saidthat they get no benefits from the area.

Willingness to Pay for ImprovedProtection of MVNP by Mahagnaoand Bocawon Respondents

Respondents were asked how much theyare willing to pay per month for improvedprotection and conservation of MVNP. Table4 shows that on average, the Mahagnaorespondents are willing to pay by 40.49PHP/month for the improved protectionand conservation of MVNP. The Bocawonrespondents indicated they are willing topay 14.88 PHP/month, on average perhousehold. The majority (16.81%) of therespondents in Mahagnao are willing to payfor 10PhP per month and only very of them(1.68%) are willing to pay above 100PhP permonth. Similarly, the majority (51.11%) ofthe Bocawon respondents are willing to pay10PhP per month and only very few (2.22%)are willing to pay above 100PhP per month.

The Market-Based Valuation Resultsfrom Households

The economic benefits provided by theMVNP protected area to households could beestimated through its impact on a household’s

economic activities such as fishing, sellingof forest products, and coconut farming.Table 5 shows that the protected resourceof MVNP is able to provide consumptiveprovisioning value for households as incomefrom fishing of about 1,733 PHP per monthor 20,800 PHP a year on average, whichtranslated to a total value from fishing of201,802 PHP per year with 10 families (5.88%of 165 households) benefiting the provisionedresource in Mahagnao. In contrast to theother barangay, there was no income earnedfrom fishing for Bocawon households sincethe lake is less accessible to them becauseof the distance. Moreover, the protected areaprovides the farmer’s income from sellingforest products (i.e fuel woods). Table 5shows that some households in Mahagnaowere also benefiting for selling fuel woods inthe area where they could get an income ofabout 1,450 PHP per month or 17,400 PHPper year on average. With 8 families (5.04%of 165 households) who were identifiedas to have benefited the forest productsfrom selling fuelwood, this has translatedto a total resource value of 144,698 PHPa year. For Bocawon, only 1 household(2% of 56 households) has reported to alsogetting fuel woods but this was for homeconsumption only. Furthermore, surveyresults have also shown that both barangays(Mahagnao and Bocawon) are benefitingfrom farming coconut and banana in theprotected area. The survey results revealedthat the Mahagnao respondents, on average,have gained a monthly income of 3,953PHP. With 51 families (31% of 165) whohave benefited the resource, the amount hastranslated to a total of 2,433,463 PHP asvalue for farming the coconut and bananain MVNP. Similarly, the Bocawon communityhas also benefited from the coconut andbanana resources in MVNP. About 25families (44.44% of 56) were the actualbeneficiaries who have earned an incomeof about 2,162 PHP per month. In total, theannual provisioning value from farming inBocawon was 645,745 PHP. Summing up the

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two barangays, the market-based valuationhas able to determine that the total economicvalue of the provisioning services of MVNP isabout 3,425,708 PHP per year. This valuedresource is expected to last for several yearsand may even increase its value if there isimproved maintenance and protection in thearea. On average, we have found that eachhousehold within the protected area has beenprovided by MVNP a provision resource in aform of income through fishing, selling forestproducts, and farming that was amountingto 16,848 PHP per year per household inMahagnao, and 11,531 PHP per year perfamily in Bocawon.

Assessing the Total Net Benefits ofImproved Protection for MVNP

This study attempts to determine households’amount of willingness to pay as a contributionto the environment relative to the benefits theyget from the natural resources of MVNP, thusgetting the net economic benefit of protectingMVNP. The contingent valuation method wasused to determine the cost that householdsare willing to contribute to the improvedprotection while the market-based provisioningvalues served as the benefits gained bythe households from the MVNP’s ecosystemservices. Based on the survey and analysis,it was revealed that MVNP is providing aneconomic value of about PhP16,848 per yearper household in Mahagnao community whileeach of the households is willing to contributefor the improved protection of MVNP byPhP486 per year, which have resulted to anet economic annual benefit of PhP16,362per year or PhP1,364 per month or PhP48.70per day. This positive economic benefit isreflecting the Mahagnao household’s surplusof benefit attributed to the significant amountthey have gained from the ecosystem servicesrelative to the lower amount of cost they arewilling to shoulder for the improved protectionof MVNP. On the other community, it was foundout that each of the households in Bocawon onaverage was gaining the benefit of PhP11,531

per year while only willing to pay with PhP178per year as their contribution to the improvedprotection of MVNP. For Bocawon, each ofthe households had an economic surplus ofPhP11,353 per year as their benefit from thesignificant provisioning value of MVNP (seeTable 6).

The Daily Benefit-Cost Ratio ofMVNP’s Protection

Table 7 shows the total benefits gained bythe communities within MVNP amount toPhP84.46 per day while the total costs oftheir willingness to contribute to improving theprotection of MVNP’s provisioning ecosystemservice amount to PhP1.98 per day, whichresulted to a total net benefit of PhP82.49 perday. Moreover, the results also determinedthat for 1 PHP cost of household’s willingnessto contribute for the protection per day, eachhousehold was gaining PhP99.27 per day,which implies significantly higher incentive thatis going to the communities if the VolcanoNatural Park is continuously protected.

Conclusions and PolicyImplicationsCertainly, Mahagnao Volcano NaturalPark (MVNP) provides critically importantecosystem services. The natural ecosystemservices of MVNP play an important rolein maintaining the well-being of the familiesin the protected area through the provisionof a wide array of services ranging fromincome support to food and recreation.This resource valuation has helped to puta price tag on the provisioning ecosystemservice of MVNP. Based on the results, it wasfound out that the most common and moreevident benefits that households derivedfrom MVNP are the provisioning serviceswhich include the provision of fishes as asource of income, fuelwood as a source offuel for cooking, and coconut and bananafarming as the main source of income. Theseresults highlight the need to preserve and

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conserve the protected resource like theMahagnao Volcano Natural Park as this areaprovides increased welfare for households.By preserving the environment, householdscould also gain sustained benefits from thearea. The primary questions “how much isthe total value of the provisioning servicesprovided by MVNP to households and howmuch do households willing to pay to improvethe protection of MVNP?” are measuredin this study through the combination ofmarket-based valuation and contingentvaluation approaches which were appliedthrough the underlying principle benefit-costanalysis (BCA). Results revealed that theannual value of MVNP’s provisioning resourcefor Mahagnao is about PhP2,779,963 peryear while Bocawon is PhP645,745 peryear, which translated to a total provisioningvalue for both communities with an amountof PhP3,425,708 per year. On average,each household within MVNP is gaining thebenefit of PhP90,174 per year. In contrastto the household’s willingness to pay forthe improved protection, survey results fromthe contingent valuation method reveal thathouseholds in Mahagnao and Bocawonare only willing to pay (WTP), PhP486 andPhP178.50 per year, respectively. In totalfor these two communities, the benefit-costassessment in terms of daily average revealedthat each household had benefited PhP84.46per day while only willing to pay PhP1.98 perday as their costs to be shouldered for theimproved protection of MVNP. Incorporatingthe benefit-cost principle of assessing thenet economic benefit of the provisioningvalue of MVNP highlights an effective toolfor evaluating critically both the benefitsgained and the willingness to pay associatedwith the protection of MVNP. Generally, itwas found that there is a huge economicsurplus on having the Mahagnao VolcanoNatural Park protected as it provides supportfor the economic activities for the two localcommunities in the area. These hugebenefits must be carefully demonstratedand presented to the local communities to

increase their willingness to help in protectingtheir natural resources in any way possible.In addition to quantifying the quantifiablemarket-based value of the provisioningecosystem services of MVNP, this researchalso may serve as a benchmark for futureresearch in measuring the other ecosystemservices and calculating the total economicvalue (tangible and intangible benefits) ofMahagnao’s Volcano Natural Park.

Acknowledgement

This study acknowledges the funding supportprovided by the Department of Environmentand Natural Resources (DENR) in the conductof the study under the program “ResourceValuation Studies for Payment for EcosystemServices of Protected Areas”. Specialthanks are conveyed to the DENR-CDD Chief,researchers, and staff who have facilitatedthe smooth implementation of the researchactivities during the entire duration of thestudy. Through the strong collaborationand partnership with Visayas State University(VSU) in Visca, Baybay City, Leyte, thiseconomic valuation study of the MahagnaoVolcano Natural Park’s ecosystem serviceswas successfully achieved. We are alsograteful for the cooperation and permission ofthe local government units of the municipalitiesof Burauen and La Paz for the permission toconduct the surveys in their localities.

† Co-author Fernando Polenio passedaway on May 28, 2020, two months beforepublication.

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