1. Experimental ecosystem accounts – valuation of ecosystem services
London Group conference
October 2017
Rocky Harris
Defra, UK

2. Valuation of ecosystem services
Need to generate transparent, intuitive, consistent and credible monetary values within ecosystem accounts in order to gain wide acceptance
Aim is to measure the contribution of the ecosystem to services used by society
These services may be
Tangible (e.g. provisioning services) so markets exist but prices may not reflect the contribution of the ecosystem
Largely hidden (e.g. regulating services) and hence rarely directly valued
Apparent but unpriced (e.g. cultural services)
Different approaches to valuation therefore required depending upon the nature of the service. The focus here is on non-provisioning services

3. SEEA EEA and Technical Recommendations
In order to be consistent with the National Accounts, exchange value are needed.
Exchange values are
“values that reflect the price at which ecosystem services would be exchanged between buyer and seller if a market existed” (emphasis added)
Underpinning exchange values is the “notion that there is a transaction between ecosystem assets and economic units … that could be imagined to take place in a market setting”.
Hence in addition to welfare values, which are not exchange values, we have two other possibilities:
Revealed market exchanges
Imagined or posited market exchanges

4. Three broad approaches to valuing non-provisioning services
Observed market exchange values
Values which could be derived from ‘posited’ markets
Welfare values
Concept
Description
Evaluation
Welfare value
Includes full consumer surplus
In principle not compatible with standard national accounts unless it is assumed that the ecosystem has monopoly power to extract all consumer surplus on every unit (Day, 2013)
Exchange value
Posited market exchange
In principle compatible with standard national accounts
Observed market exchange
In principle compatible with standard national accounts. Likely to generate low unit values and would represent only a fraction of the physical service

5. Some case studies based on UK experience
Carbon sequestration
Air filtration
Enabling outdoor recreation
Welfare value
Based on social cost
£1.05 billion
Social damage costs
£1.01 billion
Includes cost of travel time
£21 billion
Posited exchange values
Costs which society would pay under certain conditions
~£0.8 billion?
Observed travel costs
£6.52 billion
Observed exchange values
Current carbon prices in fledgling markets
£0.1 billion
Market spend on air filtration mitigation
~£0.1 billion?
Actual admission charges net of producer costs
~£0.5 billion?

6. Valuation options - conclusions
Significant differences between welfare values, posited markets and actual observed market values
All three options can be based on the same physical accounting structure
Posited markets provide a more realistic valuation of ecosystem services but more work is needed to develop relevant conventions and guidance
So far only considered three services in any depth – need to work systematically through other services to identify relevant issues and viable solutions
Welfare values are necessary for policy use. They can be incorporated into the framework but care needed over their presentation as formal “accounts” within the SEEA