Grantee Research Project Results
2000 Progress Report: Indicators of Ecosystem Value: Deriving Units of Exchange for Habitat Trades, Banking, and Preservation Priorities
EPA Grant Number: R827921Title: Indicators of Ecosystem Value: Deriving Units of Exchange for Habitat Trades, Banking, and Preservation Priorities
Investigators: Boyd, James W. , Simpson, R. David
Current Investigators: Boyd, James W. , King, Dennis , Simpson, R. David , Wainger, Lisa
Institution: Resources for the Future
Current Institution: Resources for the Future , University of Maryland Center for Environmental Science
EPA Project Officer: Chung, Serena
Project Period: September 1, 1999 through December 31, 2001
Project Period Covered by this Report: September 1, 1999 through December 31, 2000
Project Amount: $273,000
RFA: Decision-Making and Valuation for Environmental Policy (1999) RFA Text | Recipients Lists
Research Category: Environmental Justice
Objective:
Many ecosystem "trades" taking place under current regulatory programs use rather crude trading ratios to ensure that gains equal losses. For example, a common practice in wetland mitigation decisions is simply to require an "acre for an acre," or some similar area-based rule. These ratios fail to account for many of the things that determine the social value of a particular ecosystem, such as a site's location in the greater landscape, substitutes for/complements to the site, risks to the site's services, etc. This problem's conventional economic solution involves monetization of the value provided by an ecosystem's services using hedonic, travel cost, contingent valuation, and other econometrically sophisticated methods. However, while monetization is desirable in theory, it is impractical in this policy context. Monetization efforts are time-consuming and require costly site-specific, dollar-based valuation exercises. Individual ecosystem losses are relatively large in number and often are only a small number of acres in size. In other words, the benefits of site-specific monetization are unlikely to exceed the costs. In practice, it is rare to see agency decision-makers, or private conservation organizations, making land use decisions based on comprehensive monetization exercises. Practical constraints explain the relatively crude trading rules currently employed in many decision-making settings.
The project's overarching goal is the development and evaluation of a more economically sound approach to regulatory site evaluation than those currently employed, to make judgments regarding the relative value of different ecosystems. Because the target audience is decision makers, emphasis is placed on a valuation system that can be implemented easily by noneconomists. Accordingly, the tools we develop explicitly avoid the monetization of value estimates, favoring ease of use over economic precision.
The proposed indicators are a kind of middle ground: a system that identifies, based on sound economic principles, differences in habitats' social value and that employs an indicator system that does not rely on costly, site-specific monetization studies. Because of the emphasis on implementability we focus on the use of currently available GIS and census data that can be used to draw distinctions, and relative comparisons, between ecosystems. The goal is a system of indicators that is transparent, replicable, and easy-to-use by field office and other regulatory staff. In addition, the project seeks to inform valuation exercises with a better understanding of ecological science. The spatial aspect of ecological relationships, in particular, is not adequately understood by economists.
Progress Summary:
The indicator system we are developing embraces the landscape-oriented approach to ecological assessment?namely that evaluation must take into account the ecosystem's larger spatial context. Our indicator system extends this landscape perspective to the determination of economic value. Accordingly, a key initial task is to understand?as systematically as possible?the way in which ecological functions are spatially determined and the way in which the value of services created by those functions is spatially determined. The latter task involves a linkage between economic valuation principles to the underlying ecological functions at issue. The development of an indicator system must take into account relationships between myriad ecological and economic factors. For this reason, a broad overview and marriage of ecological and economic valuation principles is required.
Objective 1. This objective corresponds to tasks outlined in the project proposal: (1) constructing an inventory of biophysical, geographic, and demographic indicators; and (2) the derivation of a system of ecosystem value indicators (EVI). These tasks provide us with a defensible set of indicators to be evaluated and applied in a practical context. The tasks also will yield a written synthesis of ecological and economic evaluation principles that may be more broadly valuable to interdisciplinary research. Substantial progress has been made toward this synthesis, though there is no completed product to date.
The ecological literature provides a laundry list of services to be considered, including pollination, pest control, water purification, biodiversity, recreational, aesthetic, and flood and erosion control services. Using ecosystem services as the organizing principle, the project is integrating results from ecological science with principles from economic valuation to derive and scientifically justify observable indicators of ecosystem value (EVIs). While this broad overview is necessary for our project, we also see it as an exercise that will be useful to the growing number of ecologists and economists converging on this highly interdisciplinary realm. There is a need for writing that conveys both ecological truths to economists and economic truths to ecologists. We hope to address that need via this aspect of the project.
The core of the project is the development of a pilot ecosystem service indicator system and the application of that system to real-world land use decisions. These tasks are well underway, with data sources established. The indicator system focuses on landscape factors that limit or enhance an ecosystem's ability to provide services and that limit or enhance the expected value of those services. An ecosystem value indicator system can be broadly outlined as follows. First, a habitat is characterized in terms of its biophysical functions. Second, habitat functions are translated into services that are valuable to society. Third, the value of these services must be assessed, via relatively observable indicators. Fourth, adjustments to that value are made as necessary to reflect temporal changes that might disrupt, or enhance, the value of the service in time. Indicators can be broken down into a variety of general categories: function indicators of landscape conditions that determine how much of the functional capacity of the site is likely to be used; service capacity indicators of landscape conditions that limit or enhance the level of services expected from a given function; service scarcity indicators of local, and perhaps regional, supply and demand conditions, individual and community preferences, and the substitutability and replaceability of the service; and value uncertainty indicators of likely changes over time in the services and service values provided by the wetland.
Using existing geographic information system (GIS), census, and other data we have devised and applied a set of such indicators to the evaluation of wetland mitigation trades associated with a wetland banking system.
Objective 2. This objective corresponds to Tasks 5 and 6 outlined in the project proposal: (1) integrating the value indicators approach with existing governmental data sources, and (2) field testing the ranking system via retrospective application of EVI to existing trading, banking, and acquisition programs. We are conducting a retrospective evaluation of wetland trades in Lee County, Florida, using the EVI approach. We are also in the process of collecting data on wetland impact sites in the state of Maryland to do a similar analysis in a different geographic area.
Although the analysis is not yet complete, we can report that a basic value indicator system is readily implementable using existing public data sources. Also, the empirical exercise yields clear, qualitative improvements. First, the visual landscape analysis allows for qualitative analysis of service and service value tradeoffs. Second, in some cases the indicators allow for relatively unambiguous improvements in decision making (e.g., when tradeoffs are minimal and one habitat site clearly dominates another on the measurable dimensions). Third, the data and tools foster a spatial, holistic approach to economic valuation (e.g., the integration of ecological and economic thinking). Fourth, we have high confidence that this kind of tool can lead to more transparent and consistent evaluations than crude standardized trading ratios or reliance on "best professional judgment."
Future Activities:
Future activities will include the completion of Objectives 1 and 2 above. In addition, Objectives 3 and 4 (described below) will be pursued.
The pilot studies are expected to demonstrate the practicality of using landscape-oriented GIS and census-based indicators of ecosystem service value. As described earlier, the goal is development of easily-implemented decision-making tools. Another goal of the project, however, is to take a sober view of the limitations of such tools. Indicators, by their vary nature, sacrifice some precision and raise methodological issues that are more explicitly handled by conventional monetization tools.
Objective 3. An important project task is to assess the weaknesses of ecosystem value indicator systems relative to other valuation methods and to propose methods by which the application of EVIs can be disciplined methodologically. This objective is associated with Tasks 3 and 4 outlined in the original project proposal: (1) linking the value indicators approach to established ecosystem valuation methods, such as contingent valuation and revealed preference methods, and (2) evaluating methods for eliciting "relative preferences." These project tasks have not yet commenced.
A variety of methodological issues are associated with the use of indicators. Data are not always available at the optimal scale, which reduces the accuracy of a specific indicator. Decision-makers will ideally be led by the EVI system to make adjustments for varying levels of uncertainty and precision in the data. Viewed in isolation, a given indicator is useful information that can presumably inform decisions. However, when a larger set of indicators is provided, numerous questions arise regarding which indicators are most valid and how the information provided by them should be weighted. The project will address the methods by which decision-makers should weight noncomparable indicator rankings. It is expected that, in some cases, weighting across indicators will not be advocated due to inherent limitations in the data. The project also will address methods by which the reliability, and value, of specific indicators can be assessed.
A set of indicators will typically exhibit redundancy or cross-correlation. How are strongly correlated indicators to be treated? There also is a set of important questions related to the scaling of indicators. This relates to the "shape" of the underlying relationship being described by the indicators. For example, are the benefits (or costs) being indexed by an indicator linear? Are they monotonic? If not, the straightforward interpretation of the indicator is placed in jeopardy. These types of complications must be addressed by a proposed system of evaluation.
Aggregation methods, such as the construction of a composite indicator index, are desirable. By their very nature, composite indices summarize a complex array of data and rankings into a smaller set of more easily digested information. In principle, the indicators we will develop can be aggregated in this way to derive a single number that indexes an ecosystem's value relative to other sites. Clearly, however, this kind of aggregation presents significant methodological concerns. For aggregation to have scientific and institutional validity it must be constructed with a transparent methodology. In general, ease of use must be balanced against a loss of precision.
The final project component will be an assessment, based on the pilot projects, and theoretical concerns of the value and practicality of an EVI system as a decision-making tool.
Objective 4. Do the strengths of indicator-based ecosystem valuation methods outweigh their weaknesses? This objective will be pursued in reference to a more specific question, corresponding to Task 7 in the original proposal: Can an EVI system be effectively applied to determine units of exchange applicable to real-world habitat conservation policies? This project task has not yet commenced.
The question will be concretely addressed via an evaluation of the wetland
trading decisions exhibited in the pilot studies. Based on those results,
broader lessons for other types of ecosystem decision making will be
discussed.
Journal Articles:
No journal articles submitted with this report: View all 7 publications for this projectSupplemental Keywords:
watersheds, land, groundwater, water, ecosystem, indicators, restoration, decision making, compensation, modeling, GIS, aquatic, public policy, cost benefit, nonmarket valuation, public good, social science, socioeconomics., RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Ecosystem Protection/Environmental Exposure & Risk, Ecosystem/Assessment/Indicators, Ecosystem Protection, Ecological Effects - Environmental Exposure & Risk, Ecology and Ecosystems, Social Science, Economics & Decision Making, ecological exposure, habitat, ecosystem valuation, policy analysis, public resources, valuation, preservation priorities, decision analysis, economic benefits, environmental assets, risk management, conservation, cost benefit, economic incentives, environmental values, non-market valuation, units of exchange, socioeconomics, ecosystem indicators, cost/benefit analysis, landscape ecology, aquatic ecosystems, psychological attitudes, public values, habitat trades, ecological indicators, public policy, benefits assessment, econometric analysis, environmental risk assessment, value transfers, land useProgress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.