Thursday, April 10, 2008

Opportunity cost, ESV, and PES

Most payment for ecosystem services (PES) has been based on opportunity cost, e.g. how much profit farmers have to give up to not to farm. But in an ideal world, the amount should be determined by how much ecosystem services their fallow farmland provided to the public. The current opportunity-cost-based approach in fact mixed up cost and benefit (for the same reason, economists would recommend to use cost-based approaches, replacement cost, for instance, as the last resort to value ecosystem services).

To equate cost and benefit is much more convenient than to estimate the values of ecosystem services, which are mostly non-market. But the downsides of this convenient approach are 1) very likely the farmers got underpaid and when food price increases, they will "spurn conservation programs" as what is happening in the USA; 2) the public have no idea what they are paying for, you would think factors such as location, vegetation type, spatial configuration, and farming history of the land matter but likely these factors weren't even be considered at all.

Solution? Benefit-based PES based on ecosystem service valuation (ESV)! By ESV I don't only refer to monetary valuation. Is there any easily accessible indicators for values of ecosystem services? I remember reading a couple of papers before--have to dig into my library and come back...

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