THE WILDERNESS SOCIETY Economic Value of Forest Ecosystem Services: A Review By Douglas J. Krieger, Ph.D. THE ECONOMIC VALUE OF FOREST ECOSYSTEM SERVICES: A REVIEW By Douglas J. Krieger, Ph.D. an analysis prepared for The Wilderness Society CONTENTS Page i Acknowledgments...............................................................................................................................ii Executive Summary ...........................................................................................................................iii Chapter 1. Ecosystem Services: Values and Valuation................................................................1 Economic Value of Environmental Goods and Services...................................................1 Measurement of Economic Values.........................................................................................2 Valuation approaches and value measures.....................................................................4 Chapter 2. The Value of Forest Ecosystem Goods and Services.............................................7 Watershed Services....................................................................................................................7 Water quantity....................................................................................................................9 Water quality....................................................................................................................10 Soil Stabilization and Erosion Control..............................................................................12 Air Quality................................................................................................................................12 Climate Regulation and Carbon Sequestration................................................................13 Biological Diversity.................................................................................................................14 Recreation and Tourism.........................................................................................................15 General recreation............................................................................................................15 Hunting and fishing........................................................................................................17 Non-timber Commercial Forest Products.........................................................................20 Cultural Values.........................................................................................................................21 Aesthetic and passive use values of forests and wilderness....................................21 Endangered species habitat............................................................................................23 Cultural heritage values...................................................................................................23 References..........................................................................................................................................26 TWS Offices....................................................................................................................................31 Figures Figure 1. Ecosystem service values of U.S. forests ............................................................iv Figure 2. Consumer surplus for a change in an ecosystem good or service .................3 Tables Table 1. Range of estimated forest ecosystem service values by region.........................v Table 2. Estimate of forest ecosystem values......................................................................8 Table 3. Water quantity service values of forests..............................................................11 Table 4. Summary of water quality values of forests......................................................13 Table 5. Summary of carbon sequestration values of forests .......................................15 Table 6. Recreation and tourism values of forests....................................................19-20 Table 7. Summary of cultural values of forests.........................................................24-25 Economic Value of Forest Ecosystem Services: A Review Page ii ACKNOWLEDGMENTS Cindy De Grood, Research Analyst in The Wilderness Society’s Ecology and Economics Research Department (EERD), conducted preliminary research for this report. EERD Resource Economist Carolyn Alkire reviewed the report and made helpful suggestions with assistance from colleagues Spencer Phillips and Pete Morton. Research for this report was supported by a grant from the Alex C. Walker Educational and Charitable Foundation. March 2001 The Wilderness Society 1615 M Street, NW Washington, D.C. 20036 Phone: 202-833-2300 Fax: 202-429-3945 Cover Photo by Charlie Orr, “Big Trees, California” Editor: Deanne Kloepfer Designer: Mitchelle Stephenson Economic Value of Forest Ecosystem Services: A Review EXECUTIVE SUMMARY Page iii The importance of natural forest Resource economists have long recog- ecosystems to human well-being cannot nized the market distortions caused by be overstated. Forests provide raw materi- unpriced goods. They have developed als for food, fuel and shelter. In forests, techniques to estimate monetary values, ecosystem components such as micro- and ecological economists have applied organisms, soils and vegetative cover inter- those methods to estimate values for act to purify air and water, regulate the ecosystem services. This paper reviews climate and recycle nutrients and wastes. estimates of the economic value of forest Without these and many other ecosystem ecosystem goods and services in the goods and services, life as we know it United States. Globally, Costanza et al. would not be possible. (1997b) estimated the total value of for- When we make decisions to alter natur- est ecosystem goods and services at $4.7 al forest ecosystems, we often give little trillion annually and the total annual value thought to the consequences that change of all temperate/boreal forests at $894 may have on forest ecosystem services or billion. There are about 520 million acres to the ultimate cost of losing those ser- of temperate/boreal forest in the United vices. This oversight stems from our States (Pimentel et al. 1997), with an incomplete knowledge about how changes implied annual value for services of about in ecosystems affect the level of services $63.6 billion, using Costanza’s estimates that the systems provide and our inade- (Figure 1). Climate regulation, waste quate understanding of the roles played treatment and food production account by seemingly trivial ecosystem compo- for approximately 75 percent of this total. nents. Forest ecosystem values estimated in Perhaps the most significant factor is studies reviewed for this paper are that few ecosystem services have clearly grouped into eight categories: watershed established monetary values. And this can services (water quantity and quality), soil have a strong impact, considering that stabilization and erosion control, air qual- many decisions about resource use are ity, climate regulation and carbon seques- made by comparing benefits and costs. tration, biodiversity, recreation and The decision to log a forest tract, for tourism, non-timber products and cultural example, should be based on a compari- values. Table 1 reports ranges of the esti- son of the expected monetary value of mated values within each category for the the timber and the costs associated with entire United States and by region. These the ecosystem goods and services foregone values are not necessarily comparable as a result of logging. Any ecosystem across regions because they often corre- goods and services that do not have mon- spond to different aspects of a forest etary values are generally not accounted ecosystem service, were arrived at using for in the decision calculus. Neither is the different methods and are expressed in fact that the benefits of many resource different units. While the estimates do use decisions are usually enjoyed by small, not provide meaningful comparisons of fairly cohesive groups of people or the value across regions, they nevertheless current generation, while the costs of indicate the magnitude of values by foregone ecosystem goods and services are region. borne by larger, more dispersed groups or future generations. Economic Value of Forest Ecosystem Services: A Review Page iv EXECUTIVE SUMMARY FigureFigure 1. 1.Ecosystem Ecosystem Service service Values values of of U.S. U.S. Forests forests 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Climate Waste Food Recreation Raw Soil Biological Cultural regulation treatment production materials formation control ForestForest Ecosystem ecosystem Servicesservices The remainder of this summary briefly less (Sedell et al. 2000). In ge n e r a l , reviews sources of value and value esti- re c reational values are pro b a bly higher in mates for each ecosystem service category. arid regions such as the Southwest and Chapter 1 discusses the economic concept in regions that experience substantial of value and introduces techniques used seasonal variation in stre a m fl ow. Studies to estimate monetary values for ecosystem in Colorado and Alabama found sub- goods and services. Chapter 2 reviews the stantial existence values for stre a m fl ow. literature relevant to estimating monetary On ave r a ge, Colorado households we re values for forest ecosystem services.