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Saturday, March 31, 2012

Ecosystem Services meet Mass Land Trusts

Does it make sense to value these non-market services in order to incorporate all the reasons we need our wetlands?  Can we do so without undervaluing them?   Let's look closely at doing so for the Great Marsh of Massachusetts and study what it might mean to do so there.  

I think it does make sense to calculate the economic benefit of ecosystem services of the Great Marsh. There is considerable data available and missing information can be developed.   By including the value of the most evident and accepted ecosystem services into the total value equation, the role of natural capital is strengthened.  Moreover, valuing natural capital systems in this way accelerates the process of developing ES markets, such as the Willamette Partnership’s Ecosystem Credit Accounting system.  (Willamette)  Ultimately, these emerging markets lead the way to substantiating the value of natural capital.   

II  Background
    As a member of Eight Towns and a Bay (a Local Governance Committee for the Massachusetts Bays Program), the Great Marsh Coalition, MassAudubon, and Essex County Greenbelt, I am a frequent visitor to the Parker River Fish & Wildlife Reservation within the marsh, and commute through it daily to and from Boston. The Great Marsh is the largest salt marsh in New England and includes over 20,000 acres of marsh, barrier beach, tidal river (the Merrimack, Parker and Ipswich), estuary, mudflat, and upland islands extending across the Massachusetts North Shore, from Gloucester to Salisbury, and into Seacoast New Hampshire. “The base flow of the Ipswich River is derived mainly from groundwater and wetlands. During much of late summer and early fall, when evapotranspiration rates and water withdrawals are high, stream flow in the Ipswich River Watershed is severely affected, causing the river to flow backwards and sometimes even run dry.” (Executive Office of Energy and Environmental Affairs, Commonwealth of Massachusetts.
Ipswich River Watershed)  Over 335,000 people depend upon this river for drinking water daily. The Ipswich River is one of the 10 most endangered rivers in the country according to American Rivers. (Unger, 2009)

In 1979, a portion of this area was designated by the state as the Parker River/Essex Bay Area of Critical Environmental Concern.  It is also an internationally recognized Important Bird Area (IBA). With its network of waterways, beaches, parks, and wildlife refuges, the Great Marsh is a highly popular destination to enjoy boating, fishing, bird watching, hiking, and beach activities for the 742,582 inhabitants of Essex County (U.S. Census Bureau. State and County Quick Facts and Massachusetts Department of Conservation and Recreation, Bureau of Planning and Resource Protection. Area of Critical Environmental Concern (ACEC) Program, ACEC Designation Great Marsh).  In addition, it is served by I95 and the MBTA Newburyport rail line, and thus is accessible to a much larger regional population.  The largest landowners in the Marsh are the Parker River National Wildlife Refuge with 4,662 acres,  (Parker River National Wildlife Refuge), the Trustees of the Reservations, cities and towns, private landowners and Essex County Greenbelt. 
Essex County Greenbelt (ECG) negotiates with private property and city landowners and holds conservation restrictions as well as negotiating them. They concentrate on developing greenbelts oriented along wildlife corridors, scenic roads, rivers and streams and trails.  “Since our founding in 1961, we have protected over 13,000 acres of land. We own and manage 4,800 acres of land that comprises our reservation system; we hold over 150 conservation restrictions totaling over 5,019 acres, and we have assisted in conserving 3,000 additional acres.” (Essex County Greenbelt).  They asked me to research ecosystem services in the Great Marsh and to determine how identifying their value could further substantiate the value of conservation easements.   

III Literature review
Conservation easements A landowner has many rights over her land, including the right to grant positive easements, to cross it for example, or allow electric lines on it.  These affirmative easments may be granted in perpertuity, and thus be transferred with land ownership. Conservation easements are called negative easements since they restrict uses on the land, and were established in order to preserve open land from development.  Land has traditionally been taken out of private ownership, or put in protected ownership with a conservation easement to conserve it.  However, only 37 million acres, or 1.6 percent of the land base of the country are conserved by NGOs and land trusts in the US.” (Davis, 2010, p. 340)  In Massachusetts conservation easements are recognized and regulated by Mass. Gen. Laws ch. 184, §§ 31 to 33 (2005), having first been drafted in 1969.  The law is “a framework for negative easements to protect conservation lands, historic properties, watersheds, agricultural lands, and affordable housing facilities. The Commonwealth took a unique approach by requiring that such easements receive both city and state approval in order to remain permanently in force. In the state's lexicon, a conservation easement that has received this full approval is called a conservation restriction.” (Waltham Land Trust) 

To create a conservation restriction, an agreement is reached, and a value is developed for the lost rights, which are typically development rights.  An appraiser first establishes the “highest and best use” for the property, which involves the creation of scenarios. a) Site As Vacant-1) Legal Uses - considers current zoning, existing deed restrictions or conservation easements, building codes and environmental regulations. (2) Physically Possible Uses – considers physical factors, utilities availability and site improvements. (3) Financially Feasible Uses – market demand must be evaluated. (4) Maximally Productive Use – that use from those considered that survives all these tests and produces the greatest financial return to the land.  Then the appraiser is required to look at the same four items above with an “improved” site. He or she needs to explain whether the improvements require demolition or modification or if they are consistent with the highest and best use of the site or land.  Finally there is a Conclusion of Highest and Best Use of the Entire Property (Land, Improvements and Water). (Colorado Coalition of Land Trusts, 2004, pages 1-38). 
The appraisal is then conducted using one or more of several different approaches to determine the value of the conservation restriction.  They are: (1) Sales Comparison Approach, Cost Approach, and Income Approach. In cases where vacant land is appraised for wilderness or conservation purposes, the Sales Comparison approach is the most likely to be used. (Colorado Coalition of Land Trusts, 2004, p. 25)  (Note that Use of the Sales Comparison approach to value easements is mandated by the Treasury Regulations §1.170A-14(h)(3)(i).) This is the approach most often used for easements negotiated by Essex County Greenbelt, although sometimes their appraisers use the Income approach as well which allows for the possible value of agricultural uses.  (Personal communication)

Ecosystem Services   “The services of ecological systems and the natural capital stocks that produce them are critical to the functioning of the earth's life support system.  They contribute significantly to human welfare, both directly and indirectly, and therefore represent a significant portion of the total economic value of the planet.  Because these services are not fully captured in markets or adequately quantified in terms comparable with economic services and manufactured capital, they are often given too little weight in policy decisions.” (Costanza et. al, 1987, p. 1).
Providing economic value to ecosystem services (ES) is controversial. A recent article in the Boston Globe, (Tuhus-Dubrow, April 10, 2011) presents some of the issues.  Some environmentalists believe that since ecosystems were not created to serve people, the conversion of their “services” to economic benefits artificially restricts their worth.  Others feel that valuing ecosystem services is essential because the market is the common currency of twenty-first century decision making.  Still others feel that valuing ecosystem services adds a missing dimension to environmental policy, but is basically another tool in policy creation.  In other words we need to add ES to the total value equation in order to internalize many externalities which are at the bottom of sustainable land and water management decisions. 

Many ES are common property public goods, so inefficiency results because of the free rider principle.  Because of consumption indivisibility and non-excludability, we receive benefits from these services without “contributing to their supply”.  In addition, the costs of damaging our natural capital are not included in our Gross Domestic Product (GDP); rather they are part of the benefits in how GDP is calculated.  

Much work has been done to develop economic value for these services, and then using this value in exchange for valuable currency or debt service, stewardship skills or employment.  In this way the value of ES protects large parcels of  land and watersheds in biodiverse regions, as evidenced for example, in the Natural Capital Project.  The business community is also addressing the value of ES with the World Business Council for Sustainable Development, for example. 

Determining value for ES is not easy.  Unfortunately, “ecosystem services and functions do not necessarily show a one-to-one correspondence.  In some cases a single ecosystem service is the product of two or more ecosystem functions whereas in other cases a single ecosystem function contributes to two or more ecosystem services.”  (Costanza et. al, 1987, p. 2) 

“While there is no single, agreed method of categorising all ecosystem services, the MA framework is widely accepted and is seen as a useful starting point.  The Millennium Ecosystem Assessment (MA) identifies four broad categories of ecosystem services: provisioning services, regulating services, cultural services, and supporting services.” (Department for Environment, Food and Rural Affairs (DEFRA), United Kingdom. 2007, p. 13)  I chose to use a similar but more defined system, first developed in 2002 and augmented in 2006 by deGroot.  Here a list of thirty functions were divided into five categories: regulation, habitat, production, information and carrier functions.  He noted that the “use of carrier functions usually involves permanent conversion of the original ecosystem. Thus, the capacity of natural systems to provide carrier functions on a sustainable basis is usually limited (exceptions are certain types of shifting cultivation and transportation on waterways, which, on a small scale, are possible without permanent damage to the ecosystem).” (deGroot, 2006, p. 178) Below are a few examples of this relationship in each category.

“It is only when these services are lost that actual monetary costs are incurred. So paradoxically, the zero price for wetland services is of very high value to human well-being.”  (http://www.on.ec.gc.ca/wildlife/factsheets/fs_wetlands-e.html#7) Like Joni Mitchell’s song, “Big Yellow Taxi” we are paving paradise to put up a parking lot.
IV Total Economic Framework and Great Marsh
(DEFRA, 2007, p. 36)   In environmental policy we use the total economic value framework to determine how to manage our environmental resources.  This is because the market economy does not include all the values in its transactions, for a number of reasons.  Thus environmental policy uses willingness to pay the “total” value, which includes both use value and non-use value. Non-use value includes the very existence of a resource that will never be used, or its “existence” value, and also the willingness to pay to preserve a resource for future generations (bequest value).  Use value is divided into Actual or Planned Use and Option Value.  Option value is the willingness to pay to preserve an option to use the environment in the future, even if one is not currently using it, such as preserving the potential to go to Yellowstone National park next summer, for example.

For market goods or services the willingness to pay is straightforward; it is the area under the demand curve up to the quantity consumed. (Tietenberg & Lewis, 2010, p.37).  However, currently there is no market for many of the ES, so we need to determine which economic methods to apply for each one.
Below I outline the various methods for developing a willingness to pay for some of the services of the Great Marsh, as outlined in “Linking Ecology and Economics for Ecosystem Management”. (Farber et. al., 2006, p.120)  Note that some services are more easily  “valued” than others, as illustrated below in column two. (Farber et al. 2006, p. 121) 
Disturbance regulation, water regulation, waste regulation, water supply, food, raw materials, medicinal resources, ornamental resources, recreation and aesthetics are all highly amenable to economic valuation. Of these I have identified disturbance regulation, water supply, recreation, esthetics and also science and education as the ecosystem functions to value ES for the Great Marsh. The chart above suggests that all these, except science and education, are easier to value.   Disturbance regulation provides essential regional services to an area often affected by high storm surge events. Water supply is highly pertinent due to the Ipswich River.  Recreation value can easily be obtained.   Farber et al. also identified other ES, Water regulation, Gas regulation, Genetic resources, Soil retention and Nutrient regulation, which I chose not to add for this article, but which should be explored for further inclusion  (Farber et al. 2006, p. 123-125).

DISTURBANCE REGULATION (DIRECT VALUE):   One of the services provided by the disturbance protection or regulation function is storm protection.  I use avoidance cost defined as “A service…valued on the basis of costs avoided, or of the extent to which it allows the avoidance of costly averting behaviors, including mitigation (e.g., clean water reduces costly incidents of diarrhea).” (Farber et. al., 2006, p.120)  First the site must have hydrologic modeling to reflect the moderating of this wetland on storm surges.  Then a calculation can be done of the property damage to coastal structures resulting from a highly probable storm such as hurricane on the cities and towns from Rockport MA to Portsmouth NH protected by the marsh and barrier beach. The Federal Emergency Management Agency has software which is free to federal, State and local government agencies and the private sector, and specifically designed to model the result of a hurricane (U.S. Department of Homeland Security, Federal Emergency Management Agency, HAZUS) based on GIS.  Another way modeling can be done with GIS is described in The present and future role of coastal wetland vegetation in protecting shorelines: answering recent challenges to the paradigm (Gedan et al, 2011). There are appropriate layers on the Mass GIS website, planning organizations such as Merrimack Valley Planning Commission, and scientific and educational institutions such as Northern Essex Community College and Merrimack College with trained GIS professionals and funded study programs.  Further resources are provided by a long term ecological research (LTER) station in the Marsh. The Plum Island Ecosystem (PIE) LTER “is focused in the estuary and watersheds of Plum Island Sound, located on the northeastern Massachusetts coast. Three watersheds, totaling 585 square kilometers (km2), make up the estuarine drainage basin; the estuary itself is roughly 60 km2. This LTER investigates the effects of climate change, sea-level rise, and land-use change on the trophic structure and productivity of the Plum Island Sound estuary.” (Farber et. al., 2006, p.123)  Their website indicates that it is a collaboration of Clark University; The Ecosystems Center, Marine Biological Laboratory; City College of New York, Massachusetts Audubon Society; University of Georgia; University of New Hampshire; University of Massachusetts, and their Amherst and Dartmouth campuses and University of South Carolina. On their website are GIS Maps and Aerial Imagery developed by faculty members of the PIE research team at Clark University and a wealth of resources for ecosystem services valuation.

WATER SUPPLY (DIRECT VALUE): “Water supply service values can be evaluated using replacement costs for alternative supply sources, assuming that water supply is valued at least as highly as its replacement costs, or by treatment cost savings (avoided costs). The market price of water plus any subsidy costs can also be used as a valuation measure.” (Farber et. al., 2006, p.123) “This technique looks at the cost of replacing or restoring a damaged asset to its original state and uses this cost as a measure of the benefit of restoration. The approach is widely used because it is often easy to find estimates of such costs.).” (DEFRA, 2007, p. 61)
Note that instead of taking their own advice to do the calculation for the economic value of the willingness to pay, the authors used conjoint analysis, “a survey method that poses scenario choices to respondents, revealing relative valuations of different service components evaluated to determine the socially acceptable trade-offs among them” in a weighted matrix chart of nine ecosystem services.  (Farber et al., 2006, p. 124) 

Note also that DEFRA makes the case that “as these methods are based on costs, they do not strictly measure utility (and are therefore not included under the TEV framework), that is, they are non-demand curve methods and need to be used with care….This approach is only a valid measure of value if: the man-made alternatives are equivalent in quantity and magnitude to the natural functions; the alternative is the least-cost alternative method of performing the function; and individuals in aggregate would be willing to incur these costs to obtain the services. Cost-based approaches can be useful in validating the scale of values obtained from measurement of direct utility.”  (DEFRA, 2007, p. 37)   Despite this caution, I have chosen to include cost based measures in direct value calculations, because the subtlety of economics in this distinction has me at a disadvantage. 

    RECREATION AND ECOTOURISM (INDIRECT VALUE): A study conducted by the University of New Hampshire (Gilbert, 1994) showed that local expenditures generated by the Parker River National Wildlife Refuge with 4,662 acres within the Marsh, amounted to approximately six million dollars annually.  (http://www.massaudubon.org/GreatMarsh/Great_Marsh_Web_Site/Economy.htm) To update this value it is necessary to understand its methodology so as not to duplicate calculations, but the following components should be added, calculating unit day value, travel cost, and using contingent valuation methods where appropriate, as laid out in the “Economic Impacts of Protecting Rivers, Trails and Greenway Corridors” resource book, U. S. Department of the Interior, National Park Service (no date):
  • increased accessibility and visitation to the Parker River National Wildlife Refuge since 1994 by the opening of their Refuge Headquarters and Visitor Center facility in 2006;
  • Crane Estate and Crane Beach visits and impact of the Ipswich Shuttle from the MBTA train to the Beach;
  • value of agri-tourism in and near the Great Marsh (Northeast Harvest, The Buy Local partnership of Essex National Heritage Commission and Essex Agricultural Society)
  • eco-tourism opportunities available with the extension of the MBTA train line from Ipswich to Newburyport and the Coastal Trails Coalition regional trail network completion, for example. 
  • value of visits to the two sites, Joppa Flats and Ipswich, of the Massachusetts Audubon Society the Marsh.   They have yearly profitable programs on bird watching, and wetland restoration projects. The economic value of the programs and services as well as employment at these locations should be added to the total value of the Marsh. 
Their 990 for 2008 stated they had approximately 542,000 visitors at twenty three staffed wildlife sanctuaries with nature centers and field offices and twenty two un-staffed sites. They “taught nature programs to more than 216,000 children and adults, enrolled 6,705 children in its day and residential nature camps, conducted science/nature training for 2,383 teachers, and ran 3,398 programs for adults and families. Special events attracted another 24 ,000 participants. Mass Audubon is the largest non-profit provider of nature education in the state.  This activity brought in $13,857,695 in 2008. (042104702_200706_990.pdf, pg. 3) 

A finer breakdown is needed to understand the economic impact of these two sites in the Great Marsh area. 

ESTHETICS (INDIRECT VALUE): The increased land value and additional taxes levied as a result of a property’s proximity to the scenic views of the Great Marsh were calculated in the “Economic Benefits of the Great Marsh” (Sept. 2003, the Great Marsh Coalition).  The indirect value of this ecosystem service was thus described as  “Land with marsh view had a mean value 54% greater than land without any apparent view.”

 SCIENCE AND EDUCATION (DIRECT VALUE): The Farber chart noted above stated that science and education had a low “amenability to economic valuation”.  However, deGroot in his chart referenced earlier listed two services, the use of nature for scientific research and the use of natural systems for school excursions, under science and education services.  The use of nature for scientific research is intellectual capital, and I believe that the work of the Plum Island Ecosystems Long Term Ecological Research station, in studying the entire Great Marsh ecosystem to develop a predictive understanding of the long-term response of a connected land-estuarine ecosystem to changes in climate, land use, and sea level is such an endeavor.  During the past five and a half years, the project has involved 180 individuals from 42 research and educational institutions.  To date this project has produced 110 peer reviewed publications and 16 dissertations and theses”, and received grant funding (2004-2010) from government and private sources totaling $4,920,000, or approximately $703,000 a year (2004-2010 inclusive).  (2010 PIE LTR Renewal 2010).  I would add the salaries of these individuals (provided that they were not double counted from the grant sources) as employment as well since they would not have been made without the existence of the Great Marsh and its resources.
ESTABLISHING TOTAL VALUE:  Doing these economic calculations is not enough to substantiate the inclusion of natural capital into the total value, or convincing town assessors about the role of ES in conservation restrictions).  My research emphasized close stakeholder involvement with activities such as joint mapping, participatory resource assessments and monitoring assessments against baseline activities to do so.  Gill Shepard’s work with the International Union for Conservation of Nature and Natural Resources states the basic principles upon which the Ecosystem Approach is based.  It says that to be successful, the management of sites should be at the lowest appropriate level; that since objectives of the management of land, water and living resources are a matter of societal choice, the ecosystem approach should consider all forms of relevant information, including scientific and indigenous and local knowledge, innovations and practices; and that the ecosystem approach should involve all relevant sectors of society and scientific disciplines.” (Shepard, 2004, p. 2)  The total value of ecosystem services listed above must be combined with more traditional market based values in order to derive a total value.  Moreover, they must be put in units which are comparable, such as yearly averages and measured per acre.  Unable to calculate all the values I have described above, I have chosen to use an equation to depict all the known and calculated values.
DIRECT VALUE: Valuations are directly obtained from what people must be willing to pay for the service or good (e.g., timber harvest).  For the Great Marsh, “In 1996 the commercial value of the soft-shell clam harvest in Ipswich, Rowley, and Newbury was over one million dollars. The financial impact of the clam can be felt along many economic lines; from the harvesters to the distributors, from the processors to the restaurant owners.” Following on that analysis, the Great Marsh Coalition conducted a study titled “Economic Benefits of the Great Marsh” in Sept. 2003.  The study determined the relevant revenue generating activities: commercial clamming, haying, and recreational boating, and the fishing and beach industries which totaled $5.3 million in 2000 (Great Marsh website) or $6,877,900 in 2011. (U.S. Department of Labor, Bureau of Labor Statistics. CPI inflation calculator)
OPTION VALUE: which reflects the value people are willing to place of on resources that they might use in the future, was calculated through a  “willingness to pay” survey.   The above study found that the average willingness to pay per person was $79, for an aggregate willingness to pay of $6.6 million in 2000 or $8,565,000 today. (U.S. Department of Labor, Bureau of Labor Statistics. CPI inflation calculator)
NON-USE VALUE: not linked to economic activity, either directly or indirectly. Non-use values are also termed ‘existence values’ and refer to conservation for its own sake.  I believe that the best way to incorporate these values is in establishing the discount rate for the cost benefit analysis.  Because the market continues to consume them (often irreversibly) as if they have no economic value, the risk premium is extremely high.  Longer payoff periods may be most appropriate and there seems to be a good reason to assign the discount rate as 0 or even as a minus number. 
Total Willingness to pay (TWP) = DIRECT + INDIRECT + OPTION + NON-USE Value.
TWP= DIRECT ($6,877,900 + Disturbance regulation (DRES) + Water supply  (WSES) + Science (SES) + INDIRECT Recreation and ecotourism (IREES) $6,000,000 *updated + OPTION Aesthetics (OA)  $8,565,000 + NON-USE Value.

V Cost-Benefit Analysis
I have chosen cost-benefit analysis over cost effectiveness as appropriate measure for ecosystem services, because it has already demonstrated value in making decisions on land use.  Here is an example from my research.

 “Say a policy-maker is deciding whether or not to develop on an area of brownfield land that includes an important wetland habitat. An ecosystem services valuation is undertaken and finds that each hectare of the 10 hectare site is worth £10 million, with the ecosystem services from a rare bird species making up the bulk of the value.

However, the wetland needs to be a certain size in order to support the bird habitat. Once development reduces the wetland to below this size, the birds can no longer use the wetland and the value of the remaining area falls sharply. In the hypothetical example presented in Figure 3, the marginal cost of developing a hectare is £10 million, until after 5 hectares have been developed, when the threshold is reached. The marginal cost of developing the sixth hectare is equal to just below the remaining value of the site. Once the sixth hectare has been developed, the remaining hectares are almost worthless.”  (DEFRA, 2007, p. 47)

(DEFRA, 2007, p. 48)
However, cost-benefit analysis is one of several approaches, including cost effectiveness that should be used in making decisions about land use.  Cost-benefit analysis must contend with the following issues:
  • the cumulative impact of previous and simultaneous use of  ES resources;
  • the value of information secured by delaying a decision, known as quasi-options; (DEFRA 2007, pgs. 43, 47)
  • the calculation of the discount rate, which can be highly controversial, and which must be shared by business and by government (Tietenberg & Lewis, 2010);
  • the Hartwick Rule, which says that a “constant level of consumption could be maintained perpetually if all scarcity rent was invested in capital” (Tietenberg & Lewis, 2010, p.98), contrasted with “strong” and environmental sustainability, since these measures are incompatible.   Not all “sustainable allocations are efficient”.  (Tietenberg & Lewis, 2010, p.101).
  • the issue that payments in lieu of irreversible impacts cannot be made no matter what the cost benefit analysis shows. (Tietenberg & Lewis, 2010, p. 500).
  • Massachusetts and Federal Environmental Protection laws, which may provide market inefficiencies which should be acknowledged in the analysis.  For example Certain permitting regulations provide for mitigation alternatives which may be in direct conflict with the minimum threshold of land acreage needed to support a function or population.  NEPA and MEPA regulations may also be complicating factors and all permitting would require review when applicable.
  • the full cost principle, where all users of ES should pay their full cost, which should “proceed gradually…since political acceptance of the full-cost principle is by no means a foregone conclusion”.  (Tietenberg & Lewis, 2010, p. 497)  The authors go on to say that the cost-effectiveness principle (as contrasted with cost-benefit analysis) incorporates the trading principle where the issue of who pays for control is separated from who implements control.  Here transboundary cost sharing is possible, and “emissions trading allows for greater flexibility in how emissions reductions are achieved…In general this approach can be used any time a cap should be placed on resource use and it is appropriate to formalize the rights held by users.  As scarcity deepens, caps may become a much more important part of the policy mix.” (Tietenberg & Lewis, 2010, p. 498) 
  • the fact that valuing ES  establishes its exchange value, and that valuing is best demonstrated in a direct market for ES, as demonstrated in the Natural Capital project and here in the US in the Willamette Partnership. (Davis, 2010, p 371)VI.   


1.  Value for Essex County Greenbelt Association:  Giving up development rights typically lowers the fair market value of the land, which also can lower estate and potentially property taxes.  Local communities depend upon property taxes for their revenue and often are highly critical of the appraisal and conservation restriction value.  Currently the highest and best use calculation does not include natural capital or ecosystem services.  Davis makes the argument that if the value of the benefits of ecosystem services were “recognized by the appraisal process or through ecosystem markets, the entire issue of regulatory ‘takings’ would be at least in part neutralized.  In fact, environmental regulations could instead begin to have a positive effect on the value of natural features on private land.” (Davis, 2010, p. 379)  I believe that if the benefits of ES were incorporated into the Sales Comparison approach, even as an addition to the customary approach to sales value, they would be an acknowledged part of the total transaction.  (DEFRA, 2007, p. 46)  ES values could be developed sequentially as individual services are updated from previous studies or calculated so that the total value equation is filled in incrementally.  

I also believe that, whenever ECG is considering land purchase or restrictions, the total ES cost, related to the development of the affected parcel. should be compared to the benefit of increased area for wetland protection, similar to the cost- benefit analysis scenario cited above regarding wetland habitat.   Moreover, whenever there are decisions on land use in the Marsh area, doing ES cost/benefit analysis will assist in supporting the value of the environmental services of this critical regional resource.  The sustainability of the Great Marsh is strengthened whenever ES economic tradeoffs are used by the Parker River Fish & Wildlife Refuge, Mass Audubon, PIE-LTER, the Trustees of Reservations, Essex County Greenbelt  and towns and cities within or abutting the Marsh.   

Finally, by including key local and regional stakeholders in joint mapping, participatory resource assessments and monitoring assessments against baseline activities, ECG will increase awareness of all the benefits that the Great Marsh, and their activity within it, bring to the region.  

2. The Bid Rent Function:  Examining figure 10.1 on page 203 (Tietenberg & Lewis) we see that the allocation of land due to bid rent functions suggests that the value of land declines as we move from residential development, through agricultural use to wilderness.  Incorporating the value of ES will clearly change this allocation as the value of “wilderness” grows with the addition of ecosystem services. 

3.  A Third Form of Wealth:  Finally, while ES can and should be incorporated into the total value and cost benefit equation for the Great Marsh in valuing conservation restrictions, it is only one way to make evident market hidden externalities and market inefficiencies.  Clear title to land and subsequent wealth creation is a relatively modern construct.  Davis makes the point that less than 200 years ago, the details of “surveying, appraisal, and legal language for deeds” was still being worked out. “The transformation of the relatively abstract notion of land ownership into a precisely measured quantity recorded into a legal instrument was quietly revolutionary.”  While “clear title solidified the value of land as a place to build on, it also augmented value of land as a place from which to take resources….The concept of ecosystem services- the financial value of the measurable productivity of natural systems- represents a third was of valuing land and rewarding private landowners and land managers.” (Davis, 2010, p. 339)  

In this comprehensive and fully referenced article “Ecosystem Services and the Value of Land”, Davis points out that “the overarching effect of these two forces- environmental protection and economic development- has resulted in a legal framework in which the most significant environmental impacts are no longer the result of illegal activities, but the result of the cumulative effects of perfectly legal activities….the pool of global investment capital is still rewarded more for damaging activities than for restorative ones.  This Pool of capital- now estimated by the International Monetary Fund at $83 trillion- is over four times larger than the annual budgets of all the governments in the world combined” (Davis, 2010, p. 342). 

Davis sees a tremendous opportunity in two factors which he sees are combining: a) the scientific recognition of the value of natural resources for what they do, as well as what they are; and, b) governmental innovation moving toward increased use of market mechanisms and incentives to reward stewardship, conservation and restoration activities. (Davis, 2010, p. 342)

He cites many examples of both factors, and I highly recommend this article as a summary on environmental policy and value transformation.   In particular I was impressed with the emerging U.S. ecosystem services market of the Willamette Partnership and its ecosystem credit accounting protocols. http://willamettepartnership.org/ecosystem-credit-accounting/the-willamette-ecosystem-marketplace 

Still “irreversible impacts are not easily accounted for in the standard procedure for accounting appraisals.”  Moreover, there is an “environmental threshold when a natural resources system exhibits rapid change or even sudden collapse.” There are also environmental limits where “a point or range of conditions beyond which the benefits derived from a natural resources system are judged unacceptable or insufficient”. One other key issue is that of cumulative effects.  “If there is a large amount of a natural resource available, there may be societal benefits from developing a part of the area and losing some of the natural resource.  Such decisions at the margin can be made repeatedly and independently of each user.  If these decisions are made in an unco-ordinated way, the total value of the resources may be lost because of the cumulative effect of individual decisions.  This can happen when so much of the resource is lost that its services are no longer sustainable, or because of a loss of connectivity between different parts of the resource.  Whenever possible, it is helpful to analyze the effect of such decisions in the context of the total resource. (my emphasis) (DEFRA, 2007, p.43)  

Here is a place where government and private ownership interests converge, as environmental policy’s coordinated and hopefully prudent decision making underpins market transactions and development tradeoffs, environmental agency regulation, and environmental law.  Valuing ecosystem services may be in its adolescence, but to do so provides one clear way of preserving natural capital on which our lives depend. 

VI. References

Boyd, James, Kathryn Caballero, R. David Simpson. (1999). The Law and Economics of Habitat Conservation: Lessons from an Analysis of Easement Acquisitions Resources for the Future. http://www.rff.org Accessed May 17, 2011.
  • Cardinale, Bradley J. (07 April 2011). Biodiversity Improves Water Quality Through Niche Partitioning. Nature, Volume: 472, p. 86–89.

    Colorado Coalition of Land Trusts. (2004). A Conservation Appraisal Guide. p. 1-38.

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