NCPA - National Center for Policy Analysis

Can We Put a Price on Nature?

November 25, 2013

Intact ecosystems and the services they provide are considered by many people to be inherently valuable or priceless. Relatively recently, some environmentalists and economists began to argue that dollar values could be placed on the services nature provides, leading to wiser development decisions. However, there are a host of problems with efforts to put a price on nature, says H. Sterling Burnett, a senior fellow at the National Center for Policy Analysis.

Few estimates of the value of ecosystem services or goods actually exist. In 1997, in one of the most influential and widely cited papers, economist Robert Costanza estimated the current economic value of 17 ecosystem services for 16 biomes, or geographically and biologically distinct environments, based on published studies and a few original calculations. Among the biomes and services valued, he found:

  • Estuaries provide $4.1 trillion worth of services by reducing the damage caused by tropical storms, replenishing nutrients, providing habitat and offering recreational opportunities (among other services).
  • Tropical forests play a valuable and significant role in climate regulation, provide raw materials, prevent soil erosion and serve as a store of genetic material worth $3.8 trillion annually.
  • Tidal marshes also reduce damage from floods and storms, provide critical waste treatment services, limited food production, natural habitat and recreational opportunities, for a value of $1.65 trillion annually.
  • The value of the ecosystem services provided by the entire biosphere (most of which is outside the market) is in the range of $16-54 trillion per year, with an average of $33 trillion per year.

However, there are difficulties valuing global (and even local) ecosystem services, in part because they are public goods and thus lack a market-revealed price. Critics argue that public funding of efforts to value ecosystem services is not justified now, nor is it likely to be in the future. They question, for instance, the millions of dollars flowing to researchers attempting to define the scope of the project and the valuations produced.

Defining ecosystems in general, or specifically, is difficult. It is equally difficult to establish a sound economic baseline for the benefits nature provides to mankind. Where ecological services need to be monetized, they likely will be. Where monetization is unlikely or virtually impossible, decision makers probably don't need to spend time making these kinds of cost-benefit calculations.

Source: H. Sterling Burnett, "Can We Put a Price on Nature?" National Center for Policy Analysis, November 2013.


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