What Are Ecosystem Services?

This paper advocates consistently defined units of account to measure the contributions of nature to human welfare. We argue that such units have to date not been defined by environmental accounting advocates and that the term “ecosystem services” is too ad hoc to be of practical use in welfare accounting. We propose a definition, rooted in economic principles, of ecosystem service units. A goal of these units is comparability with the definition of conventional goods and services found in GDP and the other national accounts. We illustrate our definition of ecological units of account with concrete examples. We also argue that these same units of account provide an architecture for environmental performance measurement by governments, conservancies, and environmental markets.

The term "ecosystem services" is getting a lot of attention in the environmental community. Conservancies are interested in linking their conservation missions to the protection of ecosystem services, the Millennium Ecosystem Assessment relies on ecosystem services as a framework concept for its measurement of global ecological conditions, and numerous government agencies are trying to figure out how to measure, manage, and communicate the ecosystem services protected or enhanced by their programs. Some people even talk about trading ecosystem services.

Colloquially, ecosystem services are "the benefits of nature to households, communities, and economies." The term has gained currency because it conveys an important idea: that ecosystems are socially valuable - in many ways. This idea has great potential to unite the fields of ecology and economics, form the basis of a unified approach to environmental performance measurement, and foster clear public communication on environmental issues. However, the term lacks a clear definition, undermining its promise.

Today, if you ask different environmental practitioners what ecosystem services are, you get a disturbingly large - and often competing - set of answers. When it comes to knowing an ecosystem service when you see one, there is no real consensus. What is needed is a common understanding that is scientifically defensible on both ecological and economic grounds. What are ecosystem services?

RFF researchers James W. Boyd and H. Spencer Banzhaf have addressed this question in a new discussion paper, "What Are Ecosystem Services? The Need for Standardized Environmental Accounting Units".

Using both ecological and economic principles, they propose a definition that constrains what needs to be measured and yields concrete units of account that have wide application. These units of account can help conservationists and governments define and manage ecosystem services. They can be integrated - by design - with conventional measures of goods and services in national accounts like GDP, and they can be used to judge the quality of trades in environmental markets.

To date, decisionmakers have not been given enough practical guidance on which ecosystem services to measure and how to measure them. Boyd and Banzhaf show that economic principles create an argument for counting specific things in nature, rather than ecological processes or functions. Consider recreational angling, an activity that is enjoyable and relies on ecological inputs. If we are to measure nature's contributions to this enjoyment, what would we measure? One way to answer this is to put oneself in the role of angler. What would matter to you? First, you need a body of water in which to fish, so that would need to be counted. Second, there should be a fish population suitable for angling. Many anglers also enjoy the experience for aesthetic reasons, so the water's clarity and odor, and the characteristics of the surrounding landscape (such as, forests or wetlands) should be counted. Note that all of these "things" are ecological in nature and are countable. To ecologists, these "things" can be thought of as the end product of ecological processes. To economists, these "things" are tangible aspects of nature to which people can attach value. It is these tangible, countable things that are the units of account advocated by the authors.

In contrast, ecologists tend to advocate analysis of valuable ecological processes and functions (such as the removal of pollutants from water) as a way to get at ecosystem services. These processes and functions are very important, but they are important because they lead to ecological outputs that are valuable (the fish population, the clear lake). For practical and economic reasons, Boyd and Banzhaf advocate measurement of those outputs, rather than the ecological processes that produce them.

Boyd and Banzhaf's units of account are notable in that many are already countable using GIS datasets. The units are also a natural point of contact between ecologists and economists. In addition, they raise the possibility of greater standardization in environmental measurement. The history of science yields many examples in which standardization (weights and measures, for example) promoted subsequent advances in science and understanding. Greater standardization could be particularly valuable to the science of ecosystem assessment, which currently lacks a clear bridge between ecological and economic measurement.

Accounting for ecosystem services is important to public policy because nature's services contribute significantly to human welfare. Relative to more eclectic definitions of services - which have an "everything-but-the-kitchen-sink" quality - Boyd and Banzhaf's definition yields a more concrete and parsimonious set of ecological elements to be counted. Counting these elements is a practical step toward improved measurement of environmental impacts, priorities, and results.