Finding a market for 'ecosystem services'

November 28, 2000

How much is an ecosystem worth?

It's easy to put a price tag on timber harvested from forests or copper mined from the ground, but can we put an economic value on the less tangible services ecosystems provide, such as water purification and flood control?

A group of 30 scientists, lawyers, conservationists, economists and policymakers came together at Stanford on Nov. 16-17 to discuss novel ways to market "ecosystem services" with the ultimate goal of protecting the ecosystem itself.

"The importance of ecosystem services has been recognized since the time of Plato," said Jim Salzman, an environmental law professor at American University who helped coordinate the two-day Stanford workshop.

According to Salzman, ecosystem services are the processes through which natural systems support human life by purifying air and water, detoxifying and decomposing waste, renewing soil fertility, regulating climate, preventing droughts and floods, controlling pests and pollinating plants.

Unfortunately, he noted, most people take these services for granted because they are free.

"We explicitly value and place dollar figures on 'ecosystem goods' such as timber and fish," Salzman said, "but the services underpinning these goods almost without exception have no market value - not because they are worthless, but rather because there is no market to capture and express their value directly."

Watersheds may be among the most marketable of all ecosystems, according to several panelists, because they provide essential services such as water purification and flood control.

"There's a clear demand for improving water quality, and, as a result, a clear demand for protecting watersheds," said workshop organizer Barton "Buzz" Thompson Jr., vice dean of the Stanford Law School and the Robert E. Paradise Professor of Natural Resources Law.

Thompson pointed to the New York City water department's 1996 decision to allocate $1.5 billion to preserve the Catskill and Delaware watersheds rather than spend $6 billion to construct a new water treatment system.

New York City was able to convince its taxpaying customers that the investment was worthwhile, Thompson noted, by demonstrating the cost-effectiveness of acquiring and protecting watershed land north of the city.

Since then, he said, New Yorkers have gained a better understanding of other services provided by watershed conservation, such as the protection of wildlife habitat.

"Can we generalize from New York City's experience?" asked Thompson.

The answer, he said, is yes. Municipalities such as New York supply 85 percent of the drinking water in the United States, and most are faced with an aging infrastructure that could require a total of $1 trillion to upgrade and maintain. Therefore, he argued, watershed conservation could become a more attractive option for cash-strapped local agencies.

Thompson pointed out that Salt Lake City, Seattle and Portland, Maine, already have begun investing in watershed protection projects.

Larry Goulder, an associate professor of economics at Stanford, chaired a working group on flood management at the workshop. Goulder's group concluded that the U.S. Army Corps of Engineers should reduce its reliance on dams and levees to control floods in favor of paying farmers and other landowners to set aside property in flood-prone areas.

Other working groups evaluated alternate ways to create ecosystem markets and to develop tools that will aid scientists in predicting the kinds of services an ecosystem will provide.

Results of the workshop will be published in a special issue of the Stanford Environmental Law Journal next spring to be authored by Thompson, Salzman and Gretchen Daily, a senior research scientist in Stanford's Department of Biological Sciences.
Barton "Buzz" Thompson Jr., School of Law
(650) 723-2518;

Gretchen Daily, Department of Biological Sciences
(650) 723-9425;

Relevant Web URLs:

By Mark Shwartz

Stanford University

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