Newsletter No 3 October 2012

Major Step Taken Towards Economic Valuation of Ecosystem Services in Flanders


The Flemish Government has taken an important step towards the economic valuation of ecosystem services to support spatial planning related to the creation, restoration and design of natural areas. Commissioned by the Department of Environment, Nature and Energy (LNE), Marije Schaafsma and Roy Brouwer developed and tested a model for the estimation of the economic value of cultural services such as landscape amenity, biodiversity and recreation.

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The work was conducted together with colleagues Inge Liekens and Leo de Nocker from the Flemish Institute for Technological Research (VITO) and has recently been published in the journal Land Use Policy1. VITO and LNE used the value function to develop an online decision support tool, which is available at rma.vito.be/natuurwaardeverkenner. The online tool was officially launched last year December by the Flemish Minister for the Environment in Brussels during a one-day workshop in which about 30 Flemish policy advisors participated as potential users of the decision support tool.

The applied methodological approach is an important step forwards compared with existing attempts to inform environmental policy and decision-making, for instance in the Netherlands, on the basis of so-called indicator values for different ecosystem services2. These indicator values, usually borrowed from previous valuation studies (commonly referred to as benefits transfer), sometimes going back many years, are plugged into social cost-benefit analysis of environmental policy interventions as constants without consideration of important spatial characteristics of the ecosystem services or population of beneficiaries. One of the best known examples of this approach is a paper in Nature in 1997, in which a group of scientists aimed at valuing the world’s ecosystem services and natural capital3. Fifteen years later, recent European research projects such as AQUAMONEY (www.aquamoney.org) provide improved guidelines for more reliable and valid benefits transfer procedures based on spatially sensitive (GIS based) value functions4, which also formed the basis for this study for the Flemish Government.

The value function approach is based on a choice experiment among a representative sample of 3,000 Flemish households. Although hypothetical, the choice experiment has several advantages compared with other stated preference methods, most importantly the fact that it allows for the inclusion of ecosystem service and site characteristics, and accounts for important trade-offs and substitution effects between alternative policy scenarios. The policy scenarios in this case concerned land use change scenarios in which existing agricultural land is converted into nature areas, such as natural grasslands, forests, wetlands and marshes. The different nature types included in the choice experiment are based on the Flemish Biological Value Map. Other important spatial characteristics include area size, accessibility, species richness, adjacent land use of the area, and the distance from a household’s place of residence to the location of the proposed land use change to account for so-called distance-decay effects in demarcating the size of the economic market of beneficiaries5.

The value function gives a value estimate for any additional hectare of nature area or restoration of lost habitat, and is used in combination with available GIS-data on population density, population characteristics, and surrounding land use. Application of the value function demonstrates that the average value per hectare of land for specific nature types differs significantly depending on size, distance and other site and population characteristics. Not controlling for these influencing factors, which is common practice in many countries based on constant indicator values, can result in severe under- or over-estimation of the non-market values of cultural services of proposed land use changes, hence misguiding policy and decision-making.

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The economic valuation tool aims to support decision-making in local and regional spatial planning processes, including the creation, restoration and compensation of nature areas, based on cost-benefit analysis, so that the associated ecosystem service values can be compared with the financial costs of such plans. In densely populated countries such as Belgium and the Netherlands, land is a scarce resource and nature areas are under increasing pressure of urban and infrastructural development. In order to compensate for these developments, the Government of Flanders has designated almost 10 percent of its total land cover as protected areas such as Special Protection Areas and Special Areas of Conservation comprising around 105 thousand ha. However, the Flemish Decree for Nature Conservation requires that the government delineates an area of 125 thousand ha of natural area as part of the Flemish Ecological Network and 150 thousand ha as part of the Integral Interrelation and Support Network. Hence, further expansion of nature areas and buffer areas is required.

Parametrization of the value function allows predicting non-market values of important cultural ecosystem services associated with the proposed land use changes across designated areas in Flanders. The estimated parameters were tested for their stability in time in a so-called test-retest study where the same choice experiment was also carried out using the same sample of households one year later6. The results of the retest study show that the estimated value function one year later is slightly different, but does not result in significantly different WTP values, suggesting that the originally estimated value function is robust over the one year time period. Obviously, the value function will need regular updating over the next years to also test how robust the results are over a longer period of time for the purpose of benefits transfer.

Contact: Roy Brouwer

Publications:

1 Liekens, I. Schaafsma, M., De Nocker, L., Broekx, S., Staes, J., Aertsens, J., Brouwer, R. (2013). Developing a value function for nature development and land use policy in Flanders, Land Use Policy, 30: 549-559.

2 Witteveen en Bos (2011). MKBA-kengetallen voor omgevingskwaliteiten: aanvulling en actualisering. Rotterdam.

3 Costanza, R., d’Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Limburg, K., Naeem, S., O’Neill, R.V., Paruelo, J., Raskin, R.G., Sutton, P., van den Belt, M. (1997). The value of the world's ecosystem services and natural capital. Nature 387(6630): 253-260.

4 Bateman, I.J., Brouwer, R., Ferrini, S., Schaafsma, M., Barton, D.N., Dubgaard, A., Hasler, B., Hime, S., Liekens, I & Navrud, S. et al. (2011). Making benefit transfers work: deriving and testing principles for value transfers for similar and dissimilar sites using a case study of the non-market benefits of water quality improvements across Europe. Environmental and Resource Economics, 50(3), 365-387.

5 Schaafsma, M., Brouwer, R., Gilbert, A., van den Bergh, J.C.J.M. and Wagtendonk, A. (in press). Estimation of distance-decay functions to account for substitution and spatial heterogeneity in stated preference research. Land Economics.

6 Schaafsma, M., Brouwer, R., Liekens, I., De Nocker, L. (forthcoming). Temporal stability of preferences and willingness to pay for natural areas in choice experiments: A test-retest.