Can We Put a Price on Nature?

Executive Summary

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.

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 US$16-54 trillion per year, with an average of US$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.

Certain parts of the ecosystem such as insects provide vital ecological services, including pollination – although wind actually pollinates most cereal crops. Some argue insect pollinators are essentially as ubiquitous as the wind. Where there is scarcity, however, markets, have arisen without the need to estimate the value of ecosystem services. For example:

  • Bees provide services for which orchard owners and farmers pay beekeepers an estimated $150 million per year.
  • Dung beetles provided $380 million in services to ranchers by burying cow manure in pastures, yet no one pays for dung beetles, and there is no scarcity.

Many ecosystem services are also likely to be hard to price- for instance, the arguably beneficial effects on climate and agriculture (minus the deleterious impacts on health) when atmospheric dust from the African Sahel drifts across the Atlantic. And even if you could put a price on an ecosystem service, figuring out who has a legitimate right to sell it means picking winners and losers. Some factions might even view those attempts with suspicion, therefore undermining support for the very environmental benefits one hopes to foster.

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.

H. Sterling Burnett is a senior fellow with the National Center for Policy Analysis.