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David Pearce Lecture 2012

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Economic Analysis for Ecosystem Service Assessments
Ian J. Bateman, CSERGE, University of East Anglia, UK


Recent years have seen increased interest in the 'ecosystem service' conceptualisation of the support which the natural environment provides for human wellbeing. We argue that this approach is entirely compatible with environmental economics and indeed is best seen as a call to ensure that economic analyses are grounded upon a firm base of natural science.

The paper examines the application of economic analysis to ecosystem service assessments. Taking as an example the recent UK National Ecosystem Assessment (UK-NEA), we apply methods for valuing changes in the services provided by the natural environment. Particular attention is given to the incorporation of spatial variation in the environment within such valuations. Findings highlight the substantial improvements in welfare that can arise from shifting the emphasis of decision making away from a focus upon market priced goods towards a broader conception of economic values. We also consider weaknesses in such techniques, particularly with respect to the assessment of non-use values and draw upon ongoing work in developing countries to suggest a potential solution to such problems.
We conclude by highlighting the need to go beyond valuations of ecosystem service flows to consider the sustainability of natural asset stocks.

Professor Ian Bateman is director of CSERGE and also leads the Economics team for the UK National Ecosystem Assessment (NEA). He is Principal Investigator of the NERC Valuing Nature Network which seeks to bring together natural scientists, economists, social scientists, the policy community and business leaders to provide an integrated basis for environmental decision making. He is also Principal Investigator of the ESRC SEER Large Grant award which seeks to put the ecosystem services approach to decision analysis into practice. While it is human economic activity which has resulted in the major global environmental problems facing present and (to a greater extent) future generations, it is clear that reform of that economic activity provides the only viable solution to such problems. His interests lie in attempting to achieve this reform by bringing the environment into everyday decision making whether at the highest level, by informing government policy, or at the supermarket checkout by ensuring that prices reflect the true resource costs of production. Much of his research therefore seeks to value the true cost of pollution and the true worth of environmental improvements.

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