Dealing with negative monetary ecosystem services values in environmental and economic accounting

Abstract

The concept of exchange values refers to the theoretical notion of an exchange happening for ecosystem services between an ecosystem asset and an economic agent. The United Nations System of Environmental Economic Accounting recommends using market prices as exchange values whenever possible, or otherwise, exchange value estimates that conceptually come close to market prices. However, in countries with highly regulated access to natural resources, the observable market prices or exchange value estimates for ecosystem services may often be distorted or even negative. When exchange values are used for decision support or as evidence base for policy making, negative values can be misleading.

To address this issue, we present ideas on how to include the institutional resource regime that governs ecosystem services into the computation of exchange values. This analysis can help identify policy interventions that increase or decrease exchange values from free-market levels and can provide guidance on how to correct for distorted value estimates. Further it can help to better understand negative exchange value estimates as well as reasons why society may be willing to accept, and eventually, compensate for them. We argue that the insurance value of ecosystems can be one such reason. To exemplify the application of the extended framework, we present a case study on the monetary valuation of water for hydropower production in Switzerland.