An ecological perspective on the valuation of ecosystem services

Ecosystem services are the conditions and processes through which natural ecosystems and the species that make them up, sustain and fulfil human life. Ecosystem service valuation is being developed as a vehicle to integrate ecological understanding and economic considerations to redress the traditional neglect of ecosystem services in policy decisions. This paper presents a critical review on the neoclassical economic framework, tools used for economic valuation of ecosystem services and the economic welfare approach to collective decision-making, from an ecological perspective. The applicability of the framework and techniques for valuing ecosystem services are evaluated in light of the challenges posed by the complex, non-linear nature of many ecosystem services. Decisions concerning ecosystem management are often complex, socially contentious and fraught with uncertainty. Although judicious application of economic valuation techniques to ecosystem services can provide valuable information for conceptualizing decision choices and evaluating management options, there are serious limitations in the economic welfare approach to decision-making. These shortcomings and their implications for ecosystem management are elucidated and alternative approaches that emphasize participation, explicit treatment of uncertainty and transparent decision-making processes are discussed. (C) 2004 Elsevier Ltd. All rights reserved.