Through the provision of ecosystem services, wetlands have long been supporting the human economy without receiving due appreciation, let alone monetary compensation.
Studies in recent environmental economics literature has seen increased interest in the valuation of ecosystem service, which, as defined in Costanza et al. (1997), refers to the benefits human populations derive directly or indirectly from ecosystem functions. Table 1 tallies the contribution of wetland ecosystem service, as indicated in the TEEB (2010) and Millennium Ecosystem Assessment (2005).
In ecological engineering practices, ecosystem services offered by nature as well as constructed wetlands have been popularly accepted and untilized for wastewater
treatment, which allow for reduction in the use of non-renewable inputs for wastewater treatment. Although latent, economic value of the wetland is of significance to economic well-being of human societies. Humans have long been utilizing the ecosystem services provided by wetlands, yet at the same time disrupting the ecosystem in day-to-day economic activities.
According to Geber and Bjorklund (2002), ecosystem services used in wastewater treatment consist of three broad ecological functions: (a) biological: denitrification, nitrification, fermentation, plant uptake, and oxidization of organic matter; (b) chemical processes: ammonification, adsorption, and fixation; (c) physical: sedimentation,
evaporation, and transpiration. Geber and Bjorklund (2002) used emergy analysis to investigate the substitutablility of increased use of space (land area), time and
dependence on ecosystem services for purchased non-renewable inputs in wastewater treatment in Sweden—of three types: (1) conventional three-step treatment plant
(WWTP), (2) conventional menchanical /chemical treatment plant complemented with a constructed wetland (TP+CW), and (3) natural wetland (NW). Geber and Bjorklund (2002) found that total use of emergy per person equivalent and kg phosphorus was undifferentiated, and the emergy ratios of purchased to free renewable environmental inputs are 9:1, 141:1, and 3056:1, for NW, TP+CW, and WWTP, respectively. This study indicates the environmental efficiency of both natural and constructed wetlands in
serving for wastewater treatment.
Bateman et al. (2011) reports the comprehensive study conducted for the UK case, and identified ecosystem services and corresponding goods (see Table 2). Bateman et al.
(2011) also reviewed preceding literature and thereby proposed a general framework (see Figure 1) and nomenclature for integrating economic analyses within ecosystem service
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assessment. A comprehensive summary of valuation methods being applied to ecosystem services was provided in Bateman et al. (2011) – see Table 3. To our best knowledge of the literature, there has not yet seen any research applying Computable General
Equilbirium (CGE), nor Input-Outpu Analysis (IOA), for valuation of ecosystem service, particularly on the replacement cost.
We attempted to use a general equilibrium economic model as an alternative
approach to finding the economic value of ecosystem service being provided by the less human-disturbed Kaomei coastal wetland in central Taiwan.
In this study, we based on the idea as inspired by Leontief (1970) as well as the
“broken window fallacy” to propose an approach of measuring the replacement cost as provided by the ecosystem service. In the subsequent sections, we first introduce in section 2 the case studied, the Kaomei coastal wetland, located in central Taiwan; section 3 introduces the inspiring ideas we derived from the “Broken Window Fallacy” and Leontief (1970); section 4 describes the mutli-region computable general equilibrium model; we show in section 5 some key results of the CGE assessment of the replacement cost offered from the ecosystem service, section 6 concludes the report.
Table 1. Contribution of the wetlands’ ecosystem service towards sustainable development
Source of table: drew upon TEEB (2010) and MA(2005).
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Table 2. Final ecosystem services and corresponding goods: Examples from the UK NEA
Final ecosystem servicea Principal related goods Production of crops, plants, livestock, fish, etc.
(wild and domesticated)b
Food, fibre, energy, genetic resources, industrial inputs, fertiliser, avoidance of climate stress, recreation and tourism, physical and mental health, ecological knowledge, etc.
Production of trees, standing vegetation and peatb Timber, avoidance of climate stress, energy, noise regulation, recreation and tourism, etc.
Production of wild species diversity including microbesb , c
Natural medicine, disease and pest control, genetic resources, wild food, bioprospecting, recreation and tourism, physical health, ecological
knowledge, etc.
Production of water quantityb , c Potable water, Industrial use of water, flood protection, energy, recreation and tourism, physical health, ecological knowledge, etc.
Regulation of the climatec Avoidance of climate stress, physical and mental health, ecological knowledge, etc.
Regulation of hazards; related vegetation and other habitatsc
Coastal protection, erosion protection, flood protection, avoidance of climate stress, physical and mental health, ecological knowledge, etc.
Breakdown and detoxification of wastec Pollution control, waste removal, waste degradation, physical and mental health, ecological knowledge, etc.
Purification processesc Clean air, clean water, clean soils, physical health, ecological knowledge, etc.
Generation and maintenance of meaningful places;
socially valued landscapes and waterscapesd
Recreation and tourism, physical and mental health, ecological knowledge, etc.
a As noted previously, other inputs (e.g. manufactured capital) may in some occasions be required to combine with final ecosystem services in the production of goods. Relating the final ecosystem services to the MA (2005) nomenclature:
b ‘Provisioning’ services;
c ‘Regulating’ services;
d ‘Cultural’ services. ‘Supporting’ services relate to primary ecological services Source: Bateman et al. (2011).
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Figure 1. Phases of a joint ecosystem assessment and economic analysis for a single scenario Boundary conditions (e.g. elevation, climate)
defining ecosystem spatio-temporal context Ecosystem structure (e.g. plant species)
Primary processes and intermediate ecosystem
services (e.g. nutrient cycling)
Final ecosystem services (e.g. growth of trees)
Goods (e.g. timber)
Isolating the contribution of ecosystem services
(e.g. contribution to timber production)
Economic valuation of use and non-use values (e.g. shadow value of
timber)
Overall contribution of ecosystem services to
wellbeing (benefits) (e.g. spiritual value of
environment)
Sustainability analysis
Source: Bateman et al. (2011).
Notes: (a) Examples given in parentheses; (b) solid lines indicate relations which always apply while dotted lines indicate relations.
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Table 3. Various valuation methods applied to ecosystem services
Valuation method Value types Overview of method Common types of applications
Examples of ecosystem
services valued Example studies Adjusted market
prices Use Market prices
adjusted for distortions such as taxes, subsidies and non-competitive practices.
Food, forest products, R&D
benefits.
Crops, livestock, multi-purpose woodland, etc.
Bateman et al. (2003), Godoy et al. (1993)
Production function
methods Use Estimation of production
functions to isolate the effect of ecosystem services as inputs to the production process.
Environmental impacts on economic activities and livelihoods, including damage costs avoided, due to ecological regulatory and habitat functions
Maintenance of for aquaculture;
prevention of damage from erosion and siltation; groundwater recharge; drainage and natural irrigation;
storm
protection; flood mitigation
Ellis and Fisher (1987), Barbier (2007).
Damage cost avoided Use Calculates the costs which are avoided by not allowing
ecosystem services to degrade.
Storm damage;
supplies of clean water; climate change.
Drainage and natural irrigation; storm protection; flood mitigation
Badola and Hussain (2005), Kim and Dixon (1986).
Averting behaviour Use Examination of expenditures to avoid damage
Environmental impacts on human health
Pollution control and
detoxification Rosado et al. (2000).
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Table 3 (continued)
Valuation method Value types Overview of method Common types of applications mitigation; air quality, peace and quiet, workplace risk.
See Bockstael and
McConnell (2006) for the travel cost method and Day et al. (2007) for hedonic pricing.
Stated preference methods
Use and non-use
Uses surveys to ask individuals to make choices between
different levels of environmental goods at different prices to reveal their
willingness to pay for those goods flood prevention, air quality, peace and quiet.
See Carson et al. (2003) for contingent valuation and Adamowicz et al. (1994) for discrete choice experiment approach.
Source: Bateman et al. (2011)–adapted from de Groot et al. (2002), Heal et al. (2005), Barbier (2007), Bateman (2009) and Kaval (2010).
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