Ecosystem services contribute significantly to global employment and economic activity. The ecosystem service of food production contributes by far the most to economic activity and employment. In 2000, the market value of food production was $981 billion, or roughly 3% of global gross world product, but it is a much higher share of GDP within developing countries (C8 Table 8.1). That year, for example, agriculture (including forestry and fishing) represented 24% of total GDP in countries with per capita incomes less than $765 (the low-income developing countries, as defined by the World Bank) (C126.96.36.199). The agricultural labor force contained 1.3 billion people globally—approximately a fourth (22%) of the world’s population and half (46%) of the total labor force—and some 2.5 billion people, about 40% of the world, lived in agriculturally based households (C8.5.5). Significant differences exist between developing and industrial countries in these patterns. For example, in the United States only 2.4% of the labor force works in agriculture.
Other ecosystem services (or commodities based on ecosystem services) that make significant contributions to national economic activity include timber (around $400 billion), marine fisheries (around $80 billion in 2000), marine aquaculture ($57 billion in 2000), recreational hunting and fishing ($50 billion, and $24–37 billion annually respectively in the United States alone), as well as edible forest products, botanical medicines, and medicinal plants (C9.ES, C18.1, C20.ES). And many other industrial products and commodities rely on ecosystem services such as water as inputs.
The degradation of ecosystem services represents a loss of a capital asset (C5.4.1). (See Figure 3.1.) Both renewable resources such as ecosystem services and nonrenewable resources such as mineral deposits, soil nutrients, and fossil fuels are capital assets. Yet traditional national accounts do not include measures of resource depletion or of the degradation of renewable resources. As a result, a country could cut its forests and deplete its fisheries, and this would show only as a positive gain to GDP despite the loss of the capital asset. Moreover, many ecosystem services are available freely to those who use them (fresh water in aquifers, for instance, or the use of the atmosphere as a sink for pollutants), and so again their degradation is not reflected in standard economic measures.
When estimates of the economic losses associated with the depletion of natural assets are factored into measurements of the total wealth of nations, they significantly change the balance sheet of those countries with economies especially dependent on natural resources. For example, countries such as Ecuador, Ethiopia, Kazakhstan, Republic of Congo, Trinidad and Tobago, Uzbekistan, and Venezuela that had positive growth in net savings (reflecting a growth in the net wealth of the country) in 2001 actually experienced a loss in net savings when depletion of natural resources (energy and forests) and estimated damages from carbon emissions (associated with contributions to climate change) were factored into the accounts. In 2001, in 39 countries out of the 122 countries for which sufficient data were available, net national savings (expressed as a percent of gross national income) were reduced by at least 5% when costs associated with the depletion of natural resources (unsustainable forestry, depletion of fossil fuels) and damage from carbon emissions were included
The degradation of ecosystem services often causes significant harm to human well-being (C5 Box 5.1). The information available to assess the consequences of changes in ecosystem services for human well-being is relatively limited. Many ecosystem services have not been monitored and it is also difficult to estimate the relative influence of changes in ecosystem services in relation to other social, cultural, and economic factors that also affect human well-being. Nevertheless, the following evidence demonstrates that the harmful effects of the degradation of ecosystem services on livelihoods, health, and local and national economies are substantial.
- Most resource management decisions are most strongly influenced by ecosystem services entering markets; as a result, the nonmarketed benefits are often lost or degraded. Many ecosystem services, such as the purification of water, regulation of floods, or provision of aesthetic benefits, do not pass through markets. The benefits they provide to society, therefore, are largely unrecorded: only a portion of the total benefits provided by an ecosystem make their way into statistics, and many of these are misattributed (the water regulation benefits of wetlands, for example, do not appear as benefits of wetlands but as higher profits in water-using sectors). Moreover, for ecosystem services that do not pass through markets there is often insufficient incentive for individuals to invest in maintenance (although in some cases common property management systems provide such incentives). Typically, even if individuals are aware of the services provided by an ecosystem, they are neither compensated for providing these services nor penalized for reducing them. These nonmarketed benefits are often high and sometimes more valuable than the marketed benefits. For example:
- Total economic value of forests. One of the most comprehensive studies to date, which examined the marketed and nonmarketed economic values associated with forests in eight Mediterranean countries, found that timber and fuelwood generally accounted for less than a third of total economic value in each country. (See Figure 3.2.)
- Recreational benefits of protected areas: The annual recreational value of the coral reefs of each of six Marine Management Areas in the Hawaiian Islands in 2003 ranged from $300,000 to $35 million.
- Water quality: The net present value in 1998 of protecting water quality in the 360-kilometers Catawba River in the United States for five years was estimated to be $346 million.
- Water purification service of wetlands About half of the total economic value of the Danube River Floodplain in 1992 could be accounted for in its role as a nutrient sink.
- Native pollinators: A study in Costa Rica found that forest-based pollinators increased coffee yields by 20% within 1 kilometer of the forest (as well as increasing the quality of the coffee). During 2000–03, pollination services from two forest fragments (of 46 and 111 hectares) thus increased the income of a 1,100-hectare farm by $60,000 a year, a value commensurate with expected revenues from competing land uses.
- Flood control: Muthurajawela Marsh, a 3,100-hectare coastal peat bog in Sri Lanka, provides an estimated $5 million in annual benefits ($1,750 per hectare) through its role in local flood control.
- The total economic value associated with managing ecosystems more sustainability is often higher than the value associated with the conversion of the ecosystem through farming, clear-cut logging, or other intensive uses. Relatively few studies have compared the total economic value (including values of both marketed and nonmarketed ecosystem services) of ecosystems under alternate management regimes, but a number of studies that do exist have found that the benefit of managing the ecosystem more sustainably exceeded that of converting the ecosystem (see Figure 3.3.), although the private benefits—that is, the actual monetary benefits captured from the services entering the market—would favor conversion or unsustainable management. These studies are consistent with the understanding that market failures associated with ecosystem services lead to greater conversion of ecosystems than is economically justified. However, this finding would not hold at all locations. For example, the value of conversion of an ecosystem in areas of prime agricultural land or in urban regions often exceeds the total economic value of the intact ecosystem. (Although even in dense urban areas, the total economic value of maintaining some “green space” can be greater than development of these sites.)
- The economic and public health costs associated with damage to ecosystem services can be substantial.
- The early 1990s collapse of the Newfoundland cod fishery due to overfishing (see Figure 3.4.) resulted in the loss of tens of thousands of jobs and has cost at least $2 billion in income support and retraining.
- The costs of U.K. agriculture in 1996 resulting from the damage that agricultural practices cause to water (pollution, eutrophication), air (emissions of greenhouse gases), soil (off-site erosion damage, carbon dioxide loss), and biodiversity was $2.6 billion, or 9% of average yearly gross farm receipts for the 1990s. Similarly, the damage costs of freshwater eutrophication alone in England and Wales was estimated to be $105–160 million per year in the 1990s, with an additional $77 million per year being spent to address those damages.
- The burning of 10 million hectares of Indonesia’s forests in 1997/98 cost an estimated $9.3 billion in increased health care, lost production, and lost tourism revenues and affected some 20 million people across the region.
- The total damages for the Indian Ocean region over 20 years (with a 10% discount rate) resulting from the long-term impacts of the massive 1998 coral bleaching episode are estimated to be between $608 million (if there is only a slight decrease in tourism-generated income and employment results) and $8 billion (if tourism income and employment and fish productivity drop significantly and reefs cease to function as a protective barrier).
- The net annual loss of economic value associated with invasive species in the fynbos vegetation of the Cape Floral region of South Africa in 1997 was estimated to be $93.5 million, equivalent to a reduction of the potential economic value without the invasive species of more than 40%. The invasive species have caused losses of biodiversity, water, soil, and scenic beauty, although they also provide some benefits, such as provision of firewood.
- The incidence of diseases of marine organisms and emergence of new pathogens is increasing, and some of these, such as the ciguatera, harm human health (C19.3.1). Episodes of harmful (including toxic) algal blooms in coastal waters are increasing in frequency and intensity, harming other marine resources such as fisheries and harming human health (R16 Figure 16.3). In a particularly severe outbreak in Italy in 1989, harmful algal blooms cost the coastal aquaculture industry $10 million and the Italian tourism industry $11.4 million (C19.3.1).
- The number of both floods and fires has increased significantly, in part due to ecosystem changes, in the past 50 years. Examples are the increased susceptibility of coastal populations to tropical storms when mangrove forests are cleared and the increase in downstream flooding that followed land use changes in the upper Yangtze river (C.SDM). Annual economic losses from extreme events increased tenfold from the 1950s to approximately $70 billion in 2003, of which natural catastrophes—floods, fires, storms, drought, and earthquakes—accounted for 84% of insured losses.
- Significant investments are often needed to restore or maintain nonmarketed ecosystem services.
- In South Africa, invasive tree species threaten both native species and water flows by encroaching into natural habitats, with serious impacts for economic growth and human well-being. In response, the South African government established the “Working for Water Programme.” Between 1995 and 2001 the program invested $131 million (at 2001 exchange rates) in clearing programs to control the invasive species.
- The state of Louisiana has put in place a $14-billion wetland restoration plan to protect 10,000 square kilometers of marsh, swamp, and barrier islands in part to reduce storm surges generated by hurricanes.
Although degradation of ecosystem services could be significantly slowed or reversed if the full economic value of the services were taken into account in decision-making, economic considerations alone would likely lead to lower levels of biodiversity (medium certainty)(CWG). Although most or all biodiversity has some economic value (the option value of any species is always greater than zero), that does not mean that the protection of all biodiversity is always economically justified. Other utilitarian benefits often “compete” with the benefits of maintaining greater diversity. For example, many of the steps taken to increase the production of ecosystem services involve the simplification of natural systems. (Agriculture, for instance, typically has involved the replacement of relatively diverse systems with more simplified production systems.) And protecting some other ecosystem services may not necessarily require the conservation of biodiversity. (For example, a forested watershed could provide clean water whether it was covered in a diverse native forest or in a single-species plantation.) Ultimately, the level of biodiversity that survives on Earth will be determined not just by utilitarian considerations but to a significant extent by ethical concerns, including considerations of the intrinsic values of species.
Even wealthy populations cannot be fully insulated from the degradation of ecosystem services (CWG). The degradation of ecosystem services influences human well-being in industrial regions and among wealthy populations in developing countries.
- The physical, economic, or social impacts of ecosystem service degradation may cross boundaries. (See Figure 3.5.) Land degradation or fires in poor countries, for example, has contributed to air quality degradation (dust and smoke) in wealthy ones.
- Degradation of ecosystem services exacerbates poverty in developing countries, which can affect neighboring industrial countries by slowing regional economic growth and contributing to the outbreak of conflicts or the migration of refugees.
- Changes in ecosystems that contribute to greenhouse gas emissions contribute to global climate changes that affect all countries.
- Many industries still depend directly on ecosystem services. The collapse of fisheries, for example, has harmed many communities in industrial countries. Prospects for the forest, agriculture, fishing, and ecotourism industries are all directly tied to ecosystem services, while other sectors such as insurance, banking, and health are strongly, if less directly, influenced by changes in ecosystem services.
- Wealthy populations are insulated from the harmful effects of some aspects of ecosystem degradation. but not all. For example, substitutes are typically not available when cultural services are lost.
While traditional natural resource sectors such as agriculture, forestry, and fisheries are still important in industrial-country economies, the relative economic and political significance of other sectors has grown as a result of the ongoing transition from agricultural to industrial and service economies (S7).
Over the past two centuries, the economic structure of the world’s largest economies has shifted significantly from agricultural production to industry and, in particular, to service industries. (See Figure 3.6.) These changes increase the relative significance of the industrial and service sectors (using conventional economic measures that do not factor in nonmarketed costs and benefits) in comparison to agriculture, forestry, and fisheries, although natural resource–based sectors often still dominate in developing countries. In 2000, agriculture accounted for 5% of gross world product, industry 31%, and service industries 64%.
At the same time, the importance of other nonmarketed ecosystem services has grown, although many of the benefits provided by these services are not captured in national economic statistics. The economic value of water from forested ecosystems near urban populations, for example, now sometimes exceeds the value of timber in those ecosystems. Economic and employment contributions from ecotourism, recreational hunting, and fishing have all grown.
Increased trade has often helped meet growing demand for ecosystem services such as grains, fish, and timber in regions where their supply is limited. While this lessens pressures on ecosystem services within the importing region, it increases pressures in the exporting region. Fish products are heavily traded, and approximately 50% of exports are from developing countries. Exports from these nations and the Southern Hemisphere presently offset much of the shortfall of supply in European, North American, and East Asian markets (C18.ES). Trade has increased the quantity and quality of fish supplied to wealthy countries, in particular the United States, those in Europe, and Japan, despite reductions in marine fish catch (C18.5.1).
The value of international trade in forest products has increased much faster than increases in harvests. (Roundwood harvests grew by 60% between 1961 and 2000, while the value of international timber trade increased twenty-five-fold (C9.ES).) The United States, Germany, Japan, United Kingdom, and Italy were the destination of more than half of the imports in 2000, while Canada, United States, Sweden, Finland, and Germany account for more than half of the exports.
Trade in commodities such as grain, fish, and timber is accompanied by a “virtual trade” in other ecosystem services that are required to support the production of these commodities. Globally, the international virtual water trade in crops has been estimated between 500 and 900 cubic kilometers per year, and 130–150 cubic kilometers per year is traded in livestock and livestock products. For comparison, current rates of water consumption for irrigation total 1,200 cubic kilometers per year (C7.3.2).
Changes in ecosystem services affect people living in urban ecosystems both directly and indirectly. Likewise, urban populations have strong impacts on ecosystem services both in the local vicinity and at considerable distances from urban centers (C27). Almost half of the world’s population now lives in urban areas, and this proportion is growing. Urban development often threatens the availability of water, air and water quality, waste processing, and many other qualities of the ambient environment that contribute to human well-being, and this degradation is particularly threatening to vulnerable groups such as poor people. A wide range of ecosystem services are still important to livelihoods. For example, agriculture practiced within urban boundaries contributes to food security in urban sub-Saharan Africa. Urban populations affect distant ecosystems through trade and consumption and are affected by changes in distant ecosystems that affect the local availability or price of commodities, air or water quality, or global climate, or that affect socioeconomic conditions in those countries in ways that influence the economy, demographic, or security situation in distant urban areas.
Spiritual and cultural values of ecosystems are as important as other services for many local communities. Human cultures, knowledge systems, religions, heritage values, and social interactions have always been influenced and shaped by the nature of the ecosystem and ecosystem conditions in which culture is based. People have benefited in many ways from cultural ecosystem services, including aesthetic enjoyment, recreation, artistic and spiritual fulfilment, and intellectual development (C17ES). Several of the MA sub-global assessments highlighted the importance of these cultural services and spiritual benefits to local communitiesservices