Cost Benefit Analysis and the Environment: How to Best Cover Impacts on Biodiversity and Ecosystem Services

This paper discusses how best to take into account impacts on biodiversity and ecosystem services in cost-benefit analyses. 

It finds that while the coverage and quality of ecosystem service assessments varies by habitat and region, estimates (usually expressed in USD per hectare per year) are now available for the services from most habitats, making it possible to assess changes in values for a number of ecosystem services as a result of the introduction of a new policy or physical investment. While this is a positive development, there remain some issues to be resolved. One is the possibility of double counting of services when using the standard categories of provisioning, regulating / supporting, and cultural ecosystem services. Regulating and supporting services are the basis of the provisioning services and so value estimates for the two cannot always be added up. For example, air pollution absorption is often valued using the cost of alternative ways of reducing the pollutants from the atmosphere while recreation is often valued in terms of willingness-to-pay (WTP) through stated preference methods.

In addition, the report finds that the impact of ecosystem services valuation on informing and influencing policy development remains limited. There have been a few studies related to ecosystem services valuation that have had an impact on policy making, including on coastal zone planning in Belize and managing sites of special scientific interest (SSSI) in England. However, there have generally been few cases of actual use of such analysis and even fewer cases where they have influenced policy. This highlights the need for both continuing to improve these methods and making them easier to use.