Economic evaluation of ecosystem goods and services under different landscape management scenarios

Highlights

• We assessed EGS under five future land-use scenarios using varying levels of costs, prices and discount rates.

• Higher carbon and biodiversity values can justify landscape management for ecological outcomes.

• EGS framework can be used to assess and value different land-use options.

• There is a potential to manage landscapes to produce a mix of EGS.

Abstract

Human-induced changes in the natural environment are affecting the provision of ecosystem goods and services (EGS). Land use plans rarely include the value of public ecosystem services such as climate regulation and biodiversity due to difficulties in valuing these services. In this study, we assessed total economic value for five important ecosystem goods and services under five future land-use scenarios using varying levels of costs, prices and discount rates. Results indicated that at higher discount rates normally applied to commercial activities, and assuming the current prices for goods and services, net present value (NPV) was highest for landscape management scenarios aimed at maximising agricultural production. Potential income from services such as carbon and biodiversity does not offset projected income lost from agriculture due to land-use changes. At higher discount rates, NPV was negative for the two scenarios aimed at enhancing the longer term ecological sustainability of the landscape. These results indicate that income from carbon sequestration and biodiversity conservation would need to be considerably higher than current levels in order to justify focusing management of this landscape on ecological outcomes. At lower discount rates (at levels normally associated with public investments), the more ecologically appropriate ‘mosaic farming system’ had the highest NPV, indicating that this type of system might be attractive for investors interested in longer term return horizons or wider public benefits. Higher income from carbon or biodiversity, or increased return from timber by using high value tree species, could potentially make more ecologically appropriate systems profitable at higher discount rates.

Introduction

Human life depends on a wide variety of ecosystem goods and services (EGS) provided by healthy ecosystems. As described in the Millennium Ecosystem Assessment (MEA), these include the provisioning of resources such as food, fibre, and raw materials; regulating services such as water filtration, storm buffering, and climate stabilisation; supporting services such as soil formation, photosynthesis, and pollination; and cultural services that are spiritual, aesthetic, and recreational services (MEA, 2005). Many human activities impede ecosystem functions, thereby reducing or increasing flows of these EGS. While the supply of some goods is increasing, the MEA estimates 60% of the ecosystem services have declined globally in the past 50 years (MEA, 2005). However, the critical ways in which ecosystems support and enable human well-being are rarely captured in cost-benefit analysis for policy formulation and land use decision-making (Daily et al., 2009, Laurans et al., 2013, Nelson et al., 2008). Recent studies highlight the need to assess trade-offs among EGS under a variety of future land-use scenarios (Butler et al., 2013, Carpenter et al., 2009, Sanon et al., 2012, Willemen et al., 2012).

Prioritising landscapes for the production or harvest of a single ecosystem commodity, such as food or fibre, can diminish other services such as water quality, erosion prevention or soil formation (Bennett et al., 2010, Bryan and Crossman, 2008, Raudsepp-Hearne et al., 2010, Stoate et al., 2009, Zammit, 2013), as well as undermining overall ecosystem resilience (MEA, 2005). This is certainly the case for south-eastern Australia where such trade-offs have been observed over the past two hundred years (Bryan et al., 2010, Bryan et al., 2011, Crossman et al., 2010, Sandhu et al., 2012). Several authors explore the spatial patterns of provision of multiple EGS in production landscapes, focusing on the win–win opportunities for conservation and production of multiple EGS (Bennett et al., 2009, Egoh et al., 2008, Naidoo et al., 2008, Nelson et al., 2009, Tallis and Polasky, 2009, Zammit, 2013). However only a few deal with the economic valuation of future landscape management scenarios and associated impact on provision of EGS.

Changes in land use and land cover are ongoing due to changes in environmental conditions, patterns of human settlement, modes of production, and demands of society (Lambin et al., 2001, Verburg et al., 2009). Large areas of native vegetation in Australia have been converted to agricultural production (SOE, 2011) resulting in unforeseen economic impacts such as the costs associated with reduced flood control, the provision of potable water, or increased salinity and soil erosion (i.e., ecosystem services) (SOE, 2011) that are not captured in standard analysis of farming systems. EGS research is relatively new and quantification and valuation of services remain highly uncertain (Hou et al., 2013, Johnson et al., 2012). There are additional uncertainties with the future provision of services due to continuing land-use change and climate change. Therefore, a gross estimate of EGS at a point in time without considering future land-use scenarios will have limited value for decision makers (Fürst et al., 2013, Swetnam et al., 2011).

Identifying such potential changes in land cover, and measuring and managing multiple EGS under future land-use scenarios is a key challenge for policy makers. In the state of Victoria, Australia, efforts are underway to address these challenges. One such initiative is the Future Farming Landscapes (FFL) programme, a long-term (∼30 years) programme that aims to reconfigure landscapes to their most sustainable use. Here, we attempt to identify and assess provision of various EGS under a range of plausible landscape configurations, including one FFL-type scenario in this landscape.

Our specific aims were to (i) identify and define plausible land-use scenarios for the study area, (ii) estimate the value of key EGS: carbon sequestration, agricultural production, water, biodiversity and timber production under these land-use scenarios, (iii) show how these key EGS can be included in economic evaluations in order to better support decision making, and (iv) analyse the potential trade-offs and synergies among multiple EGS under these land-use scenarios.