Estimation of the economic value of the ecosystem services provided by the Blue Nile Basin in Ethiopia

Abstract

This paper aims to quantify and economically value the main ecosystem services provided by the Blue Nile basin in Ethiopia. It is the first study in its kind to do so in a consistent and comprehensive manner using the same valuation approach. Water flows are linked to corresponding economic market values using the residual value method. Values for provisioning and regulating services related to the hydro-morphological and hydro-ecological functioning of the Blue Nile's water resources are derived based on four main water-dependent activities in the basin: irrigated agriculture, hydropower production, commercial navigation and fisheries. Data are collected from existing official and other secondary sources and are supplemented with information obtained from stakeholders and experts. The estimated annual contribution of the provisioning and regulating services of the freshwater ecosystem to the national economy was ETB 883 million (US$ 52 million) in 2011. This is very low compared to current GDP (<1%), partly due to the malfunctioning and underdevelopment of the current infrastructure to fully exploit the potential of the Blue Nile water resources. An integrated water resources management policy and improved institutional-economic setup aimed at maximization of continued provision of these services is expected to generate substantially higher economic values.