VALUING THE IMPACTS OF CLIMATE CHANGE ON TERRESTRIAL ECOSYSTEM SERVICES

Abstract

Climate change is already having impacts on terrestrial ecosystem services and such impacts are only expected to broaden and worsen as greenhouse gas emissions (GHGs) continue at their historic levels. To set appropriate policies for reducing GHG emissions, economists recommend the use of cost-benefit analysis. To perform such analyses, the predominant approach has been to use integrated assessment models. There is a need for more targeted valuation studies to serve as further evidence about the willingness to pay (WTP) to reduce climate change. The purpose of this brief paper is to sample and classify the literature valuing terrestrial ecosystem services and make some judgments about its usefulness to benefits analysis associated with climate change mitigation. With an emphasis on nonuse values, this paper focuses on stated preference studies. We find that with the pervasiveness of the effects of global warming on all types of natural and human systems, and given the interconnectedness of those systems, it seems too reductionist to focus on valuation of changes to specific resources or systems, in this case terrestrial ecosystems. That is, the value of slowing climate change needs to be estimated from a holistic perspective. To do so, the only possible way to go is with the top-down studies, recognizing that these studies can never provide the detail and the preciseness of commodity definition that is desirable in, say, natural resource damage assessments. However we must ask ourselves as a society if we are willing to trade off precision for comprehensiveness and breadth. The vast literature simply valuing ecosystem services is not largely motivated or directly applicable to climate change. And use of these studies in benefits transfers therefore involves huge assumptions and, even then, there will be gaps in geographic coverage. There are an increasing number of ecosystem valuation studies motivated by climate change that have the right scale and type of commodities being valued. Yet, such studies are invariably place-based and draw relatively tight, rather than porous boundaries between the ecosystem of interest and its linkages to other systems. Thus, one will not be able to easily aggregate such studies, properly account for overlaps and gaps and eventually come out with a cost of carbon. However, examining such studies one at a time and drawing insights out of them may both inform the design of information treatments for the studies and lead to a more qualitative/judgmental basis for settling on a "cost of carbon" number.