A useful way to put the the value of nature's goods and services into perspective is estimate their economic value. In this way, their importance can be more readily compared to other goods and services that people rely on. This comparison can then help policy makers and communities make choices, in order to optimise the benefits they receive from the whole range of goods and services they access.

Environmental economists have developed robust methods for the economic valuation of the contributions of nature to human well-being. This is can be conceptualised through the ecosystem services framework.

This framework categorises ecosystem servicesecosystem services Ecosystem services are the goods and services provided by nature which are experienced as or transformed into benefits for human society. They are generally classed as 'provisioning' (material things that are consumed), 'regulating' (non-material benefits derived from habitat functioning), and 'cultural' (non-material benefits obtained from an experience of nature, including tourism). as:

1. provisioning (biological products obtained directly from ecosystems);
2. regulating (benefits obtained through ecosystem functions and processes); and
3. cultural (non-material benefits, such as recreation and spiritual values).

Ecosystem service valuation often also incorporates a spatial component to quantify flows and benefits from specific habitats, or ‘ecosystem assets’, in a landscape.

Study objectives

In this study we set out to estimate the value of aggregated flows of benefits - the total ecosystem service value (TESV) - from the ecosystem assets of Vanuatu, including its terrestrial and coastal marine ecosystems, forests, and subsistence gardens. Understanding the TESV is useful in

• assessing changes or trends in the contributions of ecosystems over time as a result of policy or external factors such as climate change;
• estimating the cost-effectiveness of ecosystem-based climate change adaptation options;
• assessing benefit trade-offs involved in land-use trends; and
• determining appropriate price envelopes for payments for ecosystem service schemes.

Our approach

Our method used both a spatial component, to determine ecosystem type and extent, and an economic valuation component, to determine the monetary value of the array of ecosystem services flowing from those ecosystems.

Our spatial component used both previously configured satellite data to determine the ground cover for all the islands of Vanuatu and datasets from the UN for determining the extent of coral reefs and seagrass.

Our valuation component established a set of ecosystem service value coefficients (per hectare per year), compiled from existing literature, but leaning heavily on a large database of valuations originally catalogued for The Economics of Ecosystems and Biodiversity project.

The TESV is the multiplication of the ecosystem extent and the ecosystem service value coefficient.

Findings

We found the value of Vanuatu’s ecosystem services to be considerable –between $ 1.96 billion (bn) and $ 11.54 bn (median US$ 2.9 bn) per year (2016 US dollar values).

In comparison, Vanuatu’s GDP for 2016 was estimated to be $ 804.3 m – smaller by a factor of between 2½ and 17.

The most valuable ecosystems are its forests and subsistence gardens. We estimate the contribution of subsistence gardens alone (a dominant land use), to be between $ 4,878 and $ 9,029 per person per year, while the equivalent 2016 estimate from published national accounts is only $ 430. This discrepancy suggests there is a potential under-valuation of the contribution of subsistence agriculture to Vanuatu, which warrants further in situ research to calibrate, particularly as this value includes no estimates of associated cultural values.

Table 1: Extent Total ecosystem service value of Vanuatu's ecosystems (millions 2016 US$)

Ecosystem type (habitat)	Extent (hectares)	Median	Minimum	Maximum
Coastal coral	70,238	58,050	12,081	2,742,716
Coastal mangrove	1,665	12,529	9,634	15,473
Coastal seagrass	124,038	8,185	4,072	12,298
Tropical forest	934,831	857,523	560,825	6,173,858
Grassland	39,776	24,094	14,801	72,677
Freshwater waterbodies	539	1,001	168	1,795
Freshwater wetlands	406	83	8	1,320
Subsistence gardens	154,186	1,935,300	1,357,598	2,513,001
Plantation cropping	73,940	4,141	4,141	4,141
Total ecosystem service value		2,900,906	1,963,327	11,537,280

Nature’s contributions to people far outweigh formal measures of the economy’s output. This gulf between GDP and our TESV estimate might, in part, explain the disparity between Vanuatu’s global ranking in terms of GDP per capita (126th out of 192) and its position of fourth in the most recent (2016) Happy Planet Index. Critiques of GDP as a proxy measure for human well-being, are well-developed, encompassing environmental, distributional, and feminist critiques, particularly pertinent to Pacific SIDS. Alternatives are being explored by national and state governments, including in Vanuatu itself. However, progress in developing, codifying and embedding these alternatives into policy is slow and GDP remains a pervasive measure in driving policy decisions; perhaps because alternative measures tend not to support political imperatives.

Application

Our assessment provides a snapshot of ecosystem service benefits at a point-in-time. Repeated application can enable an understanding of longitudinal trends in benefit flows as a result of land-use change. As such, our approach can inform scenario-based planning, which is relevant in light of projected increases in risk from a rapidly changing climate. Our valuation also contributes towards the global, cross-sector drive towards achievement of the Sustainable Development Goals, specifically target 15.9, which aims to integrate ecosystem and biodiversity values into local planning processes and national accounts.

Finally, our valuations can be used to demonstrate to program sponsors the value of a range of co-benefits associated with habitat conservation, some of which could be potentially monetised in the future, through payment for ecosystem service schemes.

Challenges and sensitivities

In undertaking our valuation, a number of context-specific sensitivities and challenges were evident, which, if not adequately addressed, or at least acknowledged, could result in misleading valuations, provide misguided support for perverse policy responses and erode confidence in valuations. For example, there were several key data gaps, risking undervaluation of ecosystem services, as there remains a dearth of economic valuation data for Pacific SIDS. There is also limited data on ecosystem integrity, which influences the quality of ecosystem service flows from particular land uses. Finally, understanding the customary or cultural values of nature challenges economic valuation methods based on individual willingness to pay measures.

Implications

Our study shows, that by only estimating the level of individual and community well-being via GDP the important contribution of ecosystem assets to human well-being is underestimated. This potentially leads to misdiagnoses of community threats and pursuit of maladaptive land-use policy.

Whilst further development of ecosystem accounting through the SEEA Central Framework and the incorporation of ecosystem flows into ‘green GDP’ will start to close this gap, it remains imperative to also consider locally-specific consumer surplus values associated with non-market spill-overs when designing policy and programmes. By not considering the full gamut of ecosystem service values will also likely have distributional consequences, favouring policy that promotes monetary exchange of what would otherwise be customary goods and services, such as housing, food and materials.

Traditional economic development pathways have always tended towards running down natural capital. Pacific SIDS communities, which rely heavily and directly on nature for the provisioning of their immediate needs, and who experience close spiritual and cultural connections to their traditional land and ocean resources, are reliant on the continuation of ecosystem functions and processes. Ecosystem service valuation will provide a vital role in highlighting and quantifying these values to support community-led sustainable development.