Economic Valuation of Ecosystem
Services in the Context of Irrigation
Presentation at IWMI-WLE Workshop
(04- - 09-2015 )
Parakrama Weligamage
Agricultural Economics and Business Management
University of Peradeniya
Presentation Outline
• Ecosystem services concept
• Ecosystem services in the context of irrigation
systems
• Introduction to the concept of economic values
• Economic valuation methods
• A case study on contingent valuation?
Why We should do in Valuation?
• Ecosystems provide services:
• 1) Identify what are they
(Understanding through science)
• 2) Place a value through economics
• 3) Use in Policy making or applying market based
mechanisms to enable these values to be reflected in
decision-making through incentives and price signals.
Ecosystem Services: An application
• The UK- National Environmental Assessment
identified
- (8) Eight Broad Habitats
- and give examples of the services derived from
each…… [Figure Here]
Services from Enclosed Farmland
Food
Fiber
Bio-fuels
Fresh water
Climate regulation
Pollution control
Water quality regulation
Pollination
Disease and pest control
Recreation
Aesthetic values
Cultural heritage
Education
Sense of place
Based on MEA
• Categories all services into …..
– Four Categories as,
•
•
•
•
Provisioning services
Regulating services
Cultural services, and
Supporting services.
Categories of
Goods/services
Excludability
Low -----------------High
Rivalrory
Common goods (Common-pool
resources)
fish stocks, timber, coal
Private goods
food, clothing, cars, personal
electronics
Public goods
free-to-air television, air, national
defense
Club goods
cinemas, private parks, satellite
television
7
Defining Economic Valuation
• All values are anthropocentric
• Value of satisfaction generated through the changes
occurred of the economic agent
• We use values as a quantitative measure - $
values [ common unit]
• > can compare across space, time and context
using appropriate conversion factors
• > Can aggregate by categories > make totals
Getting Values from Economic Agents
• Willingness to Pay
` - Maximum amount a person would pay (willingness &
ability to pay) for gains.
– Sacrifice or trade-off people will make
– Market prices are WTP for one more unit
Willingness to Accept
• Minimum amount a person would accept to forego a
particular ecosystem service in a particular place
Total Economic Value
• What is the value of all services emanating
from a resource?
Components of Total Economic Value
– Use Values
• Consumptive Use
• Non-consumptive Use
• Vicarious Use
– Non Use or Passive Use Values
• Sometimes option value for future use
• Existence Value
– To know it exists for oneself or others of current generation
• Bequest Values to future generations
Economic Valuation Methods
• How we get the numbers?
If goods and services have markets – Then we have
market prices
If Not?
Non-Market Valuation methods
Non-market Valuation Techniques
that measure WTP
Behavioral Linkages
Revealed Preference
Hedonic Property Analysis
Hedonic Wage-risk Analysis
Travel Cost Method
Averting Behavior
Benefit Transfer
Non-market Valuation Techniques
that measure WTP or WTA
Behavioral Linkages
Revealed Preference
Stated Preference
Hedonic Property Analysis
Contingent Valuation
Method
(Bundle valuation)
Hedonic Wage-risk Analysis
Conjoint Analysis
(attribute valuation)
Travel Cost Method
Choice Experiments
(attribute valuation)
Averting Behavior
Benefit Transfer
Understanding Services from Tabbowa
•
•
•
•
•
•
•
•
•
Crop Agriculture
Livable habitats
Fisheries
Livestock
Domestic Water to Puttalam City and residents
Recreation by residents
Water for wildlife
Habitats for wildlife
Other Productive Uses
15
Extending to other systems
•
•
•
•
Tourism
Hydropower
Landing for sea planes
Boat rides….. Closer to cities/popular
destinations
• Carbon Sequestration
Tissawewa Irrigation Tank: Scenic Beauty
17
Irrigation and Tourism: Giritale
18
Irrigation and Tourism: Kandalama
19
Prospects for Mutual Existence?
20
Two sides of the story
Two sides of the story
• stewards, or providers [
• beneficiaries, or users
• Who gets benefits?
Local
Sub-national
National
Global
Once values are known…
• make arrangements for a mechanism for
transaction in $ terms
• Biodiversity offsetting
• Certification schemes
• Payment for Ecosystem Services
Appliocation..... Veheragala Diversion
Project
75 MCM storage reservoir
Diversion: 60 MCM (50 MCM to augment KOISP)
YPC
Wildlife at YPC
Changes in flow volumes at YPC
Impact of Veheragala Project on YPC
• YPC undergoes severe water stress during the dry
season
• Regulated downstream release will increase dry
season flow to 165% of current volumes)
• Therefore the project can be considered beneficial to
YPC
Hypothetical Market
 Good status of the environment can only be
achieved by releasing water to YPC during dry
season
 General public of SL will be benefited through
Bequest and existence values
 Water releases should be financed by the public
Procedure and Results
• Elicitation format
Single bounded dichotomous choice contingent
valuation aka Referendum
WTP Values = 17.5 Billion LKR
Conclusions
• Irrigation Systems provide multiple benefits
• They occur to many beneficiaries
• Values to humans of a resource can be
estimated using economic valuation methods
• These methods can be applied to serices
generated by irrigation systems
References
• The United Kingdom Department for Environment, Food & Rural Affairs.
2013. Payments for Ecosystem Services: A Best Practices Guide. Available
online [
https://www.gov.uk/government/uploads/system/uploads/attachment_d
ata/file/200920/pb13932-pes-bestpractice-20130522.pdf]
• Weligamage, P. 2012. Irrigation in Sri Lanka: Retrospect and prospect.
Presidential Address-Section F. SLAAS.
• Parakrama Weligamage, Walter R Butcher, Keith A Blatner, C Richard
Shumway, Mark Giordano. 2010. Non-user Benefits Emanating from
Enhanced Water Flow to the Yala Protected Area Complex Proceedings of
the National Conference on Water, Food Security, and Climate Change in
Sri Lanka, BMICH, Colombo, June 9-11, 2009. Volume 2. Water quality,
environment, and climate change.
• Thank you for your attention