Conservation and Human Welfare: Economic Analysis of Ecosystem Services

The importance of the links between well-functioning ecosystems and human well-being are clearly evident in our age of rapidly changing environmental and socio-economic conditions. And yet, the role ecosystems play in supporting and sustaining human welfare has been only a marginal area of study to date in the field of economics (Dasgupta 2010). But this is starting to change. Millennium Ecosystem Assessment (2005) and the burgeoning literature on ecosystem services that has followed, largely instigated by work in ecology, has begun to percolate into economics. The number of articles by economists on various aspects of ecosystem services, including the benefits of conserving ecosystems and biodiversity, tradeoffs among services, payments for ecosystem services (PES) and other incentive mechanisms, has risen dramatically in the past several years. Still, the economics literature on ecosystems and biodiversity is nowhere near as prominent as the economics literature on climate change. Economists have played a central role in defining the key elements of the debate on climate change following publication of the Stern Review (Stern 2007) and the ensuing debates (e.g., Nordhaus 2007; Sterner and Persson 2008; Weitzman 2007). Economists have yet to play such a central role in ecosystem services and biodiversity. Ecosystems provide a wide range of benefits, from the water and climate regulation roles of forests, the waste assimilation and storm regulation capacities of wetlands, to the cultural and aesthetic benefits derived from savannas. Ecosystems processes and raw materials are