The total economic value of a forest or nature area is determined by the combination of its various functions and the relevant stakeholders for whom those functions are significant.
De Groot classifies functions of nature into four major groups: production, regulation, carrier (habitat), and information. These functions help illustrate the importance of nature for humans and facilitate economic valuation.
The decline of tropical rainforests and other biodiversity-rich ecosystems is primarily attributed to the underestimation of the value of the goods and services they provide. This undervaluation has led to insufficient protection and unsustainable management.
Functions not traded on the market are valued using valuation tools, which help estimate their monetary worth. Cost-Benefit Analysis is also used to assess the overall economic impact.
Market failure occurs when markets do not properly account for the value of certain functions provided by nature, leading to distorted prices or the absence of markets for such functions.
The Total Economic Value calculation in the Leuser Ecosystem case study helps assess the impact of different scenarios (conservation vs. deforestation) on the ecosystem by considering various costs and benefits associated with each scenario.
Functions are natural roles or abilities of ecosystems, while values are assigned by stakeholders based on their needs and preferences. Values can differ between stakeholders and are used to assess the worth of functions.
The checklist is intended to guide decision-makers in the field of natural resources management, helping them ensure that all relevant aspects of economic valuation and decision-making have been considered when evaluating proposals for projects involving alternative use of land.
Economic valuation is an analytical tool that assists decision-makers in comparing the benefits and costs of various scenarios. It aids in making informed choices among alternatives or preferred interventions.
The "Analysis" section of the checklist aims to ensure that the subject area (natural resource) is accurately defined, and that all its functions (production, regulation, habitat, information) are properly identified.
Proper valuation of forest goods and services is crucial to comprehend the full range of costs and benefits associated with their use. This knowledge is essential for informed policy and decision-making.
Multi-Criteria Analysis is used as a complementary value to ensure more balanced decision-making alongside valuation tools.
The Contingent Valuation Method is a valuation tool used to estimate the existence values of natural resources or ecosystems, capturing the willingness of individuals to pay for the mere existence or preservation of such resources.
Cost-Benefit Analysis involves comparing the positive aspects (benefits) and negative aspects (costs) of different scenarios or interventions based on their associated values.
Involving all relevant stakeholders helps incorporate their diverse perspectives and values into the decision-making process, ensuring a comprehensive and informed approach to economic valuation.
Governments may fail to adjust markets due to various reasons such as being influenced by pressure groups, difficulty in obtaining information, bureaucratic inefficiency, corruption, and lack of coordination. These factors contribute to the undervaluation of forests and nature areas.
