Accounting for the value of ecosystem services

A 'value of ecosystem services' (VES) may be calculated by multiplying a set of ecosystem services by a set of corresponding shadow prices. This paper examines the role of the VES concept in measuring trends in human wellbeing. Under conventional arguments from applied welfare economics, standard measures of market consumption may be extended to include the value of direct environmental services, which affect welfare in ways that are not mediated by the consumption of purchased goods. The VES concept does not capture values such as ecological sustainability and distributional fairness that are not reducible to individual welfare. And its operationalization is constrained by the well-known limitations of nonmarket valuation methods. Nonetheless, attempts to calculate the value of environmental services can provide insights into the tradeoffs between market activity and environmental quality that are implicit in the process of economic growth. Such efforts can promote informed debate concerning the achievement of sustainable development. (C) 2002 Elsevier Science B.V. All rights reserved.