Ecosystem Services

What are ecosystem services and why do we need them?

Manmade goods ranging in size and variety from microchips to Mack Trucks surround us in our daily lives. Similarly, we rely on manmade services such as electricity, heat, water, and the internet to conduct everyday tasks in the modern world.

Just as businesses manufacture both goods and services, so too does nature.

You are probably familiar with nature’s goods — the food, fuel and fiber that we use to produce the microchips and the Mack Trucks; but you might be less aware of nature’s  services.
Some of the many life-support services provided every day by wetlands, forests, grasslands, and oceans include:

  • water filtration
  • climate regulation
  • nutrient cycling
  • pollination
  • pest control
  • disease regulation
  • flood control

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Why are ecosystem services being lost?

Unfortunately, as the global population swells by approximately 146 people every minute, the human strain on terrestrial, marine and freshwater ecosystems is causing some of nature’s life support services to falter.

Watersheds scoured of vegetation by deforestation are losing their ability to filter water, wetlands chomped up by new developments are no longer able to control floodwaters when heavy rains hit, and the loss of natural habitat is causing the decline of wild pollinators essential to agriculture. Perhaps most perilous of all, the global thermostat is fluctuating (fueling extreme weather events) as the ability of forests and oceans to absorb heat-trapping gases is depleted.
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Can we use a free-market economy help protect ecosystem services?

Hoping to call attention to the loss of nature’s life support services and reverse this trend, scientists recently decided they would do three things:

  • First, they would give nature’s services a name;
  • Second, they would measure them; and
  • Third, they would try to convince global society to pay for and invest in them.


The first step was fairly easy…the second and third steps are proving more difficult.

Step One: Define nature’s services
In the late 1990s, a group of ecologists and economists collaborated on an effort to assign value to nature’s services. In sum, they estimated that nature’s services were worth some $33 trillion per year. Since the number was almost twice that of the total gross national products of all countries at the time ($18 trillion in 1997), the finding generated a global buzz and a generous dose of controversy. The term ecosystem services came into widespread use in the ensuing dialogue and, formalizing the term in a 1997 publication, the Ecological Society of America explained that ‘ecosystem services’, “refers to a wide range of conditions and processes through which natural ecosystems, and the species that are part of them, help sustain and fulfill human life.”

While it is worth noting that  nature’s services, environmental services, ecological services, and  ecosystem services  all refer to the same set of services,  ecosystem services  is the most widely accepted of these terms and so is the one we use regularly on the Ecosystem Marketplace.

Step Two: Measure ecosystem services
Once ecosystem services had a name, the next step was to refine measurements of their quantity and value. In many respects, efforts to quantify ecosystem services are still in their infancy. Ecologists, nonetheless, have made huge strides toward effectively measuring ecosystem services in the last decade.

A paper published by Claire Kremen of the University of California at Berkeley, for instance, cited 13 scientific studies that quantified ecosystem services ranging from the dung burial of beetles to the carbon storage of trees. The first global survey of ecosystem services, the Millennium Ecosystem Assessment, was also completed in 2005, mapping the physical flow of ecosystem services throughout the world and tracing their connection to human well-being at a variety of scales.

Importantly, once you’ve located and measured services, valuing them becomes much easier. New research suggests that the value of greenhouse gas storage in some forests can be as high $2,200 per hectare. Similarly, a study of coral reefs in the Caribbean suggests that the aesthetic value of intact reefs may be worth just over $2 billion annually to the coral-based tourism industry.
Add it all up and Klaus Toepfer, former head of the United Nations Environment Program argues that, “Conservation of habitats and ecosystems are cost-effective when compared with the short-term profits from environmentally damaging activities like dynamite fishing and sedimentation as a result of deforestation.”

Toepfer may well be right, but saying that something has value is much easier than actually convincing someone to pay for it, which is why step three is the hardest part in the fight to preserve the world’s ecosystem services.

Step Three: Pay for and invest in ecosystem services
We have little trouble understanding that the manufactured service of electricity is valuable to us, so why don’t we think of the ecosystem service of watershed filtration as being valuable too?

We pay for electricity because, when we don’t, it gets shut off. A company has to produce it, and that company invests in the buildings and dams and turbines and computer systems that allow it to generate electricity. Without the company’s investment in this infrastructure, no electricity would be produced. We understand that and so, grudgingly, we pay our electricity bills each month.

On the other hand, we don’t pay for water filtration because, until very recently, we haven’t needed to pay for it. Month after month, year after year, the root structures of trees and plants have been providing this service to us free of charge. We didn’t pay, but the service continued.

Generally, we don’t pay for things that can be had for free. And since no one is paying for ecosystem services, businesses haven’t thought to invest in providing them.

To make matters worse, we have no problem valuing ecosystem goods like timber or gold or oil or food, so we tend to invest in extracting ecosystem goods even when it means destroying ecosystem services. This system of valuing nature leads to economic decisions favoring the consumption of ecosystem goods over the conservation of ecosystem services.

Once you really understand the problem, it is fairly easy to see where the solution lies – market forces must be realigned to invest in the production of both goods and services. If the global economy can be tweaked so that market forces reward investments in ecosystem services, a positive feedback loop will start in which increased investments in ecosystem services leads to increased production of ecosystem goods, eventually fueling both sustainable economic growth and ecological restoration.

While this solution seems fairly simple, it represents one of the biggest scientific, economic, and social challenges of our time.

Can we tweak the global economy so that it provides for sustainable resource consumption and the perpetual conservation of ecosystem services?
A global band of pioneers made up of scientists, economists, lawyers, policymakers, community leaders, businessmen, and individual consumers is currently trying to ensure that the response to this question is – yes.

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Which ecosystem services does the Ecosystem Marketplace cover?

The Ecosystem Marketplace was created to tell the ongoing story of ecosystem service pioneers and, importantly, to provide them (and you) with the information services needed to build a revolutionary new economy that will pay for, and invest in, ecosystem services.

In particular, we cover payment programs for three kinds of ecosystem services:

  • Climate stabilization (carbon sequestration in trees, plants, and marine ecosystems);
  • Hydrological regulation (water quality, groundwater recharge, flood control);
  • Biological diversity benefits (scenic beauty, ecosystem resilience, pollination, pest control, disease control, etc).

We have tagged the different areas of our MarketWatch coverage simply as:  carbon;  water  and  biodiversity.