Quantifying the economic value of ecosystem services on arable farmland: a bottom-up approach

Abstract

The study concerns the evaluation and quantification of the economic value of ecosystem services (ES) or nature's services in arable farmland. The importance of ES is now very well established and ES have been demonstrated to be of very high economic value (US $33 trillion yr⁻¹, 1994 US $) worldwide. However, recent reports, such as the United Nations Millennium Assessment point towards damage being done to these services globally. Intensification of agriculture in the last century has resulted in the substitution of many ES with chemical inputs. This has resulted in some serious detrimental effects which have led to worldwide concerns about the environmental consequences of modern agriculture. Moreover, as the world approaches 'peak oil', so called conventional agriculture may no longer be able to depend as heavily or as easily on oil-derived 'substitution' inputs. Population growth and increasing food demands in the next 50 years also pose great challenges to the sustainability of modern farming practices. This study recognised these challenges and attributed dollar values to nature's services on arable farmland in Canterbury, New Zealand via experimentation and the subsequent integration of ecological and environmental economics techniques. In this study, 19 ecosystem services (biological control of pests, soil formation, mineralisation of plant nutrients, pollination, services provided by shelterbelts and hedges, hydrological flow, aesthetics, carbon accumulation, nitrogen fixation, etc.) were evaluated and quantified on arable farmland using this novel, experimental approach. The total economic value and non-market value (2005 US $) of ES for the conventional arable area (125,000ha) in Canterbury was $500 million and $100 million annually, respectively. If half of the arable area under conventional farming shifted to organic practices, the total economic value of ES would be $285 million and $240 million annually for organic and conventional arable area, respectively. In this case, the non-market value of ES for the organic area was $90 million and that for the conventional area was $50 million annually. The work showed that conventional New Zealand arable farming practices can severely reduce the financial contribution of some of these services to agriculture whereas organic agricultural practices enhances this economic value. However, the change in ES as farms convert to organic practices is very slow, as conventional farming practices have reduced these services to a large extent and organic practices are slow to respond to repair them.

This economic valuation will help in redesigning agricultural landscapes using new ecotechnologies based on novel and sound ecological knowledge to enhance ES. This will improve farm incomes by replacing unsustainable inputs and by managing natural resources. This helps to ensure long-term sustainability of farms in the face of very rapid human population growth.