Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

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Case examples:

• Protected Area Spain
• National Park Planning Austria

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Market price method

Suitability for the forest ecosystem services to be valued: All marketed services Description of the method: Market price method estimates the economic value of ecosystem goods or services that are bought and sold in markets. The market price method can be used to value changes in either the quantity or quality of a good or service. It uses standard economic techniques for measuring the economic benefits from marketed goods and services, based on the quantity people purchase at different prices, and the quantity supplied at different prices. The standard method for measuring the use value of resources traded in the marketplace is the estimation of consumer surplus and producer surplus using the market price and quantity data. Benefits of the method: People’s values are likely to be well-defined as it reflects an individual willingness to pay for costs and benefits of goods or services that are bought and sold in markets. Unless there are known distortions to correct for, such markets prices can be taken as economic values Data availability It uses observed data of actual consumer preferences It uses standard, accepted economic techniques Limitations of the method: Market data are available only for a limited number of goods and services True economic value of goods or services may not be fully reflected in market transactions Seasonal variations and other effects on price must be considered It cannot be easily used to measure the value of larger scale changes that are likely to affect the supply of or demand for a good or service Usually, the market price method does not deduct the market value of other resources used to bring ecosystem products to market, and thus may overstate benefits

Efficiency (shadow) prices

Suitability for the forest ecosystem services to be valued: Services that are traded in domestic or international markets and it may also be calculated for non-marketed goods Description of the method: The market price does not necessarily mean the “proper” price and/or reflect the true economic efficiency price. There are market and policy failures that can distort market prices. Market failures refer to the inability of market prices, under certain conditions, to reflect accurately the value of environmental goods or services. Policy failures concern instances where government policies have unintended effects, or sometimes even side-effects or cause resource-use behaviour inappropriate from a societal perspective. In financial analysis, no account is taken of any of these failures that distort market prices. Therefore, it is advisable to look at their economic value in order for their value to society as a whole to be reflected, as in the case, for example, of alternative forest land uses. To do so, the market price is adjusted. There are various methods for correcting market and policy distortions. A variant of the market price-based method uses shadow prices (market prices adjusted for transfer payments, market imperfections and policy distortions). Shadow prices may also incorporate distribution weights, where equality concerns are made explicit. Benefits of the method: Reflect the true economic value (opportunity cost) to society as a whole Especially useful when there are significant distortions on market prices (considering that prices often reflect the effects of subsidies given to foresters/farmers or of trade policies) Limitations of method: Derivation of shadow price is complex and may require substantial data Decision-makers may not accept what they might consider to be artificial prices Market prices are often more readily accepted by decision makers than artificial values derived by the analyst Market prices are generally easy to observe, both at a single point and over time Market prices reflect the decision of many buyers, whereas calculating shadow prices often relies on the objectivity of judgement of the analyst The procedures for calculating shadow prices are rather imperfect and therefore estimates can, in certain cases, introduce larger discrepancies than even the simple use of imperfect market prices Each case should be analysed within the context in which the valuation is being made, and should take into account the data and resource constraints. There cannot be a simple blueprint for every case

Restoration cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water, raw materials Regulating services: water regulation, water purification and waste treatment; soil formation Cultural services: aesthetic values Description of the method: The method uses costs of restoring ecosystem goods or services. It is based on the idea that given an alternative land-use option the non-marketed benefits provided by an intact ecosystem or the particular goods and services provided by such an ecosystem can be measured by estimating what it would cost to re-create the original ecosystem (or environmental good or service). The assumption is that by restoring the original ecosystem the original level of benefits will be restored. In the case of primary forests, this method would involve costing the restoration of the original forest cover. Clearly, this is not something that, even with active intervention in silviculture and forest management, could be concluded quickly if it could be accomplished at all. Such considerations suggest that the technique is unlikely to prove useful. Benefits of the method: Potentially useful in valuing particular environmental functions Limitation of the method: Diminishing returns and difficulty of restoring previous ecosystem conditions make application of this method questionable

Restoration cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water, raw materials Regulating services: water regulation, water purification and waste treatment; soil formation Cultural services: aesthetic values Description of the method: The method uses costs of restoring ecosystem goods or services. It is based on the idea that given an alternative land-use option the non-marketed benefits provided by an intact ecosystem or the particular goods and services provided by such an ecosystem can be measured by estimating what it would cost to re-create the original ecosystem (or environmental good or service). The assumption is that by restoring the original ecosystem the original level of benefits will be restored. In the case of primary forests, this method would involve costing the restoration of the original forest cover. Clearly, this is not something that, even with active intervention in silviculture and forest management, could be concluded quickly if it could be accomplished at all. Such considerations suggest that the technique is unlikely to prove useful. Benefits of the method: Potentially useful in valuing particular environmental functions Limitation of the method: Diminishing returns and difficulty of restoring previous ecosystem conditions make application of this method questionable

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Replacement cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water supply, raw materials, Regulating services: erosion prevention, water purification, disturbance prevention Cultural services: aesthetic values, Supporting services: nutrient cycling Description of the method: The loss of a natural system service is evaluated in terms of what it would cost to replace that service. It is perhaps more realistic method of re-creating non-marketed benefits consists in replacing specific natural ecosystem functions or assets with man-made production processes and capital, instead of relying on the restoration of the original ecosystem or function to provide the original level of benefits. This technique generates a value for the benefits of an environmental good or service by estimating the cost of replacing the benefits with an alternative good or service. It rests on the availability of such an alternative for the original good or service. The alternative should produce, as nearly as possible, the same level of benefits supplied by the resource or environmental function being valued. This technique rests heavily on the assumption that replacing the original good or service is worthwhile, and that the benefits generated by the investment in replacement outweigh the costs of replacement. Benefits of the method: Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Useful in estimating indirect use benefits when ecological data are not available for estimating damage functions with first-best methods Limitations of the method: The replacement cost method can undervalue the benefits as only market information is used and wider social, environmental and economic benefits are not considered No measure of individual utility if only decision-maker´s preferences count or if only “experts” decide about costs of public budgets In some cases, the replacement cost may be higher than the benefit gained from the replacement (and economic efficiency demands that the marginal benefit equals marginal cost) May overstate willingness to pay if only physical indicators of benefits are available There are also data issues and limitations, and these have an important impact on the results that can be generated by this method

Preventive/defensive expenditure

Suitability for the forest ecosystem service to be valued: Water quality, water purification Erosion protection Storm protection services Description of the method: The method uses the costs of preventing damage or degradation of environmental benefits. It involves obtaining a figure for what it would cost to maintain environmental benefits by investing in the prevention of their degradation. Benefits of the method: Useful in estimating indirect use benefits when prevention technologies are available Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Limitations of the method: Mismatching the benefits of investment in prevention to the original level of benefits may lead to spurious estimates of willingness to pay No measure of individual utility if only decision-maker´s preferences count

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Avalanche Protection Switzerland

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

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Case example:

• Riparian Forests France

 

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Hedonic pricing method

Suitability for the forest ecosystem services to be valued: Air and water pollution Cultural services: aesthetic and recreational services Description of the method: Hedonic pricing method relies on market transactions for differentiated goods to estimate the economic benefits or costs associated with environmental quality. The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics, or the services it provides. It is based on the assumption that goods can be considered aggregates of different attributes, some of which, as they cannot be sold separately, do not have an individual price . It utilizes information about the implicit demand for an environmental attribute of marketed commodities. For instance, houses or property in general consist of several attributes, some of which are environmental in nature, such as the proximity of a house to a forest or whether it has a view on a nice landscape. Hence, the value of a change in biodiversity or ecosystem services will be reflected in the change in the value of property (either built-up or land that is in a (semi-) natural state). By estimating a demand function for property, the analyst can infer the value of a change in the non-marketed environmental benefits generated by the environmental good. Benefits of the method: May be conducted with already existing data (no separate data collection costs) Can be used to estimate values based on actual choices Property markets are relatively efficient in responding to information, so can be good indications of value The method is versatile, and can be adapted to consider several possible interactions between market goods and environmental quality Property records are typically very reliable Limitations of the method: It can be applied only in presence of a good number of market exchanges, as the model representing the market requires a certain number of good quality data The market must be sufficiently transparent Scope of environmental benefits that can be measured is mainly limited to things that are related to housing prices, it is not possible to estimate the total economic value of the environmental good, but only the value connected to present and, with some caution, future uses Only captures people’s willingness to pay for perceived differences in environmental attributes, and their direct consequences Assumes that people have the opportunity to select the combination of features they prefer, given their income Results depend heavily on model specification Large amounts of data must be gathered and manipulated Relatively complex to implement and interpret, requiring a high degree of statistical expertise Time and expense to carry out an application depends on the availability and accessibility of data The availability of reliable price records can be a major problem.

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Restoration cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water, raw materials Regulating services: water regulation, water purification and waste treatment; soil formation Cultural services: aesthetic values Description of the method: The method uses costs of restoring ecosystem goods or services. It is based on the idea that given an alternative land-use option the non-marketed benefits provided by an intact ecosystem or the particular goods and services provided by such an ecosystem can be measured by estimating what it would cost to re-create the original ecosystem (or environmental good or service). The assumption is that by restoring the original ecosystem the original level of benefits will be restored. In the case of primary forests, this method would involve costing the restoration of the original forest cover. Clearly, this is not something that, even with active intervention in silviculture and forest management, could be concluded quickly if it could be accomplished at all. Such considerations suggest that the technique is unlikely to prove useful. Benefits of the method: Potentially useful in valuing particular environmental functions Limitation of the method: Diminishing returns and difficulty of restoring previous ecosystem conditions make application of this method questionable

Replacement cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water supply, raw materials, Regulating services: erosion prevention, water purification, disturbance prevention Cultural services: aesthetic values, Supporting services: nutrient cycling Description of the method: The loss of a natural system service is evaluated in terms of what it would cost to replace that service. It is perhaps more realistic method of re-creating non-marketed benefits consists in replacing specific natural ecosystem functions or assets with man-made production processes and capital, instead of relying on the restoration of the original ecosystem or function to provide the original level of benefits. This technique generates a value for the benefits of an environmental good or service by estimating the cost of replacing the benefits with an alternative good or service. It rests on the availability of such an alternative for the original good or service. The alternative should produce, as nearly as possible, the same level of benefits supplied by the resource or environmental function being valued. This technique rests heavily on the assumption that replacing the original good or service is worthwhile, and that the benefits generated by the investment in replacement outweigh the costs of replacement. Benefits of the method: Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Useful in estimating indirect use benefits when ecological data are not available for estimating damage functions with first-best methods Limitations of the method: The replacement cost method can undervalue the benefits as only market information is used and wider social, environmental and economic benefits are not considered No measure of individual utility if only decision-maker´s preferences count or if only “experts” decide about costs of public budgets In some cases, the replacement cost may be higher than the benefit gained from the replacement (and economic efficiency demands that the marginal benefit equals marginal cost) May overstate willingness to pay if only physical indicators of benefits are available There are also data issues and limitations, and these have an important impact on the results that can be generated by this method

Preventive/defensive expenditure

Suitability for the forest ecosystem service to be valued: Water quality, water purification Erosion protection Storm protection services Description of the method: The method uses the costs of preventing damage or degradation of environmental benefits. It involves obtaining a figure for what it would cost to maintain environmental benefits by investing in the prevention of their degradation. Benefits of the method: Useful in estimating indirect use benefits when prevention technologies are available Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Limitations of the method: Mismatching the benefits of investment in prevention to the original level of benefits may lead to spurious estimates of willingness to pay No measure of individual utility if only decision-maker´s preferences count

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Hedonic pricing method

Suitability for the forest ecosystem services to be valued: Air and water pollution Cultural services: aesthetic and recreational services Description of the method: Hedonic pricing method relies on market transactions for differentiated goods to estimate the economic benefits or costs associated with environmental quality. The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics, or the services it provides. It is based on the assumption that goods can be considered aggregates of different attributes, some of which, as they cannot be sold separately, do not have an individual price . It utilizes information about the implicit demand for an environmental attribute of marketed commodities. For instance, houses or property in general consist of several attributes, some of which are environmental in nature, such as the proximity of a house to a forest or whether it has a view on a nice landscape. Hence, the value of a change in biodiversity or ecosystem services will be reflected in the change in the value of property (either built-up or land that is in a (semi-) natural state). By estimating a demand function for property, the analyst can infer the value of a change in the non-marketed environmental benefits generated by the environmental good. Benefits of the method: May be conducted with already existing data (no separate data collection costs) Can be used to estimate values based on actual choices Property markets are relatively efficient in responding to information, so can be good indications of value The method is versatile, and can be adapted to consider several possible interactions between market goods and environmental quality Property records are typically very reliable Limitations of the method: It can be applied only in presence of a good number of market exchanges, as the model representing the market requires a certain number of good quality data The market must be sufficiently transparent Scope of environmental benefits that can be measured is mainly limited to things that are related to housing prices, it is not possible to estimate the total economic value of the environmental good, but only the value connected to present and, with some caution, future uses Only captures people’s willingness to pay for perceived differences in environmental attributes, and their direct consequences Assumes that people have the opportunity to select the combination of features they prefer, given their income Results depend heavily on model specification Large amounts of data must be gathered and manipulated Relatively complex to implement and interpret, requiring a high degree of statistical expertise Time and expense to carry out an application depends on the availability and accessibility of data The availability of reliable price records can be a major problem.

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Contingent Valuation Method

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Afforestation Spain
• Erosion and Water Quality Spain

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

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Case examples:

• Erosion and Water Quality Spain
• Riparian Forests France

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Replacement cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water supply, raw materials, Regulating services: erosion prevention, water purification, disturbance prevention Cultural services: aesthetic values, Supporting services: nutrient cycling Description of the method: The loss of a natural system service is evaluated in terms of what it would cost to replace that service. It is perhaps more realistic method of re-creating non-marketed benefits consists in replacing specific natural ecosystem functions or assets with man-made production processes and capital, instead of relying on the restoration of the original ecosystem or function to provide the original level of benefits. This technique generates a value for the benefits of an environmental good or service by estimating the cost of replacing the benefits with an alternative good or service. It rests on the availability of such an alternative for the original good or service. The alternative should produce, as nearly as possible, the same level of benefits supplied by the resource or environmental function being valued. This technique rests heavily on the assumption that replacing the original good or service is worthwhile, and that the benefits generated by the investment in replacement outweigh the costs of replacement. Benefits of the method: Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Useful in estimating indirect use benefits when ecological data are not available for estimating damage functions with first-best methods Limitations of the method: The replacement cost method can undervalue the benefits as only market information is used and wider social, environmental and economic benefits are not considered No measure of individual utility if only decision-maker´s preferences count or if only “experts” decide about costs of public budgets In some cases, the replacement cost may be higher than the benefit gained from the replacement (and economic efficiency demands that the marginal benefit equals marginal cost) May overstate willingness to pay if only physical indicators of benefits are available There are also data issues and limitations, and these have an important impact on the results that can be generated by this method

Preventive/defensive expenditure

Suitability for the forest ecosystem service to be valued: Water quality, water purification Erosion protection Storm protection services Description of the method: The method uses the costs of preventing damage or degradation of environmental benefits. It involves obtaining a figure for what it would cost to maintain environmental benefits by investing in the prevention of their degradation. Benefits of the method: Useful in estimating indirect use benefits when prevention technologies are available Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Limitations of the method: Mismatching the benefits of investment in prevention to the original level of benefits may lead to spurious estimates of willingness to pay No measure of individual utility if only decision-maker´s preferences count

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Afforestation Spain
• Erosion and Water Quality Spain

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Restoration cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water, raw materials Regulating services: water regulation, water purification and waste treatment; soil formation Cultural services: aesthetic values Description of the method: The method uses costs of restoring ecosystem goods or services. It is based on the idea that given an alternative land-use option the non-marketed benefits provided by an intact ecosystem or the particular goods and services provided by such an ecosystem can be measured by estimating what it would cost to re-create the original ecosystem (or environmental good or service). The assumption is that by restoring the original ecosystem the original level of benefits will be restored. In the case of primary forests, this method would involve costing the restoration of the original forest cover. Clearly, this is not something that, even with active intervention in silviculture and forest management, could be concluded quickly if it could be accomplished at all. Such considerations suggest that the technique is unlikely to prove useful. Benefits of the method: Potentially useful in valuing particular environmental functions Limitation of the method: Diminishing returns and difficulty of restoring previous ecosystem conditions make application of this method questionable

Restoration cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water, raw materials Regulating services: water regulation, water purification and waste treatment; soil formation Cultural services: aesthetic values Description of the method: The method uses costs of restoring ecosystem goods or services. It is based on the idea that given an alternative land-use option the non-marketed benefits provided by an intact ecosystem or the particular goods and services provided by such an ecosystem can be measured by estimating what it would cost to re-create the original ecosystem (or environmental good or service). The assumption is that by restoring the original ecosystem the original level of benefits will be restored. In the case of primary forests, this method would involve costing the restoration of the original forest cover. Clearly, this is not something that, even with active intervention in silviculture and forest management, could be concluded quickly if it could be accomplished at all. Such considerations suggest that the technique is unlikely to prove useful. Benefits of the method: Potentially useful in valuing particular environmental functions Limitation of the method: Diminishing returns and difficulty of restoring previous ecosystem conditions make application of this method questionable

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Averting behaviour models

Suitability for the forest ecosystem services to be valued: Regulating services Description of the method: Averting behaviour models are based on the presumption that people will change their behaviour and invest money to avoid an undesirable outcome. Thus, averting behaviour analyses the rate of substitution between changes in behaviour and expenditures on and changes in environmental quality in order to infer the value of certain non-marketed environmental attributes. This models are similar to the travel cost method and hedonic pricing, but they differ as they use as a basis individual behaviour to avoid negative intangible impacts as a conceptual base. However, the situation is complicated by the fact that these market goods might have more benefits than simply that of reducing an intangible bad. Averting behaviour occurs when individuals take costly actions to avoid exposure to a non-market bad. It is needed to take account the fact that valuing these alternative actions might not be a straightforward task, for instance, if time which would have been spent doing one thing is instead used to do something else, not only avoiding exposure to the non-market impact in question, but also producing valuable economic outputs. Benefits of the method: It has a sound theoretical basis It uses data on actual expenditures and data requirements can be modest Limitation of the method: Not a widely used methodology Can only estimate use values Limited to cases where households spend money to offset environmental hazards/nuisances Confined to cases where those affected are aware of the environmental issue and act because of them Appropriate data may be difficult to obtain

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Production function-based methods

Suitability for the forest ecosystem services to be valued: Regulating and supporting services Description of the method: Method estimates how much a given ecosystem service contributes to the delivery of another service or commodity which is traded on an existing market. That means, this approach is based on the contribution of ecosystem services to the enhancement of income or productivity. The idea thus is that any resulting “improvements in the resource base or environmental quality” as a result of enhanced ecosystem service, “lower costs and prices and increase the quantities of marketed goods, leading to increases in consumers’ and perhaps producers’ surpluses.” Benefits of the method: Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Use data from actual markets, and thus reflect actual preferences or costs to individuals Data are relatively easy to obtain Limitations of the method: Requires knowledge of relationships between ecosystems services and valued end points Adequate data on and understanding of the cause-effect linkages between the ecosystem service being valued and the marketed commodity are often lacking Rarely understood well enough to quantify how much of a service is produced, or how changes in ecosystem condition or function will translate into changes in the ecosystem service delivered The interconnectivity and interdependencies of ecosystem services may increase the likelihood of double-counting The non-use benefits associated with a resource are not taken into account

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Afforestation Spain
• Avalanche Protection Switzerland
• Biodiversity Germany

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

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Case examples:

• Conservation Programs Norway
• National Park Planning Austria
• Riparian Forests France

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Forest Management Practices Finland
• Forest Recreation and Use Poland

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Decision science approaches

Suitability for the forest ecosystem services to be valued: Spiritual, cultural services Description of the service: Decision science approaches derive information about people’s values through a deliberative process that helps individuals to understand and assess trade-offs among multiple attributes. The ultimate goal is for an individual or group to assign scores to alternatives (e.g. different projects) that can then be used to choose among those alternatives, recognizing that those alternatives will differ along a number of relevant dimensions or attributes. Generally, one alternative will score higher along some dimensions but not others, suggesting that trade-offs must be made when choosing among alternatives. Benefits of the method: Ability to not only integrate multiple attributes value, but also engage a broad spectrum of stakeholders, holders of traditional ecological or cultural knowledge, and technical experts in the valuation process High potential for identifying changes in ecosystems and their services that are likely to be of greatest concern to people Method may potentially overcome (primarily) public or stakeholder objections to other approaches that are not perceived to adequately include moral and other non-monetary aspects of value Limitations of the method: The trade-offs are typically not easy to make It requires time and expertise resources Engaging with stakeholders and technical experts to identify attributes that will be the focus of analysis, collecting data that characterizes these attributes, and the process of making trade-offs all will require effort on the part of Environmental Protection Agency

Travel Cost Method

Suitability for the forest ecosystem services to be valued: Recreational services Description of the method: Travel Cost Method derives willingness to pay for environmental benefits at a specific location by using information on the amount of money and time that people spend to visit the location. It is based on the rationale that recreational experiences are associated with a cost (direct expenses and opportunity costs of time). The value of a change in the quality or quantity of a recreational site (resulting from changes in biodiversity) can be inferred from estimating the demand function for visiting the site that is being studied. This method assumes that the value to the consumer is at least equal to the travel costs the consumer is willing to incur to obtain the desired good or service. Thus, peoples’ willingness to pay to visit the site can be estimated based on the number of trips that they make at different travel costs. This is analogous to estimating peoples’ willingness to pay for a marketed good based on the quantity demanded at different prices. Benefits of the method: Similar to more conventional approaches to estimate economic values based on market prices Based on actual behaviour rather than on hypothetical behaviour of the respondents On-site surveys provide opportunities for large sample sizes Results are relatively easy to interpret and explain Relatively inexpensive to apply Limitations of the method: Opportunity costs of time (i.e. the idea that time spent traveling could have been used in other ways) are difficult to determine and might not be empirically observable at all, which requires additional assumptions Assumption that people respond to changes in travel costs the same way that they would respond to changes in admission price might not always be true Limited in its scope of application because it requires user participation Standard approaches provide information about current conditions, but not about gains or losses from anticipated changes in resource conditions The simplest travel cost models assume that individuals take a trip for a single purpose The availability of substitute sites will affect values The modern variants of travel-cost models are known as Random utility/discrete choice models. Random utility models arise from the empirical assumption that people know their preferences (utility) with certainty, but there are elements of these preferences that are not accessible to the empirical observer. Thus, parameters of peoples’ preferences can be recovered statistically up to a random error component. This econometric approach is used to estimate modern travel-cost models.

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Case examples:

• Protected Area Spain

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Forest Management Practices Finland

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

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Case examples:

• Recreation England
• National Park Planning Austria

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

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Case examples:

• Recreation England

Travel Cost Method

Suitability for the forest ecosystem services to be valued: Recreational services Description of the method: Travel Cost Method derives willingness to pay for environmental benefits at a specific location by using information on the amount of money and time that people spend to visit the location. It is based on the rationale that recreational experiences are associated with a cost (direct expenses and opportunity costs of time). The value of a change in the quality or quantity of a recreational site (resulting from changes in biodiversity) can be inferred from estimating the demand function for visiting the site that is being studied. This method assumes that the value to the consumer is at least equal to the travel costs the consumer is willing to incur to obtain the desired good or service. Thus, peoples’ willingness to pay to visit the site can be estimated based on the number of trips that they make at different travel costs. This is analogous to estimating peoples’ willingness to pay for a marketed good based on the quantity demanded at different prices. Benefits of the method: Similar to more conventional approaches to estimate economic values based on market prices Based on actual behaviour rather than on hypothetical behaviour of the respondents On-site surveys provide opportunities for large sample sizes Results are relatively easy to interpret and explain Relatively inexpensive to apply Limitations of the method: Opportunity costs of time (i.e. the idea that time spent traveling could have been used in other ways) are difficult to determine and might not be empirically observable at all, which requires additional assumptions Assumption that people respond to changes in travel costs the same way that they would respond to changes in admission price might not always be true Limited in its scope of application because it requires user participation Standard approaches provide information about current conditions, but not about gains or losses from anticipated changes in resource conditions The simplest travel cost models assume that individuals take a trip for a single purpose The availability of substitute sites will affect values The modern variants of travel-cost models are known as Random utility/discrete choice models. Random utility models arise from the empirical assumption that people know their preferences (utility) with certainty, but there are elements of these preferences that are not accessible to the empirical observer. Thus, parameters of peoples’ preferences can be recovered statistically up to a random error component. This econometric approach is used to estimate modern travel-cost models.

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Case examples:

• Protected Area Spain
• Recreation England
• Spatial Scales Netherlands
• Travel costs Belgium

Hedonic pricing method

Suitability for the forest ecosystem services to be valued: Air and water pollution Cultural services: aesthetic and recreational services Description of the method: Hedonic pricing method relies on market transactions for differentiated goods to estimate the economic benefits or costs associated with environmental quality. The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics, or the services it provides. It is based on the assumption that goods can be considered aggregates of different attributes, some of which, as they cannot be sold separately, do not have an individual price . It utilizes information about the implicit demand for an environmental attribute of marketed commodities. For instance, houses or property in general consist of several attributes, some of which are environmental in nature, such as the proximity of a house to a forest or whether it has a view on a nice landscape. Hence, the value of a change in biodiversity or ecosystem services will be reflected in the change in the value of property (either built-up or land that is in a (semi-) natural state). By estimating a demand function for property, the analyst can infer the value of a change in the non-marketed environmental benefits generated by the environmental good. Benefits of the method: May be conducted with already existing data (no separate data collection costs) Can be used to estimate values based on actual choices Property markets are relatively efficient in responding to information, so can be good indications of value The method is versatile, and can be adapted to consider several possible interactions between market goods and environmental quality Property records are typically very reliable Limitations of the method: It can be applied only in presence of a good number of market exchanges, as the model representing the market requires a certain number of good quality data The market must be sufficiently transparent Scope of environmental benefits that can be measured is mainly limited to things that are related to housing prices, it is not possible to estimate the total economic value of the environmental good, but only the value connected to present and, with some caution, future uses Only captures people’s willingness to pay for perceived differences in environmental attributes, and their direct consequences Assumes that people have the opportunity to select the combination of features they prefer, given their income Results depend heavily on model specification Large amounts of data must be gathered and manipulated Relatively complex to implement and interpret, requiring a high degree of statistical expertise Time and expense to carry out an application depends on the availability and accessibility of data The availability of reliable price records can be a major problem.

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Case examples:

• Housepricing Finland

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Random utility/discrete choice models

Suitability for the forest ecosystem services to be valued: Recreational services Description of the method: Random utility / discrete choice models arise from the empirical assumption that people know their preferences (utility) with certainty, but there are elements of these preferences that are not accessible to the empirical observer. Thus, parameters of peoples’ preferences can be recovered statistically up to a random error component. This econometric approach is used to estimate modern travel-cost models. Benefits of the method: Uniquely designed to estimate values for attributes of recreation sites, which include the quantity and quality of the ecosystem services The best approach to use to estimate benefits for specific characteristics, or quality changes, of sites, rather than for the site as a whole The most appropriate approach when there are many substitute sites Limitations of the method: Data needed not only from one site but also concerning all other sites Econometric models are more complex

Choice modelling techniques

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Choice modelling attempts to determine the willingness to pay (WTP) of an individual by analysing his choices between different alternatives. Individuals are faced with two or more alternatives with shared attributes of the services to be valued, but with different attribute levels (one of the attributes being the money people would have to pay for the service). The alternatives are designed so that the respondent’s choice reveals the marginal rate of substitution between the attributes and the item that is traded off (e.g. money). The basic premise of the choice experiment is that a forest good or service can be decomposed in a bundle of attributes or features, and that individuals are sensitive to changes in these attributes. The most used variants of choice modelling techniques are Contingent ranking, Contingent rating, Pair comparisons, and Discrete choice. Benefits of the method: Measurement of non-use values possible (to provide a true measure of total economic value) Valuation of future goods and services possible Valuation of several goods/services at the same time (including their trade-offs) The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: High data requirements Analysis mathematically complicated Interpretation not straightforward for lay people Preferences for non-use values tend to be less stable Budget and time demands are high High risk of biases that may lead to inaccurate WTP estimations

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Case examples:

• Afforestation Spain
• Forest Management Practices Finland
• Forest Recreation and Use Poland

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.

Restoration cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water, raw materials Regulating services: water regulation, water purification and waste treatment; soil formation Cultural services: aesthetic values Description of the method: The method uses costs of restoring ecosystem goods or services. It is based on the idea that given an alternative land-use option the non-marketed benefits provided by an intact ecosystem or the particular goods and services provided by such an ecosystem can be measured by estimating what it would cost to re-create the original ecosystem (or environmental good or service). The assumption is that by restoring the original ecosystem the original level of benefits will be restored. In the case of primary forests, this method would involve costing the restoration of the original forest cover. Clearly, this is not something that, even with active intervention in silviculture and forest management, could be concluded quickly if it could be accomplished at all. Such considerations suggest that the technique is unlikely to prove useful. Benefits of the method: Potentially useful in valuing particular environmental functions Limitation of the method: Diminishing returns and difficulty of restoring previous ecosystem conditions make application of this method questionable

Replacement cost method

Suitability for the FES to be valued: Provisioning services: non-wood forest products, water supply, raw materials, Regulating services: erosion prevention, water purification, disturbance prevention Cultural services: aesthetic values, Supporting services: nutrient cycling Description of the method: The loss of a natural system service is evaluated in terms of what it would cost to replace that service. It is perhaps more realistic method of re-creating non-marketed benefits consists in replacing specific natural ecosystem functions or assets with man-made production processes and capital, instead of relying on the restoration of the original ecosystem or function to provide the original level of benefits. This technique generates a value for the benefits of an environmental good or service by estimating the cost of replacing the benefits with an alternative good or service. It rests on the availability of such an alternative for the original good or service. The alternative should produce, as nearly as possible, the same level of benefits supplied by the resource or environmental function being valued. This technique rests heavily on the assumption that replacing the original good or service is worthwhile, and that the benefits generated by the investment in replacement outweigh the costs of replacement. Benefits of the method: Costs incurred by individuals in order to avoid damages at already existing goods can be interpreted as a lower bound of the willingness to pay for this good Useful in estimating indirect use benefits when ecological data are not available for estimating damage functions with first-best methods Limitations of the method: The replacement cost method can undervalue the benefits as only market information is used and wider social, environmental and economic benefits are not considered No measure of individual utility if only decision-maker´s preferences count or if only “experts” decide about costs of public budgets In some cases, the replacement cost may be higher than the benefit gained from the replacement (and economic efficiency demands that the marginal benefit equals marginal cost) May overstate willingness to pay if only physical indicators of benefits are available There are also data issues and limitations, and these have an important impact on the results that can be generated by this method

Hedonic pricing method

Suitability for the forest ecosystem services to be valued: Air and water pollution Cultural services: aesthetic and recreational services Description of the method: Hedonic pricing method relies on market transactions for differentiated goods to estimate the economic benefits or costs associated with environmental quality. The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics, or the services it provides. It is based on the assumption that goods can be considered aggregates of different attributes, some of which, as they cannot be sold separately, do not have an individual price . It utilizes information about the implicit demand for an environmental attribute of marketed commodities. For instance, houses or property in general consist of several attributes, some of which are environmental in nature, such as the proximity of a house to a forest or whether it has a view on a nice landscape. Hence, the value of a change in biodiversity or ecosystem services will be reflected in the change in the value of property (either built-up or land that is in a (semi-) natural state). By estimating a demand function for property, the analyst can infer the value of a change in the non-marketed environmental benefits generated by the environmental good. Benefits of the method: May be conducted with already existing data (no separate data collection costs) Can be used to estimate values based on actual choices Property markets are relatively efficient in responding to information, so can be good indications of value The method is versatile, and can be adapted to consider several possible interactions between market goods and environmental quality Property records are typically very reliable Limitations of the method: It can be applied only in presence of a good number of market exchanges, as the model representing the market requires a certain number of good quality data The market must be sufficiently transparent Scope of environmental benefits that can be measured is mainly limited to things that are related to housing prices, it is not possible to estimate the total economic value of the environmental good, but only the value connected to present and, with some caution, future uses Only captures people’s willingness to pay for perceived differences in environmental attributes, and their direct consequences Assumes that people have the opportunity to select the combination of features they prefer, given their income Results depend heavily on model specification Large amounts of data must be gathered and manipulated Relatively complex to implement and interpret, requiring a high degree of statistical expertise Time and expense to carry out an application depends on the availability and accessibility of data The availability of reliable price records can be a major problem.

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Case examples:

• Housepricing Finland

Contingent Valuation Method

Suitability for the forest ecosystem services to be valued: All forest services Description of the method: Contingent Valuation Method (CVM) is a questionnaire based technique that seeks to discover individual preferences for an environmental change. It uses one of two measures of consumer’s surplus: compensating variation (CV) or equivalent variation (EV). CV is the amount of money (change in income) necessary to make an individual indifferent with respect to an initial situation and a new situation with different prices. EV may be viewed as a change in income equivalent to a change in welfare after a change in prices has occurred. CVM is used to estimate the consumer’s willingness to pay (WTP) for a specified good or service, or his/her WTA compensation for forgoing a desired good or service. In practice, it is usually derived from the responses of potential consumers to a hypothetical exchange situation. The method assumes that the consumer’s expressed WTP in a hypothetical situation is a utility indicator to the consumer in an actual situation. The basic premise of the contingent valuation method is that individuals are sensitive to a given environmental change and that their preferences could be measured in terms of their WTP to undergo (or their WTA a compensation to avoid) this change. Therefore, the given change is presented to individuals through a survey where the environmental change is presented and where people are directly asked to state their WTP or their WTA the given environmental change. The most used variants of CVM are Open-ended, Dichotomous or Polychotomous choice, Iterative bidding game, and Payment card. Benefits of the method: Measurement of non-use values possible (to provide a comprehensive measure of total economic value) Valuation of future goods and services possible The use of surveys allows to collect relevant socioeconomic and attitudinal data on the respondents that could be relevant for understanding the variables influencing social preferences and choices The use of surveys allows to estimate hypothetical changes and their impact before they have taken place Participative/deliberative approaches before valuing the good or service at stake seem to provide with more stable results Limitations of the method: Results sensitive to numerous sources of bias in survey design and implementation Preferences for non-use values tend to be less stable Budget and time demands are high

Value transfer method

Suitability for the forest ecosystem services to be valued: All forest services, however, it was showed that it is more reliable for transferring use values Description of the method: Value transfer method it is not a straightforward direct method, because it would also be possible to transfer results from indirect methods. It is used to estimate economic values for ecosystem services by transferring the available information from studies already completed in another location and/or context. Value transfer method is not a valuation method as such, but it is a method that involves transferring economic estimates from previous studies of similar changes in environmental quality to value the environmental change at the policy site. Thus, the basic goal of benefit transfer is to estimate benefits for one context by adapting an estimate of benefits from some other context. There are two main forms of the value transfer method: Unit Value Transfer is the simplest method which builds on the transfer of actual value estimates from other studies, appropriately adjusted for inflation, the differences in purchasing power of income across regions and, in some cases, the income variation. Function Transfer approach – it is more ambitious and suggests transferring value functions from other studies. The benefit function statistically relates people willingness to pay to ecosystem characteristics and the people whose values were elicited Benefits of the method: Typically less costly than conducting an original valuation study Economic benefits can be estimated more quickly than when undertaking an original valuation study The method can be used as a screening technique to determine if a more detailed, original valuation study should be conducted Limitations of the method: Value transfer may not be accurate, except for making gross estimates of recreational values, unless the sites share all of the site, location, and user specific characteristics Good studies for the policy or issue in question may not be available It may be difficult to track down appropriate studies, since many are not published Reporting of existing studies may be inadequate to make the needed adjustments Adequacy of existing studies may be difficult to assess Extrapolation beyond the range of characteristics of the initial study is not recommended Value transfers can only be as accurate as the initial value estimate Unit value estimates can quickly become dated

Hedonic pricing method

Suitability for the forest ecosystem services to be valued: Air and water pollution Cultural services: aesthetic and recreational services Description of the method: Hedonic pricing method relies on market transactions for differentiated goods to estimate the economic benefits or costs associated with environmental quality. The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics, or the services it provides. It is based on the assumption that goods can be considered aggregates of different attributes, some of which, as they cannot be sold separately, do not have an individual price . It utilizes information about the implicit demand for an environmental attribute of marketed commodities. For instance, houses or property in general consist of several attributes, some of which are environmental in nature, such as the proximity of a house to a forest or whether it has a view on a nice landscape. Hence, the value of a change in biodiversity or ecosystem services will be reflected in the change in the value of property (either built-up or land that is in a (semi-) natural state). By estimating a demand function for property, the analyst can infer the value of a change in the non-marketed environmental benefits generated by the environmental good. Benefits of the method: May be conducted with already existing data (no separate data collection costs) Can be used to estimate values based on actual choices Property markets are relatively efficient in responding to information, so can be good indications of value The method is versatile, and can be adapted to consider several possible interactions between market goods and environmental quality Property records are typically very reliable Limitations of the method: It can be applied only in presence of a good number of market exchanges, as the model representing the market requires a certain number of good quality data The market must be sufficiently transparent Scope of environmental benefits that can be measured is mainly limited to things that are related to housing prices, it is not possible to estimate the total economic value of the environmental good, but only the value connected to present and, with some caution, future uses Only captures people’s willingness to pay for perceived differences in environmental attributes, and their direct consequences Assumes that people have the opportunity to select the combination of features they prefer, given their income Results depend heavily on model specification Large amounts of data must be gathered and manipulated Relatively complex to implement and interpret, requiring a high degree of statistical expertise Time and expense to carry out an application depends on the availability and accessibility of data The availability of reliable price records can be a major problem.

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Case examples:

• Housepricing Finland

Related goods approaches

Suitability for the forest ecosystem services to be valued: Non marketed ecosystem services Description of the method: A non-marketed good or service may be related to a marketed good or service. By using information about this relationship and the price of the marketed product, the analyst may be able to infer the value of the non-marketed product. This broadly defined related goods approach consists of three similar valuation techniques: Barter exchange approach Direct substitute approach Direct substitute approach

Indirect opportunity costs method

Suitability of the forest ecosystem services to be valued: Non-marketed ecosystem services Description of the method: The method is used to calculate the value of non-market environmental goods when individual labour is involved in harvesting or collection. The opportunity cost method provides quick and straightforward information on the forgone development costs of preservation, but it does not provide an estimate of the social benefits of preservation. The basic assumption of this technique is that the decision to spend time in the collection and harvesting of, for example, non-timber forest product (NTFP) is weighed against alternative productive uses of labour. However, in many cases, it is almost impossible to assess how much labour is used for collecting NTFPs. These “user cost-based techniques” suffer from the same deficiency – what something is worth has no necessary relationship to the costs involved to produce it. The fact that it is hard to estimate the users’ cost to produce, for such joint products as NTFPs in the informal sector, makes this technique somewhat dubious.