Production function-based methods

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