Ecosystem services defined 

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Chapter 2: Literature Review


The purpose of this chapter is to provide an overview of the development of resource economic valuation techniques in the context of the concept of ecosystem services and critically assess knowledge gaps in valuing regulating services.There is a growing literature that attempts to internalise ecosystems’ attributes into development planning and policy analysis, through estimating and integrating shadow prices of ecosystem services and the trade-offs involved between elements in bundles of services impacted by development decisions. In spite of these efforts, the value of ecosystems’ assets and their services remain largely missing, and even when quantified, underestimated (Adamowicz 2004).
This is attributed firstly to our deficient understanding of the nature of the complex dynamics of the interactions between ecosystems’ functioning and human well-being (Perrings 2006). Gaps in current scientific knowledge of the interdependence between the coupled socio-ecological systems translate into misinformed decision making and adoption of wrong policies and actions that fundamentally result in unsustainable use of these natural assets and weak willingness to conserve them. Several factors that characterize the complex dynamics of socio-ecological interdependence are the cause of this. Among the main reasons is the fact that human society recognizes only the value of a subset of services that are directly used as final products for consumption,production or recreation. On the other hand, the role and value of other more fundamental services that are not directly used as final products, but form crucial supporting and regulating roles underlying the ecosystem functionality, are not recognized nor well understood.In spite of their crucial role as the basis of all other provisions of nature, the literature on valuing such intermediate services is sparse, leaving an important gap in our knowledge of sustainable management of ecosystems for human well-being.Perrings (2006) described several typical weaknesses in environmental economic study approaches. One of most significant weaknesses was that most environmental valuation studies had focussed primarily on the direct use values of the environment,and put comparatively little effort into understanding the indirect linkages between ecological functioning, ecosystem services and the production and consumption of other economic goods and services.
There is thus a dearth of literature on the valuation of these sets of services (Barbier et. al. 2009), especially in dealing with the uncertainty over the supply of ecosystem services (Pindyck 2006). In response to these weaknesses, the MEA (2005 and 2007) introduced a radical new approach (or framework) to the analysis of the interface of the ecology and the economy. So radical is this approach that it has been described by Perrings (2006) as equal in significance (within the field of environmental economics) to the Hartwick rule for reinvestment of Hotelling rents.

 Ecosystem services defined

Central to this approach is the definition of the concept of ecosystem services. The MEA and TEEB define ecosystem services as the direct and indirect contributions of ecosystems to human well-being. They distinguish between four types of ecosystem services: provisioning, cultural, regulating and supporting services. Provisioning services describe the material or energy outputs from ecosystems. Cultural services include the non-material benefits people obtain from contact with ecosystems. Regulating services are the services that ecosystems provide by acting as regulators. They control and normalise ecosystem functioning and thus insures the benefits supplied by ecosystems (MEA 2005; Barbier et. al. 2009, Barbier et. al.2011). Regulating services play an indirect role in the economy, and mitigate environmental risk. Supporting services underpin almost all other services through its function of providing living spaces for humans, plants and animals. Examples of these services, relevant to aquatic ecosystems, may include:
• Climate regulation. Ecosystems influence climate both locally and globally. For example, at a local scale, changes in land cover can affect both temperature and precipitation. Wetland or estuarine ecosystems can act as carbon sinks. At the global scale, ecosystems play an important role in climate by either sequestering or emitting green-house gases.
• Water regulation. The timing and magnitude of runoff, flooding, and aquifer recharge regulate water provisioning in a system.
• Erosion control. Vegetative cover plays an important role in soil retention and the prevention of landslides.
• Water purification and waste treatment. Ecosystems can be a source of impurities in fresh water but also can help to filter out and decompose organic wastes introduced into inland waters and coastal and marine ecosystems.
• Regulation of human diseases. Changes in ecosystems can directly change the abundance of human pathogens, such as cholera, and can alter the abundance of disease vectors, such as mosquitoes.
• Biological control. Ecosystem changes affect the prevalence of pests and diseases.
• Pollination. Ecosystem changes affect the distribution, abundance, and effectiveness of pollinators.
• Storm protection. The presence of coastal ecosystems such as mangroves and coral reefs can dramatically reduce the damage caused by hurricanes or large waves.
Supporting services are those that are necessary for the production of all other ecosystem services. They differ from provisioning, regulating, and cultural services in that their impacts on people are either indirect or occur over a very long time, whereas changes in the other categories have relatively direct and short-term impacts on people. Some examples of supporting services are primary production, production of atmospheric oxygen, soil formation and retention, nutrient cycling,water cycling, and provisioning of habitat. The key benefit of the MEA/TEEB framework is that it allows investigators to systematically unpack a development problem into its ecosystem attributes and the ecosystem services dependent on them.
The MEA did not attempt a comprehensive and systematic ‘total’ valuation of ecosystem services, because the judgment was that the theory, methods and data sources were insufficiently developed to support a credible effort of that sort (Kinzig et. al. 2007). Subsequent to the publication of the MEA, Perrings (2006) identified a number of challenges to the field of environmental economics in the post MEA era. Those challenges relate to the practical implementation of the MEA approach and framework, and includes that economists need to (after Perrings 2006; Kinzig et. al.2007):
1. “Understand the consequences of ecological change induced by current economic activity
2. Understand the distribution of possible outcomes of alternative activities and,where feasible, the probabilities attached to those outcomes
3. Develop appropriate mitigating or adaptive policies.”

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Table of Contents 
List of Tables 
List of Figures 
Schedule of Symbols 
1. Chapter 1: Introduction 
1.1 Motivation and problem statement 
1.2 Objectives of the study 
1.3 Hypothesis
1.4 Approach and methods 
1.5 Structure of the thesis
2. Chapter 2: Literature Review
2.1 Introduction
2.2 Ecosystem services defined 
2.3 Environmental valuation techniques: a brief history and summary of future challenges
2.4 The production function valuation approach 
2.5 Fisheries ecological production function models 
2.6 Conclusion
3. Chapter 3: Approach and methods of the study
3.1 Introduction
3.2 Advantages of the production function approach 
3.3 Evidence considerations and empirics 
3.4 Case study: marine and estuarine ecosystems in KZN 
3.4.1. The study area
3.4.2. Marine system description
3.4.3. Estuarine system description
3.4.4. Fish production
3.4.5. Fishing activities
3.5 The fishery ecological production function analytical framework 
3.6 Integration of ecological parameters as inputs into the production function . 
3.7 Type and sources of the data 
3.8 Conclusion
4. Chapter 4: Economic-ecological production functions approach to measuring the relationship between estuarine ecosystem attributes and fish production 
4.1 Overview 
4.2 The KZN estuarine fishery and estuarine ecosystem regulating services 
4.3 Data sources and empirical model specification 
4.4 Empirical estimation results and analyses
4.5 Discussion 
4.6 Conclusion
5. Chapter 5: Bio-economic fishery production model for analysis of the dynamic interactions between marine ecosystems and the fish production 
5.1 Overview 
5.2 The KZN line-fishery and supporting estuarine ecosystem attributes 
5.3 Data sources and the empirical model specification 
5.4 Empirical model estimation results 
5.5 Discussion
5.6 Conclusion 
6. Chapter 6: Summary, conclusions and implications of the study 
6.1 Using ecological production function approaches to analyse complex ecological-economic interactions 
6.2 Dealing with data limitations 
6.3 New systems knowledge and insights into risks to ecosystems 
6.4 The “insurance value” of ecosystems 
6.5 Implications for coastal management and policy 
7. References 
8. Appendix 1: Derivation of Equations
8.1 Barbier’s (2007) Cobb–Douglas derivation for estimating a static habitatfishery production function model 


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