BookPDF Available

The economic value of ecosystem services in the Mekong Basin: what we know, and what we need to know

January 2013

DOI:10.13140/2.1.4583.0728

Publisher: WWF – World Wide Fund For Nature, Gland

Authors:

Lucy Emerton

Environment Management Group

total economic value (TEV) of ecosystems

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list of ecosystem service variables included in this analysis

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ecosystem services and economic values

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steps in the analysis

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variation in estimates of the value of non-timber forest products

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Figures - uploaded by Lucy Emerton

Content may be subject to copyright.

Content uploaded by Lucy Emerton

Content may be subject to copyright.

OCTOBER

REPORT

2013

THE ECONOMIC

VALUE OF ECOSYSTEM

SERVICES IN THE

MEKONG BASIN

WHAT WE KNOW, AND WHAT

WE NEED TO KNOW

WWF is one of the world’s largest and most experienced independent

conservation organizations, with over 5 million supporters and a global

network active in more than 100 countries.

WWF’s mission is to stop the degradation of the planet’s natural

environment and to build a future in which humans live in harmony

with nature, by conserving the world’s biological diversity, ensuring that

the use of renewable natural resources is sustainable, and promoting

the reduction of pollution and wastef ul consumption.

Report prepared for WWF-Greater Mekong by Ms. Lucy Emerton.

Published in October 2013 by W WF – World Wide Fund For Nature

(Formerly World Wildlife Fund), Gland, Sw itzerland. Any reproduction

in full or in part must mention the title and credit the above-mentioned

publisher as the copyright owner.

For more infor mation – please contact: Sarah Bladen

Communications Director

WWF- Greater Mekong

sarah.bladen@wwfgreatermekong.org

Table of contents

List of boxes ............................................................................................................................................................................... iii

List of figures ............................................................................................................................................................................. iii

List of tables ............................................................................................................................................................................... iii

List of abbreviations ................................................................................................................................................................... iv

KEY FINDINGS AND MESSAGES ............................................................................................................................................. I

INTRODUCTION ........................................................................................................................................................................ 2

Overview ................................................................................................................................................................................................ 2

What are ecosystem services? ............................................................................................................................................................... 3

A framework for valuing ecosystem services ........................................................................................................................................ 3

The policy context for ecosystem services valuation in the Lower Mekong countries ........................................................................ 5

The contribution of this report ............................................................................................................................................................. 7

PART I: MODELLING ECOSYSTEM SERVICES CHANGE IN THE LOWER MEKONG ............................................. 8

A brief overview of the model structure: which ecosystems? .............................................................................................................. 8

How the value of ecosystem management and use scenarios is modelled in this report ................................................................... 8

Ecosystem service variables ..................................................................................................................................................................9

Data sources ..........................................................................................................................................................................................9

Key assumptions ................................................................................................................................................................................. 10

Study issues and limitations ............................................................................................................................................................... 11

PART II: ECOSYSTEM VALUES IN THE LOWER MEKONG ......................................................................................... 12

1. What do we know about the economic value of ecosystem services in the Lower Mekong? ...................................... 12

Direct values / provisioning services .................................................................................................................................................. 12

Indirect values / supporting and regulating services ......................................................................................................................... 14

Non-use values / cultural services ...................................................................................................................................................... 15

Conclusions: what we know about the economic value of ecosystem services .................................................................................. 16

2. ‘Real-world’ valuation: To what extent are these values being captured as payments for ecosystem services? ....... 19

Payments for ecosystem services ........................................................................................................................................................ 19

Carbon finance .................................................................................................................................................................................... 21

Biodiversity offsets ..............................................................................................................................................................................22

Other corporate funding .....................................................................................................................................................................23

Conclusions: the extent to which values are being captured as payments for ecosystem services .................................................. 24

PART III: MODELLING THE FUTURE OF ECOSYSTEM SERVICES CHANGE IN THE LOWER MEKONG .............26

1. What are the likely future ecosystem management and use scenarios? .....................................................................26

What the scenarios are based on ....................................................................................................................................................... 26

Key baseline parameters ..................................................................................................................................................................... 27

Business As Usual (BAU) .................................................................................................................................................................... 27

Green Economic Growth (GEG) ........................................................................................................................................................ 28

2. What are the impacts of ecosystem change on economic values in the Lower Mekong region? ...............................29

Net present benefits and costs of Business As Usual and Green Economic Growth ........................................................................ 29

Change in ecosystem values over time............................................................................................................................................... 29

Value added from GEG ...................................................................................................................................................................... 30

PART IV: ADVANCING ECOSYSTEM VALUATION ........................................................................................................ 37

1. Towards improved valuation of the region’s ecosystem services ................................................................................ 37

What are the information needs and gaps? ........................................................................................................................................ 37

What valuation frameworks and tools could be used? ...................................................................................................................... 38

Techniques to assess the value of ecosystem services ....................................................................................................................... 38

Guidance on conducting ecosystem valuation................................................................................................................................... 40

Analytical tools ....................................................................................................................................................................................43

ANNEXES .................................................................................................................................................................................. 45

1. Data tables...................................................................................................................................................................... 45

2. Application of ecosystem valuation techniques: data needs, data analysis and suitability ....................................... 48

Mitigative or avertive expenditures techniques ................................................................................................................................ 50

3. Terms of reference for the study ................................................................................................................................... 54

4. References ...................................................................................................................................................................... 56

iii

List of boxes

Box 1: definitions and explanations of key terms ...................................................................................................................... 6

Box 2: payments for forest environmental services in Lam Dong and Son La provinces, Vietnam ..................................... 21

Box 3: pilot REDD activities in Oddar Meanchey province, Cambodia .................................................................................22

Box 4: biodiversity offsets by Siam Cement Group in Thailand and the hydropower sector in Laos ................................... 23

Box 5: corporate funding to karst ecosystem conservation in Kien Giang province, Vietnam .............................................24

Box 6: demonstrating the value of biodiversity to Laos’ economy to public decision-makers............................................. 38

List of figures

Figure 1: total economic value (TEV) of ecosystems .................................................................................................................. 4

Figure 2: ecosystem services and economic values .................................................................................................................... 5

Figure 3: steps in the analysis .................................................................................................................................................... 8

Figure 4: variation in estimates of the value of non-timber forest products ......................................................................... 17

Figure 5: variation in estimates of the value of forest watershed protection ......................................................................... 18

Figure 6: variation in estimates of the value of mangrove products ...................................................................................... 18

Figure 7: regional Net Present Value by GEG by ecosystem service type ..............................................................................29

Figure 8: annual regional annual ecosystem values under BAU and GEG ........................................................................... 30

Figure 9: annual regional annual and cumulative value added from GEG over BAU .......................................................... 30

Figure 10: net present value added by GEG by ecosystem service type for Cambodia, Laos, Thailand and Vietnam ......... 32

Figure 11: annual ecosystem values under BAU and GEG for Cambodia, Laos, Thailand and Vietnam .............................. 33

Figure 12: annual value added from GEG over BAU for Cambodia, Laos, Thailand and Vietnam ....................................... 35

Figure 13: cumulative value added from GEG over BAU for Cambodia, Laos, Thailand and Vietnam ................................36

Figure 14: commonly used techniques for ecosystem valuation ............................................................................................39

List of tables

Table 1: list of ecosystem service variables included in this analysis ....................................................................................... 9

Table 2: summary of ecosystem services values (US$/ha/year) ............................................................................................ 16

Table 3: scenario analysis – key baseline parameters............................................................................................................. 27

Table 4: annual regional ecosystem services values under BAU and GEG (Net Present Value, US$ billion) ......................29

Table 5: annual ecosystem services values under BAU and GEG for Cambodia, Laos, Thailand and Vietnam

(Net Present Value, US$ billion) ............................................................................................................................................... 31

Table 6: how ecosystem valuation techniques can be applied ................................................................................................39

Table 7: ecosystem valuation guidelines .................................................................................................................................. 41

Table 8: online databases of ecosystem valuation references.................................................................................................43

Table 9: web-based tools and software models for ecosystem valuation .............................................................................. 44

Table 10: summary of ecosystem service value estimates for Cambodia, Laos, Thailand and Vietnam .............................. 45

List of abbreviations

CDM Clean Development Mechanism

DFID Department for International Development (UK)

FAO United Nations Food and Agriculture Organization

FCPF Forest Carbon Partnership Facility

FFI Fauna and Flora International

GEF Global Environment Facility

GIS Geographic information system

MA Millennium Ecosystem Assessment

NPV Net present value

PA Protected area

PES Payments for ecosystem services

REDD Reducing emissions from deforestation and forest degradation

TEV Total economic value

UNDP United Nations Development Programme

WCS Wildlife Conservation Society

WHO World Health Organization

KEY FINDINGS AND MESSAGES

In green economies, natural capital is incorporated into measurement of societal progress and equity, and recognized and

managed as a fundamental pillar of economic and human well-being. The Lower Mekong region must demonstrate

success in living up to commitments to maintain ecosystem integrity before claims to having ‘greened’ growth can be

made. A first step in making this commitment is ensuring that there is adequate information available on the

socioeconomic importance of ecosystems and the services they provide. Ecosystem services valuation is a basic

component of the evidence base for decisions to invest or divest in maintaining natural systems.

1. There is a lack of information on almost all ecosystem values in the region, including most ecosystem types and

categories of ecosystem services. At the very least, efforts should be made to generate new primary data on the

key values, particularly supporting and provisioning services, for representative ecosystems in the region. A

major gap also exists in terms of linking ecosystem and economic scenario modelling to a thorough analysis of

the drivers of ecosystem change in the region. Investment is required in generating more information on the

economic value of ecosystem services in order to implement effectively the national green growth strategies and

policies under development in the Lower Mekong countries.

2. Although primary data and figures are needed, filling these information gaps requires more than just numbers.

To carry out a credible scenario modelling exercise and associated economic analysis also demands a much

broader-based dialogue with key stakeholders and experts in the region. Only through this wider consultation

and input can realistic scenarios of future development, conservation and ecosystem trends be built up. Most

ecosystem valuation estimates have a weak scientific basis, and the assumptions they make about the links

between ecosystem status and ecosystem services are largely unsourced. The scientific and biophysical data

required for both ecosystem valuation and scenario modelling needs to be identified, extracted and made

available in a form that can be integrated into economic modelling and datasets.

3. The use of “off the shelf” ecosystem valuation analytical tools is not recommended. Simple, tailor-made models

may be most appropriate for future work on ecosystem valuation in the Lower Mekong region.

4. Natural capital valuation is an excellent tool for policymakers in green growth planning and realisation but the

dots must be joined between policy “problems”, real decision-making processes and valuation approaches in the

Lower Mekong countries. Information on the economic value of ecosystem services has little relevance if it is not

being communicated effectively to decision-makers, in a form that is practical, relevant and credible to them.

Policy-makers must demand the information; and practitioners must be open to engage in a dialogue with end

users of valuation data in order to design and produce valuation studies at the scale of decision-making and in

the context of particular policy issues.

INTRODUCTION

As part of its conservation strategy for the region, the WWF-Greater Mekong Programme is building green economies

and climate change resilience through integrated conservation and economic development planning and implementation.

Maintaining and enhancing intact ecosystems will bring considerable benefits to the region’s economic resilience.

Information on the economic value of the region’s ecosystems is key to achieving these aims. Integrating these values into

conservation and development indicators, planning and policies makes the benefits that ecosystems generate (ecosystem

services) visible in these governance processes. This helps make a strong economic case for taking action to maintain

ecosystems. To these ends, this technical study is a synthesis of the value of the region’s main ecosystem services

(including quantitative estimates at landscape, national and regional scales) developed to support integrated

conservation and development planning in the Lower Mekong Subregion. A companion non-technical summary is

also available.

This technical study 1 covers the major ecosystem services in the Lower Mekong, expressed for each of five key

conservation landscapes (selected from WWF’s Greater Mekong priority landscapes2) and four countries (Cambodia,

Laos, Thailand and Vietnam), and at the regional scale (though excluding Myanmar in this edition3). It intends to:

• Compile, review and synthesize key statistics, messages and insights on ecosystem values from existing data;

• Develop scenarios that capture two plausible development pathways for the region;

• Describe and contrast in general quantitative terms the costs and value of achieving each scenario over a 15-40

year time horizon;

• Identify and summarise key information needs which if filled would help develop a more persuasive economic

argument for the need to maintain ecosystem services;

• Evaluate and compare the range of existing ecosystem service valuation frameworks, models, and tools (and

required data needs for each); and

• Recommend next steps to further improve valuation of ecosystem services in the region.

This is an ambitious study. Based only on pre-existing data and information, it represents a first attempt to value and

model the region’s changing ecosystem services as observed by WWF. The figures presented in this report should be

understood within these limitations.

Overview

Following this introduction, the report is organized into five parts:

• Part I on “modelling ecosystem services change” sets out the method used in this study, detailing the

structure of the model as well as key assumptions and study limitations.

• Part II on “ecosystem values” reviews existing literature in order to document information on ecosystem

values in the Lower Mekong region.

• Part III on “modelling the future” describes two potential future ecosystem management and use

pathways, quantifies in monetary terms the main costs of achieving them, analyses the distribution of costs and

benefits, and elaborates the potential economic gains from collaborative management of ecosystems and the

maintenance of key ecosystem services.

• Part IV on “advancing ecosystem valuation” details ecosystem valuation frameworks and tools, identifies

information needs and gaps, and recommends next steps for furthering ecosystem valuation work in the region.

• The Data Annex presents a list of literature referred to in the report, data tables with detailed information on

ecosystem costs and benefits, details of how to apply ecosystem valuation techniques, and the terms of reference

for the study.

1 The terms of reference for the study are included as a n annex to this report ( Annex 3).

2 Central Annamites, Southern Annamites , Eastern Plains, Kratie to Sipha ndone River, and Mekon g Delta.

3 At the time this study was conducted, little information is a vailable on ec osystems and their economic values i n Myanmar. We plan to release an upda ted edition o f this

study in 2015 which will inc lude information for Myanmar, as we ll as stakeholder-presc ribed scenarios for cha nging ecosyste ms in the Lower Mekong countries.

What are ecosystem services?

The last decades have seen a change in the way that ecosystems are conceptualized. In particular, the publication of the

Millennium Ecosystem Assessment (MA) spurred a much greater awareness of the links between ecosystem services and

human well-being. And with the global dialogue on green economy over recent years, there is an increasing emphasis on

the development, livelihood and human well-being outcomes of ecosystem conservation. According to the MA

framework, there are four basic categories of ecosystem services: provisioning, regulating, cultural and supporting

services (MA 2005). Together these generate inputs to primary productivity, vital life support services and economic

production that are critical to human well-being and to the functioning of the economy.

A framework for valuing ecosystem services

It is now commonplace for conservation planners and policy-makers to conceptualize ecosystem services in the

terms provided by the MA. And with this, there has been a greater demand for information on the economic

value of ecosystems.

Ecosystem services are regularly taken for granted since they are delivered through the natural functions of healthy

ecosystems. They are often free to access and use, without ready-made “costs” or “benefits” to describe the impact of their

loss or maintenance to incorporate into the typically monetary-based decision-making tools used by government and

private companies. As such, the returns on investment in maintaining or improving natural (and social) capital are not

always easy to measure or materialize over longer-term horizons and across populations.4 Nature’s “economic

invisibility” means that investments in maintaining biodiversity, for example, will consistently appear less worthwhile for

society than, say, expanding unsustainable agricultural land use5. This explains in part why natural capital degradation

occurs. Those causing the degradation typically do not pay the full price of their actions; and those “supplying”

biodiversity and ecosystem services are often not rewarded for doing so.6

Valuation of the public and private goods and services delivered by ecosystems is necessary if we are to understand what

is lost through inappropriate development choices, such as increasing loss of forest cover in vital watersheds, and what

can be gained from pursuing development pathways that are more sensitive to maintaining natural capital. Similarly, it

enhances our understanding of the opportunity cost of biodiversity conservation; that is, the potential losses incurred

through choosing to conserve our natural capital through, for example, protected areas or hunting bans. In cases where

land development makes sense, it helps us understand what essential ecosystem functioning needs to be kept to avoid

undermining the fundamental flow of services benefiting local and other populations.7

There are three aspects to looking at the economic value of ecosystems:

• Ecosystems as assets – a stock of natural capital8, which, if conserved and managed sustainably, yields a:

• Flow of economically valuable goods and services – the return on investments in conservation, which in

turn contributes towards:

• Positive economic and human well-being outcomes – the measures and indicators which are used to

judge progress in economic growth and human development.

Perhaps the clearest and most useful way to trace the relationships between ecosystem services, economic values and

human well-being outcomes is to combine two frameworks. The first is total economic value (TEV), which is commonly

applied by economists. The second is the ecosystem services-human well-being framework presented in the MA, which is

widely used by conservation planners and decision-makers. This framework has been adopted by The Economics of

Ecosystems and Biodiversity (TEEB), a global initiative that sets out the case for natural capital valuation, continues the

discussion on ecosystem service classification begun by the MA and synthesizes various methods and case studies from

the academic disciplines of ecological and environmental economics; TEEB recommends using TEV in valuing the

economic contribution of ecosystems.9

4 With no dollar figure attac hed, outcomes from co nserving natural capital a re rarely captured in mar kets, and are more often considered positive externa lities. Similarly,

the costs of negative externalities from pollution or land conversion degrading biodivers ity are unpriced a nd/or uncompe nsated.

5 This situation is te rmed market failure – where a lack of pric e signals for uncompensa ted, harmful i mpacts on natural capital endowments (negative externalities) or for

good but unre warded outco mes from maintaining biodiversity a nd ecosystem services (positive externali ties) means that resourc es are allocate d inefficiently by the

‘market’.

6 Baumol, W.J. and Oates, W. 1988, The Theory of Environmental Policy. Cambridge Press, New York, USA .

7 See Atkinson, G., Bateman, I. and S. Mourato. 2012 , Recent advances in the valuation of ecosystem se rvices and biodiversity. Oxford Review of Economic Policy 28(1):

22-47.

8 See Box 1 for a definition of this term.

9 Kumar, P. 2010. The Economics of Ecosystems and Biodiversity: Ecological and Economic Foundation. UNEP/Eart hprint, London, UK.

Since it was developed in the late 1980s and early 1990s (Barbier 1989, Pearce and Turner 1990), TEV has become the

standard and most widely applied framework used by economists to categorize ecosystem values.10 The major innovation

of TEV is that it extends beyond the marketed and priced commodities to which economists have conventionally limited

their analysis, and considers the full gamut of economically important goods and services associated with ecosystems.

Although it is no easy matter to quantify these values, as prices and markets do not exist for many ecosystem services,

economists have developed a range of methods for expressing them in monetary terms.11

Looking at the TEV of Lower Mekong ecosystems involves considering their complete range of characteristics as

integrated systems − resource stocks, flows of services, and the attributes of the ecosystem as a whole, including

(Figure 1):

• Direct values: the raw materials and physical products that are used directly for production, consumption and

sale such as those providing income, energy, shelter, foods, medicines and recreational facilities.

• Indirect values: the ecological functions that maintain and protect natural and human systems through services

such as maintenance of water quality and flow, flood control, microclimate stabilization and carbon sequestration.

• Option values: the premium placed on maintaining a pool of species and genetic resources for future possible

uses, some of which may not be known now, such as leisure, commercial, industrial, agricultural and

pharmaceutical applications and water-based developments.

• Existence values: the intrinsic value of ecosystems and their component parts, regardless of their current or

future use possibilities, such as cultural, aesthetic, heritage and bequest significance.

Figure 1: total economic value (TEV) of ecosystems

From Emerton 2006a

Each of the categories of TEV corresponds to a different component of the MA ecosystem service framework: direct

values to provisioning services, indirect values to supporting and regulating services, existence values to cultural services,

and option values potentially cross-cutting all four categories. The two overlapping frameworks, within which the

ecosystem values of the Lower Mekong region are categorized in this report, are illustrated in Figure 2.

10 See TEEB. 2008.

11 Annex Chapte r 2 presents fu rther details on the req uirements for applying these.

Figure 2: ecosystem services and economic values

From Emerton 2006a

The policy context for ecosystem services valuation in the Lower Mekong countries

With the exception of Thailand, countries in the Lower Mekong are emerging from a process of economic transition and

transformation. They are showing a gradual shift from subsistence farming to diversified production bases, and from

centrally planned economies to more open, market-based systems. Signs of pressure and stress on the region’s natural

capital have long been apparent alongside these rapid rates of economic growth and market development, resulting in an

emerging trend of ecosystem loss in this region.

A report released in 2011 by the UN Economic and Social Commission for Asia and the Pacific (UNESCAP), the UN

Environment Programme (UNEP) and the Asian Development Bank (ADB) finds that the Asia-Pacific region currently

accounts for more than half of the world’s total resource use. A WWF report released in 2013 indicates that escalating

land, resource and infrastructure demands, combined with a rapidly growing human population and increasing

integration into regional and global markets, mean that biodiversity and ecosystem services in the Lower Mekong are on

a pathway of gradual decline and degradation. At the same time, climate change is affecting regional ecological

productivity in ways that may encourage even greater pressures on the natural system and cause progressively greater

stresses to human and economic systems.

The countries of the Lower Mekong have recognized the pressure human footprint puts on natural resource stocks: at the

Greater Mekong Subregion (GMS) Environment Ministers Meeting in July 2011, they announced their regional vision of

a “poverty free and ecologically rich GMS” to be achieved through “a green, inclusive and balanced economy”.12 In

December 2011, the countries endorsed a new ten-year strategic framework to further enable the transition to a green

economy. Most recently, during the GMS 2020 Conference on Balancing Economic Growth and Environmental

Sustainability held in 2012, policy-makers from all six countries, as well as development partners, explicitly considered

the issue of how best to bring about a balanced convergence between economic growth and environmental sustainability.

In green economies, natural capital is incorporated into measurement of societal progress and equity, and recognized and

managed as a fundamental pillar of economic and human well-being. The maintenance, enhancement or restoration of

natural capital is supported by legal and institutional infrastructure and measures. Financial flows encourage a strong

business case for sustainable, responsible businesses to thrive and divest from activities that threaten natural capital.

12 The Greater M ekong Subregion is an Asia n Development Bank desi gnation for the Lower M ekong countr ies of Cambodia, Myanma r, Laos, Thailand, Vietnam and two

provinces of the People’s Republic of China, specific ally Yunnan Province a nd Guangxi Zhuang Autono mous Region. It is an im portant platform for re gional decision-

making on inf rastructure developmen t and transboundary environmental management, amo ng other points of regional coopera tion.

Ecosystem services valuation is a basic component of the information required to incorporate natural systems into

economic decision-making, enabling green growth and development.

Already, in 2013, there are encouraging signs that good intentions on greening Lower Mekong economies are slowly

being put into practice in national frameworks.13 Wording is in place in many national development plans and is set to

trickle down into the core functions of government, sectoral greening policies and initiatives. Knowledge on ecosystem

services is starting to be incorporated into decision-making, economic decision-making in particular. Yet policy and legal

frameworks in the region still for the most part present an unsupportive environment for producers, consumers and

investors to factor biodiversity and ecosystem services into their choices. Large-scale subsidies in the agricultural,

fisheries, energy, industrial and water sectors still encourage the over-exploitation and destructive use of land and

resources. At the same time, products and markets which are based on the conservation and sustainable use of

biodiversity and ecosystems tend not to receive this type of preferential treatment: they are accorded a lower economic

policy priority, and face relatively less spending on research and development, higher tax rates, and greater difficulties in

accessing credit and investment funds. The bottom line is that, for many sectors, businesses and households in Lower

Mekong countries, it is more costly to act in an environmentally sustainable manner than not. As a result, most are

unwilling – and many simply cannot afford – to realise green economies in practice.

As such, the fundamental challenge is to tackle the discrepancy between unsustainable short-term economic gains and

long-term returns on sustainable investments. This can be achieved through establishing incentives that make

sustainable investments competitive. A critical approach by government, along with conservation partners such as WWF,

must be to structure economic incentives and related policies in ways that encourage good stewardship of the resource

base. Removing perverse incentives and instituting positive ones, such as encouraging the sustainable use of ecosystem

services through a range of policy, price and market mechanisms, should be integrated into government structures and

private sector practices and norms. What is missing, however, is good information for:

• Mapping the supply and demand of natural capital stocks and ecosystem service flows, and assessing the extent

to which their threatened status affects the economies of the region;

• Qualitative assessment of the contribution of these services to human well-being;

• Quantitative and monetary assessment of the contribution of these services to human well-being. The ability to

measure the true impacts of further biodiversity losses or returns on investment in conservation will aid in

policy decision-making and policy design for greening economies.

Box 1: definitions and explanations of key terms

Biodiversity:

The variability among living organisms from all sources including, among others, terrestrial,

marine and other aquatic ecosystems, and the ecological complexes of which they are a part. This includes diversity

within species, between species, and of ecosystems. For the sake of this report, we focus on “wild” biodiversity over

“agricultural” biodiversity, which is more often considered in national economies and decision-making than “wild’

biodiversity.

Clean Development Mechanism: A mechanism from the Kyoto Protocol that allows industrialized countries to

buy and trade in emissions reduction credits from certified projects.

Ecosystem: A dynamic complex of plant, animal and microorganism communities and their non-living

environment interacting as a functional unit.

Ecosystem services: The benefits that people obtain from ecosystems. Although goods, services and cultural

services are often treated separately for ease of understanding, the Millennium Ecosystem Assessment considers

all these benefits together as “ecosystem services”.

Natural capital: A society’s living and non-living natural resources. Natural capital resources can be renewable

(e.g. living species, biodiverse ecosystems, potable water, fertile soils), non-renewable (e.g. petroleum, minerals) or

cultivated (e.g. crops and forest plantations). These resources comprise the stocks of environmental goods and

services that flow to economic production.

13 As of June 20 13, Vietnam and Cambodia have comple ted a roadmap and natio nal strategy on green g rowth. Laos is currentl y beginning t he process with the assis tance

of UNESCAP. T hailand and China have i nstituted some advanc ed legislatio n though they have opted not to produce a green g rowth or economy frame work per se.

Non-timber forest products: Commodities obtained from forests that do not necessitate harvesting trees.

Examples include food and medicinal plants, fruits, seeds, ferns, game animals, mushrooms, resins and oils.

Opportunity cost: A benefit, profit, or value of something that must be given up to acquire or achieve

something else.

Protected area: “A clearly defined geographical space, recognized, dedicated and managed, through legal or

other effective means, to achieve the long-term conservation of nature with associated ecosystem services and

cultural values” (IUCN definition). Examples include national parks, wildlife sanctuaries and marine protected

areas.

REDD/REDD+: An international mechanism that aims to make tropical forests more valuable standing than cut

down by providing financial incentives to developing countries to maintain their forests. REDD stands for reducing

emissions from deforestation and forest degradation, while the “plus” takes account of other aspects such as

enhancing carbon stocks, protecting biodiversity and promoting sustainable local livelihoods.

Valuation: The process of expressing a value for a particular good or service in a certain context (e.g. of decision-

making), usually in terms of something that can be counted. Values are often monetary, but can also be expressed

through methods and measures from other disciplines (sociology, ecology, etc.)

Well-being: Human well-being has multiple constituents, including the basic materials for a good life, health,

good social relations, and freedom of choice and action. Together these factors provide the conditions for physical,

social, psychological and spiritual fulfillment. The conceptual framework for the Millennium Ecosystem

Assessment posits that because people are integral parts of ecosystems, changes in human conditions are one

factor that drives changes in ecosystems and thereby causes changes in human well-being.

Sources: UNCCD; CBD; Millennium Ecosystem Assessment, 2003; Millennium Ecosystem Assessment, 2005; Hassan, Scholes and Ash, 2005;

Kumar, 2010.

The contribution of this report

Discussion and data synthesis on economic valuation of the Lower Mekong’s ecosystem services is urgently needed. This

report is WWF’s contribution.

This study is concerned primarily with articulating the monetary value of ecosystem service flows and

the costs and benefits of conservation investments; we are essentially concerned with the value of the

Lower Mekong’s natural ecosystems to local, national, regional and even international economies. It

does not deal with the value of ecosystems as a stock of natural capital, except to infer the economic wisdom of investing

in conservation of natural capital stocks so as to maintain the supply of economically valuable services. The value of

ecosystem services as manifested through various economic and development indicators is touched upon only

peripherally.

WWF has produced this report as a starting point for dialogue. Key questions include how stakeholders think ecosystems

are likely to change in the Lower Mekong, and what future ecosystem services must be guaranteed if Lower Mekong

countries are to achieve the economic growth and social development goals set out in their green growth strategies and

policies.

PART I: MODELLING ECOSYSTEM SERVICES CHANGE IN

THE LOWER MEKONG

This technical report presents very simplified and generalized models of how the use of land and resources, and the area

and quality of ecosystems, could change between 2010 and 2035 in the Lower Mekong according to two scenarios.

Business as Usual (BAU) assumes current trends continue. Green Economic Growth (GEG) is based on

successful implementation of the green growth goals currently being elaborated by the governments of the Lower

Mekong countries.

A brief overview of the model structure: which ecosystems?

Four broad categories of ecosystem were chosen as the focus of this report: forests, freshwater wetlands, mangroves and

coral reefs. This study takes an ecosystem area-based approach that sets a baseline for the physical coverage of forest,

freshwater, mangroves and coral reefs in 2010 – and then describes scenarios for the change in that coverage and the

implications this will have for the value of services those ecosystems deliver by 2035

How the value of ecosystem management and use scenarios is modelled in this report

Figure 3: steps in the analysis

Valuation of the ecosystem management and use scenarios follows a number of iterative steps (summarised in Figure 3).

The following form core elements of the analysis:

1. First, it is necessary to project the future changes in ecosystem status and quality that would occur under each

scenario, as well as to model their other parameters and key variables. This is described in Part III, Chapter I, on

the likely future ecosystem management and use scenarios. Changes in the area under different ecosystems are

related to gains, losses and trade-offs in the provision of key ecosystem services.

2. Next, a broad typology of ecosystem types and ecosystem services is formulated. This identifies the

services generated by forest, freshwater wetland, mangrove and costal ecosystems, and identifies the key

services selected for valuation.

Ideally this would be based on a thorough scientific assessment; this, however, lay outside the scope of the current study.

The identification of services for further valuation was determined primarily by those for which data were available.

Where key services lacked data, additional information from outside the region was sought (gap-filling is discussed

below, but it should be noted that key gaps in ecosystem service values still remain).

3. A database of ecosystem service value estimates is built up. This is based on a comprehensive meta-

analysis of the ecosystem valuation studies that have been carried out in the Lower Mekong region.

Only some of these estimates were used. Several were excluded because they could not be translated into US$/ha/year

values, because the credibility of their underlying approach was questionable, or because they were not considered to be

representative of broader values in the region. For the remaining estimates, mean values were taken, and used for the

current analysis (this is described more fully in Part II, Chapter 1 on the value of ecosystem services).

4. These values are projected into the future, according to the two scenarios described in step 1.

Because the analysis of the region’s ecosystems does not include each and every ecosystem service and their values – for

which the data is limited in any case – the baseline estimate for the current contribution of ecosystem services generated

in this study must be considered as only an approximate figure. As a result, and in line with best practice for economic

valuation of ecosystem services, the focus of this study is more correctly on the marginal value of change under different

scenarios of ecosystem management regimes over a 25-year time frame. This approach gives us a net value added – or

net cost avoided – that can be ascribed to different future policy scenarios until 2035. Costs and benefits are provided for

each year, and for the entire 25-year period analysis, as a net present value (NPV). In order to do this, a number of

working assumptions were made. These are elaborated below.

5. Ecosystem service benefit figures are combined with those indicating the costs of ecosystem management, so as

to look at the economic impacts implied by each scenario.

Values are calculated and expressed for key landscapes, for each of Cambodia, Laos, Thailand and Vietnam, and at the

aggregated Lower Mekong regional level. This analysis looks at the incremental net benefit or cost implied by a GEG

scenario as compared to a continuation of the status quo under BAU.

Ecosystem service variables

The analysis focuses on specific ecosystem services within each ecosystem. The aim is not to be comprehensive but to

choose:

a) the services of most importance;

b) services for which information is available; and

c) services for which real revenues can be attributed, in order to focus on economic gains on the ground.

Table 1: list of ecosystem service variables included in this analysis

Variables

Forests

Local use of non-timber products

Sustainable timber

Watershed protection

Carbon sequestration

Freshwater wetlands

Local use of aquatic products

Water quality and flow services

Mangroves

Local use of aquatic products

Coastal protection

Tourism and recreation

Carbon sequestration

Support to offshore fisheries

Coral reefs

Tourism

On-site fisheries

Coastal protection

Data sources

No primary data was collected, and the analysis relied entirely on secondary information sources. This

data come from many sources, and is not all reliable. The sometimes doubtful quality and accuracy of the data used and

generated acts as a severe constraint. Estimates of ecosystem values in Lower Mekong countries vary widely, and many

are vague and approximate. The coverage of existing studies is patchy and incomplete, and it cannot always be

guaranteed that the estimates are wholly credible. With few exceptions, the figures presented in the literature are based

on some form of extrapolation, many assumptions, and often unreliable or incomplete data. Unfortunately, and as has

been pointed out by various other authors, it is a characteristic of many ecosystem valuation studies that data sources are

not provided or, where sources are shown, they are “guesstimates” or “back-of-the envelope” calculations of questionable

scientific veracity. Due to the large number of hypotheses and assumptions required to carry out this study, all data

sources are fully referenced and all major assumptions are carefully explained throughout the text. It is to be hoped

that as better and more accurate information becomes available, these figures can be updated and improved. We hope to

carry out a more detailed and better-informed exercise via a future project (see Section IV on “advancing

ecosystem valuation”).

Key assumptions

Assumption 1: A 25-year time period was used for analysis. This was considered the maximum length of time

that it was possible to incorporate, given the quality and scope of the information available.

Assumption 2: A linear relationship is assumed between changes in ecosystem status, ecosystem service

provision and economic values. The values were approximated by applying per-hectare values of key ecosystem

services to the area under different ecosystem types.

As has been mentioned above, the exact biophysical relationships between changes in ecosystem status, ecosystem

service provision and economic values is unknown. In the scenario analysis, per-hectare values of key ecosystem services

are modified by indexes which indicate the changes in ecosystem area, quality of ecosystem services provided, proportion

of ecosystem yielding values, and levels of use under BAU and GEG. Changes in these variables and indexes are based on

data provided by WWF-Greater Mekong.

Values are expressed per year, in US dollars (US$) at 2010 rates, and as NPVs over the entire period of analysis. A

discount rate of 10 per cent has been applied to future costs and benefits. This reflects the prevailing opportunity cost

of capital in Lower Mekong countries. It should however be noted that discounting environmental costs and benefits

remains the focus of much debate. A high discount rate reflects a strong preference for present consumption, and a low

discount rate reflects longer-term considerations and preferences. Some economists have argued that, because

environmental costs tend to be short-term while environmental benefits tend to accrue far into the future, they should be

subject to a low or zero discount rate. Others contend that if environmental costs and benefits are to be treated alongside

other sectors of the economy, and in the same terms, then they should be subjected to the same discount rate. The latter

approach is used in the current study and as such this report may undervalue, or at least conservatively estimate

ecosystem service values in the Mekong region.

Assumption 3: The real value of ecosystem services does not change over time. In reality, this may not be the

case. As tastes and demands change, and as particular services become more scarce, both the real and relative values of

ecosystem services may change in the future. For example, the real price of certain commodities may change, or

increasing urban and industrial water demands may mean an increased premium on watershed protection services.

Similarly, the growing problems associated with climate change and uncertainty coupled with intensifying coastal

development may increase substantially the coastal protection value of mangroves and coral reefs.

Assumption 4: Funding to conservation. Other funding, beyond public budgets, is assumed to be available for

ecosystem conservation inside and outside protected areas (PAs) in both scenarios.

Assumption 5: Key outcomes of implementation of green growth planning in Lower Mekong countries

are articulated under the GEG scenario, namely:

1. Primary forest area, mangrove area, freshwater wetland area and coral reef area is assumed to decline at half the

projected rate for BAU, and then stabilize.

2. Changes in terrestrial PAs and in marine PAs is assumed to occur over 10 years and then stabilize.

3. Green economy policy action is assumed to increase public funding to PAs by 25 per cent in each country over a

five-year timeframe, and then increase in real terms by 2.5 per cent a year thereafter.

4. Green economy policy action is assumed to increase funding to ecosystem conservation inside and outside PAs

to 25 per cent of public funding to PAs in Cambodia, Laos and Vietnam, and 5 per cent in Thailand over a period

of five years14, and then increase by 5 per cent a year thereafter.

Assumption 6: No reduction in consumption levels for either BAU or GEG. Within the 25-year time period of

the analysis, it is assumed that current use values can be sustained (in other words there is no decline, overall, in the

absolute levels of use in a country), and that use levels increase progressively due to the rising demands of a growing

human population. There is simply not the available information on the sustainability of local-level resource use to

project when or where thresholds of sustainable use may be exceeded. Although there may be the local exhaustion of

particular stocks of biological resources, this is compensated by use shifting to other locations or products.

14 Relatively speaking, PA funding in Thailand is already high compared to the other countries. For this reason, a lower rate of increase is

assumed for public funding allocated to protected area management in this country.

Assumption 7: In estimating the cost of achieving the GEG scenario, payments for ecosystem services

and other funding based on capturing the value of ecosystem services are not treated as costs in the

analysis. This is because they are not a net cost to society, but rather are transfer payments between groups. To include

them in the analysis as costs would result in double counting, unless they were also deducted from the figures from

ecosystem service values. They are, however, indicated in summary tables, for purposes of comparison and because they are

an important component of the broader conditions that enable a particular ecosystem conservation status to be maintained.

Assumption 8: Direct public costs of PA management are used to give average costs. These are the only

costs for which reliable country-level estimates are available, incorporating all ecosystem types and PA management

categories. Ecosystem management costs are presented as US$/ha/year figures for each scenario. Because of the

variation between funding to individual PAs, they have been calculated by dividing total public spending between the

total area of PAs in each country.

Study issues and limitations

Limitation 1: No consideration of non-linear impacts or ecosystem thresholds. As interesting as the

aggregate numbers presented in this report are, such figures inevitably mask some important elements of ecosystem

service values, and oversimplify the complex dynamics and relationships at play when looking at the impacts of

ecosystem change on ecosystem service provision and economic values. Of particular concern is the lack of information

about the sustainability of current ecosystem use, and about what future levels might be supportable in different sites and

for different ecosystems. Another important issue is that the calculations in this report do not account for non-linearities

and threshold effects in ecosystem functioning. Ecosystems often respond to change and stress in a non-linear fashion:

large changes in ecosystem size or condition may have abrupt effects on their functioning, which may not be extrapolated

easily from the effect of small changes (TEEB 2008).

Limitation 2: Omission of agriculture and other natural resource uses. In terms of direct values/provisioning

services, the analysis focuses on local-level biological resource use and largely excludes commercial agriculture,

fisheries, forestry and other natural resource uses, due to a lack of reliable data. Agriculture in particular is a problematic

sector. We cannot differentiate between sustainable agriculture and agriculture not conducted in accordance with best

practice. As there is a significant difference in ecosystem services values delivered by the two broad approaches to

agriculture practice, the margin for error is too large if this land use is included wholesale. It is recommended that this

important question be considered separately.

Limitation 3: Length of study period. While a 25-year time period was considered the maximum length of time to

incorporate with the information available, this may be too short to show the long-term implications of ecosystem change.

Limitation 4: Use of average ecosystem service values. To simplify the analysis, value estimates for indirect

values/supporting and regulating services are applied to the total area of an ecosystem in a country (with the exception of

watershed protection). In reality, not all areas will generate the same value of services, for two main reasons. Firstly,

ecosystem quality and status varies. Secondly, the value of most supporting and regulating services is predicated on

human populations directly benefiting from these services, or being directly affected by their loss. This is not always the

case – for example not all coastal areas are settled and would experience increased damages from storms if mangrove

ecosystems were degraded, and there are not water-dependent industries located downstream of all major forested

watersheds. The estimates in this study therefore represent potential or possible values.

Limitation 5: Non-comprehensive coverage of ecosystems and ecosystem services. For direct

values/provisioning services, the study does not apply value estimates to the total area of an ecosystem in a country, but

only to ecosystems which are being actively utilized. Each scenario contains different assumptions about the proportion

of ecosystem area that is subject to use, though both start from the same baseline.

Limitation 6: Some ecosystem service values are mutually exclusive. This is a standard consideration in

ecosystem service valuation. It would not, for example, be possible to impute values for timber clear-felling, tourism and

watershed catchment protection to the same area of forest. Others are location-specific. For instance, watershed

protection values cannot be attributed to the entire area of forest in a country. This study sub-categorizes forest

ecosystems into production, biodiversity protection and watershed areas. Watershed values are only applied to

designated watershed forests, while commercial timber values are primarily imputed to production forests.

Limitation 7: Analysis excludes option and existence values/cultural services. These values are highly

location-specific, as well as being particular to the group for whom they have been calculated. They cannot be

extrapolated or transferred between sites. The quality of existing estimates is also extremely doubtful.

PART II: ECOSYSTEM VALUES IN THE LOWER MEKONG

1. What do we know about the economic value of ecosystem services in the Lower Mekong?

There is a fairly substantial, and rapidly growing, body of literature on the economic value of ecosystem services in the

Lower Mekong. This chapter synthesizes available information, according to the framework proposed in the previous

chapter, in order to describe and quantify in monetary terms the types of economic values associated with ecosystem

services in the region. For convenience and ease of reference, the synthesis of existing information in this chapter is

presented according to country, and is summarised in Table 10 in the Data Annex.

Direct values / provisioning services

Cambodia

Information on forest values can be found in a number of sources, most focusing on non-timber forest products. Hansen

and Top’s (2006) figures are probably the most widely cited, and are used by several other authors as the basis of their

calculations (for example Grieg-Gran et al. 2008 and ADB 2010, below). Hansen and Top estimate per-hectare benefits

for deciduous, semi-evergreen and evergreen forests in Cambodia, finding annual values for non-timber forest products

of US$ 37, 23 and 12 respectively. They estimate sustainable timber production worth US$37 per hectare for semi-

evergreen forests and US$171 for evergreen forests. Overall, they state that the total livelihood value obtained from non-

timber forest products is US$280-345 per household per year.

Bann (1997a) calculates the value of non-timber forest products harvested from Tapean Forest in Ratanakiri province to

be worth some US$300,691, or US$165/ha/year. ADB (2010), looking at the proposed biodiversity conservation corridor

linking seven protected areas in Mondulkiri and Koh Kong provinces, estimates non-timber forest product values at

US$2.7/ha. Boscolo (2004, cited in Grieg-Gran et al. 2008) presents national-level estimates of the annual local value of

fuelwood, charcoal and liquid resin of US$16-26/ha or US$480-804 per household.

Various other estimates of local non-timber forest products values exist for other parts of the country. However, most are

expressed in terms of income per household, not per hectare of forest. Heov et al. (2006), for example, present examples

from several provinces which indicate values of US$23-29 per household per month. Grieg-Gran et al. (2008) report

income from non-timber forest products of US$15-85 per household per year in communes around Phnom Aural and

Phnom Samkos wildlife sanctuaries in the Cardamom Mountains in the west of Cambodia.

For freshwater wetlands, Chong (2005) presents estimates of the local livelihood value of fish, aquatic animals, water

birds and building materials to the 3,000 or so households living in the Stoeng Treng Ramsar site. With an average value

per household of US$3,200 a year, the total annual value of the 14,600ha wetland area is calculated at some

US$9,600,000, or US$658/ha.

Data on forest and coastal ecosystem values is provided in Emerton et al. (2002a) for Preah Sihanouk (Ream) National

Park. Almost all local residents depend on park resources in some way for their basic subsistence and income, to a net

value of some US$1.2 million a year or US$220 for every household living in and beside the national park. Non-timber

products collected from forested areas are worth just over US$190,000 or US$10/ha. Ream’s mangroves yield

subsistence goods worth almost US$620,000 or US$344/ha/year, while the net annual value of fisheries within the park

is just over US$515,000 or US$286/ha. Bann (1997b), looking at the 63,700ha of mangroves in Koh Kong province,

meanwhile estimates that local fishing benefits are worth some US$84/ha, firewood is valued at US$3.50/ha, and

sustainable charcoal production US$413/ha.

Laos

Although now several years old, perhaps the most comprehensive analysis is provided by an assessment of the economic

value of biodiversity, carried out as part of the National Biodiversity Strategy and Action Plan by Emerton et al. (2002b).

Laos’s 945,000ha of rivers, water bodies and other natural and constructed wetlands are found to provide fish and other

aquatic animals worth US$101.01 million a year for household subsistence, income and small-scale trade, an average of

US$106/ha. Agro-ecosystems contain indigenous varieties of crops and livestock that are worth some US$93.90 million a

year to crop production and US$78.74 million for livestock production, and nature-based tourism stimulates in-country

expenditure to a value of around US$58.61 million a year. It is, unfortunately, impossible to generate per hectare values

for these.

The same study meanwhile finds that, across all of the recorded 11.6 million ha of forest in the country, local non-timber

forest product use is worth US$159.87 million a year or US$14/ha for household subsistence and US$25.65 million or

US$2.2/ha for household income (an average of US$36 per household). The domestic commercial value of non-timber

forest products is US$15.25 million or US$1.3/ha, and exports are worth US$31.80 million or US$2.7/ha. Forests also

yield firewood and charcoal worth US$3.77 million a year at the local level (an average of US$40 per household or

US$0.3/ha) and US$0.82 million or US$0.07/ha for commercial users, and timber products to a value of US$17.05

million a year or US$1.5/ha for households and US$53.45 million or US$4.6/ha to the (legal) commercial sector.

A wide variety of other studies also looks at the economic value of forest and wetland products to household livelihood

and subsistence. Rosales et al. (2003) found the annual value of non-timber forest products collected in the natural

forests of Sekong province to be US$398-525 per household, or US$17-23 per hectare. ADB (2010), looking at the

proposed biodiversity conservation corridor linking four protected areas in Attapeu, Champasak and Xekong provinces,

estimates non-timber forest product values at US$7.1/ha/year. At a national level, Foppes and Ketphanh (2000)

calculate that non-timber forest products (including aquatic resources) contribute 44 per cent of subsistence value, 55

per cent of cash income, and 46 per cent of the total household economy. In Salavan province, Clendon (2001) states that

wild foods contribute up to 80 per cent of non-rice food consumption by weight, and provide an average of 4 per cent of

energy intake, 40 per cent of calcium, 25 per cent of iron and 40 per cent of vitamins A and C.

Thailand

Hinsui et al. (2008) find that average cash income from non-timber forest products in one village of Chiang Mai province

equates to around US$8.3/ha/year. Delang (2005) calculates the annual value of non-marketed wild edible plants

collected in forests around the Thung Yai Naresuan Wildlife Sanctuary to be US$30-302 per household or US$7.26-

72/ha.

Looking at the value of seasonally flooded forest in the Lower Songkhram, Khonchantet (2007) finds annual values of

US$141,858 or US$4.12/ha for non-timber forest products, and US$121,912 or US$3.55/ha for fisheries. A study by

Pagdee et al. (2007) addresses the economic value of freshwater wetlands in Udon Thani province. Direct resource

harvests are estimated to be worth approximately US$270 per household per year, to a total gross value of US$108,000

or US$24/ha.

Studies carried out by Sathirathai and Barbier (2001) in Surat Thani province indicate that mangroves are worth some

US$88/ha to the local economy, or an average of US$924 per household a year. Other estimates of the local use values

associated with mangroves range between US$230/ha (Christensen, 1982) and US$1,500 (Sathirathai, 1998).

Seenprachawong (2002), looking at Phang Nga Bay in Phang Nga and Krabi provinces, looks at willingness to pay to

conserve the mangroves for different uses. In terms of their value for fisheries and other direct uses, he finds a total

annual value of US$996,335, or US$16.5/ha to adjacent dwellers. For tour operators and tourists, the value of conserving

mangroves for various recreational uses is found to be US$30.4 million, or US$504/ha.

Seenprachawong (2003) also analyses the recreational value of the 32,900ha of coral reefs found in the Phi Phi Islands.

He estimates the total benefits to be US$1.47 million a year for domestic visitors and US$1.24 million for international

tourists, together yielding a value of some US$82.4/ha/year.

Vietnam

Phuong and Duong (2007) find that rural households in Nghe An province gain average annual values from non-timber

forest products of US$16.8 per year in subsistence use, and US$3.1-55.8 in cash income, together totalling US$20-

70/ha/year. ADB (2010), looking at the proposed biodiversity conservation corridor linking seven protected areas in

Quang Nam, Thua Thien Hue and Quang Tri provinces, estimates non-timber forest product values at US$4.7/ha/year.

Nama et al. (2005) assess the value of the 128ha of coral reef in Nha Trang Bay marine protected area. Recreational

activities such as diving, snorkelling and boating generate values worth US$4.25 million or US$332/ha/year, including

visitor consumer surplus of US$2,402,105, value added from direct expenditures of US$589,011, value added from

indirect expenditures of US$642,528 and multiplier effects of US$615,528. The gross value of fisheries provided by the

reef is US$1.55million/ha – or a total of US$1.99 million – per year. Tri (2000), looking at mangroves in Can Gio

Mangrove Biosphere Reserve, finds that the annual value of wood products from routine thinning is US$34,438 or

US$47.5/ha, while thatch obtained from nipa palm is worth US$0.2/ha. The net benefit from the local collection of

aquatic products is US$50,800 or US$2.48/ha, and trade in aquatic products is worth US$1.44/ha/year.

Indirect values / supporting and regulating services

Cambodia

Hansen and Top (2006) present figures for the value of Cambodia’s forests for carbon sequestration, and soil and water

protection. They suggest per-hectare annual values for deciduous forests of US$34 and US$75 respectively, for semi-

evergreen forests US$40 and US$131, and for evergreen forests US$62 and US$131. For forestland in Ratanakiri, Bann

(1997a) proposes that forest environmental services are worth some US$35/ha. ADB (2010), looking at the proposed

biodiversity conservation corridor linking seven protected areas in Mondulkiri and Koh Kong provinces, estimates carbon

storage values at US$1,743/ha/year, watershed protection at US$652/ha/year, water quality regulation at

US$1,018/ha/year and soil erosion control at US$399/ha/year.

Data on coastal ecosystem values is provided by Emerton et al. (2002), who calculate that Preah Sihanouk (Ream)

National Park’s mangroves yield erosion prevention and carbon sequestration benefits worth US$156/ha/year.

Laos

The study carried out to calculate the economic returns from conserving natural forests in Sekong province by Rosales et

al. (2003) finds watershed protection benefits worth some US$0.85 million a year (just under US$3/ha) for existing

downstream fisheries, irrigation and micro-hydropower, and flood control benefits to have a value of US$26.60 million

or US$92.3 per hectare. In Phou Dean Din National Biodiversity Conservation Area, Aymui and Chanhda (2009)

estimate the value of ecosystem services 15 secured when natural forest is conserved rather than degraded and converted

to be US$2,008 per hectare over 10 years, or an average of US$200/ha/year. ADB (2010), looking at the proposed

biodiversity conservation corridor linking four protected areas in Attapeu, Champasak and Xekong provinces, estimates

carbon storage values at US$1,846/ha/year, watershed protection at US$681/ha/year, water quality regulation at

US$718ha/year and soil erosion control at US$380ha/year.

Gerrard (2004) describes the ways in which the 2,000ha That Luang marsh in Vientiane serves to generate economically

valuable regulating services that are critical to the functioning of the city, and to the basic standard of living of its human

population. She calculates flood protection and wastewater treatment services to be worth some US$2.87 million a year

or US$1,436/ha to the 38,000 people living around the marsh.

Thailand

In southern Thailand, Sathirathai (1998) estimates mangrove coastline protection and stabilization services are worth up

to US$3,000/ha/year, and carbon sequestration just under US$100/ha/year. Later work by Sathirathai and Barbier

(2001) provides figures of US$3,679/ha/year for shoreline stabilization and coastal protection, and US$21-69/ha/year

for the contribution of mangroves to offshore fisheries productivity and catch. Seenprachawong (2002), assessing local

residents’ and tour operators’ willingness to pay for the ecological functions of mangroves in Phang Nga Bay, suggests an

individual willingness to pay of US$13, which translates into an annual figure of US$22.9/ha/year.

Vietnam

MARD (2008) looks at the value of Da Nhim watershed protection services in Lam Dong province, suggesting that the

downstream benefits to hydropower from 1ha of forest is US$69.07 a year, of which US$14.64 is for water regulation and

US$54.43 for reduction of sediment into the reservoir. ADB (2010), looking at the proposed biodiversity conservation

corridor linking seven protected areas in Quang Nam, Thua Thien Hue and Quang Tri provinces, estimates carbon

storage values at US$2,085/ha/year, watershed protection at US$1,417/ha/year, water quality regulation at US$

1,131/ha/year and soil erosion control at US$399/ha/year. Kuchelmeister (2003), looking at local forest values in Bac

Giang and Lang Son provinces, provides figures for the value of forests in reducing soil erosion and settling sediments in

15 Comprising n utrient cycling, raw mate rials, erosion control, climate reg ulation, recreation, wa ste treatment, food pro duction, genetic resources, biological cont rol, soil

formation, po llination, water supply, water regula tion, disturbance regulation, cultu ral services and gas regulation

small water reservoirs, resulting in benefits worth US$1-37/ha in terms of enhanced paddy productivity, US$14/ha for

micro-irrigation, and US$42.6/ha for fish productivity in small village ponds (in 2003US$).

Studies carried out by Tri et al. (1998) in southern Vietnam show that the net present value of mangroves in protecting

against extreme weather events lies at around US$500,000/ha.

The value of coral reefs for coastal protection and support to offshore fisheries

Coral reefs provide a range of extremely valuable ecosystem services in terms of their support to coastal protection and

offshore fisheries. Unfortunately, no data is available for these values in the Lower Mekong region. Various values have

however been calculated for the supporting and regulating functions of coral reefs in Indonesia and the Philippines

(Emerton 2006a, 2009a). Rather than run the risk of excluding these important ecosystem service values, and in the

absence of any estimates for the Lower Mekong region, these figures are used in the current study.

Cesar (1996) presents estimates of the value of coral reefs for the protection of coastlines against the effects of storms,

waves and tidal surges. He finds that reefs adjacent to sparsely populated areas where agriculture is the main activity can

be valued at US$82,900/ha (based on the value of agricultural production that would be lost), reefs adjacent to areas of

higher population densities at US$5,000,000/ha (based on the cost of replacing housing and roads), and reefs in areas

where tourism is the main use at US$100 million/ha (based on the cost of maintaining sandy beaches). Hargreaves-Allen

(2004) presents figures for the value of coastline protection by coral reefs in Wakatobi National Park (also in Indonesia)

of $47,300/ha.

Although quantitative indicators of the value of coral reefs to fish productivity and catch exist, none provide data which

can be translated into per-hectare values. Work carried out by Russ and Alcala (1996) around Apo Island Reserve in the

Philippines shows a sevenfold increase in the densities of large predatory reef fish after 11 years of protection through the

establishment of marine protected areas, while Maypa et al. (2003) state a tenfold increase in catch per unit effort in the

hook and line fishery over two decades. In Indonesia, the creation of Taka Bone Rate marine protected area has likewise

been demonstrated by Cesar (2002) to have had a tangible impact in improving fish stocks and yields. Work carried out

in the Philippines by McAllister (1988) also shows that sustainable fish yields from areas where coral reefs are in good

condition are estimated to be more than double those from reefs in fair condition, contributing an additional 1,000

tonnes/ha/year. Similar findings come from a study by Putra (2001) in Lampung province, Indonesia, where each

additional metre of coral coverage increases fishing productivity by more than 2kg a year (Putra 2001).

Non-use values / cultural services

Thailand

Seenprachawong (2002), assessing tourists’, local residents’ and tour operators’ willingness to pay for the non-use values

associated with the rare and endangered species found in mangroves in Phang Nga Bay, suggests an individual

willingness to pay of US$3, which translates into an annual figure of US$7.5/ha. Seenprachawong (2003) also finds that

the domestic non-use value of coral reefs at Phi Phi is US$15.85 per person, or US$15,075/ha.

Several other studies look at the non-use values associated with coastal and marine ecosystems in Thailand, but do not

provide figures that can be expressed on a per unit area basis. Nabangchang (2008) determines the non-use values of a

group of endangered species through eliciting Thai residents’ willingness to contribute funds for conservation. She finds

values of between US$8.4 million (if money were to be raised through a mandatory tax) and US$37 million a year

(through voluntary payments). Jianjun et al. (2007) and Nabangchang and Thuy (2008) look at the non-use value of

marine turtles to the urban population in Bangkok, indicating willingness to pay values of between US$7.06 million and

US$26.69 million a year.

Vietnam

Nama et al. (2005) assess the conservation existence values of Nha Trang Bay marine protected area to domestic and

international tourists, stating average figures of willingness to pay per tourist of US$3.1 and US$3.9 respectively. These

translate to a value of US$18.7/ha. Do and Bennet (2007) look at the biodiversity conservation value of Tram Chim

National Park. They find that the value for residents of Cao Lanh, Ho Chi Minh City and Hanoi is in the order of US$3.9

million or US$433/ha, expressed via aggregated willingness to contribute funds for improved wetland biodiversity

conservation via changed dyke management.

As with Thailand, several other studies provide interesting estimates of the non-use value of ecosystems which cannot

however be expressed on a per unit area basis. Jianjun et al. (2007) and Nabangchang and Thuy (2008) look at the non-

use value of marine turtles to the urban population in Hanoi and Ho Chi Minh City, indicating willingness to pay values

of between US$6.44 million and US$13.02 million a year. Hoa and Ly (2009) find that households in Ho Chi Minh City

are willing to pay at least US$0.35 per month for the preservation of Lo Go – Xa Mat National Park, reflecting its non-use

value to them. Thuy (2007) looks at the non-use benefits associated with Vietnamese rhinos found in Cat Loc Rhino

Conservation Area in Cat Tien National Park, and calculates annual values (expressed through willingness to pay) of

US$5.8 million.

Conclusions: what we know about the economic value of ecosystem services

• What’s available? The review of existing data and studies yielded almost 100 estimates of economic values,

covering various types of natural ecosystems in each of the four Lower Mekong countries. These are described in

the paragraphs above, and listed in Data Annex Table 10.

• What can we use? About 60 of these estimates are useable in the current analysis: some were excluded because

it was unclear just what ecosystem services they covered (and therefore they could not be combined and

compared with other estimates), or because they dealt with unusual situations or user groups (and thus they

were considered atypical or unsuitable for broader extrapolation). All cultural/non-use service values were also

excluded, as these cannot be scaled up or extrapolated between sites.

• How much are ecosystem services worth? From the remaining data, it is possible to obtain a range of “average”

ecosystem service values for the region, generalized to four broad categories of ecosystem: forests

(US$1,281/ha/year), freshwater wetlands (US$1,634/ha/year), mangroves (US$2,670/ha/year) and coral reefs

(US$326/ha/year). Table 2 summarises the mean economic value of ecosystem services in Cambodia, Laos,

Thailand and Vietnam, according to available data and reports. These values will be used in the scenario

analysis presented in Part II of this report.

Table 2: summary of ecosystem services values (US$/ha/year)

Mean

value

Maximum

value

Minimum

value

Standard

deviation

# useable

references

Forests

1,281

Local use of non-timber products

165

Sustainable timber

104

171

Watershed protection

183

399

153

Carbon sequestration

968

2,085

929

Freshwater wetlands

1,634

Local use of aquatic products

198

658

268

Water quality and flow services

1,436

Mangroves

2,670*

Local use of aquatic products

282

1,200

366

Coastal protection

2,243

3,679

1,575

Tourism and recreation

3,000

Carbon sequestration

100

Support to offshore fisheries

Coral reefs

326*

Tourism

207

332

125

On-site fisheries

155

Coastal protection+

171

500

233

*Excludes tourism and recreation. These values are highly location-specific, and the sites at which such data has been

generated are for the most part already developed and well served by transport and other infrastructure. It cannot be

assumed that all sites in the region have this potential, or are ever likely to do so.

+Uses data from Indonesia.

• Is such an approach defensible? Despite the limitations set out, these estimates are undoubtedly useful. They

represent the current state of knowledge on ecosystem service values in the region, and as such are the only

available base from which to work. Better or more accurate figures simply do not exist. In the absence of more

reliable estimates, taking these averages is, however imperfect, the best option available.

• What are the limitations? The resulting data should however be treated with extreme caution. It presents a first

attempt to generate indicative and rough estimates which will give some idea of the broad magnitude of the

value of the services provided by different ecosystems in the Lower Mekong region.

There is an inevitable trade-off between the need to generate practical and policy-relevant information in a situation

where time, resources and data are scarce, and the presentation of a research exercise which is based on detailed primary

data. A fundamental question remains as to whether it is in fact possible to envisage anything such as an “average”

ecosystem service value, or to extrapolate data which has been generated in one site for a particular purpose to other

locations.

As already mentioned, the quality, assumptions and overall credibility of the data sources which are available are

sometimes questionable. The valuation studies that form the basis of the current analysis vary greatly in their scope,

quality, methodology, and suitability for use in a regional-level assessment. Often the base data sources are not strictly

comparable as they may be of a different nature or be expressed in different units, or the estimates may not be clearly

related to a specific service or an area.

The estimates used in this analysis are not comprehensive, and contain many gaps – for key ecosystem services or sites,

estimates of economic value simply do not exist. An example of this is the economic values ascribed to coral reefs in

Table 2 – it would be absurd to conclude that coral reefs are somehow worth “less” than the other ecosystems presented

in the table. Rather, a lack of data makes it difficult to reflect the full economic value of coral reef ecosystem services in

the figures that are presented in this report.

In several cases, the values that are ascribed to particular ecosystem services rely on just one or two studies – they are in

no way based on a significant sample of sources. These is also a great deal of variation between the estimates of

ecosystem values given in different sources, even when they have been generated in similar sites. This is apparent from

the standard deviation figures presented in Table 2, which show a high dispersion or spread of values about the mean,

and is depicted in Figure 4, Figure 5 and Figure 6 below.

Figure 4: variation in estimates of the value of non-timber forest products

Figure 5: variation in estimates of the value of forest watershed protection

Figure 6: variation in estimates of the value of mangrove products

2. ‘Real-world’ valuation: To what extent are these values being captured as payments for

ecosystem services?

However great the value of ecosystem services is demonstrated to be in theory, this information has little impact unless it

translates into both real economic gains on the ground, and sufficient investment in maintaining the ecosystems that

generate these services and the groups that provide them. Over recent years there has been a growth in the use of market-

based and other mechanisms which attempt to capture the economically important values described in the previous

chapter. These are being used to supplement more conventional sources of conservation financing (e.g. central

government budgets, limited user fees and international donor assistance). This chapter summarises the ways in which

ecosystem values are being captured as payments for conservation, and identifies ecosystem services that are currently

not being effectively captured in payment streams.

Payments for ecosystem services

A large number of current funding efforts in the Lower Mekong region are termed “payments for ecosystem services”

(PES), probably reflecting the current popularity of the term and approach among conservation planners and donors. It

is less certain that all can, strictly, be considered to be PES: many are, in reality, just new ways of communicating and

packaging traditional donor and international NGO project interventions, or providing subsidies to communities who live

in or around high conservation value landscapes.

However, if we are looking at capturing ecosystem values, it is important to distinguish financing mechanisms which are

based on directly charging the users or beneficiaries of valuable ecosystem services, and directly compensating or

rewarding the providers of those same ecosystem services – in other words, those that make a clear link between the

value of a given ecosystem service, and the costs incurred in maintaining it. The paragraphs below therefore focus mainly

on market-based schemes which fit most closely with the definition of PES as “voluntary agreements to enter into a

legally binding contract under which one or more buyers purchase a well-defined ecosystem service by providing

financial or other incentives to one or more sellers who undertake to carry out a particular land use on a continuous

basis, which will generate the agreed ecosystem service at specified levels” (IUCN 2008).

Cambodia

There have been recent questions about the political acceptability of PES in Cambodia, even though (as described in the

following paragraphs) the reality is that several PES efforts are already under way or are being planned. After the topic

was raised at a workshop in mid-2010, the prime minister responded firmly that he did not consider PES to be feasible or

desirable, because of the risk of payments acting as disincentives to investment (particularly in hydropower, water supply

and irrigation sectors), and the possibility of the poor being penalized due to additional costs being passed on to

consumers through increased water, energy and food prices (Emerton 2010). The future broad acceptance of PES by the

Cambodian government will depend on high-level decision-makers being persuaded that these fears are unfounded.

In Cambodia there has, however, been wide use of the terms ecosystem services and PES in public planning and in

operational projects for ecosystem conservation for some time (Chervier et al. 2010). PES or “PES-type” mechanisms are

being tested in several priority ecosystems. Many of these are associated with pre-existing biodiversity conservation or

protected area projects, and most are driven by large international conservation NGOs. Without detracting from their

undoubted successes in ecosystem conservation and local livelihood terms, it should however be noted that the majority

might be more aptly seen as “conservation subsidies” from the international community or as integrated conservation

and development activities than as market-driven PES.

One exception is the Cambodia Payment for Ecosystem Services Project being developed by Fauna and Flora

International (FFI). This focuses on establishing market-based PES schemes at two hydroelectricity sites located within

protected areas of the Cardamom Mountains landscape. The Wildlife Conservation Society (WCS) also refers to a series

of direct conservation payment schemes instituted around two protected areas in the Northern Plains landscape (Kulen

Promtep Wildlife Sanctuary and Preah Vihear Protected Forest) as PES (Clements 2010). These involve agri-environment

payments, the development of wildlife-friendly products, and the provision of direct contracts for bird nest protection to

local communities. Conservation International’s “conservation agreements16” are also frequently referred to as PES in the

organization’s promotional materials. One example, in Cambodia, is the agreements entered into with six communities

living around the Cardamom Forest. The communities have agreed to cease slash-and-burn practices, stop hunting and

setting snares for wildlife, and instead engage in patrolling and protection activities to conserve the nesting sites of the

Siamese crocodile.

Laos

In Laos, payments for environmental services remain at an early stage of design and development. There are currently no

functioning schemes when PES is defined in the strict sense (revenue-sharing arrangements with the hydropower sector

are considered separately, and discussed below), and no enabling policy or legal framework. A clear interest from

government decision-makers, however, suggests that PES may soon be tested on a pilot basis, and further formalized.

The two newly established River Basin Funds are, for example, attempting to operationalize PES in relation to watershed

protection services (Emerton and Douangchan 2011), and both the Lao Environment Protection Fund and the Forest

Development Fund have expressed their wish to integrate PES funding.

Various research and academic studies have been carried out looking at the feasibility of instituting PES in Laos,

although the conclusions are mixed. There seems to be a general consensus that economic, institutional and legal

constraints mean that there is still a considerable amount of work to be done on creating the broader enabling conditions

for any kind of a PES scheme to function at the national level. It is also not certain that, outside the hydropower and

urban water sectors, there exists a sufficient market for PES buyers.

Detailed work has, for example, been carried out in Houay Xon watershed on the feasibility of PES (George et al. 2009,

Mousquès et al. 2008). This finds that, in princinple, downstream ecosystem service beneficiaries would be willing to pay

enough to compensate upland farmers for implementing new land management practices which would abate some of the

negative impacts of soil erosion on water quality; however, the absence of a critical mass of buyers would hinder the

development of a more comprehensive PES scheme.

Thailand

PES appear to be least developed in Thailand, although there are clear indications of a growing interest to develop and

pilot such schemes. A recent UNDP-sponsored workshop looked into the potential and constraints of applying a PES

system in Thailand,17 and three government of Thailand/UNDP-GEF projects have been developed or are in the process

of development which aim to pilot PES. These relate to protected areas, the development of sustainable harvesting and

supply chains for biodiversity-based products, and integrated catchment management systems.

Vietnam

PES have been institutionalized at the national level in Vietnam. Box 2 describes Vietnam’s experiences in payments for

forest environmental services. This pilot scheme (which focused on payments for watershed and tourism ecosystem

services in two provinces) has just been extended, via Decree No. 99 /2010/ND-CP, to the entire country. Decree 99 is

confined to forest environmental services, comprising watershed protection, carbon sequestration, tourism and

“spawning grounds, sources of feeds, and natural seeds, use of water from forest for aquaculture”. Those eligible to

receive payments include forest owners, local households and communities, economic organizations and the

management boards of protection forests and special use forests.

16 Under these s chemes, land owners or loc al communities are direc tly or indirectly compensated with i nternational f unding for protecting s pecific habitats or species, on

the understanding that they enter into for mal agreements not to carry out certain land and resource uses which are considered incompat ible with conservation, or

directly engage in biodiversity conservation acti vities.

17 “Payments fo r Ecosystem Se rvices in Tha iland: why and how?”, U NDP Thailand News and Eve nts, 15 December 2009.

Box 2: payments for forest environmental services in Lam Dong and Son La provinces, Vietnam

The idea of payments for environmental services began to take hold in Vietnam in 2005. In 2008, the government issued

Decision No. 380/QD-TTg on piloting payments for forest environmental services in Lam Dong and Son La provinces.

These two schemes have both been developed collaboratively between the Ministry of Agriculture and Rural

Development and external donors: USAID/Winrock International in Lam Dong, and GTZ in Son La.

Similar systems operate in both provinces. Cash payments are received from key water users (hydropower, water bottling

companies and other urban and industrial consumers). These payments are calculated at VND20/kWh (US$0.001/kWh)

of commercial electricity, and VND40/m3 (US$0.002/ m3) of clean commercial water. The revenues collected are

retained in separate bank accounts as part of provincial forest protection and development funds. Between 10 and 20 per

cent is retained by government, and the remainder paid out to environmental service providers. Local households in

watershed areas are eligible to receive payments, calculated on a per-hectare basis.

The Son La pilot scheme covers an area of 395,000 hectares of forest in nine districts, and involves just over 4,500 forest

owners. The scheme is funded from two water supply companies and two hydropower plants. Payments will be made at a

rate of between VND70,000 and VND140,000 per hectare per year. As yet, no funds have actually been released, but

payments are expected to start soon.

The Lam Dong pilot scheme covers just under 550,000 hectares in four districts, and involves around 3,000 households

and forest owners. The scheme is funded by two hydropower plants, two water supply companies and one tourism

company. Payments have been made at the rate of between VND270,000 and VND290,000 per hectare per year.

Decision 380 was subsequently extended to an additional 15 provinces (those with major watersheds and hydropower

plants). A decree was passed in September 2010 which scaled payments for forest environmental services up to the

national level, extending the scope of environmental services for which payment could be made (most notably including

carbon sequestration), and updated the recommended payment levels.

Carbon finance

Carbon finance can also be considered to be a form of PES (it is based on capturing ecosystem carbon sequestration

service values), but is considered separately in this chapter due to its rather specific institutional and funding

characteristics. Three main carbon finance mechanisms are considered below, and can be found in the region: Clean

Development Mechanism (CDM) 18, reducing emissions from deforestation and forest degradation (REDD)19, and

voluntary carbon markets.

Although CDM projects can in theory provide funding for afforestation and reforestation activities, the requirements for

project preparation and verification are extremely complex. It is maybe for this reason that there seems to be very little

focus in Lower Mekong countries on CDM as a mechanism for funding forest ecosystem restoration. Although two CDM

projects have been registered in Cambodia, one in Laos, 54 in Thailand and 46 in Vietnam, all except one concern energy

efficiency. The only forestry and land use CDM project is a relatively small one in Vietnam, the Cao Phong Reforestation

Project.

REDD/REDD+ and voluntary carbon market projects are generally seen as more appropriate sources of funding for

ecosystem conservation in the region. Several pilot REDD projects are already underway, and many more are being

planned by conservation agencies active in the four countries.

For example, in Cambodia, Community Forestry International and Pact are supporting a REDD pilot project in Oddar

Meanchey province (see Box 3), and WCS has developed REDD activities in Seima Mondulkiri. In Laos, GIZ, working

with KfW, is supporting the testing of REDD in Nam Et-Phou Loei and Nam Phui NPAs; WCS is undertaking a REDD

18 The Clean Development Mec hanism (CDM), defined i n Article 12 of the Proto col, allows a c ountry with an emissio n-reduction or emission-limita tion commitment

under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries. Such projects can earn s aleable certified emissio n

reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyo to targets. See

http://unfcc c.int/kyoto_ protocol/mec hanisms/clean_developme nt_mechanis m/items/2718.php

19 REDD is a mec hanism to create an ince ntive for developing co untries to protect, better manage and wisely use the ir forest resources, co ntributing to the global fight

against clima te change. REDD strategies aim to make forests more valuable s tanding than they woul d be cut down, by creating a financial value for t he carbon sto red in

trees. Once t his carbon is assessed and quantified, the final phase of REDD invo lves developed countries paying developing countries carbon offsets for their standing

forests. See http://www. un-redd.org/FAQs/tabid/ 586/Default.a spx

feasibility study for sites in Nam Et-Phou Loei NPA, Nam Kading NPA and Bolikhamxay province; and JICA, under the

PAREDD project, is working on REDD at four sites in Luang Prabang province.

In Thailand, the Tenasserim Biodiversity Corridor and Western/Kaeng Krachan forest complexes has been identified as a

pilot REDD site. The Department of National Parks, Asian Development Bank and a private company have prepared a

proposal to secure funding. In Vietnam, Lam Dong province has been identified as a pilot site under the UN-REDD

programme, with Son La and Can Tho provinces also highlighted as priority areas for REDD development and piloting.

Box 3: pilot REDD activities in Oddar Meanchey province, Cambodia20

In December 2007, the Forestry Administration introduced the Oddar Meanchey REDD project, working with a variety of

international and national NGOs and forest communities. The project seeks to retain and increase carbon stocks,

enhance the hydrology in the upland watersheds of the Tonle Sap basin, and conserve endangered biodiversity. Its

intention is to generate 8.5 million verified emission reductions over 30 years, which will be sold on voluntary carbon

markets. The project was submitted for validation to the Climate Community Biodiversity Alliance and Voluntary Carbon

Standard in 2009 but has yet to bring credits to the voluntary market.

The pilot project covers 60,000 hectares and involves 13 forestry groups in 55 villages. Project sites include larger tracts

of community-managed forests with healthy closed canopy forests, as well as degraded forests suitable for restoration.

The project provides regeneration contracts to all participating community forest management committees (CFMCs) to

restore their degraded forests. Restoration contracts are based on CFMC management plans, providing employment

opportunities, materials, and funding CFMC operations. Carbon financing is used to support rural communities to

develop a range of livelihood activities including non-timber forest product industries, community-based ecotourism

infrastructure, and water resource development. The project is also working with the Forestry Administration and

commune, district and provincial government to assist planners to formulate long term plans for sustainable natural

resource management that can foster economic growth.

REDD is, however, in the early stages of development, and may only come on track as a mainstream source of ecosystem

funding in several years’ time. In the meantime, a number of uncertainties remain about exactly how it will operate in

Lower Mekong countries. National benefit sharing systems are in the process of being designed, and REDD roadmaps

and readiness plans are being formulated, with the assistance of UN-REDD and the World Bank’s Forest Carbon

Partnership Facility.

Several other new funding opportunities associated with climate change, carbon and REDD have also recently emerged

which may offer financial resources for ecosystem conservation. In Cambodia UNDP has stated its intention to set up a

new small grant facility concerned with REDD and climate, and two donor-funded climate adaptation funds have

recently been developed. A multi-donor fund of just under US$9 million has been established through the Climate

Change Alliance and is being administered through Cambodia’s Forestry Administration. Although a final decision has

not yet been taken on exactly how these funds will be used, it seems likely that grants will be made available for

organizations and agencies to engage in climate change adaptation activities.

A second adaptation fund for Cambodia is in the design stage, to be financed from the World Bank, DFID, JICA, EU,

France and other donors. This will also be used for adaptation activities, but at the level of policy development and

mainstreaming rather than for on-the-ground activities. It is planned that funds will be provided as general budget

support, and allocated according to priorities decided by the central government – possibly for mainstreaming climate

change adaptation into agriculture, rural infrastructure, irrigation and other priority development sectors.

Biodiversity offsets

Biodiversity offsets cannot be considered as payments for ecosystem services, because they serve to compensate (or

offset) negative biodiversity and habitat impacts by investing in conservation efforts elsewhere. Broadly speaking,

however, they are predicated on a recognition of the value of ecosystem services, and the need to offset the costs of

20 See: red-monitor.org, ‘Oddar Meanchey REDD pro ject runs in to problems selling carbo n credits, as the Cambod ian government misses d eal signing deadline’ 2 1 June

2013. http://www.redd-monitor.org/2013/06/21/oddar-meanchey-redd-project-runs-into-problems-selling-carbon-credits-as-the-cambodian-government-misses-deal-

signing-deadline/

ecosystem service degradation or loss through the restoration or maintenance of equivalent services elsewhere. They are

therefore dealt with briefly below.

Biodiversity offsets are not widespread in the region, but are in the early stages of development in all of the Lower

Mekong countries. Experiences with the cement industry in Thailand and with hydropower in Laos probably represent

the closest approximation (voluntary contributions by the corporate sector are dealt with separately, below). As

illustrated in Box 4, in Thailand the Siam Cement Group is engaged in the restoration and reforestation of exhausted

quarry areas, and in Laos there are now several examples of individual hydropower schemes providing environmental

funding in order to offset or compensate for damages caused on-site.

In Vietnam, a national programme on biodiversity offsets is under development, and it is envisaged that a policy on

biodiversity offsets will be developed.21 The Ministry of Environment and Natural Resources has recently submitted a

draft policy on environmental compensation to the government, and the legal framework on biodiversity offsets also

draws on Article 75 of the Biodiversity Law No. 20/2008/QH12.22 Work on developing a national biodiversity offset

programme is being supported by Forests Trends’ Business and Biodiversity Offsets Programme.

Box 4: biodiversity offsets by Siam Cement Group in Thailand and the hydropower sector in Laos

In Thailand, the Siam Cement Group is engaged in an active corporate environmental and social responsibility

programme which includes biodiversity offsets. These operate mainly through the rehabilitation and revegetation (using

local species) of limestone quarries. Check dams have been constructed to increase soil moisture, and biodiversity

surveys and monitoring are carried out. The project runs in collaboration with the Ministry of Forestry, Department of

Fundamental Industry and Mining and Faculty of Forestry at Kasetsart University.

In Laos, both the Nam Theun 2 and Theun-Hinboun Expansion hydropower projects are piloting mechanisms for sharing

revenues or investing funds in environmental management. The World Bank-funded Lao Environment and Social (LEnS)

project was designed as a complementary activity to the Nam Theun 2 project, including social and environmental

activities to address the cumulative impacts of river basin development in the Nam Theun-Nam Kading river basin. In

addition, the Theun 2 project has undertaken to provide direct funding for the Nakai-Nam Theun Watershed

Management and Protection Authority of US$1 million a year for the duration of the concession period (31 years),

including funds for management of Nakai Nam Theun NPA and two corridor areas.

Under a slightly different structure (and working through an international NGO, WCS), funding is being made available

from the Theun-Hinboun Expansion project for the development and implementation of a catchment biodiversity

development and protection plan in Nam Gnouang watershed.

Based on these models, several other new hydropower projects are also discussing methods for contributing funds

towards land and resource conservation in the catchments in which they operate.

Other corporate funding

Aside from PES which are designed to recompense directly for the benefits of ecosystem services and offset the costs of

ecosystem services loss, various other corporate funding sources are being voluntarily invested in biodiversity and

ecosystem conservation. As this funding is being provided at least partially in recognition of the high value of ecosystem

services, it is included in this chapter.

In Cambodia and Laos, for example, WWF has a partnership with the Swedish home furnishings company IKEA to

promote responsible forestry. This is providing funding for research on rattan production, harvest, use and trade, as well

as determining the potential to develop a sustainable rattan harvesting model at the community level. In Laos, WCS has

managed to access funds for biodiversity and species conservation from the mining company MMG, which operates the

Sepon copper and gold mine in Savannakhet province. In Thailand, the government is working with the ASEAN Centre

for Biodiversity to support a forum to encourage companies to include biodiversity conservation in their corporate social

responsibility initiatives. In Vietnam, the international cement company Holcim is providing ongoing funding to the Kien

Giang Provincial People’s Committee and other organizations for the conservation of karst landscapes (see Box 5).

21 Vietnam News Agency, 24 Ap ril 2010, “Vietnam considers biodiversity offset scheme.”

22 “Organizatio ns or individ uals that infringe upo n conservatio n areas or biodiversity conservation facilities… s hall pay damages in accordance wit h law” and “damage

caused to biodi versity due to environmental pollutio n or degradation shall be compensa ted in accordance with la w.”

Box 5: corporate funding to karst ecosystem conservation in Kien Giang province, Vietnam

Holcim Ltd., a global company specialising in the manufacture and distribution of cement and aggregates, has committed

to provide around US$1 million to preserve and restore the ecological system of Kien Giang province and Kien Luong

district, part of a UNESCO Biosphere Reserve. Activities include protection of important karst landscapes and

conservation of endangered species, namely the silver langur and sarus crane.

A framework agreement with the Kien Giang Provincial People’s Committee and the Kien Giang Union of Friendship

Organizations has also been established, to provide a platform to engage the local authorities in the Kien Giang province,

where Holcim’s Hon Chong plant is located. Training programmes have been developed to raise awareness of the

importance of environmental protection among the local community and Holcim staff. As part of the agreement, Holcim

and its local partners are determining the feasibility of eco-tourism in the Mo So caves area as a means for protecting

biodiversity.

Conclusions: the extent to which values are being captured as payments for

ecosystem services

Are values being captured as payments? As the experiences and case studies presented above show, all forms of payments

for ecosystem services are very much at an incipient stage in the Lower Mekong countries – which suggests that they are

not capturing the full value being delivered by the region’s ecosystems. The exceptions to this are of course (a) the

government and donor funding which is (presumably) being provided in recognition of the important public benefits that

are generated by biodiversity and ecosystems, and the responsibility of the state and the international community to

maintain them; and (b) the various charges, fees and taxes that are levied on the physical products and facilities that are

associated with ecosystems. Both of these mechanisms, which are not dealt with in this report, have long formed sources

of conservation financing, and continue to do so.

Why is leakage a potential issue? One important lesson learned from conventional ecosystem and biodiversity-related

revenue-generating mechanisms, as they have been applied in the region to date, is that simply instituting PES

mechanisms is not by itself sufficient to ensure increased investment in conservation. Beneficiaries of many of the direct

values or provisioning services associated with ecosystems are already charged for their use (for example through forest

royalties, fishing concession fees, hunting permits, tourist entry charges or environmental taxes). But in many if not most

instances, the revenues raised are not reinvested in the management of ecosystems – and may not even be retained by

the agency or at the site that generated them. They tend to be treated as general budget funds, and are remitted to the

parent ministry or central treasury. The danger of this type of leakage remains a potential issue to be dealt with, as other

payments for ecosystem services emerge.

What stage have payments for ecosystem services reached? Pilot PES schemes exist, or are emerging, in all of the Lower

Mekong countries. It is only in Vietnam that PES have been institutionalized, and are specifically covered by law. In

Cambodia, Laos and Thailand it is however clear that there is a great deal of interest (among both government and the

NGO community) in scaling up site-specific PES efforts, and establishing some kind of national institutional, legal and

funding framework that could guide the further development of PES across the country. This process is being expedited

by the emergence of REDD/REDD+ across the region, which is demanding that these issues are addressed – although the

extent to which carbon finance can, or will, be “bundled” with payments for other ecosystem services is not yet clear. All

four countries are still in the process of finalizing REDD/REDD+ structures and arrangements.

While it is clear that PES (including REDD/REDD+ and other forms of carbon finance) provide a potentially

important source of ecosystem funding, they should not be seen as the sole solution. Despite the high economic

value of the region’s ecosystem services, there is at present only a limited market and relatively small amount of

buyers. Much of the region’s population and many of its businesses currently remain economically unable, or

unwilling, to voluntarily pay for the ecosystem services that they benefit from.

Who are the beneficiaries of payments for ecosystem services? Unlike more conventional ways of capturing ecosystem

values, such as user fees which accrue as budgetary revenues for the government, PES provide an opportunity to mobilize

funding for all the different groups that incur a cost from ecosystem conservation. The development to date of PES in the

region has focused on establishing mechanisms which do not just generate revenues for government, but also provide

funding to the landholders, resource users and local communities which are involved in providing key ecosystem services.

This is an important point, as PES are not only being used as a tool to better capture (and reinvest in) ecosystem values,

but also to cover more equitably the costs of ecosystem service provision.

Which ecosystem services are currently not being effectively captured in payment streams? The review of experiences

from the region underlines the fact that almost all of the current PES efforts focus on forest ecosystems, primarily on

watershed23 and biodiversity24 services. There remains a significant gap in PES relating to freshwater wetlands, marine

and coastal ecosystems, despite the economically important (and potentially marketable) services these provide. In this

sense the Lower Mekong region varies little from the rest of the world, where forest ecosystem services – and particularly

forest watershed services – have long dominated PES systems.

23 Including ero sion control, water flo w regulation and water q uality maintenance.

24 Including la ndscape, tourism and spec ies habitat.

PART III: MODELLING THE FUTURE OF ECOSYSTEM

SERVICES CHANGE IN THE LOWER MEKONG

1. What are the likely future ecosystem management and use scenarios?

Ecosystem service values are not static. It is self-evident that they depend both on the types, extent and quality of

ecosystems, and on the level of reliance of the region’s human population on ecosystem services for their economic well-

being. This chapter outlines two possible future scenarios for ecosystem management and use in the region, and the

implications of different levels of management for the delivery of ecosystem services. It goes on to assess the economic

implications of each scenario, and provides details about the key trends, assumptions and parameters associated with

them.

What the scenarios are based on

Each scenario presents a (very simplified and generalized) model of how the use of land and resources, and the area and

quality of ecosystems, might change over the next 25 years in the Lower Mekong countries of Cambodia, Laos, Thailand

and Vietnam.

It should be noted that there are several other possible ways to construct scenarios of the future economic value of

ecosystem services. It would be possible, for example, to use a more anthropocentric basis for projections, such as

population growth and resource demand. It would also be possible to use changing policies as the basis for projections.

This study, however, takes a land use/ecosystem area-based approach. It sets a baseline for the physical coverage of

forest, freshwater, mangroves and coral reefs in 2010 – and then describes scenarios for the change in that coverage with

the implications for the change in value of services being delivered by those ecosystems by 2035.

This is for three main reasons. First, an ecosystem value scenario-modelling exercise has already been conducted for the

WWF-Greater Mekong priority landscapes (Campbell, 2010), which takes this approach. Because this data is included in

the current study, it was necessary to generate country and regional data which could be directly compared and combined

with the figures calculated in the earlier exercise. Second, it is consistent with the TEV-MA framework presented in the

introduction to this report. The scenarios essentially relate changes in ecosystem assets or natural capital (ecosystem

extent and quality) to changes in the flow of ecosystem services and, in turn, changes in economic values and well-being.

Third, it reflects WWF’s concern with ecosystem conservation and improved investment in ecosystems.

Extrapolating current ecosystem values into the future is both imprecise and risky. As already noted, the relationship

between changes in ecosystem areas and quality, the provision of ecosystem services, and the generation of economic

values is not a linear one. However, the time and data constraints faced by the current study mean that some degree of

linearity has to be assumed in the calculations. Future changes in land use and ecosystem status are almost impossible to

predict, and there are high degrees of uncertainty involved.

Other parameters, such as the degree of human dependence on ecosystem services, the real value of these services over

time, and changes in population, demography, income levels and societal preferences all affect ecosystem values;

however, these cannot be predicted with any certainty. Partly for this reason, and also because of the limited time and

information base available to this study, the modelling exercise holds many of these factors constant between the

different scenarios – even though, in reality, one would expect them to vary significantly, depending on future

conservation and development pathways.

Many assumptions are required to take all of these factors into account, and are applied in the current study. In terms of

basic parameters for land use, ecosystem area and quality, the scenario modelling draws on the underlying data and

assumptions provided in many sources. The key baseline parameters are summarised in the next section, and the further

assumptions used in the scenario modelling are elaborated.

Key baseline parameters

Table 3: scenario analysis – key baseline parameters

Cambodia Laos Thailand Vietnam Source

Per capita GDP

Current US$

667

940

3,893

1,032

World Bank 2011

Population

Million persons

14.81

6.32

67.76

87.28

World Bank 2011

Population (rural)

Million persons

11.83

4.22

44.32

60.75

UNDP 2010

Land area

’000

176.52

230.80

510.89

310.07

World Bank 2011

Agricultural area

’000

54.55

21.29

197.50

100.72

World Bank 2011

Terrestrial PAs

’000

43.40

37.55

104.45

18.59

World Bank 2011

Marine PAs

’000

0.69

n/a

19.87

4.52

World Bank 2011

Natural forest

’000

100.25

155.27

149.87

102.85

FAO 2010

Other wooded areas

’000

1.33

48.34

11.24

FAO 2010

Designated production

forest

km2 ’000 33.31 36.23 26.56 64.85 FAO 2010

Designated watershed

forest

km2 ’000 5.05 91.36 13.28 51.05 FAO 2010

Designated biodiversity

conservation forest

km2 ’000 39.37 29.93 89.17 22.08 FAO 2010

Freshwater swamps,

marshes and rice fields

km2 ’000 7.60 9.45 9.90 6.10 Various*

Inland waters

’000

4.52

6.00

2.23

19.24

FAO 2010

Mangroves

n/a

250

150

FAO 2007

Coral reefs

n/a

2,130

1,270

Spalding et al. 2001

*Excludes large rivers, streams and open water bodies. For Cambodia, includes flooded forest, flooded grasslands,

receding/floating rice fields, and swamps (from MOE 2010); for Laos includes swamps, marshes and receding/floating

rice fields (from Emerton et al. 2002b); for Thailand includes swamps, marshes and receding/floating rice fields

within 50km of the main Mekong channel (from Choowaew 2003); for Vietnam includes small ponds, small lakes,

marshes, swamps and receding/floating rice fields (from Do, T.N. and Bennett, J. 2007.).

Business As Usual (BAU)

The “Business As Usual” scenario depicts what will happen if current trends continue. In practical terms, this means that

even though the region’s protected area system will be maintained at its current size, coverage and management

categories, the area of well-managed natural ecosystems contained in the system will be progressively degraded,

converted and lost. Conversion and degradation of natural ecosystems outside protected areas will continue.

A dominant development paradigm which emphasizes short-term economic gains at the expense of longer-term

sustainable development will prevail. Even though policies supporting the conservation and sustainable use of

ecosystems will remain in force, they will not always be implemented or enforced effectively. No significant new

conservation or environmental policy measures will be put in place. In many cases, economic policies and instruments

which aim to stimulate production and consumption in other sectors (such as subsidies, price support or inducements for

investment) will act as perverse incentives in conservation terms, encouraging people to carry out activities that harm

biodiversity and ecosystems.

As population increases in the region, there will be a rising demand for food, timber and other products, many of which

will be sourced unsustainably. Stocks of biological resources will become exhausted in certain places, and some species

may become locally extinct. Resource demands will also be driven by the growth of an increasingly affluent urban

population, and the progressive integration of Lower Mekong countries into wider regional and global markets.

Meanwhile, the incidence of poverty, although declining, will remain high. A large proportion of the region’s rural

population will continue to rely on wild products and species for their day-to-day livelihoods and survival.

Under the BAU scenario, farming and land-based production systems will be intensified, and there will continue to be

wide-scale conversion of natural habitats to agriculture, industrial plantations and urban settlements. Rapid

infrastructure development in the roads and hydropower sectors, as well as an upscaling of the activities of extractive

industries, will also leave its mark on many currently pristine terrestrial and coastal/marine landscapes. There will be

problems associated with the introduction and spread of alien invasive species, to the cost of native fauna and flora.

Ongoing climate variability and climate change will compound these impacts, as human and natural systems become less

resilient, and more vulnerable to stresses and shocks.

While biodiversity will be conserved to some extent within most PAs, there will be intensifying problems of

encroachment – particularly in those PAs which are located close to human settlements or in high-potential agricultural

lands. Public funding to PAs and ecosystems will remain steady in real terms, and there will be a modest increase in new

conservation finance, particularly that sourced from self-generated revenues, the private sector, PES, carbon finance and

voluntary contributions. The amount of funding will, however, be insufficient to ensure that PAs are managed effectively

or that ecosystems outside PAs are adequately conserved.

Green Economic Growth (GEG)

The “Green Economic Growth” scenario depicts what will happen if the region’s PA system is expanded and recategorized

to include a more representative range of critical ecosystems and management systems, and if renewed efforts are made

to better fund and conserve ecosystems and biodiversity outside PAs. This is in line with the green growth strategies and

policies currently being elaborated by Lower Mekong countries. A defining characteristic of this approach is that it

attempts to stimulate public and private involvement in the sustainable use of biodiversity and ecosystems, so as to

capture ecosystem values both as real economic and livelihood gains, and as financing for conservation.

In practical terms, this means that the region’s protected area system will be extended, and in places rezoned and/or

recategorized. A more progressive and realistic approach to conservation which is based on maximizing sustainable use

opportunities and devolving responsibility for key functions and facilities will be introduced. Existing PAs will be

managed more effectively, rates of ecosystem loss outside PAs will decline, and key landscapes will be rehabilitated and

restored.

National development policy will continue to be focused firmly on economic growth and poverty reduction, and on the

expansion of trade, industry and investment. A more proactive and progressive on-the-ground approach to ecosystem

conservation will, however, be reflected in greater success in mainstreaming conservation goals into the strategies,

policies and plans of other sectors. New conservation management and funding approaches will be backed up by a series

of new policies and instruments, and improved implementation and enforcement of existing ones. Although the policies

and instruments of other sectors will continue to present some level of perverse incentives as regards ecosystem

conservation, new financing mechanisms for conservation will go some way towards balancing the market and price

distortions that have long acted as disincentives to sustainable ecosystem management.

Urbanization and market integration will increase, and there will be an upsurge in industrial and commercial activities

across the region. The focus on more environmentally sustainable development by government and overseas donors,

combined with more effective enforcement of environmental laws, will however mitigate many of the negative effects that

economic growth implies in terms of land-use change and resource demands. Investments will be made in promoting

cleaner production, alternative energy sources, greener technologies and sustainable sourcing of products. Meanwhile,

both the corporate sector and civil society will become more involved in sustainable use activities, and better able to

benefit from the economic opportunities they afford. The effects of climate variability and climate change will continue to

pose a threat both to people’s economic well-being and to the status of natural ecosystems, but human and natural

systems will be more resilient, and less vulnerable to these stresses and shocks.

Development will not be achieved without some impact on biodiversity and ecosystems. Some areas of formerly pristine

ecosystems will see an increased level of human presence and economic activities, and there will be some level of habitat

degradation, conversion and modification. These trade-offs will, however, gradually be balanced by more effective

conservation in other locations.

Central budget allocations to PAs will see a small and steady increase, and there will be substantial growth in new sources

of conservation finance, particularly those sourced from other sectors, self-generated revenues, the private sector, PES,

carbon finance and voluntary contributions. Ecosystem conservation will become more financially sustainable and cost-

effective.

2. What are the impacts of ecosystem change on economic values in the Lower Mekong

region?

Each future ecosystem management and use scenario has different implications for the economy, and for people’s

economic well-being. This chapter integrates the information on ecosystem values presented in Part II with the scenario

models developed in Chapter 1, Part III and the methodology described in Part !. It presents estimates of the monetary

values associated with achieving each scenario, and describes how costs and benefits will be distributed between different

stakeholder groups. It finishes by outlining the potential economic gains from the collaborative management of

ecosystems and the maintenance of key ecosystem services.

Net present benefits and costs of Business As Usual and Green Economic Growth

The scenario analysis makes it clear that there are considerable gains to the region from GEG over and above a

continuation of BAU. At the regional level, the net present value added from pursuing such a strategy is estimated at

almost US$10.5 billion (Table 4; see Table 5 for country-level figures). As ecosystems are maintained and improved, all

ecosystem services increase in value over the 25-year period modelled. Although the value added to extractive uses and

harvested production is not insignificant, with a NPV of more than US$2.5 billion, regulating and supporting services

contribute by far the greatest proportion – around three-quarters − of this value (Figure 7).

Table 4: annual regional ecosystem services values

under BAU and GEG (Net Present Value, US$

billion)

Figure 7: regional Net Present Value by GEG by

ecosystem service type

BAU GEG Value

added

Natural forests

64.19

69.87

5.68

Freshwater

wetlands

45.82 50.41 4.59

Mangroves

1.10

1.19

0.10

Coral reefs

0.63

0.71

0.08

Total

111.74

122.19

10.45

BAU GEG Value

added

Harvested

products

26.39

28.91

2.52

Watershed

protection

25.34

27.33

1.99

Carbon

sequestration

19.14

20.94

1.79

Water quality and

flow

39.38

43.35

3.96

Coastal protection

1.32

1.48

0.16

Coastal tourism

0.17

0.19

0.02

Total

111.74

122.19

10.45

Change in ecosystem values over time

As is to be expected, and has already been described above, the implementation of GEG will initially result in a decline in

ecosystem service values 25 (Figure 8; see Figure 11 for country-level figures). It will take time to shift to more sustainable

and reduced-impact land and resource activities and initiate improved ecosystem management and investment. As a

result, there will be a delay before the current downward trends in ecosystem status are reversed and the impacts on

25 This is in addition to increased eco system conservation a nd management costs, w hich are not included i n the analysis .

service provision become apparent. However, over time the value of ecosystem services will recover, and continue to

grow. In contrast, under BAU, it is possible to discern a steady downward trend in values, as ecosystems are degraded,

become unable to support the demands for extractive use that are placed on them, and yield a progressively declining

quality and quantity of services.

Figure 8: annual regional annual ecosystem values under BAU and GEG

Value added from GEG

As described above, the NPV from GEG over and above that which would be generated under BAU is estimated at almost

US$10.5 billion. The value added by GEG will steadily increase over time. By 2035 (the end of the time period analysed),

GEG will be generating an annual value added of more than US$4.6 billion as compared to the benefits that would have

been gained under BAU (Figure 9; see Figure 12 for country-level figures). Cumulatively, almost US$55 billion value will

have been added to the region’s economy by GEG over and above BAU (see Figure 13 for country-level figures). These

values can also be thought of as the costs of policy inaction over the next 25 years: the losses that will accrue as a

consequence of failing to take steps to reverse the current trends of ecosystem degradation and underinvestment.

Figure 9: annual regional annual and cumulative value added from GEG over BAU

Table 5: annual ecosystem services values under BAU and GEG for Cambodia, Laos, Thailand and Vietnam (Net Present Value, US$ billion)

Cambodia Laos Thailand Vietnam

BAU GEG Value

added

BAU GEG Value

added

BAU GEG Value

added

BAU GEG Value

added

Natural forests

6.78

8.18

1.40

26.34

28.23

1.89

12.81

13.66

0.84

18.26

19.80

1.54

Freshwater

wetlands

9.92 11.13 1.22 12.54 13.96 1.42 13.34 14.46 1.12 10.03 10.87 0.84

Mangroves

0.16

0.18

0.01

0.58

0.64

0.05

0.35

0.38

0.03

Coral reefs

0.01

0.00

0.39

0.44

0.05

0.23

0.26

0.03

Total

16.87

19.50

2.64

38.88

42.19

3.31

27.13

29.19

2.06

28.87

31.31

2.44

Cambodia Laos Thailand Vietnam

BAU GEG Value

added

BAU GEG Value

added

BAU GEG Value

added

BAU GEG Value

added

Harvested products

4.36

5.16

0.80

6.98

7.54

0.56

6.03

6.44

0.41

9.02

9.77

0.75

Watershed

protection

0.61

0.73

0.13

14.68

15.73

1.05

2.14

2.28

0.14

7.92

8.59

0.67

Carbon

sequestration

2.99

3.61

0.62

6.18

6.63

0.44

6.00

6.40

0.40

3.97

4.30

0.34

Water quality and

flow

8.76

9.84

1.08

11.05

12.29

1.25

12.11

13.13

1.01

7.46

8.09

0.63

Coastal protection

0.13

0.15

0.02

0.74

0.83

0.09

0.44

0.50

0.05

Coastal tourism

0.02

0.00

0.10

0.11

0.01

0.06

0.01

Total

16.87

19.50

2.64

38.88

42.19

3.31

27.13

29.19

2.06

28.87

31.31

2.44

Figure 10: net present value added by GEG by ecosystem service type for Cambodia, Laos, Thailand and Vietnam

Figure 11: annual ecosystem values under BAU and GEG for Cambodia, Laos, Thailand and Vietnam

Figure 12: annual value added from GEG over BAU for Cambodia, Laos, Thailand and Vietnam

Figure 13: cumulative value added from GEG over BAU for Cambodia, Laos, Thailand and Vietnam

PART IV: ADVANCING ECOSYSTEM VALUATION

1. Towards improved valuation of the region’s ecosystem services

On the basis of the foregoing analysis, this chapter reflects on the needs to advance ecosystem valuation in the Lower

Mekong, and on the steps that are necessary to do this. It identifies critical information gaps and data needs, and reviews

available ecosystem techniques and tools as to their suitability for application in the region. The chapter ends by

proposing a series of broad recommendations which relate to the core elements of a future project or programme that

might be undertaken to further this work.

What are the information needs and gaps?

One gap is clearly in estimates of the value of ecosystem services. There is a lack of information on almost all ecosystem

values in the region, including most ecosystem types and categories of ecosystem services. Although almost 100

ecosystem valuation studies from the region were discovered as part of the current study, of which around 60 per cent

were broadly useable, only a handful deal with each category of ecosystem and ecosystem service. The exception to this is

estimates on the economic value of non-timber forest products, for which there is a large body of information. Even

among those studies that were considered useable, serious questions arise about the accuracy and credibility of some

ecosystem service value estimates. Particularly critical gaps concern supporting and provisioning services, particularly for

freshwater wetlands and coral reefs.

The resulting estimates of ecosystem values vary so widely between different studies that it is of paramount importance

to generate an additional body of information, based on credible assumptions and data, to widen the sample from which

value estimates can be obtained. We recommend that at the very least, efforts are made to generate new

primary data on the key values, particularly supporting and provisioning services, for representative

ecosystems in the region. Without such information, it will be difficult to advance ecosystem valuation.

The information gap is, however, far wider than just a dearth of credible economic estimates of ecosystem values. Most

ecosystem valuation estimates have a very weak scientific basis, and the assumptions they make about the links between

ecosystem status and the provision of given ecosystem services are largely under-researched. A basic lack of information

about the underlying scientific and biophysical parameters relating to the region’s ecosystems both prevents more

accurate valuation, and acts as a constraint to credible scenario-based modelling. Examples include detailed GIS and

other figures on ecosystem status and change, and on the links between ecosystem status and the provision of given

ecosystem services. While some of this scientific and biophysical data may exist, or may even already be

readily accessible, it needs to be identified, extracted and made available in a form that can be

integrated into economic modelling and datasets.

Although primary data and figures are obviously needed, filling these information gaps requires more than just the

generation and extraction of numbers. To carry out a credible scenario modelling exercise and associated

economic analysis also demands a much broader-based dialogue with key stakeholders and experts in

the region. Only through this wider consultation and input can realistic scenarios of future development, conservation

and ecosystem trends be built up.

An associated issue, and major gap in the current study, is linking ecosystem and economic scenario modelling

to a thorough analysis of the drivers of ecosystem change in the region. Future changes in ecosystem services

will result from the interactive and cumulative effects of a large number of social, economic and other drivers. Further

information is needed on the pressures and threats that are currently occurring, and are likely to persist in the future, in

order to predict future ecosystem values with any degree of certainty.

Last, but not least, is the issue of communications. However good the data and “science” of ecosystem valuation and

scenario modelling are, the resulting information has little relevance if it is not being communicated

effectively to decision-makers. It needs to be communicated in a form that is practical, policy-relevant

and credible to them, and which leads to real changes in both development and conservation policy and

practice. Economic and monetary measures can be especially convincing to planners and policy-makers, but simply

generating such figures is not enough. Values have little meaning unless they actually tell a story, and relate directly to

the development and economic indicators in the region that matter to decision-makers. Box 6 provides one example of

how information on ecosystem values was specifically articulated in terms of measures and arguments that mattered to

decision-makers – in this case financial and economic planners in government and development donor agencies in Laos.

Box 6: demonstrating the value of biodiversity to Laos’ economy to public decision-makers

With the major aims of ensuring that adequate investment in biodiversity and protected areas could be justified to

economic planners and decision-makers in government and the donor community, an economic assessment was carried

out as part of Laos’s National Biodiversity Strategy and Action Plan. The results underlined the importance of

biodiversity to the country’s key development goals as articulated in the Five Year Socio-Economic Development Plan

and National Development Vision. They showed that biodiversity contributes almost three-quarters of per capita GDP,

more than 90 per cent of employment, just under 60 per cent of exports and foreign exchange, a third of government

revenues and nearly half of foreign investment.

Yet both donor and government budgets to biodiversity have fallen drastically in recent years. There has

been a major change in development policy and funding priorities – finance has been realigned towards

economic growth, poverty alleviation and the Millennium Development Goals. Budgets were shifted away from

conservation. Today, funding to PAs is less than 40 per cent of what it was in 2000, and continues to decline sharply.

The figures presented questioned the wisdom of these decisions. As natural ecosystems make such

a demonstrably important contribution to the national economy, failing to allocate adequate funds

to their conservation may in fact undermine the main goals that government and donor assistance

aim to achieve: sustainable and equitable development for all (from Emerton et al. 2002b).

What valuation frameworks and tools could be used?

Techniques to assess the value of ecosystem services

Today, a wide range of ecosystem valuation techniques is in common usage. These address the fact that ecosystem

services tend to be left out of conventional economic calculations and analyses, because they so often do not have a

market or a price. It is beyond the scope of this document to describe these valuation techniques in detail (although

further details on each of the main techniques listed in terms of the requirements and steps in their application to valuing

ecosystem services are provided in Annex Chapter 2). We give no specific recommendations on individual

ecosystem valuation techniques, as each is suitable for different situations, and it is generally

considered best practice to deploy as broad a range of techniques as possible.

As summarised below in Figure 14 and Table 6, the main toolbox of ecosystem valuation techniques used by economists

and suitable for further development in the region includes:

• Production function approaches: These attempt to relate changes in the output of a marketed good or

service to a measurable change in the quality or quantity of ecosystem goods and services by establishing a

biophysical or dose-response relationship between ecosystem quality, the provision of particular services,

and related production.

• Surrogate market approaches: These look at the ways in which the value of ecosystem goods and

services is reflected indirectly in people’s expenditures, or in the prices of other market goods and services.

• Cost-based approaches: These look at the market trade-offs or avoided costs from maintaining

ecosystems for their goods and services.

• Stated-preference approaches: Rather than looking at the way in which people reveal their preferences

for ecosystem goods and services through market production and consumption, these methods ask

consumers to state their preference directly.

Figure 14: commonly used techniques for ecosystem valuation

(from Emerton and Bos 2004)

Table 6: how ecosystem valuation techniques can be applied

Valuation techniques How they are applied, and for what

Revealed

preference

approaches

Market

prices

How much it costs to buy an ecosystem good or service, or what it is worth to sell – e.g.,

the price of timber or minerals

Effect on

production

Changes in the output of a marketed good or service related to a measurable change in

ecosystem services – e.g., the reduction in lifespan of a hydropower dam due to siltation

resulting from deforestation

Travel costs

The amount of time and money people spend visiting an ecosystem for recreation or

leisure purposes – e.g., the transport and accommodation costs, entry fees and time spent

to visit a National Park

Hedonic

pricing

The difference in property prices or wage rates that can be ascribed to the different

ecosystem qualities or values – e.g., the difference in house prices between those

overlooking an area of natural beauty and those without a view of the landscape

Cost-based

approaches

Replacement

costs

The cost of replacing an ecosystem good or service with artificial or man-made products,

infrastructure or technologies, in terms of expenditures saved – e.g., the costs of flood

protection infrastructure after the loss of catchment protection forest

Mitigative or

avertive

expenditures