October 2, 2019
Valuation of ecosystem is gaining ground.

A RECENT study by the Indian Institute of Forest Management (IIFM) and National Tiger Conservation Authority (NTCA) found that 10 select tiger reserves of the country provide economic benefits worth Rs 5.96 trillion.

These benefits include employment generation, fishing, fodder, fuelwood, carbon sequestration, water provisioning, and soil conservation among many others. 

Globally, efforts are being made to assess the benefits of conservation on economy and various methods and formulas have been devised to evaluate these aspects. 

Critics, however, believe that ecosystem valuation can lead to commodification of nature and its sale to the highest bidder. GoI Monitor talks to Dr Madhu Verma, lead researcher of IIFM study and an expert in field of ecosystem valuation.

Q. You have been involved in ecosystem valuations in India for a long time now, how ready do you think policymakers are in incorporating evaluations in their decision making? 

The scenario has been changing of late as now we have larger body of knowledge for informed decision making and more interaction is happening that of academicians, researcher with all set of stakeholders specially with the policy makers, planning and decision makers. I have exclusively been doing action and policy research for last 25 years.

The study built a strong case for forest conservation and 14th Finance Commission in its award gave 7.5 percent weightage for the first time in the formula for devolution of taxes


The very first incorporation of valuation in decision process was internalisation of our assessment of the value of Himachal Forest in 2000 which was worth Rs. 1.06 lakh crores. In August 2002, the state government notified imposition of an ‘environmental levy’ for compensation for loss of environmental values on user agencies against forest lands diverted for non-forest use. This one-time levy has been fixed at Rs. 8 lakhs per hectare where forest density is above 10 percent and Rs. 5 lakhs per hectare for other forest areas where density is less than 10 percent. This levy is in addition to the compensatory afforestation and cost of catchment area treatment, rehabilitation of dumping sites wherever applicable.

The finding of the study was also subsequently used in Net Present Value (NPV) which were included in the Cost Benefit Analysis (CBA) of forest diversion. NGT issued new guidelines which added 30 per cent of the net present value (NPV) of forests to the cost of diversion for "possession of forest land", and 50 per cent of NPV cost as "habitat fragmentation cost". Another 10 per cent of the forest’s net value is added as compensation for loss of animal husbandry productivity and soil moisture conservation costs. 

Similarly, the 13th Finance Commission led to fivefold increase in forest grant from Rs. 1,000 crores to Rs.5,000 crores based on the forest cover and added para of states based on our studies seeking compensation for states managing large forest areas. For the 14th Finance Commission, we developed a High Conservation Value Index and further expanded our formula to include 13 indicators to include  number of endemic floral and faunal species, area under wetlands, protected area, natural forests etc besides the forest area and cover.

We made a case for ‘Conservation Costs’ which  included the maintenance cost of keeping forests as well as the restoration cost required for improving the health of existing degraded forests in the state. The study built a strong case for forest conservation and 14th Finance Commission in its award gave 7.5 percent weightage for the first time in the formula for devolution of taxes. Now in the study for the 15th FC , the study on behalf of MoEFCC we are proposing formula for forest environment and climate change and hoping that recommendations shall be internalised to a great extent as we have done massive consultation across the country.

Putting value on environmental asset doesn’t mean its commodification rather the intent is to highlight its uniqueness value


On August 29, 2019, the environment ministry released over Rs 47,000 crores to 27 states for compensatory afforestation and other green activities, including wildlife management, forest fire prevention, work related to soil and moisture conservation in forests, voluntary relocation of villages from protected areas, management of biological resources and biodiversity, research in forestry and monitoring of CAMPA works among others. Out of a total allocation of Rs 47,436 crores to the states, Odisha received Rs 5,933.98 crores while Chhattisgarh and Madhya Pradesh got Rs 5,791.70 crores and Rs 5,196.69 crores respectively. 

Q. Critics feel putting money on value of environment assets is not a good practice. What do you have to say on this ?

Putting value on environmental asset doesn’t mean its commodification rather the intent is to highlight its uniqueness value and  the worth of the environmental asset such that an estimate could be made for creating enough budgets for its maintenance else in the absence of such maintenance funds, the asset is eroding fast despite its priceless contribution to the society.

Q. Are there examples from other parts of the world where ecosystem evaluation has helped changed policy making?

There are many cases on the world where economic value of ecosystems has been used for setting Payments for Ecosystem Services (PES) for individual service mostly for water services, landscape values and carbon sequestration or stock or bundle of services.  

PES are incentives have mostly provided to farmers or landowners in exchange for managing their land to deliver some kind of ecological service. The world's largest and longest running PES program is the United States' Conservation Reserve Program, which pays about $1.8 billion  (Rs 12 thousand lakh crores) a year under 7,66,000 contracts with farmers and landowners to "rent" a total 34,700,000 acres (140,000 square km) of what it considers "environmentally-sensitive land.

In 1999, the Chinese central government offers farmers grain in exchange for not clearing forested slopes for farming, thereby reducing erosion and saving the streams and rivers below from the associated deluge of sedimentation worth $43 billion Grain for Green program. 

Q. Do you think including evaluation of ecosystem services in environment impact assessments (EIAs) for development projects can be the next step in this field? 

Yes surely, that would lead to a holistic EIA. As we know that the main purpose of EIA  is to assess impact of the planned project on the environment and people and to try to abate or minimise the same. Inclusion of NPV will greatly help in assessing such impacts better.

Q. Have there also been cases where economic value of forests vis-a-vis a development project been analysed? 

Various economic valuation frameworks like Stock - flow, tangible- intangible, direct-indirect, material –non material, provisioning-regulating-cultural services have been used to reflect the worth of forest capital and to reflect the uniqueness value of forest resource which is irreplaceable thus cannot be compared with developmental projects which provide different kind of services.

Q. We are using Western models to do ecosystem evaluation. Is there any progress being made on evolving our own models which might be more suitable for native, tropical regions?

Yes we are using various western models which fit our system well and for many services like pollination , gene pool, biological control, habitat/refugia, climate regulating etc. for which we do not have data to make our own primary estimate, we use benefits transfer method to borrow estimates from the western world and adjust it to our populations and price levels.

But to simplify the valuation process we have developed a guidance manual for estimation of ecosystem services using the primary data based on simple and reachable set of indicators and conducting capacity building programs for various stakeholders.

Q. How can conservationists/environmentalists use studies like the one for tiger reserves done by your team to push for healthy forests?

We have used multiple approaches to estimate the ecosystem services flowing out of the tiger reserves and besides the valuation we have also developed some GIS-based models for water provisioning, carbon sequestration and sediment retention and have also estimated health benefits from these tiger reserves. Knowing the value of tiger reserve will greatly help both conservationist and environmentalist to make a strong case of conservation. 

Infact, our tiger habitat valuation has demonstrated the need for high status conservation of these areas and has ed to doubling of investment in tuger conservation over last for years and have also led to declaration of more suitable habitats as tiger reserves.

Listen to Pros and Cons of Current Ecosystem Valuation

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