The economic importance of a protected area is based on its combined market and non-market values. Its financial value is calculated from the perspective of the protected area as a business and is a subset of its economic value. Financial value is concerned with the balance of payments for the park, meaning revenue from commercial activities like tourism minus management costs. Economic value is calculated from the point of view of society and includes the financial value, regional economic growth, and contributions to net federal economic development (Dixon & Sherman, 1990; WCPA-IUCN, 1998). Protected areas provide benefits to different customers. These include neighbours and residents, commercial visitors (including tourists), regional customers, and global customers (WCPA-IUCN, 2000). This means that the economic benefits associated with a protected area are felt beyond the borders of the park, and even beyond the region or country in which the park is located.
The economic criteria that could be used in the proposed model are summarised in Table 3.9 at the end of this section.
Financial Benefits
Financial benefits are described by the WCPA-IUCN (2000) as ‘site-level mechanisms’ for funding protected areas. These include user fees, donations, and
cause-related revenue (WCPA-IUCN, 2000). The financial accounting system of a protected area should involve the collection, recording, analysis, and presentation of income and expenditure data. This should include standard accounting practices such as inventories, reconciliations, balance sheets, and profit-and-loss reports (De Lacy et al., 2006).
User Fees
Use values such as recreation and tourism are primary objectives in national parks, and the provision of these services results in direct financial benefits (Dharmaratne, Sang, & Walling, 2000; Dixon & Sherman, 1991). User fees cover a broad spectrum of revenue possibilities, such as entry fees, fees for the use of facilities, fees charged to concessionaires who generate revenue through operating services in the park, and fees for permits (WCPA-IUCN, 2000).
Protected areas can provide recreational and aesthetic experiences satisfying subjective values which are traded for capital. Generally, this falls within the tourism industry in various forms (Murphee, 2004). Many national parks charge a fee for visitors to enter the site. However, admission fees for national parks are widely criticised for being decided upon arbitrarily, often below the market price (La Page, 1994; Mitchell & Carson, 1989). It is important that people of all ages, ethnic and cultural backgrounds have the opportunity to experience national parks meaning that if admission prices are charged or raised it must be well reasoned (Lovett, 1998).
Concessionaires pay for the right to provide facilities to visitors (WCPA-IUCN, 2000). For example, Ruapehu Alpine Lifts has a concession to provide skiing facilities on Mt Ruapehu in Tongariro National Park, New Zealand. Other facilities run by concessionaires may include accommodation, food and beverage conveniences, guiding, and equipment hire. Parts of a national park may also be leased to individuals or groups for a limited time period. Revenue could be generated by charging ‘publicity fees’ to corporations using the park as a location or backdrop for films, posters, or advertising. Fees can be charged for the installation and/or use of facilities like transmission towers, marine platforms, or research stations. Income may be earned by sales from book and gift/curio shops or through the provision of user pays services like guided hikes, lectures,
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museums, films, maps, guides, and equipment rental. Revenue may also be generated from fees for parking, camping and picnicking facilities, and yachting or cruise-ship visit permits (Page et al., 2001; WCPA-IUCN, 2000).
Donations
Donations to a park may be one-off or ongoing payments from corporations, individuals, or donor organisations. Corporations may be driven to donate by a sense of environmental responsibility, tax write-offs, or improved image. Individual charitable donations may also be made through a person’s will or estate, or through insurance and annuities (WCPA-IUCN, 2000).
Cause-related Revenue
Cause-related revenue includes income from ‘Friends of the Park’ schemes, adoption programmes, sales of park-related books/curios, and special events. ‘Friends’ schemes involve the voluntary support of people that may not actually visit the protected area, usually arranged through a nature-NGO. Adoption programmes tend to focus on the sale of deeds to an acre/hectare of a protected area, involvement in special projects, or the adoption of a wild animal. Cause- related sales involve goods or services with the purchaser understanding that they have helped conservation by purchasing them. Examples of cause-related marketing include special events, sales, adoption schemes, and collection schemes (WCPA-IUCN, 2000).
Sales
Sometimes, flora and fauna may be sold to other parks or to zoos. This occurs in Africa where animals that are abundant in one park are sold to a park in the same or a neighbouring country where the species historically existed, but now is not present or exists in low numbers (David Cumming, personal communication, 10 September 2003).
Benefits to the Economy
Tourism is a demand-driven activity and is arguably the world’s largest business (McKercher & du Cros, 2002). Tourists may pursue travel to satisfy personal wants, but destinations pursue tourism for economic benefits. Only a fraction of a tourist’s money is spent on the attractions that draw the tourist to the region. The
attraction – in the case of this research, the national park – entices the tourist to the region, but the benefits of a tourist’s visit are accrued within the region and beyond (McKercher & du Cros, 2002). Tourism also stimulates employment and rural development in surrounding areas (Dixon & Sherman, 1991). Tourists spend money on transport, accommodation, food and drinks, tips, sightseeing and tour guides, and commissions to the travel industry (McKercher & du Cros, 2002). Other types of business that support and benefit from the travel and tourism industry include printers, publishers, wholesalers, utilities, administration, and computing and security firms (Page et al., 2001). Interestingly, Wescott (1994) found that tourism increased once the Grampians area was declared a national park, implying that the ‘national park’ label is important for drawing tourists to an area. These increases in tourism lead to increased economic activity in the surrounding area.
Balance of Payments
A country’s balance of payments records all debit and credit transactions with foreign countries. Tourists act as ‘invisible exports’ and contribute to the balance of payments. For this reason, improving the balance of payments is probably the most significant justification governments use to promote tourism (Page et al., 2001).
Income and Gross Domestic Product
Tourism stimulates local economic activity and can lead to increases in gross domestic product (Page et al., 2001).
Employment
The provision of national parks initiates a wide spectrum of employment opportunities. Park staff include managers, bureaucrats, planners, rangers, and scientists. In areas that are popular with tourists the provision of supporting infrastructure stimulates employment (Murphee, 2004). According to Page et al. (2001), the types of employment created by tourism include:
Direct – jobs that directly support tourism activity like hotels, guides, shuttle buses, equipment hire, and restaurants specific to a tourist destination;
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Indirect – jobs that are not a direct result of tourism activity, but are within the tourism supply sector; and,
Induced – jobs created because local residents spend the money they earned from tourism.
Wildlife and nature-based tourism can become an important engine of economic growth and job creation in many developing countries. However, such industries are dependent upon adequately maintained roads and tourism infrastructure, the presence of wildlife, and effectively enforced laws against illegal logging, hunting, fishing, and settlement inside protected areas (Spergel, 2001). Not all jobs will necessarily go to the host community as employment is dependant on skills. If local people have little skill they will acquire the jobs requiring little skill that also tend to be menial, low paid and seasonal. The managerial jobs may go to well- qualified, experienced candidates that are often from other areas. Job creation is hard to measure, not least because tourism jobs can attract people from other sectors or those not normally part of the economic workforce (Page et al., 2001). Cumming (2004) suggests the following indicators to measure the contribution of parks to local economies:
The number of contracts awarded to local (that is on park borders or park neighbours) companies or bodies to provide services to the park (e.g. fence repairs, game drives, the number of people employed, jobs created);
The area and extent of compatible land uses developed on land
surrounding the park and into which animals from the park can disperse;
The number of commercial lodges and other tourist facilities, which depend on the park for game viewing opportunities;
The extent to which institutions are developed with local partners to involve them in wildlife conservation-based economic development, planning and resource management; and
The number of jobs created and value added to local and national economies.
This list of indicators was developed with transitional southern African nations in mind. However, these criteria are applicable to most national parks worldwide.
Ecosystem Functions and Services
Ecosystems, and therefore national parks, provide essential services to humans known as 'ecosystem services' (Boumans, Costanza, Farley, Wilson, Portela et al., 2005; Costanza, 2000,2003; Costanza, d'Arge, deGroot, Farber, Grasso et al., 1997; Costanza & Folke, 1997; Curtis, 2004; de Groot, Wilson, & Boumans, 2002; Molnar et al., 2004; Pritchard, Folke, & Gunderson, 2000; Sutton & Costanza, 2002; Word Resources Institute, 1998). Ecosystem services include diverse and essential benefits including food and water, drought resistance, spiritual opportunities, the pollination of crops, and the cycling of minerals (Kareiva & Marvier, 2003; Spergel, 2001). In the past, these services were not recognised as having economic significance. However, it has become evident that human well- being is reliant on ecosystem services (Edwards & Abivardi, 1998). Ecosystem services challenge neoclassical market-based economics because they involve significant non-market values, meaning that it is often impossible to assign unambiguous property rights to them (Straton, 2005).
Ecosystem services are derived from natural structures and processes that perform ecosystem functions, which are divided by de Groot et al. (2002)into four primary categories: regulatory functions, habitat functions, production functions, and information functions. A clear conceptual framework and typology for describing and classifying ecosystem functions and services is presented in Table 3.8. This classification addresses the fullest possible range of 23 ecosystem functions that provide a much larger number of ecosystem services.
Regulatory functions relate to the capacity of ecosystems to regulate essential ecological processes and life-support systems through bio-geochemical cycles and other processes. These functions maintain ecosystem and biosphere health and provide services of direct benefit to humans, like clean air, water, and soil. Regulatory functions are essential to the proper functioning of all natural systems and should be part of every assessment of the economic benefits of protected areas (de Groot et al., 2002).
112 Table 3.8
Functions and Services of Natural and Semi-Natural Ecosystems
Ecosystem Functions Ecosystem Processes and Components Examples of Ecosystem Services Gas regulation Role of ecosystems in bio-geochemical cycles (e.g. CO2/O2 balance, ozone layer) UVB-protection by O3 (preventing disease);
maintenance of (good) air quality
Climate regulation
Influence of land cover and biological mediated processes (e.g. DMS-
production) on climate
Maintenance of a favourable climate including temperature, precipitation, and carbon sequestration (e.g. human habitation, health, cultivation)
Disturbance prevention Influence of ecosystem structure on dampening environmental disturbances
Storm protection (e.g. by coral reefs); flood prevention (e.g. by wetlands and forests)
Water regulation
Role of land cover in regulating runoff and river discharge
Drainage and natural irrigation; medium for transport; timing and magnitude of runoff, flooding, aquifer recharge
Water supply Filtering, retention and storage of fresh water (e.g. in aquifers)
Provision of water for
consumptive use (e.g. drinking, irrigation and industrial use)
Soil retention Role of vegetation root matrix and soil biota in soil retention
Maintenance of arable land; prevention of damage from erosion/siltation Soil formation Weathering of rock, accumulation of organic matter Maintenance of productivity on arable land; maintenance of natural productive soils
Nutrient regulation
Role of biota in storage and re- cycling of nutrients (e.g. nitrates, phosphates, sulphates)
Maintenance of healthy soils and productive ecosystems
Regulatory functions: Maintenance of essential ecological processes and life support systems
Waste treatment
Role of vegetation and biota in removal or breakdown of xenic nutrients and compounds
Pollution control/detoxification; filtering of dust particles; abatement of noise pollution
Ecosystem Functions Ecosystem Processes and Components
Examples of Ecosystem Services
Pollination Role of biota in movement of floral gametes
Pollination of wild plant species; pollination of crops Biological control Population control through trophic- dynamic relations
Control of pests and diseases (including human pathogens); reduction of herbivory (crop damage)
Refugium function
Suitable living space for wild plants and animals
Habitat functions: Providing habitat (suitable living space) for wild plant
and animal species Nursery function
Suitable
reproduction habitat
Maintenance of biological and genetic diversity (and thus the basis for most other functions); maintenance of commercially harvested species
Food Conversion of solar energy into edible plants and animals
Hunting, gathering of fish, game, fruits, etc.; small-scale
subsistence farming and aquaculture
Raw materials
Conversion of solar energy into biomass for human
construction and other uses
Building and manufacturing (e.g. lumber, skins); fuel and energy (e.g. fuel wood, organic matter); fodder and fertilizer (e.g. krill, leaves, litter)
Genetic resources
Genetic material and evolution in wild plants and animals
Improve crop resistance to pathogens and pests; other applications (e.g. health care)
Medicinal resources
Variety in (bio)chemical substances in, and other medicinal uses of, natural biota
Drugs and pharmaceuticals; chemical models and tools; test and essay organisms
Production functions: Provision of natural resources Ornamental resources Variety of biota in natural ecosystems with (potential) ornamental use
Resources for fashion, handicraft, jewellery, pets, worship, decoration and souvenirs (e.g. furs, feathers, ivory, orchids, butterflies, aquarium fish, shells, etc)
Aesthetic information
Attractive landscape features
Enjoyment of scenery (scenic roads, housing etc.)
Information functions: Providing opportunities for cognitive development Recreation Variety in landscapes with (potential) recreational uses
Travel to natural ecosystems for eco-tourism, outdoor sports etc.
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Ecosystem Functions Ecosystem Processes and Components Examples of Ecosystem Services Cultural and artistic information Variety in natural features with cultural and artistic value
Use of nature as motive in books, film, painting, folklore, national symbols, architecture, advertising etc. Spiritual and historic information Variety in natural features with spiritual and historic value
Use of nature for religious or historic purposes (i.e. heritage value of natural ecosystems and features)
Science and education
Variety in nature with scientific and
educational value
Use of natural systems for school excursions etc; use of nature for scientific research
Source: Adapted from de Groot, Wilson, and Boumans (2002)
Habitat functions relate to the role of ecosystems in providing refuge and reproduction habitats to wild flora and fauna, thereby contributing to the in situ conservation of evolutionary processes, biological diversity, and genetic diversity. Along with regulation functions, habitat functions are essential to the maintenance of natural processes (de Groot et al., 2002).
Production functions relate to the benefits accruing from living biomass. Through photosynthesis and nutrient uptake autotrophs convert energy, carbon dioxide, water, and nutrients into carbohydrate structures which are used by secondary producers to create more biomass. This diversity provides goods for human consumption, ranging from food to energy resources and genetic material (de Groot et al., 2002).
Finally, information functions refer to the services that wilderness and natural areas play in the maintenance of human health through the provision of opportunities for reflection, spiritual enrichment, cognitive development, and recreation (de Groot et al., 2002). These functions overlap with those described in the section on social criteria (section 3.3).
The table only includes goods and services that can be used on a sustainable basis, excluding important non-renewable natural mineral resources like gold, iron, diamonds, and oil. In addition, energy sources that cannot be attributed to a
particular ecosystem type, such as wind and solar-energy, have also been omitted.
Over the past few decades there has been increased interest regarding the valuation of ecosystem functions, goods, and services. Early references date back to the mid-1960s and 1970s, but widespread discussion regarding ecosystem services was initiated by Costanza et al.’s (1997) controversial essay. This article made a conservative estimate that the annual contribution of global ecosystem services is at least US$33 trillion dollars, more than three times greater than global GDP. While recognised as an important political document stimulating additional research and debate about ecosystem services, critics suggest that this estimate involved distorted price structures and double-counting. In addition, critics question whether it is reasonable to assume meaningful comparison with GDP (Toman, 1998).
The article has stimulated much debate and further valuation attempts (Boumans et al., 2005; Costanza, 2000,2003; Curtis, 2004; Pritchard et al., 2000), as well as Special Issues in the Environmental Economics Journal (issues 25 in 1998 and 41 in 2002). In a recent assessment Boumans et al. (2005) found the value of global ecosystem services to be about 4.5 times the value of Gross World Product in 2000. These values were estimated using economic valuation techniques (World Resources Institute, 2003).
Economic value relates to human well-being and changes in well-being are revealed by people’s preferences (Pearce, 2006; Pritchard et al., 2000). For goods that are traded, preferences are revealed by the market value. For non-use or non- commercial goods, value is determined by calculating an individual’s willingness to pay for the provision of the good, or willingness to accept compensation for loss of it. Techniques have been developed to reveal preferences and determine the dollar value of environmental elements (WCPA-IUCN, 1998). Valuation methods for measuring ecosystem services can be classified differently, but the primary distinction is between techniques that are based on observed behaviour and hypothetical behaviour. These can be divided into four categories: direct market valuation, indirect market valuation (observed), expressed preference methods, and benefit transfer (hypothetical) methods. Direct market valuation is based on
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market prices where goods are extracted from ecosystems and traded in functioning markets. Some regulation, information, and production function goods are exchanged in markets through trade. Indirect market valuation uses actual behaviour on a surrogate market to reveal preferences. Methods include hedonic pricing, were the price paid for a service is statistically broken down to the price of environmental attributes like clean air; the travel cost method, where demand functions are derived from the observed costs of travel to a recreational destination; and, cost-based methods, like the replacement cost method where environmental services are valued at the cost of replacing related infrastructure. Expressed preference methods use questions about hypothetical scenarios to infer value. Methods include contingent valuation, which asks respondents how much they are willing to pay for certain benefits or willing to accept for compensation for the loss of a benefit; and contingent ranking or conjoint analysis, which asks respondents to rank groups of goods. Benefits transfer occurs when estimates obtained for one context are used to estimate values from the same