Valuation of Ecosystem Services, Karnataka State, India

Ecosystem services are the contributions of ecosystems to the benefits that are used in economic and other human activities. Further, ecosystem services encompass all forms of interaction between ecosystems and people, including in situ and remote interactions. The supply of an ecosystem service is associated with an ecosystem structure or process or a combination of ecosystem structures and processes that reflect the biological, chemical, and physical interactions among ecosystem components. Ecosystem services are broadly categorised as (i) provisioning services are those ecosystem services representing the contributions to benefits that are extracted or harvested from ecosystems, (ii) regulating and maintenance services are those ecosystem services resulting from the ability of ecosystems to regulate biological processes and to influence climate, hydrological and biochemical cycles, and thereby maintain environmental conditions beneficial to individuals and society, (iii) cultural services are the experiential and intangible services related to the perceived or actual qualities of ecosystems whose existence and functioning contributes to a range of cultural benefits. A range of other benefits, for example, concerning relational and intrinsic values, are not captured in the above categories. India is trying to accelerate economic growth and relax environmental laws, and there is tremendous pressure to divert natural systems to other uses. Hence, there is a pressing need to undertake the natural capital accounting and valuation of the ecosystem services, especially intangible benefits, provided by ecosystems in India. The value of all ecosystem services, including the degradation costs, needs to be understood to develop appropriate policies toward ecosystem conservation and sustainable management. Scientific efforts during the past decade have refined the understanding of ecosystem function and demonstrated the links between functions and the provision of ecosystem services. This knowledge needs to be communicated effectively to decision-makers and the public, which will lead to developing policies that adequately consider the trade-offs between the conservation of ecosystems and natural resources and economic growth. There is an urgent policy need for more comprehensive assessments of the natural capital of ecosystems, which will aid in comparing these aggregate values with the opportunity cost of this land. Policymakers need such information to gain support for conservation funding, engage local communities, and develop market-based instruments for conservation. This necessitates accounting for the natural capital found in the forest ecosystems (among others) and incorporating their economic worth added to the measurement of the wealth of a region. The valuation of ecosystem services of terrestrial ecosystems (forests and agriculture) is implemented district-wise for Karnataka State, India, as per the validated protocol—System of Environmental-Economic Accounting (SEEA EA; SEEA.un.org), which constitutes the statistical framework for natural capital accounting. According to this protocol, ecosystem services are defined as the contributions of ecosystems to the benefits that are used in economic and other human activities. The valuation of ecosystem services (VES) allows for adjusted national accounts, which reflect the output of ecosystem services as well as the depletion of natural resources and the degradation costs (externalized costs of the loss of ecosystem services) of ecosystems in economic terms, which will help raise awareness and provide a quantitative tool to evaluate the sustainability of policies. It provides an unbiased and dependable national framework to value so far unaccounted ecosystem benefits and helps develop meaningful policy interventions. Services of the ecosystem services were quantified considering only the contribution of the ecosystem to the benefit, through the residual value method by taking the gross value of the final marketed good to which the ecosystem service provides input and then deducting the cost of all other inputs, including labour, produced assets, and intermediate inputs. The current chapter focuses on ecosystem services in forest and agricultural ecosystems for 2005 and 2019. Values of 2005 were adjusted through the consumer price index or gross domestic product (GDP) deflator. These values reflect the actual measures of ecosystem services, which could be compared with ecosystem services of 2019. A comparison of the values of services of 2019 with 2005 highlights that there has been a considerable decline in ecosystem services in Karnataka. A 28.5% reduction in provisioning services (51.6% reduction in forest ecosystems), a 21% reduction in regulating services (mainly in forest ecosystems—27.1% reduction), and a 1.9% reduction in cultural services from 2005 to 2019. Ecosystem services were aggregated to compute the Total Ecosystem Supply Value (TESV). This aggregate measure is also referred to as Gross Ecosystem Product (GEP), which equals the sum of all final ecosystem services (i.e., by monetary values of those services) from ecosystem assets. The TESV of forest and agricultural ecosystems in Karnataka was 3620 billion INR in 2005 (forest ecosystems: 2841 billion INR and agricultural ecosystems: 779 billion INR). However, TESV declined in 2019 to 2912 billion rupees, with forest ecosystems driving this 35% decline in TESV. The TESV was also compared to the GDP of Karnataka, which is about 10128 billion rupees. The TESV of the forest ecosystem is equivalent to 18.1% of the GDP, and the TESV from agriculture ecosystems is equivalent to about 10.6% of the GDP in Karnataka. There has been a 35.4% reduction in the TESV of forest ecosystems from 2005 to 2019, mainly due to the degradation of ecosystems. The decline in the TESV highlights the degradation of forest ecosystem assets from 2005 to 2019, as shown by the reduction of ecosystem extent and ecosystem condition (Ramachandra et al. 2021a, b). The decrease in value is also demonstrated by a fall in the net present value (NPV) of expected future returns of the ecosystem services supplied by forest ecosystem assets. The NPV of the assessed ecosystems based on 2005 ecosystem flows is about 93130 billion INR (forest ecosystem: 73099 billion INR, agriculture ecosystem: 20031 billion INR). However, the NPV of ecosystems in Karnataka, based on 2019 flows, indicates 74938 billion INR (forest ecosystem: 47214 billion INR, agriculture ecosystem: 27,724 billion INR). This highlights that there has been a decline of 35.4% in the asset value of forest ecosystems with the transition of forest ecosystems to croplands or horticulture (agriculture ecosystems), which is correlated to an increase in NPV of agriculture ecosystems by 38%. Ecosystem accounts make the value of ecosystem services visible, allowing them to be internalized into decision-making. This enables an assessment of trade-offs between economic development and environmental conservation and restoration, resulting in better-informed decisions. It also strengthens the economic case for conserving forests in states in India and developing countries where there can be great pressure to relax forest laws and divert forests to non-forest uses without proper consideration of the sustainability of such actions. The ecosystem services computed for Karnataka State also support the viability of markets for ecosystem services. The development of such markets requires additional institutional reforms, such as changes with respect to property rights and reforms in land and labour markets. The main policy challenge of the future concerns is to promote conservation and develop such markets so that those bearing the cost of conservation can be adequately compensated. The current endeavour of the valuation of ecosystem services done in Karnataka State can be replicated in other states so that the accounts can play a vital role in conservation planning and ecosystem-based management across India. This involves (i) inventorying, mapping, and identifying ecologically vital regions and (ii) quantification of ecological services (both direct and indirect) of these regions, which would help in evolving strategies for the conservation of ecosystems to support people’s livelihood. Improved knowledge of biophysical links and pre-existing incentive structures experiment would allow the establishment of compensation schemes, which requires: The ecosystem management objectives need to be defined by societal demands in relation to the ecology of the ecosystem, especially in the case of ecosystems that are strongly influenced by human use. The key role of science in such human-dominated systems is to provide insights into the social, economic, and environmental benefits of various levels of biodiversity. This can be achieved through innovative ecosystem management options and by effectively communicating the research results to decision-makers and other stakeholders. The economic valuation of ecosystem services and biodiversity can help clarify trade-offs among conflicting environmental, social, and economic goals in the development and implementation of policies.