EcoPerspectives Blog
Ecosystem Services in Agency Cost-Benefit Analysis
By Elizabeth Hein, Staff Editor for the Vermont Journal of Environmental Law
May 3, 2024
On February 28, 2024, the White House issued guidance on how to evaluate ecosystem services in agency cost-benefit analysis. The guidance seeks to help agencies better assess the benefits of ecosystem services throughout agency decision-making.
The guidance defines ecosystem services as “contributions to human welfare from the environment or ecosystems.” This definition is broad; the guidance makes clear that agencies should consider benefits stemming from ecosystem services in relation to how they affect other environmental costs and benefits.
I. What are Ecosystem Services?
The term “ecosystem services” refers to several different services, or benefits, that people receive from nature. There are four types of ecosystem services: provisioning services, regulating services, cultural services, and supporting services. Ecosystems provide people with food, drinking water, timber, plants, and several other resources. Ecosystems also provide regulating services, such as plants turning carbon dioxide into breathable oxygen through photosynthesis. The National Wildlife Federation describes ecosystem services as crucial because “[e]cosystems provide many of the basic services that make life possible for people.”
II. Ecosystem Services are Hard to Monetize
Ecosystem services are hard to quantify. How do you measure the dollar value of bees pollinating flowers? Or the dollar value of tree roots holding soil in place?
A major difficulty is that each type of ecosystem service requires different data or information to calculate a dollar value. Certain services are easier to calculate. For instance, the dollar value of timber that a forest provides is easily calculable. The value can also vary by location. Some locations, such as a city with high levels of air pollution, might value plants that clean the air more than a rural town.
III. Agency Cost-Benefit Analysis
Federal agencies must weigh the costs and benefits of regulations that the agency expects will have large economic effects. Agencies use this cost-benefit analysis to justify their decision to adopt a regulation. This cost-benefit analysis is not the only determinative factor; agencies consider other factors, such as the policy priorities of the President. The cost-benefit analysis weighs the dollar value of the costs of a regulation against the dollar value of the benefits of the regulation. This results in a clear numerical value that answers the question: do the benefits truly outweigh the costs?
Economic cost-benefit analysis suffers from a major flaw. Without accounting for ecosystem services, these cost-benefit analysis have a strong methodological bias against environmental policies. Failure to include the value of ecosystem services results in agencies treating these services as if they are worth nothing.
That is not to say that agencies completely fail to consider ecosystem services or other environmental benefits—the National Environmental Policy Act requires that agencies consider environmental impacts of major agency actions. There have also been previous collaborative agency efforts to evaluate ecosystem services. For instance, the National Ecosystem Services Partnership created a guidebook for agencies that engage in land management. This guidebook provides “credible approaches for incorporating ecosystem services into natural resource planning and management.”
IV. Pros and Cons of the White House Guidance
The numerous benefits of the White House guidance outweigh the costs, or challenges, that the guidance imposes. Overall, the guidance will ensure that agencies consider the effect of regulations on ecosystem services. The guidance states that when agencies consider alternative actions that may cost less or result in increased benefits, the agencies should “consider developing alternatives that generate additional services.” This guidance also applies to all federal agencies, not just those involved in environmental regulations.
Accounting for ecosystem services does not guarantee that agencies will create regulations that better protect these essential services. In addition, given the challenges of developing a dollar amount of the benefits provided by an ecosystem service, there is limited data that agencies can rely on. Finally, the guidance confines agency consideration of environmental benefits to ecosystem services. The complexity of our environment cannot easily be defined or quantified.
V. Conclusion
The inclusion of ecosystem services in agency cost-benefit analysis represents a massive shift in how agencies evaluate the environment. Although the White House’s guidance does not mandate that agencies adopt regulations that benefit ecosystem services, the guidance does provide a pathway to ensure that agencies consider the complexities of the environment. Agencies must now evaluate how regulatory decisions will affect ecosystem services.