Policy option description | Regional Guidelines for the valuation of ecosystem goods and services in the Pacific

Policy option	Description of the policy option	Information required What do you need to know to be able to implement this policy option.	Suitable valuation method What valuation method can be used to obtain the economic information you need?
Benefit-cost analysis	A decision-making tool used to evaluate whether a project, policy, or investment is worth doing by comparing its expected benefits to its expected costs.	Economic information Market-based benefits of the environment e.g. provisioning services Non-market based benefits of the environment e.g. cultural services	Value of ecosystem services Market value method for values of fishery, timber, carbon Replacement cost, restoration cost or avoided damage cost to infrastructure from coastal inundation Observed revenue generated by the tourism industry Contingent valuation or choice experiment to estimate cultural values
Quotas	A fishing quota is a limit set on how much of a particular type of fish can be caught. Quotas can be measured in weight (like tons of fish) or number of fish, and they help balance environmental conservation with the economic needs of fishing communities.	Size of fish stock Sustainable catch limit Total catch for subsistence fishing Market price of fish	Total catch for subsistence fishing Unit resource rent/Net factor of production Production function, cost function and profit function methods
Restrictions/Marine protected areas	A restriction is any rule or regulation that limits how, when, where, or what people can harvest in order to protect the marine ecosystems. A Marine Protected Area is a type of restriction.	Size of fish stock Sustainable catch limit Total catch for subsistence fishing Market price of fish	Total catch for subsistence fishing Unit resource rent/Net factor of production Production function, cost function and profit function methods
Tourism tax	A general tax applied to tourists or tourism-related activities, charged by a government or local authority to help fund services and infrastructure related to tourism e.g. accommodation tax, cruise ship tax, airport arrival departure tax.	Revenue needed to generate Visitor willingness to pay tax Visitor response to tax i.e. demand elasticity Benchmarking against similar destinations Economic impact on tourism sector	Visitor willingness to pay for tax and response to tax Contingent valuation Choice experiment Economic impact on tourism sector Demand elasticity Expected change in number of tourists Expected change in tourist spending
User fee	A direct charge that people pay to access or use a natural resource or environmental service e.g. park entry fee, camping permit, boat launch fee.	Annual park budget Government funding Number of fee paying visitors Visitor willingness to pay for fee Visitor response to fee i.e. demand elasticity Benchmark with other countries	Visitor willingness to pay for fee and response to fee Contingent valuation Choice experiment
Congestion charges	A fee imposed on visitors entering or using certain high-traffic areas, usually during peak times, to reduce overcrowding and lessen environmental and social pressures e.g. national parks might raise fees or cap entries during busy seasons to avoid congestion.	Average daily number of visitors Visitor willingness to pay for fewer people Visitor response to price i.e. demand elasticity Benchmark with other countries	Visitor willingness to pay for fee and response to price Contingent valuation Choice experiment
Economic incentives e.g. subsidies	Financial or policy-based tools used to influence people's behavior by rewarding certain actions (e.g. with subsidies) or discouraging others (e.g. fines).	Environmental outcome desired by the government/country	Willingness to accept of end-users to stop damaging the environment Willingness to pay of beneficiaries for environmental conservation
Payment for ecosystem services (PES)	A financial incentive given to people or communities to protect, manage, or restore ecosystems that provide valuable benefits to society i.e. than the local community itself.	Ecosystem information Ecosystem type and health/condition Ecological thresholds Ecosystem services provided: Provisioning e.g. fish stock, timber Regulating e.g. coastal protection, carbon sequestration Supporting services e.g. biodiversity, habit Cultural e.g. recreation, tourism Economic information Ecosystem services value Transaction cost to set up the PES scheme Expected revenue from PES	Beneficiary’s willingness to pay for nature credits Contingent valuation Choice experiment Value of ecosystem services Market value method for values of fishery, timber, carbon Replacement cost, restoration cost or avoided damage cost to infrastructure from coastal inundation Observed revenue generated by the tourism industry Contingent valuation or choice experiment to estimate cultural values
Nature repair markets (NPR)	A market or systems where people, companies, or organizations can buy and sell “credits” linked to restoring or protecting nature, like ecosystems, habitats, or biodiversity.	Ecosystem information Ecosystem type and health/condition Restoration potential of the ecosystem Ecological metrics e.g. fish abundance Ecosystem services provided: Provisioning e.g. fish stock, timber Regulating e.g. coastal protection, carbon sequestration Supporting services e.g. biodiversity, habit Cultural e.g. recreation, tourism Economic information Ecosystem services value Transaction cost to set up the NPR Expected revenue from PES	Beneficiary willingness to pay for conserving the ecosystem asset Contingent valuation Choice experiment Value of ecosystem services Market value method for values of fishery, timber, carbon Replacement cost or avoided damage cost to infrastructure from coastal inundation Observed revenue generated by the tourism industry Contingent valuation or choice experiment to estimate cultural values
Buyback and buy-out schemes	A program where a government or organization purchases something back from individuals, businesses, or communities to voluntarily give up rights, assets, or activities, usually for social, environmental, or economic reasons.	Government budget to invest in buy back program Stock of asset Sustainable harvesting limit of asset Value of asset to current end-user Provisioning e.g. fish stock, timber Regulating e.g. coastal protection, carbon sequestration Supporting services e.g. biodiversity, habit Cultural e.g. recreation, tourism	Beneficiary willingness to pay for conserving the ecosystem asset Contingent valuation Choice experiment Value of ecosystem services to current end user Market value method for values of fishery, timber, carbon Replacement cost, restoration cost or avoided damage cost to infrastructure from coastal inundation Observed revenue generated by the tourism industry Contingent valuation or choice experiment to estimate cultural values
Loss and damage payments	Financial support given to countries or communities that have suffered harm from climate change — especially when the damage is beyond what they can adapt to.	Potential tangible loss/cost Infrastructure cost e.g. roads, homes, public buildings. Agriculture loss/Food security loss e.g. loss of cropland Fisheries decline i.e. from coral bleaching Economic output e.g. tourism revenue decline Relocation and resettlement costs Potential intangible loss/cost Loss of culture and identify Loss of heritage sites Loss of traditional knowledge Loss of social cohesion Loss of sovereignty Mental health impacts	Infrastructure cost Replacement cost of damaged infrastructure Payment to avoid infrastructure damage Hedonic pricing for decomposing house and land price Agriculture loss and fisheries decline Unit resource rent/Net factor of production Production function, cost function and profit function methods Restoration cost Economic output e.g. tourism revenue decline Travel cost Unit resource rent/Net factor of production from tourism Relocation and resettlement costs Cost of (new) land acquisition Housing construction cost Infrastructure costs e.g. building roads Public building costs e.g. schools Relocation logistics costs e.g. temporary shelter Cost of livelihood disruption e.g. loss of income Cost for employment support e.g. retraining Institutional costs e.g. legal frameworks, government intervention. Intangible loss/cost Averting behaviour i.e. willingness to pay to avoid undesirable outcome

Valuation technique	Description	Comments	Applicable for the following ecosystem services	Suitability for valuation of individual ecosystem services in Ecosystem Accounting (SEEA-EA)
Unit resource rent / Net factors of production	Prices determined by deducting costs of labour, produced assets and intermediate inputs from market price of outputs (benefits).	Estimates the average value of ecosystem service, not marginal. Estimates will be affected by the property rights and market structures surrounding production. For example, open access fisheries and markets for water supply often generate low or zero rents.	Provisioning services involving harvest or abstraction (e.g. concerning timber, fish, crops, livestock, etc.) Potentially, also applicable to cultural services such as recreation provided by established businesses.	In principle, this method is appropriate but care is needed to ensure that the residual estimated through this approach is limited to the target ecosystem service.
Production function, cost function and profit function methods	Prices obtained by determining the contribution of the ecosystem to a market based price using an assumed or estimated production, cost or profit function.	In principle, analogous to resource rent but generally can be better targeted to focus only on specific ecosystem services and models more able to take into account ecological connections. Can reveal marginal value of ecosystem service. However, more data intensive and require benefit transfers methods for higher level aggregates.	Prices for all type of ecosystem services may be estimated using this technique provided an appropriate production or similar function can be defined. This will require that the ecosystem services are direct inputs to the production of existing marketed goods and services. It is likely to be of most relevance in the estimation of prices for provisioning services and for certain regulating services that are inputs to primary production, e.g. water regulation.	Appropriate provided the market based price being decomposed refers to a product rather than an asset – e.g. value of housing services rather than the value of a house.
Payment for Ecosystem Services (PES) schemes	Prices are obtained from markets paying for specific regulating services (e.g. in relation to carbon sequestration)	Estimates will be affected by the type of market structures put in place for each PES (see SEEA EEA 5.88-94). Because payments are not typically conditional upon ecosystem service delivery, prices do not represent true consumer or producer surplus.	Given the most common focus of PES schemes, the price information will be most applicable to the valuation of regulating services, e.g. carbon sequestration.	Possibly appropriate depending on the nature of the underlying institutional arrangements.
Hedonic pricing	Prices are estimated by decomposing the value of an asset (e.g. a house block including the dwelling and the land) into its characteristics and pricing each characteristic through regression analysis	Very data intensive approach and separating out the effects of different characteristics may be difficult, unless there are large sample sizes.	Most commonly applied in the context of decomposing house and land price information and hence will be relevant for those ecosystem services that impact on those prices. Examples include access to green space, amenity values and air filtration. A challenge is attributing the estimated prices to the location of supply.	Appropriate in principle, if an individual service can be identified. Heavily used in the pricing of computers in the national accounts.
Replacement cost	Prices reflect the estimated cost of replacing a specific ecosystem service using produced assets and associated inputs.	This method requires an understanding of the ecosystem function underpinning the supply of the service and an ability to find a comparable “produced” method of supplying the same service. Overestimates value when no reasonable replacement is available.	The idea of replacement cost assumes that a service can be replaced, i.e. that a man-made alternative can be developed. In general, this engineering type focus will mean that the method would be applied for various regulating services such as water regulation, water purification and air filtration.	Appropriate under the assumptions (i) that the estimation of the costs reflects the qualities of the ecosystem services being lost; (ii) that it is a least-cost treatment; and (iii) that it would be expected that society would replace the service if it was removed. (Assumption (iii) may be tested using stated preference methods and should take into account the potential scale issues in replacing the service.)
Damage costs avoided	Prices are estimated in terms of the value of production losses or damages that would occur if the ecosystem services were reduced or lost due to ecosystem changes (e.g. as a result of pollution of waterways).	May be challenging to determine the value of the contribution/impact of an individual ecosystem service.	Similar to replacement costs, the focus will generally be on services provided by ecosystems that are lost due to human activity impacting on environmental condition, particularly through pollution. Regulating services are likely to be the most commonly estimated using this method.	Appropriate under the assumptions (i) that the estimation of the damage costs reflects the specific ecosystem services being lost; (ii) that the services continued to be demanded; and (iii) that the estimated damage costs are lower than potential costs of abatement or replacement.
Averting behaviour	Prices are estimated based on individual’s willingness to pay for improved or avoided health outcomes.	Requires an understanding of individual preferences and may be difficult to link the activity of the individual to a specific ecosystem service.	Coastal communities may experience health risks due to polluted marine waters, such as from untreated sewage or agricultural runoff leading to pathogen contamination. This can increase the risk of waterborne diseases (e.g. gastrointestinal illness). Residents or tourists may purchase bottled water, avoid swimming, or install water filtration systems to reduce their exposure to contaminated coastal waters.	Possibly appropriate depending on the actual estimation techniques and also noting the method relies on individuals being aware of the impacts arising from environmental changes.
Restoration cost	Refers to the estimated cost to restore an ecosystem asset to an earlier, benchmark condition. Should be clearly distinguished from the replacement cost method.	The main issue here is that the costs relate to a basket of ecosystem services rather than a specific one. More often used as a means to estimate ecosystem degradation but there are issues in its application in this context also.	For example, the cost of rehabilitating a degraded mangrove forest to restore its natural capacity to buffer storm surges, support fisheries, and sequester carbon. The total amount paid to restore the degraded mangrove reflects how much people value the mangrove and the services it provides in its original condition.	Likely inappropriate since it does not determine a price for an individual ecosystem service but may serve to inform valuation of a basket of services.
Travel cost	Estimates reflect the price that consumers are willing to pay in relation to visits to recreational sites.	Key challenge here is determining the actual contribution of the ecosystem to the total estimated willingness to pay. There are also many applications of this method with varying assumptions and techniques being used with a common objective of estimating consumer surplus. Finally, some travel cost methods include a value of time taken by the household which would be considered outside the scope of the production boundary used for accounting purposes.	This will relate to valuation of recreational ecosystem services. This is most suited to valuing places where tourists visit or recreate, such as coastal reefs for SCUBA diving.	Possibly appropriate depending on the actual estimation techniques and whether the approach provides an exchange value, i.e. excludes consumer surplus. A distinction here is that the total of actual travel costs is not a measure of the value of the ecosystem services but it may be appropriate to use the demand profile associated with the travel cost (the estimation of this demand curve is referred to as use of the travel cost method).
Stated preference	Prices reflect willingness to pay from either contingent valuation studies or choice modelling.	These approaches are generally used to estimate consumer surplus and welfare effects, and non-use (bequest and existence) values. Contingent valuation uses surveys to ask participants what they would be willing to pay for an ecosystem service or associated attribute. Choice modelling/Choice experiments offers survey respondents a range of choices or scenarios that include different levels of ecosystem service and ask them which scenario they prefer at a certain price. Within the range of techniques used there can be potential biases that should be taken into account.	Suitable for valuing hypothetical changes in ecosystems. For example, how much local communities are prepared to pay to protect their coastal mangroves from being destroyed. The willingness to pay could be used to value both use and non-use values. Non-use values include cultural and spiritual values. Stated preference methods are suitable for valuing cultural ecosystem services. Stated preference methods could also be used to estimate how much monetary compensation people are willing to accept to forgo what they currently have. For example, local communities may be willing to accept financial compensation from property developers or the government to forego harvesting timber and fish from their coastal mangroves.	Inappropriate since does not measure exchange values. However, while the direct values from stated preference methods are not exchange values, it is possible to estimate a demand curve from the information and this information may be used in forming exchange values for ecosystem services.
Marginal values from demand functions	Prices are estimated by utilising an appropriate demand function and setting the price as a point on that function using (i) observed behaviour to reflect supply (e.g. visits to parks) or (ii) modelling a supply function.	This method can use demand functions estimated through travel cost, stated preference, or averting behaviour methods. The use of supply functions has been termed the simulation exchange value approach (Campos & Caparros, 2011)	In principle, may be applied for many types of ecosystem services but most likely to be relevant in the estimation of values for regulating and cultural services.	Appropriate since aims to directly measure exchange values. However, the creation of meaningful demand functions and estimating hypothetical markets may be challenging.