An explanation of the various methods of valuing wetlands

Placing an economic value on wetlands is a challenging task. This is because many of the functions that wetlands provide are extremely hard to value economically, because they are nonmarketed goods, or public goods. There are some functions that wetlands provide that can be marketed, such as fishing or trapping, and therefore have a market price. But most functions, like water quality and wildlife habitat, have no market to measure their worth. Therefore, in order to value wetlands people have had to turn to nonmarket valuation techniques to obtain the true market value of wetlands. In general, marketed functions provide private goods, while nonmarketed functions provide public goods.

"Revealed Willingness to Pay" methods of valuing wetlands base their valuation on what society is willing to pay for a certain good. There are two main RWTP goods. They are commercial fishing and trapping. Because wetlands provide the food and habitat necessary for the survival of fish and shellfish, it is possible to measure the fish and shellfish production in the cachement area of the wetlands in question to obtain a RWTP value. Trapping can measured much more easily, purely based on the value of pelts from animals in a certain kind of wetland, and the number of pelts per acre.

There is also one other RWTP way to value wetlands. That is to look at what people have paid to have different sorts of wetlands constructed all over the country, as well as to look at what wetland credits are selling for on the open market today. In an indirect sense, the mitigation costs that society imposes on wetland destruction reveals, in one number, the bundle of values society sees in wetlands. Obviously, this second WTP method can vary greatly from state to state depending upon local regulations and enforcement. Tables 3 and 4 show the results of the second RWTP method.

Expressed Willingness to pay is the idea that if you ask people they will tell you what they are willing to pay for a good or service. In order to measure the value placed on a wetland by someone using it as a recreational good, surveys and the travel cost method are used. Surveys are as straightforward as they sound. Ask people what they are willing to pay to preserve a certain wetland per year, per household for recreational purposes. The travel cost method estimates the average wages of user groups visiting the wetlands, and then estimates how far people are traveling to reach the wetlands, and then adding that up on a yearly basis.

Derived Willingness to pay is a way to estimate the value that people would place on things like wind protection and flood protection in coastal areas. This can be calculated by estimating the cost to society if property owners are closer to the water due to wetland destruction. This is only applicable in some areas of the country.

Non-Use willingness to pay is measuring option and existence values. Option value is measuring the value that people place on having the option to use a certain resource in the future. Existence value measures what someone is willing to pay just to know a resource exists, without ever intending to use it.

Energy analysis (EA) is a completely different way of valuing wetlands than the various willingness to pay methods. EA measures the total amount of energy captured by natural ecosystems (amount of carbon fixed, or gross primary production) as an estimate of their potential to do useful work in the economy. It generates an upper bound on the economic value of the products of an ecosystem. It is interesting to note that wetlands are some of the most energy intensive ecosystems per acre in terms of gross primary production.