The Total Economic Value Approach Accounting Essay

Assignment: ( 1 ) Undertake an cyberspace scavenge for illustrations of Rhizophora mangle ecosystem values surveies. These surveies should give a clear account of the methodological analysiss used in the survey, its aims, the sorts of analysis the informations used was put to and a thorough outline of the deductions of the survey. ( 2 ) Use the illustrations of the Rhizophora mangle ecosystem values that you found to build a TEV for a conjectural Rhizophora mangle system. ( 3 ) Discuss why you think the illustrations may or may non suit within the model of the Total Economic Value attack and see any defects with these ratings and attack.


Mangrove communities are an of import entity of wetland ecosystems. Mangrove woods are located in the brackwish H2O border between land and sea in tropical and semitropical sheltered coastal countries. ( Spaninks & A ; van Beukering, 1997 ) They consist of a assortment of unrelated trees, workss, bushs, vines and ferns that portion a common ability to populate in boggy saline dirts subjected to regular implosion therapy. Mangroves are normally found throughout the universe between latitudes 32 grades north and 38 grades south ( Tomlinson, 1986 ) . There are around 80 species of Rhizophora mangles found throughout the universe ( Saenger et al. , 1983 ) . Mangroves can be divided into two distinguishable groups: sole and non sole. Exclusive Rhizophora mangles are the largest group, consisting about 60 species. These Rhizophora mangles are confined to the intertidal countries and have non been found to be within any other type of flora community. The staying 20 species are considered to be non sole. These workss are non restricted to the typical Rhizophora mangle environment and are frequently found within drier, more tellurian countries. Examples include Hibiscus tiliaceus and Barringtonia acutangula ( Saenger et al. , 1983 ) .

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Mangrove ecosystems supply a broad array of valuable resources. They include economic, human wellness and public assistance and environmental benefits. These valuable resources are assessed through the goods, services and maps provided by Rhizophora mangle ecosystems. However, frequently times the full value of Rhizophora mangle ecosystems is non recognized. This may be attributed to two factors ( Hamilton et al. , 1989 ) : ( I ) many goods and services provided by these ecosystems are non traded on markets and therefore do non hold an discernible value ; and ( two ) some of these goods and services occur off-site and are hence non readily acknowledged as being related to mangrove ecosystems. Harmonizing to Spaninks and Van Beukering ( 1997 ) “ methods for valuing environmental goods and services offer a more comprehensive rating of the many goods and services provided by Rhizophora mangle ecosystems and thereby lend to more informed decision-making ” .

Theoretical/ Conceptual Framework- Economic Valuation Methodology

Harmonizing to World Resources Institute ( 2009 ) “ economic rating assesses a resource in footings of its value to worlds. Economic rating surveies may try to quantify all or some of the usage and non usage values of a resource. ” The World Conservation Union ( IUCN ) ( 2007 ) “ economic rating offers a manner to compare the diverse benefits and costs associated with ecosystems by trying to mensurate them and showing them in a common denominator typically a pecuniary unit. All benefits and costs are valued in footings on their effects on humanity. ”

Economic rating of environmental resources such as Rhizophora mangles should be done on neoclassical economic public assistance analysis ( Grigulas & A ; Congar, 1995 ; Gregerson, 1995 ; Dixon et al. , 1997 ; Bann, 1997 ) . The construct of ‘economic value ‘ is defined in the standard economic theory as the measuring of alterations in personal well being. The theory has been farther extended to mensurate alterations in the monetary values and measures of marketed goods every bit good as public and other non marketed goods and services. A cardinal construct used in this analysis is the economic excess, which consists of consumer ‘s excess and manufacturer ‘s excess. Consumer excess is the difference between the maximal sum that a consumer would pay and the sum that they really pay and manufacturer ‘s excess refers to that difference between the grosss received and the cost of production for specific goods.

The Entire Economic Value model ( TEV ) is likely the most normally used methodological analysis in economic sciences to mensurate the economic value of the environment and natural resources ( Rosales, 2005 ) .Refer to Figure 1. Harmonizing to the IUCN ( 2007 ) “ TEV is the pecuniary step of the incremental alteration in an person ‘s well being due to an incremental alteration in environmental quality. It is non environmental quality that is being measured, but people ‘s mentions for alteration in that quality. ”

Figure 1: Entire Economic Valuation ( TEV ) Framework ( Source: Tri, 2007 )

Economic rating of environment is anthropocentric and it tries to measure the penchants held by people and the value determines by an exchange or minutess in the market. There is an statement that TEV is non needfully equivalent to the Total Environmental Valve ( Television ) of a resource. TEV includes both anthropocentric instrumental and intrinsic values. Television includes TEV values plus other instrumental values that are non of human concern ( non anthropocentric instrumental value ) ( CSERGE, 1995 ) .

( Gren et al. , 1994 ) proposes a reasonably new theoretical model for sorting wetland values. Gren et Al ( 1994 ) states the entire production end product of a wetland ecosystem is divided between three different utilizations. They are ( 1 ) for its ain development and care which can mention to the build-up and ego forming capacity of the wetland itself ; ( 2 ) exports to other ecosystems ; and ( 3 ) exports to human society. A wetland ‘s Television can be classified into two classs based on these different sorts of utilizations. They are: 1 ) the primary value or ‘glue value ‘ ( i.e. , the value of the ecosystem ‘s ego forming capacity and 2 ) the secondary value which is the value of the other two utilizations and can be described as the value of end products, life support and ecological services that the ego forming capacity generates ( Gren et al. , 1994 ) . The secondary value is consistent with the TEV. Spaninks and Van Beukering ( 1997 ) do non experience that construct of primary and secondary values is, in rule more complete than that of the TEV.

The Entire Economic Value Approach

In environmental economic sciences, harmonizing to Sathirathai ( 2000 ) ‘the Economic Valuation Methodology involves the pecuniary step of a alteration in an person ‘s well-being due to a alteration in environmental quality. This mensural value is known as the Total Economic Value ( TEV ) . The TEV consist of two chief beginnings of value: Use Value ( UV ) and Non- Use Value ( NUV ) . Mention to calculate 1 above.

The Use values are normally, farther bomber divided into Direct Use ( DUV ) , Indirect Use ( IUV ) , and Option Value ( OV ) .

Direct usage values ( DUV ) are the goods and services provided by the Rhizophora mangle ecosystems. Harmonizing to the World Conservation Union ( 2007 ) “ direct usage values refer to values derived from existent usage of the good either for direct ingestion or production of other trade goods. ” They include consumptive or extractive utilizations such as forest resources ( lumber and nutrient ) or the productive and non lunger or non extractive utilizations such as touristry and diversion ( Tri, 2007 ; World Resource Institute, 2009. Chong ( 2005 ) defines “ Indirect usage values as the ecological maps which indirectly support economic activity. ”

Harmonizing to Barber ( 1992 ) “ Indirect usage values ( IUV ) root from the indirect support and protection to economic activity by the wetland ‘s natural maps or regulative and belongings ‘environmental ‘ services. ” They include ecosystem services such as H2O filtration and shoreline protection ( World Resources Institute, 2009 ) .

( IUCN, 2007 ; Spaninks and new wave Beukering, 1997 ) Option value ( OV ) refers to an person ‘s Willingness to Pay ( WTP ) to continue the option of utilizing a good in the hereafter. The World Resources Institute ( 2009 ) “ option values estimate the value of continuing the usage of ecosystems goods and services for the hereafter, including ‘bequest value ‘ , where the value is for future coevalss. OVs are some kind of insurance values, in which people assign values to put on the line antipathy in the face of uncertainness. Example Rhizophora mangles provide possible insurance for future natural catastrophes like sea degree rise and other natural menaces associated with clime alteration. Forest provides an option for possible finds of micro-organisms or familial resources that may turn out beneficial in the hereafter ( IUCN ( 2007 ) ) .

Additionally, Arrow and Fisher ( 1974 ) identified another category of Use Value known as the Quasi-Option value. The Quasi- Option value relates to those planning determinations where the benefits of saving are unknown, while at the same clip development is irreversible, that is, the possible benefits of saving will be lost everlastingly.

Non-Use values are hard to specify and mensurate as these values are non quantitative. Non- usage values are derived from the satisfaction by persons cognizing that ecosystems exist for future coevalss ( Chong, 2005 ) . World Resources Institute ( 2009 ) described non -use values “ as the value humans topographic point on the cognition that a resource exists, even if they ne’er visit or use it. ” Non-use values are subdivided into Existence Value ( EV ) and Bequest Value ( BV ) ( Sathirathai ( 2000 ) ; Chong ( 2005 ) ) .

The Categories of Economic Valuation Techniques / Methods

There are several rating techniques or methods that are used to measure or quantify the benefits of ecosystem services.

Figure 2: Economic Valuation Techniques/ Methods ( Source: WRI, 2008 )

Literature Review

Most TEV surveies for Rhizophora mangle ecosystem acknowledge but do non measure the indirect benefits of protecting shorelines. Most surveies focus on the direct usage values and all differ from each other in a figure of ways. Four instance surveies on the TEV of Rhizophora mangle ecosystems are summarized below. They are:

Survey 1: Chong, J. 2005. Protective Valuess of Mangrove and Coral Ecosystems: A reappraisal of methods and grounds.

Survey 2: IUCN. 2007. Environmental & A ; Socio economic Value of Mangroves in Tsunami Affected Areas: Rapid Mangrove Valuation Study, Panama Village in South Eastern Coast of Sri Lanka

Survey 3: Sathirathai, S. 2000. Economic Evaluation of Mangroves and the Role of Local Communities in the Conservation of Natural Resources: Case Study of Surat Thani, South of Thailand.

Spaninks, F. & A ; Van Beukering, P. 1997. Economic Evaluation of Mangrove Ecosystems: Potential & A ; Limitations. Creed Working Paper No 14

Chong ( 2003 ) paper reviews grounds and methodological analysiss for measuring the shoreline protective values of Rhizophora mangle ecosystems. He identified that the most normally used methodological analysiss for measuring the protective values of ecosystems are based on costs. There are two chief types of cost based methods:

The expected amendss avoided by keeping the ecosystems ‘ protective maps, such as the cost of replacing substructure, or the losingss to productive values of land

The defensive outgos required to replace the protective map of the ecosystem, such as the cost of building and keeping sea wall or weave break substructure.

The cost of relocating communities if protective maps are lost.

However, these cost bases methods have been criticized when valuing environmental maps. Spaninks and new wave Beukering ( 1997 ) suggest that the expected amendss approach may be given to underestimate protective maps. They besides suggest that it is hard to measure whether defensive outgos on protective substructure efficaciously replacement for the protective maps of natural coastal ecosystems. However, the cost based rating attacks are seen as the 2nd best ratings because of these restrictions. Alternative first best methods include: Chong ( 2005 )

Hedonic methods

Contingent Valuation methods

However, they are non the most appropriate attacks when measuring protective maps of ecosystems. The truth of these methods tends to be to a great extent dependent on the clip, information and human resources available. In state of affairss where these resources are scarce, it may be a more cost effectual attack to set about cost based methods to rating ( Chong ( 2005 ) ) .

IUCN ( 2007 ) survey aims to research the function of Rhizophora mangles ecosystems in supports, ecosystem services and protective function against utmost conditions events based on the experience of tsunami. The monetary value based attack was considered in the appraisal of direct usage values of Rhizophora mangles. The market monetary value of mangrove goods and services was used. The Rhizophora mangle merchandises collected form the Rhizophora mangle ecosystem by the families and the related market monetary values were collected. Then the existent market value of each good was determined by multiplying the monetary value by the measure, thereby bring forthing the gross benefits. The Participatory Environmental Valuation ( PEV ) technique was used for locals to show the value of Rhizophora mangle merchandises within the context of their ain perceptual experiences, demands and precedences instead than through conventional hard currency based techniques. The consequence on value method was used to gauge the fish genteelness map of Rhizophora mangles. Last, the harm cost avoided method was used for gauging the shoreline protection maps of Rhizophora mangles in the context of Tsunami. Information on personal belongingss damage/ destroyed, livelihood damage/ loss, physical hurts, hospitalizations and deceases due to tsunami incidence were obtained for a control site. The selected control site was non sheltered straight by the Rhizophora mangles. The difference of costs of amendss in the two sites was assessed.

Sathirathai ( 2000 ) has calculated the benefits of Rhizophora mangles to the villagers utilizing the TEV methodological analysis. He calculated the direct usage values utilizing the market monetary value i.e. Rhizophora mangles merchandises sold in the market. Foster monetary values were used for merchandises used for subsistence intents. He calculated the indirect usage values utilizing the offshore piscary linkages and values for coastline protection and stabilisation. In gauging the indirect value generated by off shore piscaries, the Ellis-Fisher-Freeman theoretical account was applied in sing two scenarios ; unfastened entree and managed offshore piscaries. The replacing cost method was adopted to measure the net benefits of the Rhizophora mangle for coastline stabilisation. Last, the foregone benefits of Rhizophora mangles compared to the net returns from change overing the countries into runt farms have besides been calculated.

Spaninks and new wave Beukering ( 1997 ) survey reappraisal and analyse the range of restrictions of ratings methods for measuring direction options for Rhizophora mangle ecosystems. The aim of the undertaking ‘Economic Evaluation of Mangrove-Fishpond Interactions ‘ for which the paper was written is the rating and rating of direction options for the Pagbilao Bay mangrove modesty ( Refer to Calculate 3 below ) . The consequences of this surveies show that many TEV surveies still limit rating to utilize values. Most surveies limit indirect usage values to the baby’s room map. In rule, methods are available for the rating of the full scope of merchandises and services provided by mangrove ecosystems ; but the deficiency of informations and quantitative cognition sing some cardinal ecological relationships present major restraints ( Spaninks and new wave Beukering, 1997 ) .

Figure 3: TEV along with the rating methods for Pagabilao Bay ( Source: Spaninks and new wave Beukering ( 1997 ) ) .

TEV for a Hypothetical Mangrove System – The Protective Valuess of Mangrove Ecosystems to Small Island Developing States

Mangrove Ecosystems provide of import protective values to little island developing provinces. They protect belongings, substructure, lives and productive economic activities on coastlines from moving ridge and storm energy ( Chong, 2005 ) . The shoreline protective services of Rhizophora mangle ecosystems are really valuable during utmost conditions events, such as hurricanes and tropical storms. The intent of this survey is to measure the protective value Rhizophora mangle ecosystems and cipher the outgo cost of building or keeping protective coastal defences and systems if Rhizophora mangles were removed.

Use Values of Mangroves Ecosystems – goods, services and maps to be valued

There are many more use values of Rhizophora mangle ecosystems ( See Bann ( 1997 ) ; Spaninks and new wave Beukering ( 1997 ) ; Emerton and Kekulandala ( 2003 ) ; EEPSEA manual ) . However, for the intent of this scenario, merely the indirect usage values will be assessed. For each of the indirect values the possible rating techniques/ method is noted.

TEV – Goods, Services, Functions

Valuation Techniques/ Methods

Shoreline stabilisation

Hedonic monetary values method

Cost based method -Damage costs avoided

Contingent rating method

Storm Protection

Hedonic monetary values method

Damage cost avoided

Contingent rating method

Erosion bar ( shoreline )

Erosion bar ( riversides )

Hedonic monetary values methods

Cost based method -Damage cost avoided

Preventive outgos

Contingent rating method

Flood and flux control

Hedonic monetary values methods

Cost based method – Damage cost avoided

Preventive outgos

Contingent rating method

Sediment and food ( Retention )

Protective services provided to belongings and production activities

Hedonic monetary values method

Cost based method – ( cost of replacing, rehabilitation cost method, extra constitution cost, cost of resettlement )

Demand and Supply Analysis

Market Monetary values

Coral reef care and protection

Hedonic monetary values method

Damage cost avoided

Contingent Valuation methods

Based on the surveies presented in the literature reappraisal, the Hedonic monetary values methods and Contingent rating methods are regarded as the first best methods. Chong ( 2005 ) “ Hedonic methods -differences in grade of protection provided by Rhizophora mangle ecosystems could perchance reflected in the difference monetary value paid for land in these countries. Contingent Valuation – could uncover the willingness to pay for protective services ” . While Cost- Based methods are 2nd best techniques. It is problematic whether first best methods are the most appropriate attacks to measuring protective maps of ecosystems. The truth of these methods is dependent on clip, the information and human resources available. In state of affairss where these resources are scare, it may be a more cost-efficient attack to set about cost based methods to rating ( Chong, 2005 ) . Last the usage of these methods must be used with cautiousness.


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