ARTICLE

Approaching Wetland Valuation in Canada

Kent Gustavson & Elizabeth Kennedy

Received: 9 December 2009 /Accepted: 1 October 2010 /Published online: 11 November 2010# Society of Wetland Scientists 2010

Abstract Development of a reliable and practical approachfor quantifying values of wetlands in Canada is essential tosupport full cost accounting in resource managementdecisions. Information on wetland values can: demonstratethe magnitude and range of existing values; assist in trade-off analysis; and guide wetland management and publicinvestments to protect and enhance benefits. Our approachto valuation focuses on identifying the wetland types,attributes and services, types of economic values, andappropriate valuation procedures. Functional assessmentoffers the best means to link wetland attributes to servicesand values. To identify economic values, informationregarding ecosystem services is placed in the context ofthe study site. Additionally, the scales and increments ofscientific data collection are chosen to suit the economicvaluation tools being employed. Valuation must make animportant distinction between strategic level and detailedsite valuation. Clear identification of the policy question isthe critical first step in analysis, as it determines whether ameasure of total economic value will suffice, or ifinformation is required on marginal values. Before wetlandvaluation can be implemented broadly in Canada, addition-al baseline inventory information must become available.Preferably, regionally-calibrated models of wetland func-tion should be developed.

Keywords Full cost accounting . Function models .

Functional assessment

Introduction

Wetlands provide a myriad of tangible and intangiblebenefits to Canadians and are an important feature of bothurban and rural landscapes (e.g., Olewiler 2004; Anielskiand Wilson 2007). Wetland losses have been considerablebecause wetland functions have not successfully competedfor space with other land uses (Hanson et al. 2006). Untilthe early 1980s, the drainage of wetlands in Canada foragricultural and urban development was not only anaccepted practice, but it was encouraged by legislationsuch as the Drainage Act, the Provincial Special DrainageAssistance Program, and the Farm Improvement Loans Act(Tomcik 1991). As the losses of biodiversity and environ-mental quality became more evident over time, thesocioeconomic case for conservation grew and wetlandsbecame foci of conservation efforts.

The conservation of natural capital, the stock ofenvironmental assets that yield a flow of valuable ecosys-tem goods or services into the future, is essential toenvironmental and economic security. However, we con-tinue to lose our natural capital because existing markets,policies, and programs don’t effectively account for, orencourage the conservation of, these assets. Better infor-mation on the economic value of natural capital, includingwetlands, is required to support development decisions,land use planning, and the monitoring of natural capitalassets.

The United Nations Integrated Environmental andEconomic Accounting approach (United Nations et al.2003) advocates the incorporation of information within

K. Gustavson (*)Rescan Environmental Services Ltd.,113-116 Research Drive,Saskatoon, Saskatchewan S7N 3R3, Canadae-mail: kgustavson@rescan.com

E. KennedyStantec Consulting Ltd.,40 Highfield Park Drive Suite 102,Dartmouth, Nova Scotia B3A 0A3, Canada

Wetlands (2010) 30:1065–1076DOI 10.1007/s13157-010-0112-0

the system of national accounts (SNA) that link theeconomy and the environment explicitly by measuring thecontribution of the environment to the economy and theimpact of the economy on the environment (see also Lutz1993; El Serafy 1999). This necessitates the measurementof natural resource assets and the economic valuation ofecosystem goods and services.

In 2000, Environment Canada and Statistics Canadainitiated a multi-phase study to investigate and develop aframework for monitoring the value of natural capital inCanada (Gardner Pinfold Consulting Economists Limitedand GeoEconomics Associates 2000). The overall objectivewas to develop estimates of value that will further extendthe current scope and coverage of the national income andasset accounts to include environmental assets. One of thepilot projects commissioned under this broader initiativewas to develop a framework for classifying the uses andfunctions of water that can be given a monetary value(Gardner Pinfold Consulting Economists Limited 2002).However, the framework broadly considers water assets ofmany types, and further work is required if such aframework is to be meaningfully applied to specific assets.

Building on this earlier work, the objective of the studypresented here was to develop a practical and consistentapproach to determining the economic value of wetlands inCanada. A prominent and persistent barrier to valuation isthe mismatch between science, economics, and the infor-mation needs of policy makers. The focus of the frameworkproposed here is on advocating the establishment of a clearlink between: 1) the type of wetland; 2) the wetlandattributes and associated functions; 3) the types of economicvalues; and 4) the appropriate valuation procedures.

In any environmental valuation exercise, it is critical tobe true to the biophysical, ecological, and microeconomicrealities that provide the foundation for the values inquestion. The greater the abstraction from these realities,the less accurate and useful will be the information fordecision making. Wetlands are highly complex, variable,and dynamic systems that exist within the context of a localwatershed and regional landscape. Generalizations based onwetland type and attributes are attractive to policy makersand economists, who require consistent relationships foreconomic models, but such generalizations are difficult tomake for wetland scientists. However, the wetland valua-tion framework we present provides strong guidance to helpensure economic valuations are valid and meaningfullyapplied to support decisions on the management of naturalcapital assets.

Our paper discusses the hurdles and essential elementsfor developing a reliable wetland valuation tool for use inCanada. It is intended to bridge an identified gap betweenscientists, economists, and policy makers in wetlandprotection by distilling the core needs of economic

valuation models and relating them to the way in whichwetlands function data is collected and presented.

Drivers for Economic Valuation

Scientific studies can quantify the incremental changes in awetland’s ecological function that result from humanimpact. Translating convincing data on function loss intoa language useable by policy makers—specifically, eco-nomic value loss—creates an opportunity to present thebiophysical information in another format that can bedirectly used to inform decisions and, ultimately, to protectwetlands from development on a wider scale. Economicvaluation has the potential to substantially increase theeffectiveness by which the results of scientific research inwetlands can be translated into wetland protection policies.

A comprehensive accounting of wetland values is neededto protect social welfare as it is affected by resourcemanagement decision making. Without this more compre-hensive approach, the costs of losing the functions providedby wetlands cannot be appropriately measured against thebenefits of a development, nor can the true value of wetlandsbe understood or appreciated by the public at large.

In general, information on the monetary value ofwetlands can be used for any of the following purposes:

& To demonstrate the magnitude and range of existingwetland values, at an individual wetland, landscape orlarger regional level;

& To assist in the analysis of the trade-offs associated withwetland conservation versus development (or other landuses); and/or

& To help guide wetland management efforts and publicinvestments to protect and enhance the benefits that can berealized from wetlands (i.e., an analysis of the costs andbenefits of conservation, or to identify the most cost-effective approach to achieve a conservation objective).

For each of these purposes, wetland economic valuationcan provide important information to support resourcemanagement decisions and, more broadly, support theinitiative to monitor the economic value of natural assetsin Canada, including wetlands.

A number of research studies have reported the value ofwetlands on a large regional or global scale. These studieshave had significant influence on the public and governmentby communicating the overall importance of these ecosystems(e.g., Gabor et al. 2004; Olewiler 2004; Schuyt and Brander2004; Millennium Ecosystem Assessment 2005; Anielskiand Wilson 2007). However, because they use data based onregional or global means and, thus, do not make a strong linkbetween ecological attributes and values, these studies areonly coarsely applicable to natural capital valuation and of

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little use for the valuation of individual wetlands or localwetland systems, or the incremental change in economicvalue in response to stressors.

The results of a number of individual wetland valuationstudies at a site-specific level are also reported in theliterature (numbering well over 200 in total, and counting).These results can be transferred to other study sites;however, this type of benefit transfer is very crude andtypically inaccurate. Alternatively, with meta-analysis ofresults from a number of individual studies, regressionmodels can be developed that define relationships betweeneconomic value and variables that determine value (Rose-nberger and Loomis 2003). Value functions have beenderived for wetlands and are available for use in benefittransfer (Brouwer et al. 1999; Woodward and Wui 2001;Brander et al. 2004; Hoehn 2006). However, this approachsimilarly produces coarse estimates that can result insubstantial error (Rosenberger and Stanley 2006), primarilybecause of the averaging of values that occurs and theinappropriate application of original study results. This callsfor a careful consideration of the approach to wetlandvaluation based on a broader range of available tools.

Core Needs of Economic Valuation Models

Wetland valuation should be based in the establishment of aclear link among: 1) the wetland type, attributes, andassociated services; 2) the types of economic values; and 3)the appropriate valuation methods. In this way, economicvalue and the incremental changes in value that result fromchanges in wetland health can most meaningfully bemeasured in natural capital accounting. Wetland researchersprovide the basic rationale for wetland conservation in thequantification of the goods and services provided bywetlands and how the provision of goods and serviceschange in response to anthropogenic, ecological, andclimatic stressors. However, a literature review of studiesthat quantify wetland functions and services (e.g., waterquality treatment) reveals that the increments and scales ofdata presented vary widely by study and are, therefore,often not appropriate for direct use in economic valuation(e.g., Devito et al. 1989 vs. Ontkean et al. 2003). To fulfillthe policy need to estimate economic values, economistsoften split, lump, scale, and summarize site-specific data tofit economic models for wetland value estimates, potential-ly beyond the applicability of the data. More widespreadknowledge of the needs of economic models amongwetland researchers may provide an opportunity to directlylink ongoing studies of wetland function with conservationpolicy in Canada.

The following sections discuss the direct needs ofeconomic valuation tools with the intention of making a

case for increased focus on quantitative studies of the goodsand services provided by wetlands for use in natural capitalestimates in Canada. This is the basis of a framework forwetland valuation in Canada—a proposed consistency inthe division and categorization of the functions andresulting goods and services provided by wetlands; theuse of quantitative wetland function data; the requirementto link wetland structure and function to provide opportu-nities to determine wetland value at a local, regional andnational scale; a palate of economic methods employed tovalue these functions; and guidance on the selection of theappropriate economic methods of goods and servicesvaluation.

Wetland Functions for Valuation

The diversity of wetland types is indicative of the diversityof functions performed by and values derived from wet-lands. Wetland functions are defined as the chemical,biological, and physical processes that take place withinthe wetland, such as the storage of water, transformation ofnutrients, growth of living matter, and support for thediversity of wetland plants (Government of Canada 1991;Kusler 2004a, b). There are literally thousands of differentbiophysical processes occurring in wetlands that producebenefits or services for humans (Novitzki et al. 1997;Kusler 2004b).

From a biophysical perspective, most wetland assess-ment techniques group wetland values according to thefunctional processes involved, such as hydrology, biogeo-chemical cycling, and habitat (Smith et al. 1995; Novitzkiet al. 1997; Mitsch and Gosselink 2000). Wetlands mayprovide one or more of a number of possible functions;however, not all wetlands of a particular type will performthe same functions, and not all wetland functions will beperformed equally well (Smith et al. 1995; Novitzki et al.1997; Kusler 2004b). Table 1 summarizes the types ofeconomic values and the linkages to general wetlandfunctions as described in the literature (Barbier et al.1997; de Groot et al. 2006). In this categorization, carewas taken to ensure an internal consistency and correspon-dence between wetland values (including what can actuallybe measured by available economic methods) and biophysicalwetland functions. For this reason, the categorization inTable 1 is proposed as a basis for future Canadian researchin quantifying wetland functions, goods, and services interms of the language and types of functions.

Identifying Wetland Types, Attributes, and Servicesfor Valuation

There are a number of services provided by wetlands,including: water flow moderation; groundwater recharge;

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shoreline and erosion protection; climate regulation; waterquality treatment; nutrient export; carbon sequestration andstorage; and biological productivity and support forbiodiversity. For each, there may be a common set ofwetland attributes that are associated with the performanceof the service (e.g., basin morphology, water tablefluctuation, and retention times are attributes associatedwith nutrient removal/retention; Fisher and Acreman 2004).These attributes can be more prominent in certain hydro-geomorphic conditions, as are certain types of wetlands;thus, the classification of the wetland form can provide aninitial indication of the ecosystem services that are likelyimportant.

But each individual wetland provides a unique suite offunctions, goods, and services according to its developmenthistory, placement within a watershed, ecological composi-tion, and surrounding land uses and pressures. If any of thekey physical attributes of a wetland system (i.e., thebotanical community structure and composition; the wild-life community composition; the basin morphology; thesubstrate; and the frequency, timing, duration, and depth ofinundation) are affected, the functions, goods, and servicesprovided by the wetland will in turn be affected. Moreover,wetlands are dynamic, resulting in changes both seasonallyand annually in the specific functions they provide.

For example, emergent marsh vegetation helps controlthe temperature, flow, and substrate composition of openwater channels. The brook trout, a popular fish forrecreational angling in parts of Canada, requires specifictemperatures and substrate for spawning habitat within themarsh open water channels. Changes in the distribution andtype of wetland vegetation along the riparian area may alterbrook temperatures and substrate, and subsequently reducethe brook trout spawning success. The quality of theecosystem good produced by the wetland, brook troutspawn, is reduced as a physical parameter, the botanicalcommunity structure, is changed. The changes in thebotanical community structure may result from changes inthe duration, timing, and amounts of water received by themarsh as a result of watershed development, waterdiversions, or longer-term climate change.

Establishing a clear link between wetland attributes andeconomic values requires the biophysical quantification ofservices provided by wetlands to feed into economicvaluation models. In wetland science, there are numerousexisting procedures for describing the type of wetland, thewetland attributes, and the associated functions, known asfunctional assessment.

Functional assessment offers the best means to linkwetland attributes, services, and economic values. Thefunctional assessment may require the collection andanalysis of relatively detailed site-level biophysical infor-mation in order to provide quantitative data at the incre-

ments and scales required to feed into economic models.Although generalizations on ecosystem services and valuesbased on wetland type and attributes are difficult to make, itis the hydrogeomorphic character, the combination of localhydrology/hydrogeology, and wetland morphology, sub-strate, and ecological structure, which can be most reliablylinked to the likely performance of valued servicesassociated with wetlands (Brinson 1993; Smith et al.1995; Tiner 2003).

The scientific literature contains a range of studies thatdescribe the functions of individual or groups of wetlands,and represent a substantial body of knowledge. Althoughthe majority of studies may support the fact that wetlandshave a significant influence on the hydrologic, biogeo-chemical, and ecological environment, there is not generalagreement on the extent and character of this influence. Allagree that it is difficult to make definitive statementsregarding the role of various types of wetlands in thewatershed, and a substantial number of studies haveproduced evidence to contradict previously widely acceptedknowledge of the performance of individual functions forcertain wetland types. This creates a great difficulty for thegoal of a complete natural resource accounting of the valueof wetland assets, but one that could surely be resolved ifquantitative research on Canadian wetlands was moreabundant, identified the wetland types according to acommon classification system based on hydrogeomorphiccharacter (e.g., the Canadian Wetland Classification Sys-tem; NWWG 1997), and provided recommendations for theapplicability of the data at scales and increments requiredby economic models.

Valuation Models and Methods

In general terms, economic value is defined as the surplusbenefit to both consumers (individuals) and producers(firms) (e.g., see Pearce and Turner 1990); for consumers,it is the personal value of the benefit received above thecosts to receive it, while for producers, it is the paymentreceived less the costs of production. With respect towetlands, both can be important components of economicvalue, and can be either part of or outside of the market (seeTable 1).

Methods to value the environment can be broadlyclassified as: 1) market-based methods; 2) surrogatemarket-based methods; and 3) non-market-based methods(e.g., Johansson 1987; Pearce and Turner 1990; Freeman1993; Pearce et al. 2002). Market-based methods use directmonetary information on the value placed by the marketeconomy on ecosystem goods and services. Surrogatemarket-based methods use proxy market measures, suchas changes in property values or costs to travel to arecreational destination, to infer the economic value of

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natural capital assets. Non-market-based methods elicitinformation through the use of a survey instrument becauseneither direct nor surrogate market information is available.Table 2 describes the primary valuation methods that havebeen specifically applied to wetlands as described byBarbier et al. (1997) and de Groot et al. (2006), as well asother methods identified as potentially useful.

It is important to recognize that the values provided bywetlands, be they direct use, indirect use, or passive usevalues, are linked both to the wetland functions (Table 1)and to each other. In the modeling of values, thisinterdependence must be recognized. For example, onevaluation method may focus on a specific ecosystemservice (e.g., water storage), while another may focus on aspecific use value (e.g., provision of water); however, bothvalues may be interdependent, with changes or impacts onone affecting the other. In addition, the problem of doublecounting may arise, whereby the different tools used in thevaluation do not provide mutually exclusive and separableestimates, resulting in the same type of economic valuebeing measured more than once. For this reason, care mustbe exercised in choosing wetland valuation methods thatare consistent within the given wetland context andinformation needs.

For each of the valuation methods outlined in Table 2,there are particular data requirements, and advantages andlimitations to the methods. These are described in Table 3and are important to consider in the identification of themost appropriate valuation method to use in a given study.The primary valuation methods for each main type ofwetland value are listed in Table 4. No method in itself willprovide a complete description of all important wetlandvalues. Rather, a set of methods must often be employed ifthis is to be achieved.

The prominence of an ecosystem service does notnecessarily translate to it being an important economicvalue. To identify economic values of importance, theinformation regarding the ecosystem services must beplaced in the context of the study site in question.Specifically, a wetland service is likely to be an importanteconomic value if:

& The ecosystem service clearly supports economicvalues based on geographical proximity or spatial andtemporal relationships to human activities; and

& The ecosystem service is actually valued by humans.

The above two conditions do not necessarily hold in allcases. For example, a wetland may have substantial

Table 1 Values provided by wetlands

Economic value Linkage to general wetland functions

Direct uses

Agriculture ▪ Biological production of crops (e.g., cranberries)

Food Production ▪ Biological production of fish, wildlife and plants

Commercial Hunting and Trapping ▪ Biological production of fish and wildlife

Fuel Wood Production ▪ Biological production of wood

Peat Production ▪ Biological production of peat

Water supply ▪ Provision of water for residential and commercial use

Recreation ▪ Provision of water, habitat and biodiversity

Science and Education ▪ Provision of ecosystem processes and biodiversity

Indirect uses

Flow modification ▪ Water storage, diversion and release

Groundwater recharge ▪ Water capture, retention and infiltration

Flood protection ▪ Water storage, diversion and release

Storm protection ▪ Biological production of storm-dissipating shoreline plants

Water treatment ▪ Sediment and contaminant removal and nutrient assimilation

Erosion control ▪ Biological production of soil stabilizing plants

Climate regulation ▪ EvapotranspirationCarbon sequestration ▪ Biological production and storage of sequestered carbon

Shoreline stabilization ▪ Biological production of shoreline stabilizing plants

Support for biodiversity ▪ Provision of habitat and biodiversity

Passive uses

Bequest value ▪ Potentially all as described under Direct Uses

Existence value ▪ Provision of habitat and biodiversity

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capacity to moderate storm water flows, but this servicemay be of low economic value if there are no usesassociated with the land downstream of the wetland. Anumber of similar examples may arise with any of theservices previously described. More specific guidance onidentifying economic values of importance cannot beprovided, but ultimately is based on the professionalexperience and judgment of the analyst.

Analysis Guidance

As previously described, there are two distinct levels ofinformation regarding wetland values available from theliterature—generalized, mean value estimates (e.g., Schuytand Brander 2004; Millennium Ecosystem Assessment 2005;

Anielski and Wilson 2007), versus more detailed site andfunction-specific estimates. Consequently, current approachesto wetland valuation are divided according to two distinctapproaches: 1) strategic level valuation; and 2) detailed sitevaluation. Each approach can be distinguished according to:

& The policy need and use of the value information;& The functional assessment requirements;& The economic valuation methods; and& Information output.

The main differences among these valuation approachesare listed in Table 5.

The clear identification of the policy question is the criticalfirst step in the analysis. For example, if information is neededfor an overall measure of total economic value to demonstrate

Table 2 Methods for valuation of wetland species and functions

Method Value measurement Applicable wetland species and functions

Market-based methods

Market prices ▪ Actual price of an environmental good as tradedin the market.

▪ Biological production of crops

▪ Biological production of fish, wildlife and plants

▪ Biological production of wood

Defensive expenditure ▪ Measures the costs expended to mitigate againstadverse effects on the environment.

▪ Many wetland functions, particularly where thereis engineered mitigation defined (e.g., constructionof dykes to protect against flood events)

Opportunity costof labour

▪ The implicit labour cost of obtaining a resource(foregone opportunity of employing labour elsewhere).Best applies to subsistence use.

▪ Biological production of crops

▪ Biological production of fish, wildlife and plants

▪ Biological production of wood

Production functionapproach

▪ Environmental resource modelled as an input for theproduction of goods and services.

▪ Potentially all wetland functions, where productionprocesses can be modelled (e.g., the production ofcrops or fish)

Replacement orsubstitution cost

▪ The cost of replacing or substituting the servicesprovided by an environmental resource.

▪ Most wetland functions, where replacement istechnically feasible (e.g., water storage, waterfiltration)

Surrogate market-based methods

Hedonic valuation ▪ Determines value of environmental quality from achange in the market price of property due toan environmental effect.

▪ Provision of water, habitat and biodiversity

▪ Environmental quality modelled as a determinantof property prices.

Travel cost methods ▪ Measures the total value of a recreational site bydetermining the total costs of users travelling to thatsite and deriving a demand function.

▪ Provision of water, habitat and biodiversity

▪ Travel expenditures are considered an indicator of thevalue placed on the benefits provided by the site.

Non-market-based methods

Contingentvaluation methods

▪ Elicits information concerning specific environmentalpreferences through the use of a survey or questionnaire.

▪ Potentially all wetland functions, particularly thosethat can be easily described and understood by thepublic (e.g., provision of habitat and biodiversity,water quality)

Discrete choiceexperiment

▪ Elicits information concerning a range of environmentalpreferences by examining trade-offs through the use of a survey.

▪ Potentially all wetland functions, particularly thosethat can be easily described and understood by thepublic (e.g., provision of habitat and biodiversity,water quality)

Derived from Barbier et al. (1997) and de Groot et al. (2006)

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Table 3 Advantages and limitations of methods for wetland valuation

Method Data requirements Advantages to method Limitations of method

Market-based methods

Market prices ▪ Prices and costs ofproduction as determinedby the market.

▪ Market/shadow prices reflectdecision-making reality (these pricesare faced when making decisions).

▪ Price signals are biased in situationsof market and policy failures.

▪ Requires the functioning of relativelywell-developed, undistorted competitive markets.

Defensiveexpenditure

▪ Costs of mitigation of effectsdue to loss of ecosystemfunction.

▪ Relatively easy to calculate andoften based on observed behaviourwith actual market prices.

▪ Requires availability of well-definedand accepted mitigation measures.

▪ Mitigation measures may not completelyameliorate the negative effects on the environment.

Opportunitycost of labour

▪ Local wage andunemployment rates.

▪ Useful for production with highlabour requirements, where oneland use or activity clearly precludesanother (i.e., there is an explicitopportunity cost of labour).

▪ Opportunity cost of labour may be difficult to valuewithout detailed knowledge of the local labourmarket and the nature of available alternatives.

▪ Nature of availablewage-labour alternatives.

▪ While the unskilled wage rate is commonlyused reliably as a proxy, this wage ratemay itself become distorted in the presenceof large local projects or institutionalarrangements/policies that distortcompetitive labour markets.

Productionfunctionapproach

▪ Detailed input-outputrelationships, includingdefining all factors ofproduction.

▪ The value of a resource as an inputcan be determined by modellingthe relationship to the output ofgoods and services (i.e., thecontribution or value added by theecosystem as a factor of production).

▪ Limited to ecosystem goods and servicesthat are used in the production processof goods and services sold in well-definedand competitive markets.

▪ Physical production relationshipseasily understood by decision-makersand the public.

▪ Detailed quantitative input-output dataneeded on physical relationships.

▪ Changes in biophysical relationships in theecosystem (spatially, seasonally or over time),can substantially change production functions.

Replacement orsubstitution cost

▪ Costs of best availablesubstitute (e.g.,engineered wetland).

▪ Relatively easy to calculate (basedon observed behaviour and/or actualmarket prices) and useful as asecond-best estimate.

▪ Requires availability of well-defined andaccepted replacement technologies.

▪ Substitution cost often wellknown and defined.

▪ Substitute may not be a perfect substitute(i.e., the engineered human-made solution maynot be sufficient to replace an ecosystem service).

Surrogate market-based methods

Hedonicvaluation

▪ Detailed data on individualproperty characteristics,distances from environmentalattributes, and sale prices.

▪ Based on observed behaviourin property markets.

▪ Substantial data requirements, includingthe presence of a well-developed,near-equilibrium property market providinga sample of suitable size and coverage.

▪ May be difficult to identify and isolatethe effects of the environmental attributeon price from other unknown determinants.

Travel costmethods

▪ Detailed data on individualcosts of travel andsocioeconomiccharacteristics of users.

▪ Based on actual observed behaviour. ▪ Substantial data requirements, includingindividual travel origin information, travelcosts, and socioeconomic profiles.

▪ Useful for recreationaluses and eco-tourism.

▪ Derivation of demand function operatesbest if travel distances are relatively shortand sample has a range of distances, costsand socioeconomic characteristics.

▪ Best applied when travel is clearly dedicatedto the use of the ecosystem.

Non-market-based methods

Contingentvaluationmethods

▪ Detailed information onwetland characteristics/function and socioeconomiccharacteristics ofrespondents.

▪ Can be used to value almost allenvironmental attributes.

▪ Substantial data requirements.

▪ One of the few methods tocapture non-use values.

▪ Individuals may find it difficult toseparate environmental from widervalues (embedding problem).

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the importance within the regional or national landscape, then astrategic level valuation will suffice. If information is requiredon the marginal value for a given wetland within the local orregional landscape, either to estimate the current economicvalues or the change in values due to alteration or destruction ofthe wetland, then a detailed site valuation is required.

The strategic level valuation may employ a benefittransfer approach, preferably using a meta-analysis valua-tion model available from the published literature (Brouweret al. 1999; Woodward and Wui 2001; Brander et al. 2004;Hoehn 2006). This method is rapid and cost-effective. If adetailed site valuation is required, the analyst is faced witha number of decisions regarding the wetland services andeconomic values that are likely important, and the appro-priate valuation methods to employ (Table 4). A detailedvaluation of a wetland can be potentially expensive andtime-consuming. It is critical to determine the level of effortappropriate to the policy need, and the social and economicimportance of the values at risk. One or a number of thevaluation methods described in Table 2 may be applied.

As general guidance, the level of effort for a detailed sitevaluation should be proportional to the wetland values at riskfor the case in question. For any specific wetland values thatare believed not to be particularly important or the potentialchange in the values not substantial, a study of those valuesmay not be warranted. But for all existing values that aresubstantial (in magnitude, extent, etc.) or for which the changein land use will have major impacts, a study of those values islikely required. Professional judgement must ultimately beused to determine the appropriate level of analysis.

The Challenges That Remain

Our guidance is an early step toward implementation of aconsistent approach to wetland valuation across Canada forthe measurement and monitoring of these natural capital

Table 3 (continued)

Method Data requirements Advantages to method Limitations of method

▪ Biases often evident in survey responses.

▪ Low income is a constraint on willingnessto pay for environmental attributes.

Discretechoiceexperiment

▪ Detailed informationon wetland characteristics/function, trade-offs andsocioeconomiccharacteristics ofrespondents.

▪ Different components of anenvironmental attribute can bevalued separately.

▪ Substantial data requirements.

▪ Can be used to value almost allenvironmental attributes.

▪ Complexity of survey design and response.

▪ One of the few methods to capturenon-use values.

▪ Complexity in model estimation.

▪ Directly shows trade-offs associatedwith each choice made.

Derived from Ruitenbeek and Cartier (2008)

Table 4 Wetland values and primary valuation methods

Wetland value Primary valuation methods

Direct uses

Agriculture ▪ Market Price

Food production ▪ Opportunity Cost of Labour

Commercial hunting and trapping ▪ Production Function Approach

Fuel wood production ▪ Substitution Cost

Peat production

Water supply ▪ Market Price

▪ Substitution Cost

Recreation ▪ Market Price

▪ Production Function Approach

▪ Hedonic Valuation

▪ Travel Cost

▪ Contingent Valuation Method

Science and education ▪ Market Price

▪ Production Function Approach

▪ Travel Cost

Indirect uses

Flow modification ▪ Substitution CostGroundwater recharge

Flood protection ▪ Defensive Expenditure

Storm protection ▪ Substitution CostWater treatment

Erosion control

Climate regulation

Shoreline stabilization

Support for biodiversity ▪ Valued as part of a passive useor direct use values

Passive uses

Bequest value ▪ Contingent Valuation Method

Existence value ▪ Discrete Choice Experiment

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assets. Further testing using case studies is required. Inaddition, before any framework can be implementedbroadly, additional baseline information on wetlandsmust become available. There is also an alternativeapproach to wetland valuation, contrary to what iscurrently done in Canada, which should be explored.Comments are provided below regarding these key areasfor further research.

The Development of Information on Wetlands

There is a continued need for baseline information onwetlands in Canada. Information on wetland type, extent,and attributes is required in applying wetland valuation.Specifically, the key information gaps that exist are areliable and consistent inventory of wetlands in Canada,and a larger pool of studies that quantify the servicesprovided by various types of Canadian wetlands using theincrements and scales required by economic valuationmodels. If reliable inventory information were availableon a national level, a strategic level valuation could bereadily applied across Canada. Such baseline informationcould also support the application of detailed site valuation,if supplemented with additional primary research on a site-specific basis.

A national inventory of wetlands has not been completed.Inventories in Canada are generally conducted at a provincialand regional scale, and the extent, minimum size, resolution,classification system, and availability of digital data have notbeen consistent. Furthermore, there is no practical orconsistent way to translate the classifications in existinginventories into one system of classification that is based onhydrogeomorphic character, such as the Canadian WetlandClassification System (NWWG 1997). The importance of

using a system based on hydrogeomorphic character is that itis the best way to consistently link wetland type and form tothe likelihood of function performance. The CanadianWetland Classification System has not been widely adopted,particularly in inventory work based on aerial photo interpre-tation, because the indicators of class and form are not easilyidentified by this method. Further, regulators and practitionersmay be reluctant to abandon provincial systems that predatethe Canadian Wetland Classification System. A nationalinventory using the standardized classification of wetlandsbased on hydrogeomorphic character facilitates the use ofexisting economic valuation models and has the potential forbeing an important tool.

More information is required on the quantities ofservices performed by various wetlands to support valua-tion. Scientific studies that quantify the services providedby the various types and forms of wetlands can be linked tonational wetland inventories to provide regional andnational estimates of wetland value. On a more local orwetland-specific basis, these studies are important for rapidvalue estimates to support regulatory decision making whenwetlands are at risk of alteration for development.

It is clear that the performances of some wetlandfunctions are more widely studied than others. The currentlevel of study of a particular wetland form and serviceprovision is often related to the ease of quantification (e.g.,stormwater management services can be quantified by aphysical measurement of basin capacity and watershedfeatures, whereas groundwater recharge services requiresmultiple seasons and years of water balance to provide anestimate), the known importance of a wetland type inperforming a particular service (e.g., northern bogs areknown to have particular value in global carbon cyclingcompared to shallow water wetlands), or regional interest

Table 5 Wetland valuation approaches

Valuationapproach

Policy use Functional assessmentrequirements

Valuation methods Information output

StrategicLevel Valuation

▪ Demonstration of currentTEV at risk for a wetlandor number of wetlands ata landscape or largerregional level

▪ Information on wetlandtype (category), wetlandfunctions (presence orabsence), wetland area,and local socioeconomiccharacteristics

▪ Use of published wetlandmeta-analysis valuationmodel

▪ Average TEV for a givenwetland or numberof wetlands

DetailedSite Valuation

▪ Current values or changesin values associated withspecific wetlandfunctions due to wetlandalteration, destructionor investment

▪ Development of aquantitative biophysicalmodel of wetlandfunctions of interest

▪ A number of market-based,surrogate market-based ornon-market-based methods,selected as appropriate forthe wetland species andfunctions of interest

▪ Marginal value loss/gain forall or individual functions dueto alteration/destruction of orinvestment in a given wetland

▪ Identification ofimportant wetlandfunctions at policy site

▪ Quantitative model of keywetland functions

TEV = total economic value, the sum of all direct use, indirect use and passive use values

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(e.g., Saskatchewan’s prairie potholes versus Nova Scotia’sbasin swamps). To support the comprehensive valuation ofwetlands, estimates for all services provided by all wetlandtypes requires quantification on a regional basis. Further,the studies would most effectively inform policy ifscientists intentionally designed research to provide datain the increments and scales required to be utilized ineconomic models.

Development of Rapid Assessment Valuation Approaches

As previously described, a strategic level valuation isrelatively easy and inexpensive to apply, but provides arelatively crude level of accuracy and detail; for this reason,it is best suited for use on a landscape or regional level todemonstrate the magnitude of existing wetland values. It isnot appropriate to use the approach to examine specifictypes of wetland values or marginal changes in the valuesassociated with individual wetlands. Detailed site valuation,on the other hand, will provide information on currentvalues or changes in values associated with specificwetland functions due to wetland alteration, destruction,or investment. However, it can be expensive and time-consuming to apply.

A third approach can be developed as part of functionalassessment, but has yet to be applied in Canada. It providesa greater level of accuracy and detail on wetland values,and is appropriate to use for examining changes in valuesassociated with individual wetlands. Moreover, it isrelatively cost-effective to apply on an ongoing basis.However, the use of this approach, which can be called arapid assessment valuation, requires the prior developmentof regionally-calibrated wetland function models. In short,the procedure uses a region-specific model in which theperformance of functions is compared to a locally-developed reference standard. Thus, it is appropriate touse estimates from this approach to determine changes invalues due to impacts on or changes in certain wetlands.And because the method is indicator-based, it is also usefulin identifying important wetland functions.

As an analog, the HGM (hydrogeomorphic) Approach iswidely used in the United States. Its application issupported by region-specific procedural documents thatprovide the user with the necessary information and dataforms to complete an assessment for specific wetland types.Examples of the regional guidebooks currently in use areprovided by United States Army Corps of Engineers(USACE 2010).

The required regional models have not been developedin Canada and, thus, this currently precludes the use of thisapproach. It is strongly recommended that further work beundertaken towards developing these models and a rapidassessment valuation procedure. A rapid assessment proce-

dure has the potential to replace both a strategic levelvaluation and a detailed site valuation. With respect tostrategic level valuation, the advantage would be togenerate much more precise and reliable wetland valueestimates. With respect to detailed site valuation, theadvantage would be to generate value estimates morecost-effectively, but that would still be meaningful inexamining marginal changes in value.

Development of regionally-calibrated wetland functionmodels also has the potential to better address landscape-level processes and cumulative effects. The economicvaluation methods discussed in this paper are most validfor examining marginal changes, but where non-linearimpacts within a larger complex dynamic system arepredominant other economic modelling approaches (e.g.,general equilibrium modelling, simulation modelling) mayneed to be used to explore how values can be expected tochange. Models of wetland function are important tosupporting this work.

Bringing Together Science and Policy

A revision to the current policy of judging the merit ofproposed wetland alterations based on subjective signifi-cance or presence/absence statements of wetland function isnecessary to drive reliable wetland valuation in Canada.Wetland protection policy in Canada typically requires theassessment of wetland character for review by a regulatoryagency to prevent the loss of significant wetland values as aresult of conflicting land uses. Existing formal frameworksfor the assessment of wetland character demand a statementof the significance or presence/absence of particularwetland functions (e.g., Bond et al. 1992). These frame-works are highly subjective and do not yield quantitativemeasures of wetland function and are, therefore, notadaptable to reliable economic valuation.

There is currently a gap in quantitative information ofthe performance of individual functions by wetlands inCanada at the appropriate scale and increment to support awetland policy. The collection of quantitative scientific dataon wetland character rarely takes into account the catego-ries, scales, and increments of data required to feed intoeconomic models for use in wetland valuation unless it is aspecific goal of the research. Typically, the chosen scale(seconds vs. years) and increment (wetland vs. watershed)of data collection is driven by the cost of research and theminimum resolution required to arrive at a conclusion asguided by current policy. Further investigation into theappropriate scale and increment of data appropriate for usein the described wetland valuation approaches would bevaluable in directing future research needs in Canada.Furthermore, the categories of function or wetland typeused by researchers in many cases seem arbitrary, which

1074 Wetlands (2010) 30:1065–1076

does not lend itself to a broader use in economic valuation.The categories applied should be consistent for all newresearch (e.g., adoption of the function categories inTable 1), and the Canadian Wetland Classification Systemshould be consistently applied to determine wetland typeand form.

Until some of these challenges can be overcome,wetland valuation in Canada will continue to be hindered.The demands of decision makers for rapid, cost-effectivevaluation methods, and the desire for widespread applica-tion of these in many different policy contexts, are currentlymismatched with the largely reductionist approaches andsite-specific studies of wetland science. A common groundmust be found.

Acknowledgments This paper was the result of a research projectconducted for Environmental Policy Analysis and Evaluation, Envi-ronment Canada. We acknowledge the assistance and advice providedby Yves Bourassa, Lisa Fougere, Jean-François Bibeault, and MikeMilloy of Environment Canada. Any opinions or conclusionsexpressed in this paper are ours and do not necessarily reflect theposition of Environment Canada, Stantec Consulting Ltd, or RescanEnvironmental Services Ltd.

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