The protection and enhancement of natural resources and nature-based solutions (NBSs) [1
] are fundamental to ensure the correct functioning of ecosystems at different scales, from global to local, as ecosystem services (ESs) are the “direct and indirect contributions of ecosystems to human wellbeing” [2
]. A better understanding of the economic value generated by NBSs, and the ESs they provide, can facilitate the adoption of efficient policies and measures to preserve and enhance them [3
]. The monetary valuation of an ES is traditionally absent from economic accounting and so their production ordinarily fails to reach optimum social conditions. As a result, their critical contributions are not considered in public, corporate, and individual decision-making [5
Public goods, such as water and air, are characterized by non-excludability and non-rivalry. The former signifies that it is not possible to selectively exclude some individuals from their use, while the latter signifies that consumption by one individual does not reduce its availability to others. Other environmental goods such as urban parks are closer to the category of common goods. Unlike public goods, common goods are non-excludable but rivalrous. Therefore, individuals cannot be excluded from their use, but consumption by one individual does reduce its availability to others.
In traditional environmental economic theory, this is the cause of market failure and justifies state intervention to avoid underproduction and the depletion of natural resources [6
]. Coase [7
] argues that this kind of market failure depends on the incomplete attribution of property rights on natural resources and the services they provide. Other authors argue that neither the state nor the market ensures that individuals sustain a long-term, productive use of natural resource systems and so innovative collaborative governance systems are needed [8
When it comes to NBSs, assessing costs is usually quite straightforward. For example, planting a tree requires investments for the actual purchase, transport, site preparation, equipment, miscellaneous supplies, and labor costs [9
]. However, valuing its benefits is more complicated. The ESs provided by trees in an urban context include climate regulation through shading, carbon sequestration, recreation, etc. [10
]. The valuation of ES benefits allows the pricing of the impacts generated by human actions on the environment, thus disclosing the complexity of human–environment relationships and highlighting how human decisions affect the flows and the values of ESs [11
]. It is important to note that the economic valuation is very unlikely to reveal the effective value of such goods or services, and an underestimation of such value is bound to occur. In particular, capturing the non-use value component of ESs can be cumbersome, as it is usually measured based on the preferences of individuals who do not often have complete knowledge about the issue with which they are presented. The presence of biases in some valuation methodologies also affects the estimation of the economic value of a good [12
]. Measuring the monetary value of environmental goods and services still poses a problem, in particular at the urban level. The choice of the proper methodology to apply is linked to the ESs to be valued [13
]. ESs are multi-functional, that is, they provide several benefits such as the improvement of air quality, climate regulation, flood risk reduction, urban heat island effect reduction, and cultural and recreational services, thus helping cities to cope simultaneously with the significant social, economic, and environmental challenges they face [14
]. To capture the multi-functionality of an ES, it is necessary to select and adopt the appropriate valuation methodology which can fully capture the hidden values of the ES. This would foster the introduction of policies and actions which protect and enhance ESs though the implementation of NBSs. Attaching a value to environmental goods would make it easier for their inclusion in economic choices and public decision-making processes. Eventually, this will lead to the creation of stronger conservation policies, and to the adoption of economic instruments that would result in better safeguarding of the environment, such as payment for ecosystem services (PESs) [18
The paper aims to identify, analyze, and describe the methodologies that can be used to gauge the economic value of the ES generated by the NBS at the urban level. Features and pros and cons of different valuation methodologies are assessed and a framework that highlights the linkages between specific economic valuation methodologies, ES categories, and the NBSs providing these ESs is created. To this purpose, a literature review of papers focused on the economic analysis of the ES provided at the urban level has been performed to detect the most frequently adopted methodologies for each category of ES. The methodologies analyzed have been categorized and associated with the ES valued. Moreover, the NBS providing the ES—e.g., urban forest, green roofs, etc.—have been considered as well. The paper contributes to (i) identifying a set of case studies which carried out a monetary valuation of ESs, (ii) detecting the most common methodologies for the valuation of ESs at the urban level and illustrating the strengths and weaknesses, (iii) creating a framework that matches ESs with valuation methodologies, and (iv) identifying existing gaps in valuation approaches. The paper is structured as follows: Section 2
describes the paper methodology; Section 3
provides a classification of ESs based on international frameworks; Section 4
, analyses the case studies and the valuation methodologies found in literature; a discussion of the results is dealt with in Section 5
; and finally conclusions are drawn in Section 6
The following steps of analysis were performed: (i) a literature review of case studies on ES valuation at the urban level, (ii) an analysis of the methodologies adopted in the literature (description, pros, and cons), and (iii) definition of a framework linking valuation methodologies with ESs at the urban level.
As a first step, a literature review of the case studies of ES valuation at the urban level has been performed using Scopus and Google Scholar. Research articles have been searched in English using combinations of words related to urban ESs and their economic value. In particular, the following keywords have been used: first, the methodology name, followed by “ecosystem service”, “urban”, and “(economic) valuation”. The term “(economic) valuation” has been added only when the previous search did not return any relevant results. Besides the database search of scientific literature, bibliographic references were also drawn from the relevant articles and included in the present literature review. In total, the initial search yielded over 200 articles, 80 of which were considered for inclusion in the study after a screening of their abstracts. Given the purposes of this paper, only 25 of them were eventually selected for analysis: the ones which carry out a quantitative valuation of the economic benefits provided by ESs at the urban level. On the contrary, the ones which carry out only a qualitative analysis, in absence of an economic valuation, as well as those articles gauging ESs outside the urban context, have been excluded. The selected papers include 29 selected cases ranging from 1984 to 2018. The case studies collected through the literature review have been categorized based on (i) the methodological category (direct market valuation, revealed preferences, and stated preferences), (ii) the valuation methodology adopted, (iii) the location and year of valuation, (iv) the NBS that provides the ES, and (v) the ES valued.
The second step includes the analysis of the methodologies used to measure the economic value generated by the ES in the selected case studies. The methodologies have been analyzed and described taking into consideration three main elements: (i) the description of the methodology, (ii) the ES valued through each methodology, and (iii) the pros and the cons of the use of a methodology concerning specific ES categories. The third step capitalizes on the previous ones: pros and cons have been defined by taking into account the intrinsic properties of the valuation methodologies, the outcome of the case studies on the valuation of ESs, and the drivers that affect the implementation of such methodologies during the valuation process.
Finally, a framework that identifies the relations between specific economic valuation methodologies, ES categories, and the NBSs providing these ESs has been developed. The framework is composed of three elements: ES category, specific ES valued, and the methodology adopted for the economic valuation. The framework has been defined capitalizing on the results obtained through the previous methodological steps.
3. Ecosystem Services Categorization
ESs at the urban level contribute in several ways to human wellbeing. They ensure a better quality of life in cities by providing a myriad of benefits such as air and water purification, flood mitigation, noise reduction, local climate regulation, CO2
sequestration, water and food provision, renewable energy supply, and higher physical and psychological wellbeing [14
]. Several classifications of ESs have been provided, including those presented by the Millennium Ecosystem Assessment (MA) [2
], the Economics of Ecosystems and Biodiversity (TEEB) [21
], the Common International Classification of ES (CICES) [22
], and the Mapping and Assessment of Ecosystems and their Services (MAES)—Urban ecosystems, 4th report [23
The MA individuates four categories of ES: (i) regulating—“benefits obtained from the regulation of ecosystem processes, including, for example, the regulation of the climate, water, and some human diseases”; (ii) provisioning—“goods directly produced by ecosystems, such as food, freshwater, timber, and fibers”; (iii) cultural—“intangible benefits derived from ecosystems such as spiritual enrichment, recreation, and aesthetic experience, and aesthetic values”; and (iv) supporting—“the services that ensure the flow of the other ESs”. Since the CICES and TEEB focus on different contexts, a correspondence framework between these two different classification approaches is provided hereby.
summarizes in detail the correspondence between the ESs identified by the CICES and the ones considered by TEEB. The first column refers to the classification of ESs made by the CICES. The second column refers to the name adopted by TEEB. Finally, the last column shows the definitions of each service identified according to TEEB, except for noise reduction and the regulation of water flows, the definitions of which are taken from the CICES since they are absent from TEEB classification. In order to have the full picture, the authors have included them as well. To define a complete framework of correspondence between the different classifications, ESs included in the MAES Urban classification have also been highlighted (boxes outlined in black in the second column).
The ES classification according to the MAES Urban is limited to only 11 out of the 21 ESs presented in Figure 1
. That is because the MAES Urban only considers those ESs which are relevant to and occur in urban ecosystems, defined as socio-ecological systems composed of green infrastructure and built infrastructure [23
]. For this study, only the ESs included in the MAES Urban are taken into account. According to the MAES Urban, freshwater and food are the main provisioning services in cities; noise reduction, air quality regulation, moderation of extreme events, regulation of water flows, local climate regulation, climate sequestration and storage, and pollination are the main regulating services; and finally, recreation, mental and physical health, and aesthetic appreciation and inspiration are the main cultural services. The only ESs that have been included in our study, despite being left out of both the MAES Urban and the CICES, are supporting services, namely habitats for species and maintenance of genetic diversity. In literature, these kinds of ESs are defined as intermediate ESs. Even if ESs do not produce direct benefits to human wellbeing [24
], through a cascade model the linkages between intermediate ESs and final ESs can be put in evidence by investigating their indirect contribution to human wellbeing (e.g., urban parks create habitat for pollinators, which in turn provide pollination, beneficial to society) [25
]. Moreover, several studies claim that urban parks constitute biodiversity hotspots and thus provide habitats for wildlife [26
]. Since the interaction with biodiversity is among the activities of park visitors [27
], the provision of habitats for species in urban contexts does contribute directly to human wellbeing. Thus, as a habitat for species, the ES is deemed as a final service and not only as an intermediate one in this study. Indeed, whether ESs have an intermediate or final role depends on the context [28
The relationships between valuation methodologies, ESs considered, and the NBSs providing the service have been identified through the analysis. These relationships are graphically represented through a framework linking the ES considered, the methodologies adopted to value them, and the NBS that provided the specific ES valued. The methodologies are illustrated in Figure 2
. The ESs are divided according to the category they belong to—namely, provisioning, regulating, cultural, and supporting.
The framework shows that direct market valuation methodologies are the most adopted in the case studies detected through the literature review. In particular, the market price methodology has been applied for the valuation of three different ESs (food, air quality regulation, and carbon sequestration and storage), while replacement costs and damage cost avoided have been applied for the valuation of six ESs (air quality regulation, carbon sequestration and storage, moderation of extreme events, regulation of water flows, local climate regulation, and pollination). The direct market valuation category is followed by the stated preference category: choice modelling gauges four different ESs (erosion prevention, regulation of water flows, local climate regulation, and habitat for species), while contingent valuation gauges three ESs (local climate regulation, recreation and physical and mental health, and aesthetic appreciation and inspiration for culture, art, and design). Finally, the least adopted category is revealed preference: the travel cost method measures two ESs (recreation and physical and mental health, and spiritual experience and sense of place), while hedonic pricing only measures one (aesthetic appreciation and inspiration for culture, art and design). In total, seven ESs are valued by direct market valuation methods, six by stated preference methods, and three by revealed preference methods. It is also possible to observe that, based on the literature review performed, a few ESs have not been valued at all: out of the 11 ESs identified in the MAES Urban, 9 have been valued in literature so far.
The framework shows how some methodologies are used only for some categories of ESs. Direct market valuation has been used to value provisioning and regulating services and revealed preferences to assess cultural services, while stated preferences has gauged regulating, cultural, and supporting services.
In more detail, the ES category with the most observations is by far that of regulating services (27 out of 36 observations): air quality regulation and local climate regulation have been valued the most, with nine valuations each, followed by carbon sequestration and storage, with five valuations. It is not surprising that these ESs are the most studied, given their capacity to deliver positive impacts on environmental, social, and economic dimensions at the same time [68
]. For example, a local climate regulation ES, which is tightly linked with urban heat island effect, generates benefits that copes with all of the three challenges: through a decrease in temperature, it improve citizens wellbeing (social effect), diminishes the impact of climate change (environmental effect), and finally, reduces households’ energy expenses (economic effect). Specific methodologies have been used for the valuation of the ESs for each of the following categories: provisioning, regulating, cultural, and supporting. In some cases, the same ES category can be valued through different methodologies belonging to different methodological categories.
For the provisioning category, only the market price methodology has been adopted to value the provisioning of food at the urban level. In total it has been possible to detect the valuation of one out of four ESs included in the provisioning category through the case study literature review, although markets exist for most provisioning services in particular those linked with water. Although, as suggested by Koetse [69
], provisioning services can also be valued through contingent valuation and choice modelling valuation. For the regulating category, different methodologies have been applied: market price methods, replacement costs and damage cost avoided, choice modelling, and contingent valuation, and in total it has been possible to detect the valuation of six out of eleven ESs included in the regulating category through the case study literature review. Even in the case of regulation services other methodologies can be applied: hedonic prices, contingent valuation, and choice modelling valuation [69
]. For the valuation of the services under the cultural category, the methodologies adopted are the travel cost method, hedonic pricing, and contingent valuation (in total it has been possible to detect the valuation of three out of four ESs included in the cultural category through the case study literature review). Finally, for the supporting category, habitat for species has been valued through the choice modelling methodology (in total it has been possible to detect the valuation of one out of two ESs included in the supporting category through the case study literature review).
Besides this, as previously described, various methodologies can be used to measure the use-value and non-use value of NBSs and the related ES associated. In particular, direct use-value is usually estimated through direct market valuation approaches such as market-price based, cost-based, and production function approaches, which rely on data from actual markets to carry out the economic valuation [42
]. For indirect use-value, along with direct market valuation approaches, revealed preferences (hedonic pricing and travel cost methods) [55
], and stated preferences (contingent valuation and choice modelling) can also be adopted [60
]. Since it is based on future scenarios that are yet to happen, option value can only be measured through stated preference methods, that is contingent valuation and choice modelling. Indeed, contingent valuation and choice modelling are the only methodologies able to value non-use values of ESs. Even if these methodologies can be applied to all ES categories [69
], in the case studies analyzed these methods have been used to value only 6 out of 21 ESs considered.
First of all, the results highlight that not all the ESs provided by an NBS are valuated in literature. In fact, in the majority of the detected case studied only one ES per each NBS considered is valued (only 3 case studies out of 25 value more than one ES). So, even if NBSs are by definition multifunctional and can provide different ESs at the same time, the economic valuation carried out is able to catch only part of the generated benefits [38
Secondly, non-use values are often not considered in the valuation of the ES. In fact, they can be detected through the adoption of the contingent valuation and choice modelling methodologies, which are scarcely adopted (in the case studies analyzed these methodologies have been used only 7 times out of 29). Non-use values are particularly important at the urban level as they are linked with aspects such as scenery and landscape, community identity, and sense of place, which significantly affect wellbeing in cities.
So, it can be said that the value generated by ESs at the urban level is generally underestimated. The lack of considerations of the full economic value of ESs generated by NBSs at the urban level can incentivize the undesirable conversion of ecosystems into built infrastructures, with an associated loss of ES. A critical aspect refers to the difference in values estimated through the use of the different methodologies. A possibility to provide more reliable values of NBSs is to use a combination of valuation models [70
Moreover, values of ESs are often site-specific, as societal and economic conditions of each context, including the characteristics of urban residents and in particular their economic status, affect the values of ESs following several methodologies, especially the ones based on the willingness to pay (e.g., contingent valuation) [72
]. In some case the economic valuation “can fail to reflect the plurality of values across different stakeholder groups within complex socio-ecological systems” [73
]. This can lead to a different attribution of values to the ES produced by a NBS based on their location. This can potentially lead to unequal distribution of NBSs in cities and raise social divide issues. For example, land use planning for climate change adaptation has often been found to exacerbate socio-spatial inequalities [74
] by concentrating the implementation of NBSs in higher-wealth neighborhoods [41
Other approaches can be adopted to assess the benefits generated by ESs, such as the mapping of the status of ESs [75
] helping to overcome some of the barriers and biases encountered in the economic valuation of ESs. In fact, ES mapping can be used to investigate how ES values vary across space and identify spatial areas with high or low provision and high or low demand for ESs [78
]. This can lead to policies targeted to reduce gaps and differences. Furthermore, mapping ESs makes it possible to analyze their spatial configuration, highlighting which the inter-connections and dependencies are between ES provisioning at different scales. Mapping ESs can be linked to economic valuation to compare the relation between ES demand and supply [40
], and to measure the economic value of the benefits derived from ES conservation and enhancement [38
]. Mapping ESs and in particular presenting data at finer resolution can support the management of ESs also at smaller scales and can contribute to (i) providing more relevant information for specific management interventions, (ii) facilitating the engagement of other relevant scientific disciplines [40
], and (iii) guiding land use planning and land management at large scales, where multiple sectors, such as agriculture, urban areas, water resources, conservation, and forestry intersect [81
]. This can help to take into account the urban-rural area interactions that are essential to ensure the flow of ESs. Even if the majority of the ES mapping studies are focused on a wider scale, studies in urban areas are increasing [82
In fact, one of the main barriers encountered in valuation is the lack of bio-physical data, so the creation of a dataset on the state of ESs over time, based on the mapping of ESs, can support the application of several economic valuation methodologies.
Overall, the economic valuation of ESs should be further developed and experimented upon at the urban level also with the support of other approaches and interactions with other disciplines. In fact, economic valuation can contribute to improved urban planning and management of NBSs by informing decisions makers about the full social cost and benefits provided by ESs, leading to more efficient public choices and an increase of social wellbeing.