Recognising institutional context in simulating and generalising exchange values for monetary ecosystem accounts

The paper argues that monetary valuation of ecosystem services for ecosystem accounting needs to be sensitive to institutional context, when simulating markets to generate exchange values where none was available previously and when conducting value generalisation that extrapolates exchange values from specific sites to the whole acounting area. The same ecosystem type can contain different governance regimes or, conversely, a single governance regime may be present in many ecosystem types. Governance regimes are, in part, determined by ecosystem type and condition, but also by ecosystem access characteristics which vary over urban-rural gradients. An ecosystem service will not have a single price if costs of supply and transaction vary in space. This is generally true for all accounting compatible valuation methods if they are extrapolated across different market contexts, but require particular attention if markets are simulated for specific locations and then assumed to be generally valid for the accounting area. The paper exemplifies this for different institutional settings for exchange values of recreation services exploring the general recommendation in SEEA EA for making valuation methods sensitive to institutional context. Stated preference methods simulate markets for ecosystem services. The paper then reviews non-market stated preference valuation studies that have been sensitive to institutional design. Findings on institutional design are, therefore, specifically relevant for simulation of market exchange values for the purpose of compiling monetary ecosystem accounts. The paper finds that disregard for the institutional context in valuation for ecosystem accounting can lead to: (i) errors of generalisation/aggregation and (ii) downward ‘bias’ in simulated accounting prices (relative to the status quo of the institutional context).