The hidden economy
The Waikato region’s economy is usually measured by GDP, but this does not take into account the value of our ecosystems and the ‘services’ they deliver, such as waste treatment.
In 1997, the value of the Waikato region's ecosystem services was calculated to be worth approximately $9.4 billion - the same as our GDP at the time1. This means we need to take better care of our environment to ensure we keep these ‘services’.
Standard accounting practices that measure our economic performance don’t help us measure how well we are looking after our environment. How do we know if we are going to be able to continue to use our natural resources in the future?
The negative environmental effects of doing business may even count positively in measuring the growth of the economy. This is because cleaning up environmental disasters or paying for treatment facilities generates income.
Another way to measure the value of ecosystem services provided by natural resources is to estimate the benefits those natural resources and associated ecological processes provide. This is only an estimate, but it does highlight how important our natural resources, ecosystems and the services they provide are to our regional economy.
The Regional Ecological Footprint measures the effect of these types of activities on the Waikato region. It is expressed as units of land needed to sustain our current lifestyle - for example, hectares per person, per region, or per country.
By working out the value of ecosystem services in monetary terms, we can compare them to standard economic measures. Find out about the structure and productivity of our economy in standard economic terms.
Ecosystems services provide us with indirect and direct benefits. For example, forests provide humans with timber that has a direct economic value, but they also have an important role in terms of:
- climate control, by regulating the flow of substances and gases such as CO2
- erosion control, particularly on steep or erosion–prone land
- water regulation, by moderating runoff and flood events
- biodiversity, by providing habitat for species
- recreation, by providing us with places to swim, tramp, boat, fish, ski and walk.
Other important ecosystem services include:
- food production
- waste treatment.
Table 1 shows an estimate of the value of ecosystem services in the Waikato region, estimated in terms of direct and indirect values2. Forests, lakes, agricultural and wetland ecosystems together contribute 63 per cent of the total value of ecosystem services for the Waikato region.
Table 1: The value derived from ecosystem services 1
|Ecosystem type||Total value per ha/year ($)||Total $ (million)||% of total value|
|Lakes and Rivers||19,700||1,856||19.8|
|Coastal Marine Area (CMA)||500||1,113||11.9|
|Near Coastal Zone||8,000||915||9.8|
Figure 1 shows the values of land and water ecosystems based on the money value of services they provide. Water based ecosystems contribute approximately twice (64 per cent) the total value of land based ecosystems (36 percent).
Table 2 shows the important services provided by the top five ecosystem types (excluding coastal ecosystems). Any land use development that changes ecosystem types will also change the ecosystem services.
For example, draining wetland areas for agricultural use actually lowers the value of the ecosystem services supplied. It’s important that people consider the effects of these changes to ecosystems when planning developments.
Table 2: Ecosystem types and their services
|Ecosystem type||Ecosystems services|
|Lakes and Rivers||Hydrological cycles, flow regulation and flood control, water supply, recreation and food.|
|Forests||Climate and erosion control, nutrient cycling, waste treatment, raw material production and carbon storage.|
|Agricultural/Horticultural||Commercial food production, erosion control, soil formation, waste treatment, nutrient cycling and pollination.|
|Freshwater Wetlands||Storm protection, flood control, habitat, nutrient recycling and waste treatment.|
|Estuarine||Spawning and nursery grounds for many species, habitat, waste treatment and nutrient cycling.|
- The GDP for the Waikato region in 2009 was $16.89 billion3.
- The estimated value of ecosystem services in the region was estimated at $9.4 billion in 1997.
- Land–based ecosystem services were calculated at $7.2 billion, or 75 percent of the regional GDP for 1997.
- The value of ecosystem services for New Zealand was estimated at $39.4 billion (about 50 percent of the national GDP for 1994).
- The Waikato region's higher than the national average value of ecosystem services can be explained by our relatively large proportions of ecosystems, such as lakes, rivers, wetlands and estuaries with a high per-hectare value.
- Patterson, M. and Cole, A. 1998: The Economic Value of Ecosystem Services in the Waikato Region. Report prepared for Environment Waikato. Massey University, Palmerston North.
- Direct Values: This is the value of all goods and services derived form direct use of natural resources and ecosystems and are generally traded on commercial markets and enter standard economic accounts (GDP). Indirect Values: Indirect values of ecosystems support or protect direct use (for example food production).
- Market Economics Limited. 2009: Waikato Region Economy-Environment Futures Model.