RIVER-BASED ECOSYSTEM SERVICES IN THE CITY: AN ECONOMIC POINT OF VIEW

Tags: ecosystem services, housing market, ecosystem service, ecosystem diversity, market price, urban areas, river ecosystem, ecosystems, development, UK National Ecosystem Assessment, urban agglomeration, biodiversity conservation, biodiversity, aquatic ecosystems, water retention, water runoff, urban river, garden areas, Mississippi River, Singapore River, biological diversity, housing prices, Anacostia River, Bruce Burgess, sustainable drainage systems, agglomeration, Potomac River, method, climate change, housing market prices, environmental attributes, public goods, Gulf of Bothnia, ecosystem valuation, valuation method, Hedonic method, Urban Planning, hedonic price, flood prevention, Ecological Economics, Kiiruna, Economic Analysis for Ecosystem Service Assessments, variables, revealed preferences, hedonic price analysis, city of Pori, agglomeration economies
Content: Course: HENVI Workshop 2012; Ecosystem services in urban areas RIVER-BASED ECOSYSTEM SERVICES IN THE CITY: AN ECONOMIC POINT OF VIEW Authors: Alexandre Losco Catherine Nannan Edmund Asare Jenni Kylmдaho Marie Gilard Paula Lampinen
2 ABSTRACT In the guise of earth's ecosystems, for example, biodiversity provides the conditions and drives the processes that sustain our very survival. Biodiversity is considered to exist at four levels, namely: genetic, species, population and ecosystem diversity. This review focuses on ecosystem diversity. It examines what ecosystem services of waterbodies can offer and explains how this kind of ecosystem functions. industrial growth based on biotic and abiotic ecosystem services and urbanization are closely linked together. The study also highlights the important role of biodiversity conservation. The study analyzes economic forces that draw masses into the same area or why firms cluster in cities. This study provides a scientific analysis of how cities are designed on basis of proximity factors e.g. river; describes concept of urban ecosystem services and their roles; reviews ecosystem services offered by rivers in urban areas and important functions of rivers in urban areas. The current study basically attempts to pose the following research questions on the chosen subject: Do citizens realize the importance of the urban ecosystem services. And if they do not realize, how can politicians make them consider this importance? And it is widely considered that wellbeing persons are more efficient in work and are more resistant to sickness. This fact induces economic benefits. If ecosystem contributes greatly to this fact, could it be possible to attribute a market price to this hedonic service? This paper discusses Hedonic analysis as a method used in estimating the amenity value of ecosystems. It focuses on a practical hedonic price estimation equation example i.e. applying Hedonic price estimation to the city of Pori river ecosystem services .This study analyses the effect on actual residential housing prices of proximity to several environmental amenities of Pori river ecosystem services. The Hedonic method statistically separates the influence of property values of proximity to environmental amenities (the river ecosystem of Kokemдenjoki environmental attributes and their influence on prices in the housing markets in the city of Pori) from other factors that affect housing prices. The study demonstrates that river-based ecosystem services have a remarkable role in many sectors of industry. It reveals that river-based ecosystem services are preconditions for virtually any industry. The study concludes that overall, benefits of agglomeration are vital for cities and urban sustainability is also linked to some far- reaching aspects, such as keeping up those agglomeration benefits for future generations. 1. INTRODUCTION The significant role of biodiversity conservation in the earths functioning is clearly reflected in, among others, Multilateral Environmental Agreement such as the Convention on Biological Diversity and the United Nations Framework Convention on climate change (Asare 2011). To conceptualize for the current study, the term "biodiversity" or synonymously "biological diversity", a fundamental property of the natural environment, needs to be defined. For convenient understanding of the concept of biodiversity, the definition of the Convention on Biological Diversity (CBD) can be used (Article 2): "variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems" (CBD 1992). The critical importance of biodiversity to humankind is clearly seen from the services it supplies. Biodiversity plays a crucial role in providing a flow of ecosystem services that contribute to human well-being. Biodiversity is considered to exist at four levels, namely: genetic, species, population and ecosystem diversity. This review focuses on ecosystem diversity. The word "ecosystem" in ecological science, designates a complex and dynamic biological system of a naturally occurring assemblage of living organisms interacting as a functional unit with each other and their natural environment (Deke 2008). Ecosystems are characterized by the differences in the interaction of biological, chemical
3 and physical factors. Ecosystems are part of each life and each human activity. A convenient understanding of the different ecosystems point to mountains, grasslands, enclosed farmlands, woodlands, freshwaters, urban, coastal margins and marine (UK NEA 2011). Various studies have shown the worlds ecosystems are presently undergoing extensive change (Asare 2011). Available statistics indicate that predominantly ecologically diverse natural areas are being transformed into homogenized agroecosystems. It is also noted that red lists of threatened species have continuously been extended, accompanied by renewed estimates on accelerated rates of the gradual extinction of species. Besides, there are signs of an increasing decline in the worlds genetic diversity (Deke 2008). Ecosystems form the basis of life and their critical importance to humankind is clearly seen from the services they supply. These "ecosystem services" include: 1) The production of consumer goods (food, clothes, furniture, shelter, etc.) 2) The maintenance of plant and animal life (oxygen, climate etc.) 3) Other services (recreational and aesthetic uses, etc.) This study fundamentally distinguishes between terrestrial and river-based ecosystem services, whereas ecosystem service of urban water bodies often play a connecting role between the two. Without going into detail, it is evident that the ecological interactions and functioning, as well as the nature of human use in representative ecosystems of the two kinds, can differ considerably. Against this background, this paper recognizes the importance of river-based ecosystems and particularly the services offered by rivers in urban areas. Furthermore, in order to describe the complex interactions between the ecological and economic systems, the paper discusses methodological tools that are applied to study ecosystem services from an economic perspective. It is noted that several valuation methods can be applied to ascertain the value that people assign to nonmarket ecosystem services. Generally, there are two distinct classes of methods. The revealed preference represents the first class valuation method. This method comprises the travel cost method, the hedonic price method, the replacement cost assessment, avert behaviour, and the production function approach. The most common feature of these methods is that they rely on existing market data on goods and services related to biodiversity. The contingent valuation method represents the second class. In contrast to the former class, numerical values are determined on the basis of stated preferences (Deke 2008). Against the backdrop of the forgoing situation, it is important to go deeper into the many aspects of ecosystem functioning in ecosystem services offered by rivers in urban areas which would be helpful in developing a sound perspective compatible with our specific geo-ecological and socio-cultural framework. Regarding the ethical foundations of this study, the question is posed: "What is the ethical basis of the valuation of these ecosystem service?" It is thought that the study mainly depends on a moderate anthropocentric approach to the policy of ecosystem services. This considers ecosystem services as a means of satisfying human needs. Humans ultimately attach value to ecosystem. On the basis of foregoing consideration, decisions on optimal resource management determine the human ecosystem interference that maximizes the well-being of the resource owner under given constraints of ecological productivity and resilience (Deke 2008). Unlike anthropocentric approach, an analysis of biodiversity may depend on the ideas of biocentrism, which assumes that biodiversity has a high intrinsic value and that, thus, preserving biodiversity will generate a value of its own. It is possible to combine elements of both concepts, by the introduction of the precautionary principle and safe minimum standards in the actual biodiversity policy. In general, the conservation and use of biodiversity is also linked to some far-reaching aspects such as the rights of future generations or species other than man. It could be suggested that a policy formulation in this respect has to depend on ethical considerations rather than on Economic Analysis (Ibid.).
4 2. GENERAL DEFINITIONS 2.1. Ecosystems and biodiversity Ecosystems are part of each life and each human activity. They are defined as a complex and dynamic biological system consisting of plants, animals, microorganisms and their natural environment. Abiotic components such as air, water, sunlight and mineral soil are also included in the definition. These living organisms and non living components coexist within the same cycle and are dependent on one another. Ecosystems are characterized by the differences in the interaction of biological, chemical and physical factors. This results in a list of 8 different ecosystems that are mountains, grasslands, enclosed farmlands, woodlands, freshwaters, urban, coastal margins and marine. These ecosystems are spread all around the world (UK NEA 2011). Biodiversity is the degree of variation of life forms. This diversity occurs at four levels: genetic, species, population and ecosystem diversity. In this review, we will mainly focus on the ecosystem diversity. 2.2. The concept of ecosystem services Ecosystems are the basis of life. The photosynthesis is one key reaction which allows the capture of light energy, carbon and water to produce organic compounds. Photosynthetic (or autotroph) organisms are food producers by which aerobic life is possible on Earth (De Groot 2002). Food supply is one of the services ensured by an ecosystem. The concept of ecosystem services is defined as the benefits that humans get from ecosystems (Kroll et al. 2012). These services directly or indirectly satisfy human needs but also life processes (De Groot 2002). The ecosystem services have been grouped into four primary categories. All these groups are vital to human health and well-being: 1 Supporting services include the regulation of basic infrastructures of life and the regulation of ecological processes. More precisely the transformation of energy, the cycling of water and nutrients, the soil formation and retention are the major services of this group. The maintenance of the Earth's biosphere depends on a delicate balance between these processes. The other groups of ecosystem services directly or indirectly depend on the supporting services (UK NEA 2011). 2 Regulating services consist in the regulation of climate systems, gas and biogeochemical cycles. Other services are provided by this group: pollination is necessary for the fertility of the crops; forests can treat organic wastes in water or air; floods or droughts can be prevented with adequate vegetative structure (De Groot 2002). As supporting services, regulating services influence and are linked with other services. In particular, water quality regulation depends on the cycling of water. Then, it influences other regulating services such as soil and air qualities. Finally, the regulation of water quality affects the supply of water, which is part of the third group of ecosystem services, provisioning services (UK NEA 200). 3 Provisioning services supply goods such as food, fibre, wood or non-woody biomass, water, oxygen, medicinal and genetic resources. They also supply sources of energy and material for clothing and building (De Groot 2002, UK NEA 2011). Different kinds of ecosystems provide these goods. On the one hand, the agricultural and aquacultural systems, for instance the plantation forests which have been installed by humans in order to produce. On the other hand, goods can be provided by natural or semi-natural systems such as capture fisheries and harvest wild food. Historically, provisioning services were the services on which humans focused the most due to the direct economic benefits. 4 cultural services concern the cultural goods and benefits which support interactions between humans and nature. They are a vital source of inspiration for science, culture and art. They also provide opportunities for education and research (De Groot 2002). They comprise green and blue spaces such as gardens, countryside,
5 parks, rivers, lakes and seashores. Exposure to them has various benefits for humans, such as aesthetic satisfaction, recreation and (eco) tourism, improvement in health and fitness (UK NEA 2011). Other classifications of the ecosystems services exist. Some of them make the distinction between services, functions and benefits and other distinguish between structures and processes. Therefore, one common classification system is needed. A recent study suggests a common international classification of ecosystem goods and services (ICES). This classification also includes abiotic elements (not only mineral resources but also wind, solar and hydroelectric energies). These elements have to be taken in account while describing the ecosystem services and while putting a price on them (Kroll et al. 2012). The demand for ecosystem services is described as the sum of all ecosystem services and goods which are used or consumed over a given time period in a particular area. However, the ecosystem services supply is their capacity to provide this specific service within a given time period. This supply is linked to the rate of generation of the ecosystem, which is determinate by environmental resources and human contributions. human actions and decisions (governmental policies and technical progress) interfere with ecosystem services. The effects of human inputs (fertilizers, constructions of power plants...) cannot be forgotten in the analysis of ecosystem services supply (Kroll et al. 2012). For example, human activities have consequences on biodiversity. Studies have already shown that factors such as urbanization, intensification of agriculture, pollution... disturb biodiversity. A decrease in biodiversity damages ecosystems and thus their capacity to produce ecosystem services. To sum up, many sectors such as energy, industry, housing and transport affect ecosystems and therefore disturb the delivery of ecosystem services (UK NEA 2011). 2.3. Urban ecosystem services As the urban population represents more than the half of the global population, urban regions are the focal points of ecosystem services demands (Kroll et al. 2012). Urban ecosystem is composed of components that can be sorted in three levels. The first level is the abiotic sphere (atmosphere, hydrosphere, lithosphere and pedosphere). The second involves biotic factors such as the biosphere of urban plants and animals. The last one is the socioeconomic world of people, which can be called the anthroposphere. The problem of urban ecosystems is that they are the place of consumption. At the same time, these areas are the primary sources of global environmental impacts. However, some urban ecosystem goods and services directly contribute to quality of life in cities. These goods are part of the groups of provisioning, regulating and cultural services (Davies et al. 2011). Firstly the provisioning services can only occur in a little proportion of urban areas because of the high proportion of impermeable surfaces. However, urban productions of food, plants and crops are possible in places such as domestic gardens and urban farms. Many other possibilities exist such as the presence of honey bees in European cities which are crucial for pollination. Moreover street trees can grow up in cities and provide sources of timber, charcoal, wood chip, and compost. But they are also linked to the regulating services (see below). Another concept is the urban forest that surrounds the towns. They are common in Scandinavia. They provide many environmental, economic and social advantages (Tyrvдinen 1997). The biodiversity can also be ensured by such places. Furthermore urban water bodies can supply drinking and irrigation water. This water can be used for Industrial processes or for cultural and recreational activities (Davies et al. 2011). In this way water can also ensure biodiversity. Secondly great advantages of the regulating services are visible in cities. The climate, hazard, purification and noise are the most regulated. The noise can be reduced by a good choice of building material; soft lawn reduces noise compared to concrete paving. Then, air quality can be drastically improved with the extent of vegetation and open spaces. The urban forests also have remarkable effects on the quality of air by removing pollutants through
6 deposition or dispersion. Although the number of trees can be great in urban forests, the street trees are more effective to improve air quality due to their proximity to high intensities of road traffic. Engineers also work on the soil quality, which can be deteriorated due to the compaction, the mix and the chemical additives. A degraded soil leads to a loss of porosity that results in bad infiltration and storage of water. Thus the regulating ecosystem services such as flood alleviation, water purification and storage are affected. The water quality is also influenced by the sewage treatment plant effluents and storm water discharges. Another type of regulation is the climate regulation. Natural urban surfaces covered by vegetation or water can lower the consumption of energy. They can lower summer temperatures, and reduce the need for winter heating and summer air conditioning. The plants mechanism consists in the consumption of heat energy to drive the evapotranspiration process. The last regulating services concern the hazard regulations such as erosion and flood risk management. For instance, vegetation roots stabilize the soil and the leaves and branches reduce the impact of rainstorms on the ground. The drainage is an important element to consider to avoid flood (Davies et al. 2011). Thirdly, urban ecosystems provide cultural services too. Their effects are direct on physical and mental health. Proximity of greenspaces is correlated to physical exercises and to a reduced risk of anxiety and depression. They are also positive for healthy childhood development and for social cohesion. Some natural places (park, old trees...) may be part in the cultural heritage. The aesthetic value is really good for human health and it can further interest tourists, which can be positive for the economy of the city (Davies et al. 2011). 3. ECOSYSTEM SERVICES OFFERED BY RIVERS IN URBAN AREAS 3.1. The waterbody ecosystem Rivers and freshwater bodies in urban areas have many features including both positive and negative impacts on the urban society but provide many ecosystem services. Following the Urban Land Use classification for the UK NEA, the water subhabitat includes natural and artificial waterbodies such as rivers, streams, groundwater, lakes, wetlands, ponds, ditches, canals and reservoirs. To understand the ecosystem services waterbodies can offer it is important to understand how this kind of ecosystem functions. Water is a medium offering habitat for a large variety of fauna (fiches, microorganism) and flora (algae, microorganism, water plants). As previously mentioned an ecosystem is the interaction between the biotic an abiotic features of an environment that makes the development of life possible. Indeed, the different properties of water are such that it protects the aquatic communities against some environmental features while providing the necessary energy and nutrients. This makes water a nice place to live. Firstly, the clearness of water allows the solar radiation to reach a certain depth under the water surface and to be diffused. This availability of energy makes photosynthesis by plants and microorganism possible; this allows carbon sequestration and biomass production. The water surface protects them also against the novice ultraviolet rays by reflecting them. Water is also an media in which oxygen and other nutrients essential for life (N, P, and K) are soluble and hence available for fauna and flora. Furthermore, it can act as a buffer against strong temperature and acid variation and offering a stable environment to live. If there is organic matter dissolved or suspended in the water, the heterotrophs microorganism will use the latter as energy source and decomposing it by respiration. 3.2. The ecosystem service of urban waterbodies The different ecosystem services offered by the urban waterbodies and rivers can again be classified in three
7 categories: the provisioning, the regulating and the cultural services. 1 In the provisioning water services we can include the supply in drinking and irrigation water, a medium for industrial processes as well as transport way for navigation. This makes industrial and commercial development of cities possible. It also provides sites for recreational and spiritual activities. Eventually, if the stream is strong enough or if, depending on the topography, there is falling water the production of energy (electricity) in water power plants can also be a sustainable good provided by rivers. It is, however, important to remind that the drinking and irrigation water are available by pumping of groundwater and is hence a finite resource if the recharge of groundwater bodies is not efficient or if the spilling of water is too large. 2 The capacity of water ecosystems to depollute sewage treatments plants effluent or more generally to improve the water quality makes it an invaluable regulating services in urban areas. This is because water offers a habitat to a particular fauna and flora that are furthermore able to provide ancillary regulating services such as pollination, noise regulation and sequestration of carbon. This water quality regulation is also linked to climate regulation. 3 The cultural services linked to the rivers in cities are the same as identified for green areas in these. The proximity of water increases the positive mental well-being for all ages and they are essential for physical activity if watersports and other recreational features are allowed even by offering a nice sidewalk. The presence of urban rivers has also been linked to benefits such as promoting environmental consciousness and engendering a sense of well being. Religious and spiritual benefits can also be associated to the presence of waterbodies since the contemplation of them and, eventually, of the fauna (ducks, birds, fish...) are considered as peaceful and symbolic. Of course the basics ecosystem services of supporting life, biodiversity and nutrient cycling are included in urban water bodies. To make these ecosystem services efficient, a good quality of water is necessary. Following the definition of urban water bodies of Paul and Mayer, 2001, "urban water bodies are considered to typically receive polluted inputs from sources that includes urban and highway runoff and cross-connection of overloads from foul to storm sewers resulting in the prevalence of pollution-resistant fauna and flora". This is exactly the kind of uses of water and rivers that can irreversibly disturb the functioning of the associated ecosystem if the amounts of sewage water brought into the river are too high. Indeed, the main disease of those waterbodies is the too high enrichment of water called "eutrophisation". If there is a too high supply in nutrients (principally organic matter and phosphorus) the growing of the micro-organic, algae and plants will be too important compared with the availed dissolved oxygen. Furthermore, the water will become less clear due to an increased amount of organic matter and suspended solids. The lack in oxygen and the reduced amount of solar energy that will be disponible will slightly toxic the environment. Microorganisms and plant will die and sediment and the river (or water body) will fill up with death organic material. This will at the end diminish and inhibit all life in the water and cancel all the regulating and provisioning services this ecosystem could provide. Furthermore it will affect the cultural services by diminishing the recreational and mental well-being and will be source of bad odours. This is of course a slow process and a long-term situation that is more frequent in ponds and calm water bodies with no stream but it is important to realise that the quality of water have to be daily treated with precaution and pollution (overloads in organic carbon and other nutrients) have to be avoided. The EU Water Framework Directive (WFD) requires all water bodies to have a ,,good ecological potential or ,,good status.
8 3.3. Rivers in urban areas In urban areas, the synenergies between the goods and services provided by aquatic ecosystems as well as with the other element of the biosphere (such as soil, air, vegetation and climate) are important purposes for urban management. This is because the elements are strongly dependent of each other and interconnected. The following four examples highlight this global view. 1 The presence of rivers in a more natural state decreases local floods, improves flood storage capacity and reduces downstream flooding. It is also a cost-effective alternative to traditional engineering. Skinner and Bruce Burgess (2005) add that additional benefits could be provided by the restoration of urban river in natural sustainable drainage systems. 2 The development of walking and cycling along rivers and green areas path can also encourage the use of ,,green transports such as cycling and walking for short journeys (school, local grocery shop, sport complexes,...) and hence reducing the CO2 and other greenhouse gases emission as well as enhancing air quality. 3 A well- structured soil with a thick organic layer over the surface horizon will improve the water retention and drainage respectively in and through the soil. By flowing through the soil, the water quality is enhanced, the recharge of the groundwater table is effective, flooding and erosion is reduced. This could result in a lowered pressure on the rivers by diminishing the amount of water runoff and sludge would be poured into. By ensuring the development of parks, forest and other green areas, this can be effective. In England, for example, new driveways legislation requires that permeable paving be used if garden areas have to be paved over to facilitate drainage, reduce flooding and remove pollution from these surfaces. 2 Previously we also mentioned the fact that the presence of water can diminish the consumption of energy by moderating the temperature in summer and winter. Indeed, water absorbs and releases heat and hence reduces the need for winter heating and summer air conditioning. 4. ECOSYSTEM SERVICES AND THE DESIGN OF THE CITY The city of Kiiruna in Sweden is established on grounds of an ore mineralisation, and most likely the whole city exists because of the iron ore mine and location nearby the cost. Water connections facilitated the growth of the city, and the logistics of heavy metal industry components is organized by shipping. This mineralisation and industry around it has speeded up the growth of Kiiruna as well as other coastal cities nearby. The ore comes from Kiiruna, processing it to steel takes place in Tornio (Outokumpu factory in Tornio is the world leading steel manufacturer), and in the city of Raahe the steel is turned into wind energy turbine components etc, which are shipped onwards to different companies. Kiiruna is an example of urban agglomeration, where cities start growing to areas where critical economically important ecosystem services take place. 4.1. Economies explaining the growth of cities There are three economical forces that draw masses into the same area. According to agglomeration economies, it is cost efficient to establish services close to each other because a clustering of economic activity facilitates production and marketing. Manufacturers benefit from having material resources within a short distance, and companies benefit from having products they sell close by, because that keeps the cost of logistics low. Workers benefit from living close to work and all inhabitants benefit from having good employment possibilities. That whole setting makes firms cluster in cities. By facilitated production and marketing, agglomeration economies can explain the growth of large cities. Another force is comparative advantage considering differential rate of productivity, which causes trade from more productive region to less productive one. Trading goods between geographically separate regions conclude to development of market cities. The idea behind exchanging money or labour for other
9 goods is to overcome the problem that we are not self-sufficient. On the other hand, not all people need to master many skills; specialization of labour in factories gives workers routines that they can specialize in. Internal scale economies result from factor specialization. Factory machines facilitate cost-effective production in large quantities of products. That equipment usage is indivisible input, and it increases factory production further. Specialization and indivisible input make production in factories more efficient compared to individual production in households; hence internal scale economies explain the development of industrial cities. 4.2. On ecosystem services, industry and urbanisation Industrial growth based on biotic and abiotic ecosystem services and urbanization are closely linked together. There is a great range of ecosystem services that are important for urbanization and different industries. Basic production provides land areas suitable for agriculture and other biomass production, for example forestry products, renewable raw materials and energy sources. Logistic possibilities are provided by rivers and eskers - there are no ground frost based problems or deformation on esker areas and therefore railways and highways are built on them. Energy production utilizes seas and rivers in order to get electricity by water power. Seas and rivers are base for fishing industry and production in fisheries. Mineralisations, as mentioned, are utilized worldwide. Industry and urbanization are grounded on ecosystem services that sustain successful urban life. 4.3. River-based point of view River-based ecosystem services have a remarkable role in many sectors of industry. Paper industry is a relevant example being a big sector of Finnish industry, and demanding large quantities of water. In the city of Ддnekoski there are waterbodies which can be used in logistics and industrial processes of paper making. Paper industry was started in 1896 by Ддnekoski rapid, and, in ,,the land of lakes and forests, agglomeration was enhanced by the citys perfect location for forestry as well. So the river embodies the beginning of the city, providing such many necessities for urban agglomeration. River-based ecosystem services are preconditions for virtually any industry. It is not all about industry and economic profitability, when discussing urban agglomeration around rivers. Several water-based ecosystem services play an incredibly important role for people. Fresh waterbodies and ground water are absolutely necessary for drinking purposes, but essential for waste management, transportation and recreational areas and values, too. Before industrialization, rivers and estuarine deltas provided fertile farming and cultivation land, and fresh water was crucial for irrigation. Today effective water pipe systems are developed, but rivers are still essential for irrigation in agriculture. That explains to a great extent why people have settled down in river areas in history. And from there grew the cities around water-based ecosystem services. 4.4. How cities are designed Planning a city includes land use planning, facility and infrastructure planning (as physical aspects), and community development. Urban planning emphasises the management of private development through established planning methods and programs. Urban design focuses on physical improvement of the public environment, giving meaningful form and shape to the city structure. How planners should plan and what issues planners should be focusing on in their work are the fundamental concepts of planning theory (Lew 2007).
10 From top left, clock-wards: i. Singapore, Singapore River, ii. Quebec City, St Lawrence River, iii. Memphis, Mississippi River, iv. Paris, Seine River, v. Washington, D.C, river junction, vi. Hamilton, Waikato River i) The city of Singapore initially grew around the port. The river mouth has became a financing and trading centre, and is the most expensive and economically important piece of land in Singapore. ii) Quebec City stands on the St Lawrence River, which leads from Lake Ontario to the Atlantic Ocean. The river seaway is widely used for shipping in Canada. iii) The largest river system in North America is The Mississippi River. It rises in northern Minnesota, meanders southwards for over 4000 kms and ends to the Mississippi River Delta at the Gulf of Mexico, passing the cities of Minneapolis, St. Paul, Quad Cities, St. Louis, Memphis, Baton Rouge and New Orleans. This is a satellite image by NASA showing the Mississippi River flooding around Memphis. iv) The most intense city structure in Paris begins right at the River Seines built-up banks, and contiguous urbanization seems to reach the horizon. v) Washington has three natural flowing streams: the Potomac River and its two tributaries, the Anacostia River and Rock Creek. vi) Hamilton is the largest inland city in New Zealand, and has a connection to the ocean via the Waikato river. 4.5. City design follows the river In the very heart of the city buildings are built contiguously and land use is very comprehensive. There are heavily competing boutique streets with many services like restaurants, banks and leisure possibilities like cinemas and art exhibitions. Often blocks by the river are built with no unused areas. Services benefit from having an attractive view to the river running through the city. Along the River Thames there were industrial buildings that were left empty after industrial structural change, and are now transformed to loft-houses with popular apartments. In Amsterdam, Copenhagen and Bergen the same happened in warehouses along the river, and nowadays restaurants prosper in those buildings. All actions that are typically located in the core of the city can be combined in a shopping centre, which could as well be located further away from the city centre, lined with public transport. Whether a shopping centre is located in the city centre or between two busy areas, for example business district and residential area, it requires extra
11 space for car parking, logistics, storage of goods etc. That kind of ensemble deprives the citys greenspace sweeping it away from relatively large spot at once. That applies to several ways of land use in the city. In train and bus stations, highways and all transport, car parking lots, business district, industrial and harbour sites soil is removed and large areas are paved or constructed. Looking at satellite pictures, greenspace is scarce in the core of the city. Outside the busiest city centre, there are residential areas, parks and cemeteries, gardens and allotments, athletic fields, waterbodies and so on. They provide patches of greenspace in the city. All actions are connected with public transport; favourably connections are made by transport via river. Further from that sector are agricultural and industrial areas, again following the river whenever possible. 4.6. Cities in the 21st century Cities like Kiiruna relay heavily on their abundant ecosystem services, and they will keep going for a long time without having to worry about running out of resources for industry. What is wrong with this kind of cities? As mentioned, there is a great range of ecosystem services that are important for urbanization and different industries, but they cannot be utilized forever without careful consideration. We are only just opening our eyes to see the importance of ecosystem services. We are starting to ask whether a city has a sustainable strategy. Benefits of agglomeration are vital for cities, and urban sustainability means keeping up those agglomeration benefits. sustainable development is essential for the existence of cities. There are efforts for achieving sustainable design by implementing principles that are seen in nature, which, in the long run, could improve the quality of deteriorated ecosystem services. Closed loop economy is a step towards a system where resources remain in use by recycling, and all industrial releases to air, water, land or space should be non-toxic. From the viewpoint of river-based ecosystem services, that could be good news, since implementing closed loop economy is already improving the quality of waterbodies in Ддnekoski (paper industry). Increase in the amount of impervious surfaces has resulted in urban soil losing its regulating function and resilience (The UK NEA). In urban planning, new possibilities are emerging from physical soil solutions for surface runoff water, so that runoff water could possibly be turned from flooding to water-use in irrigation. Apparently, there is no systematic monitoring of urban greenspace (and loss of it), and data gathered by a range of organizations is inconsistent (The UK NEA). Green- and bluespace and ecosystem service-thinking should be integrated to urban planning. Thinking of rapidly developing economies, such as China, India and Brazil, sustaining ecosystem services within their large cities is a challenge. Idealistically, those countries could jump directly to sustainable level of industry, and utilize the newest knowledge in development and management in their urban planning. 5. ECONOMIC VALUATION OF ECOSYSTEM SERVICES 5.1. The idea behind The idea of economic valuation of ecosystem service is to be able to estimate the wealth offered by an ecosystem in a certain economic situation. In fact, the whole wealth offered by an ecosystem isnt always very evident to value and estimate its market price. By valuating ecosystems service, it is possible to have a numbered estimation on the services offered. This way, the consequences of the destruction of an ecosystem can be financially evaluated. In fact, it often leads to conservation or creation of ecosystems. Meanwhile external costs due to natural phenomenon are drawback that must also be considered in the valuation of the ecosystem. Ecosystems can be compared to stock of financial wealth, which interests are withdrawal regularly but the capital
12 must remain in order to continue to give interests. The ecosystem produces extra products that can be harvested but it mustnt be overharvested so that it can continue to produce. The benefits of ecosystems on our society are not always material. This initiates the notion of use goods and non-use goods. The first one refers to things we can value with numbers and units such as carbon, food or wood for instance; the second one refers to things that are valuable just by their existence, like services or cultural benefits such as countryside, wellbeing or knowledge. The non-use goods are not valuable on a market, but must be considered in the value of an ecosystem by the attribution of coefficients taking into account various factors. The separation between use goods and non use goods must be clearly defined in order to make a correct valuation of the ecosystem. On this point, in the theory, most authors agree, but in the application, there are some different points of view. For instance, for some experts, the view from a house can add value to a house, so its a use product, but others consider it cannot be "consumed", so its a non use product. In ecosystem valuation, many factors must be considered and all do not have the same aim, the same type of benefit or evolutes at the same rate when the ecosystems evolutes itself in a way or another. This makes it even harder to have a correct idea of the valuation of ecosystems, so it must be the most rigorously done. 5.2. Use and non-use goods Ecosystems produce goods necessary to human society. But these goods often need to be transformed in order to be used properly. This added value must be taken in account during the valuation process. The good losses more "natural value" on the market as it needs more processing. To evaluate the welfare of ecosystems, different methods can be applied. But it seems generally accepted that the output of some goods is a sum of manufactured human input and natural input. Each part must be considered in the final value of the use good, in order to have the exact value of the ecosystem service. The evaluation of non use goods is different using non-market valuation method. The value of an ecosystem is not its price. As said before, non-use goods are priceless but have a value witch mustnt be neglected. 5.3. Valuation methods As shown on this chart, for Bateman et al. (2011), 6 methods can be used for the valuation ecosystems. Each method gives a different vision of the ecosystems because each is based on different criteria, has different application domains and concerns the valuation of different services. The difference between use and non-use good is shown here. All these methods have their weakness and advantages, some need very important data and are very difficult to implement, some are not very accurate, but all this methods are tools that brings scientists and economists the closer as possible to the real value and help determine the orientation of the policies. The point is to choose the most appropriate method and be realistic and keep posted the politics on the uncertainty of the results.
13 5.4. Hedonic method We can see from the chart that only one method permits to calculate the non use value, although other authors and authors estimate there are several. Hedonic goods that are valuated are mostly non use good products such as acoustic isolation, aesthetic value and recreational activities, which obviously do not have a price, they are public goods. Individuals behaviour towards these services is a good marker for the valuation of this service. By observing the differences in the market price of commodities sharing the same attributes, it is possible to establish a
14
hedonic method of pricing the value. This value can be put into a linear model by an equation where the market price of the house which benefits from the services is the sum of variables attributed to the housing multiplied by the willingness to pay for each attribute such as:
P=(bnxni)+
(1)
Where P is the value added to the b, the willing value, x the parameter and the error. This value is to be added to the price of the house itself which can be calculated threw the sum of the value of the parameters it offers. The liner model is not the only one; other models exist, such as the double log model, which permit to consider other parameters, such as the area of the housing or the reciprocal model, which adds in the value useful information on the real estate market. These methods are empirical and not always very accurate, but the main point is giving an idea of the value that an ecosystem can add to housing. But for a costumer, it seems that the environmental price is mostly given by the distance between the housing and a green area, the other parameters seem to be secondary.
6. APPLYING HEDONIC PRICE ESTIMATION TO THE CITY OF PORI RIVER ECOSYSTEM SERVICES This section of the paper focuses on a practical hedonic price estimation equation example. Environmental attributes can have considerable economic importance in price forming on real-estate markets (de Groot et al. 2002). The example is formed to approximate the river ecosystem of Kokemдenjoki environmental attributes and their influence on prices in the housing markets in the city of Pori. The hedonic price approach focuses on estimating the implicit price of recreational and aesthetic benefits (Notie et al.1995). Therefore, hedonic variables added to housing prices avails to comprehend peoples willingness to pay for environmental attributes based on revealed preferences (Tyrvдinen 1997). In other words, the method aims to measure non-consumptive ecosystem services in a monetary value. Various Research Papers have shown that aesthetic and recreational variables have mostly a positive impact of on housing selling prices (e.g. Notie et al. 1995; Tyrvдinen 1997; Morancho 2003). These variables are such as waterfront location, scenic view and proximity to ecosystem services (Notie et al. 1995). However, Kokemдenjoki as a complex river ecosystem, as well as geographical changes in the Gulf of Bothnia, have brought negative variables on urban city planning in Pori. These aspects are considered further when applying the hedonic price estimation function.
6.1. Background The city of Pori is a coastal town in the south-west part of Finland. Together with the harbour location on the Gulf of Bothnia and the town along the river Kokemдenjoki, the city of Pori has grounded its importance in Finnish industrialisation and internationalization trough trade and well-organized transport connections since the city was found in 1558. Currently, there lives approximately 83 000 habitants. (Pori-info 2012).
15 Geographically, the urban area of Pori is situated along the river basin of Kokemдenjoki waterway. Kokemдenjoki waterway is the 4th largest water system in Finland. The river of Kokemдenjoki descends predominantly from the inland lakes of Pirkanmaa and Hдme regions, hence the water regulation in lakes redound to currents in Pori river basin. (Pori 2012). The river ecosystem plays an important role in Poris land-use development; to date, the citys facilities and housing have been constructed near riverside and the area also contributes recreational activities for urban population. 6.2. The influence of the river ecosystem on urban planning Despite the positive ecosystem services supply, the river of Kokemдenjoki also poses risks to the urban land-use development in Pori. The main issues concerning the urban planning are seasonal flooding, ground uplift in the Gulf of Bothnia, and extreme natural hazards as a result of on-going climate change. Due to the risks of water rising up to town level, the city of Pori has set up a flood protection program to prevent complications in the urban area. The seasonal flooding risk occurs mainly during the spring time when melting snow surface runs down into the river, which can increase the power of currents. Moreover, during this period, ice floes can form dykes, which elevate the water level and cause a risk to riverside housing. In addition, if ground uplifting and strong currents occur in the Gulf of Bothnia, the sea level elevates faster than in Kokemдenjoki. As a result, a risk of seawater flowing to urban areas increases. In a long-term consideration, the alteration of the sea level impacts on the average coastline location. On the coastal area of the Gulf of Bothnia, the ground level elevates yet faster than the sea level, whereas on side of the Gulf of Finland the situation is reverse, which has caused the coastline to shift towards inland. Third issue is the risks of climate change, which are concerned as long-term forces. The potential melting of the ice sheet elevates the sea level. This has been already discerned in long-term sea level measurements. Also extreme weather phenomena are seen as potential risks for the urban area. Erosion and river sedimentation intensify due to rise in maximum values of currents as well as the increase of average annual irrigation. (Pori; Tulvasuojelu 2012.) Estimated risk events mentioned above can cause ruinous costs to the city of Pori and to the environment as well as
16
they can have an efficacy on housing selling prices. The flooding can damage 5000 dwellings. In this area lives approximately 15 000 people. Furthermore, the estimated danger area covers city facilities and industrial buildings as well as information and energy systems. In addition, the wastewater treatment plant, dump and gas stations are located in the risk area. (Pori; Tulvasuojelu 2012).
5.3 Practical example of the hedonic price estimation method A linear function is formed to frame an example of the method to the case of Pori. Before forming a linear function, two assumptions of the housing markets in Pori have to be made: 1) the entire urban area can be treated as a single market and 2) the housing market is in or near equilibrium. (Tyrvдinen 1997; Freeman 1985; Palmquist 1991). The hedonic price estimation is based on an idea of properties to be characteristically heterogeneous, which form different prices on the housing market (Tyrvдinen 1997). The method divides the characteristics forming the full market price (Pi) of housing from characteristics of the property (xn) with an existing market price, and from environmental attributes (zn), which, in an economic perspective, are seen as public goods without a market price (Morancho 2003). The linear function of the hedonic price estimation is expressed as:
Pi = b1x1i+b2x2i+...+bnxni +bzzi+...+ei,
(2)
i =1, 2,..., T Where, xni zi ei bn,bz
variables describing housing attributes variables describing environmental attributes error term marginal willingness to pay (MWTP) for each attribute
( Morancho 2003)
The case of Pori concentrates on the impacts of the environmental attributes of Kokemдenjoki river ecosystem to urban area housing markets. Hence, the linear function of hedonic price estimation is particularized on a specific ecosystem attributes, which are included to a dwellings market price. The chosen characteristics are described on the table 1.
Housing attributes
MWTP * variable
Variable
Explanation of the variable
b1x1
AGE
Housing age in years
b2x2
BATHS
Number of bathrooms
b3x3
CENDIS
Distance to town centre (in m)
b4x4 ELEVATOR
Elevator in the building (dichotomous variable)
17
b5x5
FLOOR The location of the floor of the flat
b6x6
HOUSE Description of the housing (a house,
a flat)(dichotomous)
b7x7
M2BAL
square meters of the balcony
b8x8
ROOMS
Number of bedrooms
b9x9
SIZE
Square meters of the dwelling
b10x10
STORE
storeroom (dichotomous)
Environmental attributes
b1z1
PROXI
b2z2
WATLE
Proximity to riverside Water level
b3z3
RIVERSC
b4z4
WATFRL
b5z5
WQUAL
River scene Waterfront location water quality
b6z6
CLIMA
climate change
Table 1. Characteristics applied to the linear function
Considering that the physical attributes of housing have direct market values, it is necessary to focus on the indirect environmental attribute analysis. First, since under the linear specification, marginal willingness to pay does not depend on z, the parameter b remains constant (Morancho 2003). Secondly, it is essential to analyze environmental variables on housing prices. The linear function assumes a sum of positive attributes forming the market price when instead; some of the attributes could have controversial result in the equation. An analysis of each variable is required. To form the most comprehensive example, further research data would be needed to form a complete linear function. This analysis instead is based on earlier studies, which assist comprehending the importance of choosing right variables and their complexity. The proximity (PROXI) to the river ecosystem service adds the most value to the housing selling prices (Notie et al. 1995; Morancho 2003; Tyrvдinen 1997). The distance limit of value-adding should be further investigated in the case of Pori since hedonic price estimation studies implicate a diminishing influence beyond a certain distance (Notie H. et al., 1995). Due to the easy access to public good, river scene (RIVERSC) as well as the waterfront location (WATFRL) are estimated to add value to housing prices (Notie et al. 1995). As well, a good water quality (WQUAL) hypothesizes recreational and aesthetical value to housing prices. The controversial attributes of Kokemдenjoki ecosystem service are water level (WATLE) and climate change (CLIMA) because these characteristics include the risks to the urban planning. Earlier studies of recreational and aesthetic value of lakeside water, shows a significant impact on housing price depending on water level variation. In the case of lakeside, high water level implicated a positive relationship with sale prices (Notie et al. 1995). Hypothetically, the variation in river ecosystem could be reverse. The flood protection program of Pori estimates 1 meter water level rise to cause mentioned risks in previous paragraph to urban area (Pori; Tulvasuojelu 2012). In addition, the water level attribute could impact on housing prices seasonally, since the flooding risk increases in spring time. These variables in water level can bring a negative sign to the hedonic price estimation equation. Otherwise, water level is hypothetically a positive characteristic in housing prices.
18 Other controversial variable is the climate change. The flood protection program of Pori has stated the climate change as a risk causing variable in flood prevention (Pori; Tulvasuojelu 2012). Even though extreme natural hazards are considered rare, the fact that the climate change is on-going implicates the necessity of adding the variable to the price equation since it can have a tremendous effect to the city of Pori urban planning. These two variables, water level and climate change, can pose a complex risks on housing selling prices. If the risks of Kokemдenjoki ecosystem occur, hypothetically the other listed variables in table 1 could diminish their value. These attributes of Kokemдenjoki ecosystem are selected based on a specific ecosystem service. In the hedonic price estimation theory, the recreational and aesthetical attributes are estimated as variables of value-adding to the actual housing market prices. The value is considered to be formed from revealed preferences, which indicate the complexity of choosing the variables to a study to estimate a value of a certain ecosystem. To form a theoretically supportive analysis, further investigation of complexities of the variables would be required. In addition, the housing market prices and the environmental attributes impact on selling and buying, depend on the information. Well-informed buyers tend to purchase in a lower market price compared to uninformed buyers (Notie et al. 1995). Accordingly, the ecosystem of Kokemдenjoki can offer a possibility to the real estate practitioners to sell dwellings in a substantially higher price to out-of-town buyers than to well-informed, risk ­ conscious, local buyers. Even though the buyer would be informed, also seasonal changes in appearance in an ecosystem service can influence purchase decisions (Notie et al. 1995). In summary, environmental attributes can have a significant importance in housing market prices, when preferences are revealed and buyers and sellers are informed. Moreover, the hedonic price estimation method is useful in urban city planning since it counts in the environmental aspects, benefits and costs, to the risk management and to land-use development (Morancho 2003). 7. CONCLUSION We have reviewed some aspects of ecosystem services theory and their relevance to the function in the city. Furthermore, we have focused on river-based ecosystem services and provided an econometric instance/demonstration. Based on the analysis, we are suggesting the following open questions: (a) What is the vision of ecosystem services? (b) Do citizens realize the importance of the urban ecosystem services? And if they do not realize, how can politicians make them consider this importance? (c) What are the most efficient methods to use to estimate the negative impacts of an ecosystem to the society? (d) Is there a method that is based on an ecological value itself, without peoples preferences? (e) Can the hedonic method be used in the future in the real estate housing market price estimation in a sense that its openly acknowledged method? (f) It is widely considered that wellbeing persons are more efficient in work and are more resistant to sickness. This fact induces economic benefits. If ecosystem participate greatly to this fact could it be possible to attribute a market price to this hedonic service?
19 REFERENCES ASARE, E. 2011. Studies on Changes in Vegetation Cover in Southern Sudan as Indicated by Remote Sensing and GIS Analysis. MSc Thesis, University of Helsinki. BATEMAN, I. J., MACE, G. M., FEZZI, C., ATKINSON, G. & TURNER, K. 2011. Economic Analysis for Ecosystem Service Assessments. Environmental & Resource Economics, 48, (2) 177-218. BENZERZOUR, M., MASSON, V., GROLEAU, D. & LEMONSU, A. 2011. Simulation of the urban climate variations in connection with the transformations of the city of Nantes since the 17th century. Building and Environment, 46, 1545-1557. CBD (Convention on Biological Diversity), 1992. Convention text. [Available at: www.biodiv.org/convention/articles.shtml?a=cbd-00 . Accessed on 5/04/12]. DAVIES, L., KWIATKOWSKI, L., GASTON, K. J., BECK, H., BRETT, H., BATTY, M., SCHOLES, L., WADE, R., SHEATE W. R., SADLER, J., PERINO, G., ANDREWS, B., KONTOLEON, A., BATEMAN & I. HARRIS, J. A. 2011. UK National Ecosystem Assessment. Chapter 10: Urban. UNEP-WCMC, Cambridge. de GROOT, R., WILSON, M. & BOUMANS, R.M.J. 2002. A typology for the classification, description and valuation of ecosystem functions, goods and services. Ecological Economics; 41(3): 393-408. Deke, O. 2008. Environmental Policy Instruments for Conserving Global Biodiversity. Springer, Germany. GERIN, P. cours de Physico Chimie Biologique de lґEau et du sol, Universitй Catholique de Louvain, Belgique GOMEZ-BAGGETHUN, E., de GROOT, R., LOMAS, P. L. & MONTES, C. 2010. The history of ecosystem services in economic Theory and Practice: From early notions to markets and payment schemes. Ecological Economics, 69, 1209-1218. KROLL, F., MULLER, F., HAASE, D. & FOHRER, N. 2012. Rural-urban gradient analysis of ecosystem services supply and demand dynamics. Land Use Policy, 29, 521-535 LEW, A. A. 2007. Invited commentary: Tourism planning and traditional urban planning theory: Planners as agents of social change. Leisure/Loisir: Journal of the Canadian Association of Leisure Studies, 31(2):383-392. MORANCHO A. B. 2003. A hedonic valuation of urban green areas. Landscape and Urban Planning; 66:35-41 NOTIE, H., LANSFORD JR. & LONNIE, L. J. 1995. Recreational and aesthetic value of water using hedonic price analysis. Journal of agricultural and resource economics 20 (2): 341-355 SULLIVAN, A. O, 2000. Urban Economics, McGraw-Hill. Chapter 2: Why cities exist? SYNTHESIS OF THE KEY FINDINGS AND CHAPTER 10: Urban, 2011, UK National Ecosystem Assessment (NEA). [Available online] http://uknea.unep-cmc.org/Resources/tabid/82/Default.aspx (Cited on March 2012). TYRVДINEN, L. 1997. The amenity value of the urban forest: an application of the hedonic pricing method. Landscape and Urban Planning, 37, 211-222 UK National Ecosystem Assessment. 2011. The UK National Ecosystem Assessment: Synthesis of the Key Findings. UNEP-WCMC, Cambridge. OTHERS Maanmittauslaitos, 2012, [Available online] www.maanmittauslaitos.fi (Cited on March 2012) Nalle 2006: [Available online] http://www.nalle.fi/suomi/heraldiikka/julkishal/kuntavaakunat_suomi.html (Cited on March 2012) Pori-info, [Available online] http://www.pori.fi/pori-info.html (Cited on March 2012) Pori; Tulvasuojelu, [Available online] http://www.pori.fi/tpk/tulvasuojelu.html (Cited on March 2012)

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