INTRODUCTION

Wetlands constitute a transitional zone between terrestrial and aquatic habitats. They are influenced to varying degrees by both terrestrial and aquatic habitats. They differ widely in character due to regional and local differences in climate, soils, topography, hydrology, water chemistry, vegetation, and other factors. Depth and duration of inundation, a key defining force, can differ greatly between types of wetlands and can vary from year to year within a single wetland type. As per the definition adopted at Ramsar Convention (Ramsar, Iran 1971), ''Wetlands are areas of marsh, fen, peat land or water, whether natural or artificial, permanent or temporary, with water that is static or flowing; fresh, brackish, or salty, including areas of marine water the depth of which at low tide does not exceed 6-m.''

Wetlands are categorised as inland (also known as non-tidal, freshwater wetlands) and coastal (also known as tidal, salt water or estuarine wetlands) (Edward B Barbier et al, 1997). In addition to these, man-made wetlands have also been included under wetland classes. Inland wetlands receive water from precipitation, snowmelt, ground water, and runoff. Coastal and estuarine wetlands receive water from precipitation, surface water, tides and ground water discharge.

Wetlands due to their biological, ecological, social, cultural, and economic values form an important component of the environment. They provide habitats and support diverse range of biodiversity [e.g., in one square meter of coral reef there can be up to 3000 species (Kenya Wildlife Service Training Institute, 2004)]. Wetlands undertake important biological and ecological processes including life support systems i.e. water and carbon cycles. Hence, they are important for hydrological functions, economic development, social, spiritual and cultural development.

Functions are the physical, chemical, and biological processes occurring in and making up an ecosystem. Processes include the movement of water through the wetland into streams or the ocean; the decay of organic matter; the release of nitrogen, sulphur, and carbon into the atmosphere; the removal of nutrients, sediment and organic matter from water moving into the wetland; and the growth and development of all the organisms that require wetlands for life.

To aid and improve wise use and management of wetland resources, economic valuation aids as a powerful tool for measuring and comparing the various benefits of wetlands (Edward B Barbier et al, 1997). In terms of economics, the value of the benefit is generally determined by its price, i.e., the amount of money for which it will be exchanged. The value of a benefit is the price of that product in the open market and the worth of that benefit to a potential buyer. This is measured in economic terms as willingness to pay. In other words, the economic value of the wetland services/commodity is measured by people's willingness to pay (WTP) for those benefits.Hence, economic valuation is an effort to consign quantitative values to the goods and services provided by environmental resources, whether or not market prices are available to assist. In addition, the economic valuation is essentially quantification of the environmental goods and services, and the values of human beings for the environment.

The economic value of environmental goods and services/commodity is measured by the summation of many individuals' willingness-to-pay for it. Therefore, economic valuation in the environment context is about 'measuring the preferences/choices' of people for an environmental benefit or against environmental degradation. Valuation is therefore in relation to preferences held by people. Moreover, the use of economic values permits the comparison that is required between 'environmental’ and 'developmental’ values. The latter is expressed in fiscal/monetary terms, either in rupees or as economic rate of return (US Army Engineer Research and Development Center, 2004). Using other units to measure environmental values would not permit the comparison with development values. The economic value of wetlands includes both use and non-use values. Typically, use values involve some human ‘interaction’ with the resource whereas non-use values do not. Wetland use values are associated with a diverse and complex array of direct and indirect uses. Wetland "values" may be derived from outputs that can be consumed directly, such as food, water supply, recreation, or timber; indirect uses which arise from the functions occurring within the ecosystem, such as water quality, and flood control; possible future direct or indirect uses such as biodiversity or conserved habitats; and the knowledge that such habitats or species exist (known as existence value) (Serageldin, 1993).

Values are "an estimate, usually subjective, of worth, merit, quality, or importance”. Direct uses of wetlands could involve both commercial (marketed value) and non-commercial activities whereas indirect use values are unmarketed, go financially unrewarded and are only indirectly connected to economic activities. A special category of value is option value, which arises because an individual may be uncertain about his or her future demand for a resource and/or its availability in the wetland in future. If an individual is uncertain about the future value of a wetland, but believes it may be high or that current exploitation and conversion may be irreversible, then there may be quasi-option value derived from delaying the development activities. The quasi-option value is the value that society would place on wetlands, if all knew the complex functions of wetlands. Uncertainty is acceptable in non-economic valuations, but must be accounted somehow in economic valuations. Quasi-option value is a concept allowing expert scientists to define wetland value. In contrast, non-use values, often referred as intrinsic or existence values are difficult to measure, as they involve subjective valuations by individuals unrelated to either their own or others’ use, whether current or future. An important subset of non-use or preservation values is bequest value, which results from individuals placing a high value on the conservation of tropical wetlands for future generations to use. Bequest values may be particularly high among the local populations currently using a wetland, in that they would like to see the wetland and their way of life that has evolved in conjunction with it passed on to their heirs and future generations in general. Table 1 lists various use and non-use values of wetlands.

Table 1: Classification of total economic value for wetlands

In general, the direct use of marketed products of ecosystems is easier to measure since marketed products exist and their prices may be adjusted for distortions. In contrast, ecological functions, such as groundwater recharge or discharge, may have indirect use values, which are reflected in the economic activities these functions support. Usually, changes in the well-being or social welfare are used to define and quantify economic value. Therefore, valuing a good or service requires one to study the change in a person’s welfare due to a change in the availability of the resource. The purpose of economic valuation is to reveal the true costs of using scarce environmental resources.

The need for economic valuation of environmental impacts and assets arises for pursuing efficient policies and investing in efficient projects and programmes. At the most general level of intergenerational concern, valuation is still required. If transfers of resources are to be made between generations -- with the current generation sacrificing for the future, or future benefits being lost for the sake of present gain -- then it is essential to know what is being sacrificed and how much it is that is being surrendered (United Nations Environment Programme, 2004). Information on the economic values of policy changes (with regard to the environment) can greatly assist in identifying the policy and sectoral priorities. Economic valuation incorporating environmental aspects helps in evaluating developmental projects, programmes and policies.

Economic decisions of developmental projects, which exclude ecosystem values, lead to ecosystem degradation. Economists trace this problem to market failure, which is the failure of markets to reflect the full or true cost of goods or services. In the case of a wetland, the calculation of the economic value for converting the wetland area to housing or commercial layouts does not include costs such as loss of water quality/quantity or flood control. Since these ecosystem services are available as free to all and not purchased, there is a tendency to leave the quantification of the vital function of these ecosystems and indirect benefits derived from them. It is only when these services are lost; the actual financial or commercial costs are incurred. So paradoxically, the zero prices for wetland services are of very high value to human well-being. Since it is difficult for an individual owner to receive direct monetary benefit for those benefits, which a wetland provides to others (e.g., downstream water quality improvement or producing waterfowl which migrate elsewhere), the true value of such benefits is generally not taken into account in land use decisions  (Michal Bardecki et. al., 2001)

To counter the problem of market failure in accounting for wetland values, it is necessary to find ways to calculate the economic value of wetland benefits in a way the market understands – in financial currencies. This helps both the individuals and policy makers to compare alternative uses and policy options. A value for the economic benefits that would be lost through the development of a wetland, for example, could prompt policy makers to put resources into the conservation of the wetland instead. Similarly, such evaluations can lead to a better understanding of tax incentives, rebates or subsidies that could give individuals an economic incentive to retain a wetland. In effect, the community can purchase the wetland services from the individual, through which one can provide panacea for market failure to some extent (Environment Canada, 2000).