Economic Valuation of Watershed Services for Sustainable Forest Management: Insights from Mexico

Ecosystem services are the benefits that people obtain from ecosystems (Brauman et al., 2007). Recognizing the importance of the services provided by ecosystems for human wellbeing is not a new idea, going as far as Plato (Feen, 1996) and the economic conceptualization of ecosystem values (Coase, 1960; Feen, 1996). However, the scientific and practical interests in assessing and trading ecosystem services have not gained momentum until the 1990s when pioneering works by Daily (1997) and Costanza et al. (1997) galvanized the field. Among the ecosystem services that received increasing attention in the recent years are the hydrological services due to the role of water as a vital, and sometimes decisive, element in human life (Pare et al., 2008). Hydrologic services encompass a range of benefits that terrestrial ecosystem produces in terms of freshwater. These services can be grouped as: improvement of extractive water supply, improvement of in-stream water supply, water damage mitigation, provision of water related cultural services, and waterassociated supporting services (Brauman et al., 2007). The majority of hydrological services take place in the highlands of forest watersheds (Messerli et al., 2004). In these areas, upland forest watersheds work as a source that collects, manufactures, and distributes water and provides hydrological services to lowlands (Neary et al., 2009). Various components of the water cycle (i.e., evaporation, infiltration, surface run-off) critically depend on forest cover. If the forest cover is affected, so it will be the quality and quantity of the water provided to downstream users (Brown et al., 2005). In developing countries, such as Mexico, changes in forest cover are caused among other things by the local economic conditions in which landowners live. While searching for basic needs (food and shelter), they exercise excessive pressure over the forests eventually triggering forest fragmentation and deforestation (Perez-Verdin et al., 2009). Based on the methods used for their economic valuation, hydrological services can be classified into two broad categories of values: marketed and non-marketed. The economic