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- People value biodiversity in many ways. The reasons vary from person to person, and from region to region. But generally, nature’s contributions to people, also called ecosystem services, are divided into three overlapping and interdependent categories, namely material contributions, regulating services, and nonmaterial contributions.
- Material contributions include benefits people get from consuming natural resources (e.g. drinking water or burning wood for cooking) or using natural resources in production and trade (e.g. timber to build homes or other structures).
- Biodiversity also provides a large variety of regulating services that enable people to benefit from nature’s material contributions. Some of these contributions include ecosystem productivity, water and soil protection, climate regulation, pollination, seed dispersal, and disaster prevention and detection.
- People attach nonmaterial values to biodiversity which are difficult to quantify, and thus to account for, in modern economic systems. These values include support for inspiration and learning, support for psychological and physical experiences, and support for personal and group identities.
- Environmental economics studies the implications of economic transactions, environmental policies, and other decisions that impact the environment. This field has highlighted how damage to the environment, such as pollution caused by industry, are not always fully considered when making political and development decisions, leading to unsustainable economic practices and market failure. Accounting for negative externalities and perverse subsidies can help policymakers design incentives that promote sustainable practices.