Trade-off analysis of ecosystem services in Eastern Europe

• We assess trade-offs between biodiversity and ecosystem services in a spatially explicit way.
• Frontier functions are estimated using two-stage semi-parametric estimation techniques.
• When expanding ecosystem services, target regions with low opportunity costs.
• Opportunity costs of carbon sequestration decrease when sequestration increases.
• Opportunity costs of biodiversity can be low in biodiversity poor and rich areas.

In this paper we assess trade-offs between ecosystem services in a spatially explicit manner. From a supply side perspective, we estimate opportunity costs, which reflect in monetary terms the trade-offs between ecosystem services due to a marginal land use change. These are based on estimation of the frontier function, which gives the feasible bundles of ecosystem services that can be generated. For this, a two-stage semi-parametric method is applied and spatial data are used on agricultural revenues, cultural services, carbon sequestration and biodiversity for 18 Central and Eastern European countries. Based on the estimates, we assess which regions are most suitable for expanding any of the ecosystem services. Where opportunity costs are low, a further expansion of any of the ecosystem services is cost-effective. If areas are targeted carefully, joint improvement of several ecosystem services can be reached. If carbon sequestration levels are to be increased, it is best to focus on areas already having high sequestration levels because opportunity costs of carbon sequestration decrease with increasing sequestration levels. For biodiversity and cultural services the pattern is less clear as low opportunity cost were found both in areas rich and poor with these services.