Valuing ecosystem services for improved national accounting: A pilot study from Madagascar

•Application of valuation of ESs in a national accounting framework.•Estimation of production functions in the presence of ESs as factor inputs.•Estimation of costs of no protection of the forest area (policy inaction).•Pilot implementation of the SEEA-Experimental Ecosystem Accounts in Madagascar.

The present paper proposes a micro-econometric methodology for the economic valuation of the impact of ecosystem services in selected economic sectors. In the context of natural capital and ecosystem accounting, we built a four steps valuation protocol. The methodology is applied to the valuation of freshwater in the Ankeniheny-Zahamena Forestry Corridor (CAZ), Madagascar - a country partner with the Wealth Accounting and the Valuation of Ecosystem Services (WAVES). Our results corroborate the intuition that understanding the value of water in its alternative uses is a key to fostering informed debate on water management and allocation in the CAZ area. More generally, this study provides a solid contribution towards a more effective way to elicit and record nature's ecosystem services contribution to the economy.