1-15 of 15 Results

  • Keywords: nonmarket valuation x
Clear all

Article

Achilleas Vassilopoulos and Phoebe Koundouri

Water accounts for more than 70% of Earth’s surface, making marine ecosystems the largest and most important ecosystems of the planet. However, the fact that a large part of these ecosystems and their potential contribution to humans remains unexplored has rendered them unattractive for valuation exercises. On the contrary, coastal zones, , being the interface between the land, the sea, and human activities competing for space and resources, have been extensively studied with the objective of marine ecosystem services valuation. Examples of marine and coastal ecosystems are open oceans, coral reefs, deep seas, hydrothermal vents, abyssal plains, wetlands, rocky and sandy shores, mangroves, kelp forests, estuaries, salt marshes, and mudflats. Although there are arguments that no classification can capture the ways in which ecosystems contribute to human well-being and support human life, very often policymakers have to decide upon alternative uses of such natural environments. Should a given wetland be preserved or converted to agricultural land? Should a mangrove be designated within the protected areas system or be used for shrimp farming? To answer these questions, one needs first to establish the philosophical basis of value within the ecosystems framework. To this end, two vastly different approaches have been proposed. On the one hand, the nonutilitarian (biocentric) approach relies on the notion of intrinsic value attached to the mere existence of a natural resource, independent of whether humans derive utility from its use (if any) or preservation. Albeit useful in philosophical terms, this approach is still far from providing unambiguous and generally accepted inputs to the tangible problem of ecosystem valuation. The utilitarian (anthropocentric) perspective, on the other hand, assumes that natural environments have value to the extent that humans derive utility from placing such value. According to the total economic value (TEV) approach, this value can be divided into “use” and “nonuse.” Use values involve some interaction with the resource, either directly or indirectly, while nonuse values are derived simply from the knowledge that natural resources and aspects of the natural environment are maintained. Existence and altruistic values fall within this latter category. Not surprisingly, economists have long revealed a strong preference for the utilitarian approach. As a result, the valuation of marine ecosystems requires that we understand the ecosystem services they deliver and then attach a value to the services. But what tools are available to economists when valuing marine ecosystems? For the most part, ecosystem services are not traded in formal markets and thus actual prices are usually not available. Valuation techniques essentially seek different ways to estimate measures like Willingness To Pay (WTP), Willingness To Accept (WTA), or expenditures and costs. The techniques used for the valuation of ecosystem services can be divided into three main families: market-based, revealed preference, and stated preference. Finally, value-transfer methods are also used when estimates of value are available in similar contexts. All these methods have advantages and disadvantages, with different methods being suitable for different situations. Hence, extra caution is required during the design and implementation of valuation attempts.

Article

Bartosz Bartkowski and Nele Lienhoop

While economic values of nonmarket ecosystem goods and services are in high demand to inform decision-making processes, economic valuation has also attracted significant criticism. Particularly, its implicit rationality assumptions and value monism gave rise to alternative approaches to economic nonmarket valuation. Deliberative monetary valuation (DMV) originated in the early 2000s and gained particular prominence after 2010, especially in the context of the United Kingdom National Ecosystem Assessment (UK NEA). It constitutes a major methodological development to overcome the limitations of conventional nonmarket valuation methods by incorporating deliberative group elements (information provision, discussion, time to reflect in a group setting) in the valuation process. DMV approaches range from those that focus on facilitating individual preference formation for complex and unfamiliar environmental changes and stay close to neoclassical economic theory to those that try to go beyond methodological individualism and monetary valuation to include a plurality of different values. The theoretical foundation of DMV comprises a mix of economic welfare theory, on the one hand, and various strands of deliberative democratic theory and discourse ethics, on the other. DMV formats are mostly inspired by deliberative institutions such as citizens’ juries and combine those with stated preference methods such as choice experiments. While the diversity of approaches within this field is large, it has been demonstrated that deliberation can lead to more well-informed and stable preferences as well as facilitate the inclusion of considerations going beyond self-interest. Future research challenges surrounding DMV include the exploration of intergroup power relations and group dynamics as well as the theoretical status and the validity of DMV results.

Article

Geologists’ reframing of the global changes arising from human impacts can be used to consider how the insights from environmental economics inform policy under this new perspective. They ask a rhetorical question. How would a future generation looking back at the records in the sediments and ice cores from today’s activities judge mankind’s impact? They conclude that the globe has entered a new epoch, the Anthropocene. Now mankind is the driving force altering the Earth’s natural systems. This conclusion, linking a physical record to a temporal one, represents an assessment of the extent of current human impact on global systems in a way that provides a warning that all policy design and evaluation must acknowledge that the impacts of human activity are taking place on a planetary scale. As a result, it is argued that national and international environmental policies need to be reconsidered. Environmental economics considers the interaction between people and natural systems. So it comes squarely into conflict with conventional practices in both economics and ecology. Each discipline marginalizes the role of the other in the outcomes it describes. Market and natural systems are not separate. This conclusion is important to the evaluation of how (a) economic analysis avoided recognition of natural systems, (b) the separation of these systems affects past assessments of natural resource adequacy, and (c) policy needs to be redesigned in ways that help direct technological innovation that is responsive to the importance of nonmarket environmental services to the global economy and to sustaining the Earth’s living systems.

Article

Md Sayed Iftekhar and Maksym Polyakov

Ecological restoration is a complex activity that requires integrating biophysical, social, and economic factors. It requires the engagement of various stakeholders with potentially competing interests and goals. Economists have developed methods to elicit peoples’ values and preferences related to restoration. These economic tools provide information that allows decision makers to better understand how to best allocate scarce resources among alternative restoration projects and activities. The field of restoration economics can be traced back to the 1970s, but it did not gain popularity until the late 2000s. A review of the literature indicates that only about 6% of academic papers on ecological restoration have used economic tools and instruments. Economic tools and instruments can be applied at five stages of a restoration project: (a) understanding the causes and processes of degradation, (b) setting restoration targets and policies, (c) project planning and prioritization, (d) project implementation, and (e) ex-post assessment and evaluation of restoration outcomes. Generally speaking, economic tools and analysis are not extensively applied in all five stages of a restoration project, which potentially limits the effectiveness of investment. Several strategies can be applied to strengthen restoration science and practices, which include the incorporation of economic analysis into the planning of ecological restoration projects, reducing the cost of economic data collection and analysis, addressing social values, establishing links between the causes of degradation and restoration outcomes, understanding of the alignment of incentives and motives, and assessment of large-scale and long-term impacts of restoration projects.

Article

Robert P. Berrens and Therese Grijalva

Against a backdrop of increasing species imperilment, there is considerable empirical evidence that preserving threatened, endangered, and rare (TER) species provides significant economic benefits to society. But efforts to measure these benefits has generated both strong methodological and philosophical criticisms. Since the 1960s, economists have developed a battery of nonmarket valuation approaches for estimating economic values associated with changes in the quantity or quality of environmental goods and services. This battery includes both revealed preference and stated preference (SP) approaches (including the contingent valuation [CV] method), with only the latter capable of providing willingness to pay (WTP) estimates for nonuse values. The total economic value of TER species preservation can include nonconsumptive use values (e.g., wildlife watching), and may be especially composed of nonuse values (e.g., based on existence value motivations). By the early 1980s, applied CV studies focusing on TER species preservation had begun to accumulate. Early research centered in the United States. By the mid-1990s the first statistical meta-analysis of TER species NMV studies was completed, and was then updated a dozen years later. These metaregression functions facilitated potential benefit transfers, where the systematic structure of prior original studies could be used to estimate WTP values for a TER species in another setting (absent an original study). Since roughly 2010, the use of choice experiments as an alternative SP approach expanded rapidly. Likewise, the accumulation of additional SP studies generated new summary reviews and meta-analyses, including applications from both developed and developing countries, and expanded benefit transfer opportunities. Going forward, new studies will lead to updated meta-analyses, with additional statistical and theoretical sophistication. Critiques targeted to SP approaches (e.g., with respect to hypothetical bias and nonuse value motivations) will likely remain, and further validity testing and methods development are called for. However, from a pragmatic perspective, persistent efforts at quantification continue to help make the benefits of TER species preservation visible in the face of rapidly increasing species imperilment.

Article

Bartosz Bartkowski

Massive population declines and species extinction have characterized the 20th and early 21st centuries. These local and global phenomena do not only involve the loss of particular species, habitats, and ecosystem services; they also result in a general reduction in biotic diversity. Ecological research has long indicated the importance of biodiversity within and across ecosystems. However, capturing the economic value of biodiversity remains a challenge. Biodiversity is a multidimensional public good; it encompasses the diversity of genes, species, functional groups, habitats, and ecosystems. A large empirical literature in biology and ecology indicates that biodiversity has a stabilizing effect on ecosystems—the higher the biodiversity within a given ecosystem type, the more well-functioning (productive, stable, and resilient) is the ecosystem. However, the economic importance of biodiversity goes beyond this stabilizing effect. The multidimensionality and complexity of the biodiversity concept has resulted in a multitude of approaches to its economic valuation. While the theoretical and conceptual literature has focused on biodiversity as insurance and as a pool of options, empirical studies have been much more diverse. Given the public-good nature and complexity of biodiversity, stated preference methods are particularly common. The focus on biodiversity valuation has fostered many important theoretical and methodological developments. Many estimates exist of the willingness to pay for biodiversity conservation in different countries across the world; however, relatively few studies have been conducted in developing countries despite the considerably higher biodiversity levels there as compared with the better-covered developed countries. Valuation of biodiversity is a controversial subject, and the economic, predominantly anthropocentric approach has been criticized frequently. However, non-anthropocentric accounts of biodiversity value are problematic for their own reasons; an important question is whether biodiversity has intrinsic value and, if yes, whether this can be captured within the economic perspective. Valuation of biodiversity remains a vibrant topic at the intersections of disciplines such as ecology, environmental ethics, and economics.

Article

The economics literature has developed various methods to recover the values for environmental commodities. Two such methods related to revealed preference are property value hedonic models and equilibrium sorting models. These strategies employ the actual decisions that households make in the real estate market to indirectly measure household demand for environmental quality. The hedonic method decomposes the equilibrium price of a house based on the house’s structural and neighborhood/environmental characteristics to recover marginal willingness to pay (MWTP). The more recent equilibrium sorting literature estimates environmental values by combining equilibrium housing outcomes with a formal model of the residential choice process. The two predominant frameworks of empirical sorting models that have been adopted in the literature are the vertical pure characteristics model (PCM) and the random utility model (RUM). Along with assumptions on the structure of preferences, a formal model of the choice process on the demand side, and a characterization of the supply side to close the model, these sorting models can predict outcomes that allow for re-equilibration of prices and endogenous attributes following a counterfactual policy change. Innovations to the hedonic model have enabled researchers to more aptly value environmental goods in the face of complications such as non-marginal changes (i.e., identification and endogeneity concerns with respect to recovering the entire demand curve), non-stable hedonic equilibria, and household dynamic behavior. Recent advancements in the sorting literature have also allowed these models to accommodate consumer dynamic behavior, labor markets considerations, and imperfect information. These established methods to estimate demand for environmental quality are a crucial input into environmental policymaking. A better understanding of these models, their assumptions, and the potential implications on benefit estimates due to their assumptions would allow regulators to have more confidence in applying these models’ estimates in welfare calculations.

Article

Tim Haab, Lynne Lewis, and John Whitehead

The contingent valuation method (CVM) is a stated preference approach to the valuation of non-market goods. It has a 50+-year history beginning with a clever suggestion to simply ask people for their consumer surplus. The first study was conducted in the 1960s and over 10,000 studies have been conducted to date. The CVM is used to estimate the use and non-use values of changes in the environment. It is one of the more flexible valuation methods, having been applied in a large number of contexts and policies. The CVM requires construction of a hypothetical scenario that makes clear what will be received in exchange for payment. The scenario must be realistic and consequential. Economists prefer revealed preference methods for environmental valuation due to their reliance on actual behavior data. In unguarded moments, economists are quick to condemn stated preference methods due to their reliance on hypothetical behavior data. Stated preference methods should be seen as approaches to providing estimates of the value of certain changes in the allocation of environmental and natural resources for which no other method can be used. The CVM has a tortured history, having suffered slings and arrows from industry-funded critics following the Exxon Valdez and British Petroleum (BP)–Deepwater Horizon oil spills. The critics have harped on studies that fail certain tests of hypothetical bias and scope, among others. Nonetheless, CVM proponents have found that it produces similar value estimates to those estimated from revealed preference methods such as the travel cost and hedonic methods. The CVM has produced willingness to pay (WTP) estimates that exhibit internal validity. CVM research teams must have a range of capabilities. A CVM study involves survey design so that the elicited WTP estimates have face validity. Questionnaire development and data collection are skills that must be mastered. Welfare economic theory is used to guide empirical tests of theory such as the scope test. Limited dependent variable econometric methods are often used with panel data to test value models and develop estimates of WTP. The popularity of the CVM is on the wane; indeed, another name for this article could be “the rise and fall of CVM,” not because the CVM is any less useful than other valuation methods. It is because the best practice in the CVM is merging with discrete choice experiments, and researchers seem to prefer to call their approach discrete choice experiments. Nevertheless, the problems that plague discrete choice experiments are the same as those that plague contingent valuation. Discrete choice experiment–contingent valuation–stated preference researchers should continue down the same familiar path of methods development.

Article

Ashley Barfield and Craig E. Landry

The result of interactive dynamics of the ocean, landforms, and weather patterns, sandy beaches and dunes are a natural feature along many coastlines around the world. Their contributions to overall social welfare are multifaceted and complex. Providing water access, recreation and tourism potential, scenic beauty, and leisure amenities, sandy coastlines have witnessed extensive commercial and residential development. Intact beach–dune systems provide coastal development projects with protection from storms, erosion, flooding, and (to some extent) sea-level rise. While yielding value through capital investment, market expansion, and the enhancement of access to natural amenities, increases in buildings and infrastructure can upset the delicate dynamic equilibrium in coastal systems. This, in turn, puts beaches, dunes, wetlands, wildlife habitats, and other ecological resources at risk. Concerns about these impacts have provided the impetus for several environmental management initiatives. Critical to these initiatives is information about the multidimensional economic and social values of coastal amenities, especially beaches and dunes. The economic valuation of beach quality and coastal ecosystem services has traditionally focused on the implementation of non-market valuation techniques, including revealed (e.g., hedonic prices and travel costs) and stated preference (e.g., contingent valuation and choice experiment) approaches, in conjunction with survey/experimental design methods. Analysis of beach quality has become a vibrant topic, especially in response to concerns about the need for climate change adaptation; the impacts of sea-level rise; worsening and more frequent storm events; and changes in ocean temperature, salinity, and alkalinity. Each of these factors can ultimately impact beaches and coastal economies. As a result, the literature has broadened to include a number of interdisciplinary studies that feature the contributions of environmental economics, marine science, applied geology, natural resource management, risk and insurance, and urban planning disciplines, among others. These collaborations have advanced the science of coastal economics and management, but many significant challenges remain. Questions about the optimal order and timing of adaptation procedures, how to balance the provision of synergistic or conflicting goods and services, and how to design dynamic models that incorporate real-world management scenarios across different jurisdictions all require further investigation.

Article

2019 marked the 20th anniversary of the removal of the Edwards Dam in Augusta, Maine (USA). Edwards Dam was the first federally licensed hydropower dam to be denied relicensing, and the dam was removed for the purpose of restoring the 10 anadromous fish species that use the Kennebec River. Since that time, numerous other small dams have been removed in the United States. The relicensing process considers benefit-cost analysis, yet remains fundamentally flawed in the consideration of the benefits of dam removals and fish passage. Successful dam removals rely (mostly) on local efforts and outside analysis.

Article

Alexandra Dehnhardt, Kati Häfner, Anna-Marie Blankenbach, and Jürgen Meyerhoff

All types of wetlands around the world are heavily threatened. According to the Ramsar Convention on Wetlands, they comprise “areas of marsh, fen, peatland or water, whether natural or artificial, permanent or temporary, with water that is static or flowing, fresh, brackish, or salt.” While they are estimated still to cover 1,280 million hectares worldwide, large shares of wetlands were destroyed during the 20th century, mainly as a result of land use changes. According to the Millennium Ecosystem Assessment (MEA), this applies above all to North America, Europe, Australia, and New Zealand, but wetlands were also heavily degraded in other parts of the world. Moreover, degradation is expected to accelerate in the future due to global environmental change. These developments are alarming because wetlands deliver a broad range of ecosystem services to societies, contributing significantly to human well-being. Among those services are water supply and purification, flood regulation, climate regulation, and opportunities for recreation, to name only a few. The benefits humans derive from those services, however, often are not reflected in markets as they are public goods in nature. Thus, arguing in favor of the preservation of wetlands requires, inter alia, to make the non-marketed economic benefits more visible and comparable to those from alternative—generally private—uses of converted wetlands, which are often much smaller. The significance of the non-market value of wetland services has been demonstrated in the literature: the benefits derived from wetlands have been one of the most frequently investigated topics in environmental economics and are integrated in meta-analyses devoted to synthesizing the present knowledge about the value of wetlands. The meta-analyses that cover both different types of wetlands in different landscapes as well as different geographical regions are supplemented by recent primary studies on topics of increasing importance such as floodplains and peatlands, as they bear, for example, a large flood regulation and climate change mitigation potential, respectively. The results underpin that the conversion of wetlands is accompanied by significant losses in benefits. Moreover, wetland preservation is economically beneficial given the large number of ecosystem services provided by wetland ecosystems. Thus, decision-making that might affect the status and amount of wetlands directly or indirectly should consider the full range of benefits of wetland ecosystems.

Article

Amy W. Ando and Noelwah R. Netusil

Green stormwater infrastructure (GSI), a decentralized approach for managing stormwater that uses natural systems or engineered systems mimicking the natural environment, is being adopted by cities around the world to manage stormwater runoff. The primary benefits of such systems include reduced flooding and improved water quality. GSI projects, such as green roofs, urban tree planting, rain gardens and bioswales, rain barrels, and green streets may also generate cobenefits such as aesthetic improvement, reduced net CO2 emissions, reduced air pollution, and habitat improvement. GSI adoption has been fueled by the promise of environmental benefits along with evidence that GSI is a cost-effective stormwater management strategy, and methods have been developed by economists to quantify those benefits to support GSI planning and policy efforts. A body of multidisciplinary research has quantified significant net benefits from GSI, with particularly robust evidence regarding green roofs, urban trees, and green streets. While many GSI projects generate positive benefits through ecosystem service provision, those benefits can vary with details of the location and the type and scale of GSI installation. Previous work reveals several pitfalls in estimating the benefits of GSI that scientists should avoid, such as double counting values, counting transfer payments as benefits, and using values for benefits like avoided carbon emissions that are biased. Important gaps remain in current knowledge regarding the benefits of GSI, including benefit estimates for some types of GSI elements and outcomes, understanding how GSI benefits last over time, and the distribution of GSI benefits among different groups in urban areas.

Article

A number of challenges are faced by practitioners seeking to elicit values associated with water in a world of global change. These values are needed to assist in decision-making around the use of water as a country’s key asset. Five different pathways show the complexity of the relationship between global change and environmental valuation of water: a climate change pathway, ecosystem infrastructure pathway, population/demographics pathway, income pathway, and technological change/innovation pathway. The challenges are most acute for water when it is related to ecosystem services since values need to be elicited through the use of non-market survey-based valuation techniques. In addition, environmental valuation will be important to inform the determination of water quality standards associated with different uses of water (drinking, recreation, etc.) and the allocation of resources to provide these different services. Several case studies illustrate issues and solutions. The article concludes with an appreciation of future challenges and opportunities.

Article

Natural environments represent background settings for most outdoor recreation activities, which are important non-consumptive benefits that people obtain from nature. Recreation has been traditionally considered a non-market service because it is practiced free of charge in public spaces and therefore of secondary relevance for the economy. Although outdoor recreation in natural parks became relevant during the 19th century, the increased popularity of recreation after the Second World War required tools for the assessment of recreational benefits, which were not considered in the evaluation of investments in recreational facilities, and increasing spending for recreational equipment captured the attention of outdoor recreation as an economic sector. In the 1990s, it was observed that many recreational activities were commercialized and started being considered equally important to tourism as a means to boost the economy of local communities. The expansion of outdoor recreation is reflected in a growing interest in the economic aspects, including cost–benefit calculations of the investments in recreational facilities and research on appropriate methods to evaluate the non-market benefits of recreation. The first economic technique used for valuing recreation was the travel cost method that consisted in the assessment of a demand curve, where the demanded quantity is the number of trips to a specific site and the cost is the unit cost of travel to the destination. After this first intuition, the number of contributions on recreation valuation exponentially grew, and new methods were proposed, including methods based on stated preferences for recreation that can be used when travel cost data that reveal consumers’ behavior are not available. A regular assessment of recreational benefits has several advantages for public policy, including the evaluation of investments and information on visitor profile and preferences, income, and price elasticity, which are essential to understand the market of outdoor recreation and propose effective strategies and recreation-oriented management. The increasing environmental pressure associated with participation in outdoor recreation required effective conservation activities, which in turn posed limitations to economic activities of local communities who live in contact with natural resources. Therefore, a balance between environmental, social, and economic interests is essential for recreational destination to avail of benefits without conflicts among stakeholders.

Article

Dennis Guignet and Jonathan Lee

Hedonic pricing methods have become a staple in the environmental economist’s toolkit for conducting nonmarket valuation. The hedonic pricing method (HPM) is a revealed preference approach used to indirectly infer the value buyers and sellers place on characteristics of a differentiated product. Environmental applications of the HPM are typically focused on housing and labor markets, where the characteristics of interest are local environmental commodities and health risks. Despite the fact that there have been thousands of hedonic pricing studies published, applications of the methodology still often grapple with issues of omitted variable bias, measurement error, sample selection, choice of functional form, effect heterogeneity, and the recovery of policy-relevant welfare estimates. Advances in empirical methodologies, increased quality and quantity of data, and efforts to link empirical results to economic theory will surely further the use of the HPM as an important nonmarket valuation tool.