Valuing environmental benefits

Natural environments and ecosystems provide a range of valuable economic services to communities. One of the contributions of environmental economics is in the field of environmental valuation: attempting to put a monetary value on the services that ecosystems provide.

"Putting a dollar value on nature" inevitably attracts criticism as it seems to represent the worst of the economic way of thinking: something that’s sacred and priceless is reduced to a dollar figure. But the reality is that people make decisions about natural resources based on an assessment of the value of different uses and when the value of ecosystem services is not known, it tends to be ignored or at least underestimated. For example, the decision to clear fell an area of forest is much less likely to be approved by a government forest management agency if you can demonstrate that the value of a standing forest in purifying water entering a catchment approaches the value you could obtain by harvesting the trees.

There’s good news for Australian economists and policy-makers with an interest in this area: Australia has just joined the international Environmental Valuation Reference Inventory (EVRI), which means that all Australians can access the inventory for free. (The United States, France, the United Kingdom and Canada are already members).

The inventory contains details of about 1,700 international studies providing values, methodologies, techniques and theories on environmental valuation. It’s intended primarily as a tool to assist policy analysts in estimating economic values for changes in environmental goods and services. The idea is that the results of the previous studies in the EVRI can be applied, with appropriate modifications, to estimate the economic value of changes stemming from new programs or policies. This should be easier (and cheaper) than setting up a valuation study from scratch.

I haven’t checked it out yet (it looks a bit technical for me!) but it should be a useful resource for any environmental economists out there. The NSW Department of Environment and Conservation has more information on the inventory and Australian data in this area.