Question

just brief discussion please

reul Ululeueudle. 3. List and describe the different methods that economists take to value environmental benefits. Describe whether or not they are appropriate for use values, nonuse values or option values. Give examples from the reading of specific types of environmental benefits that have been valued with the different methods. Describe some of the pros and cons of using the different methods.

Answer 1

Environmental valuation techniques:

The market value approach covers only natural assets that have an market value.They are those assets that are connected with actual and potential market transactions.Market value approach does not covers environmental assets of air,waters and species that provide environmental services.The maintenance cost concept reflect a more clear view of the environment.It measures the cost that economic agents would incur to meet environmental regulations for maintaining the quality of environment.Also the the use of maintenance costs for valuing environmental functions is similar to valuing services of produced capital in the national accounts,based on the consumption and replacement of fixed capital.As such they can be deducted from the GDP and gross value added to obtain after further deductions of conventional capital consumption,the corresponding environmentally adjusted net indicators.

1. Hedonic price methods:It is based on the consumption theory which postulates that every good provides a bundle of characteristics or attributes.Market goods are often regarded as intermediate input into production of more basic attributes that the individual really demand.For example:The demand for housing can be considered as derived demand.A house yields shelter but through it's location it also yields access to different qualities and quantities (ex:schools,activities etc.).and different qualities and quantities of environmental goods(open space,access to plain air,land etc).The hedonic property value approach measures the welfare effects of changes in environmental goods or services by estimating the influence of environmental attributes on the value or price if properties. Advantages of hedonic pricing methods were ability to estimate values,based on concrete choices,flexibility and so on.Major drawback of this method is,including its ability to only capture consumers' willingness to pay for what they perceive are environmental differences and their resulting consequences.

2.Travel cost method:This method often used in research to assess recreational or eco-tourism values of a recreational site such as national park or hill station.It is based on the concept that ,if people travel to a site,then their willingness to pay for visiting this site must be at least as large as the travel cost incurred .It is useful for estimating time costs and their impact on the choice of transport mode.Drawback of this method is,it does not take into account multi purpose travel.

3.Contingent valuation method:This method is a direct approach using a hypothetical market.Contingent valuation method is a survey method in which respondents are asked how much they are willing to pay for the use or conservation of natural goods.It is the only environmental valuation technique that takes into account non use values.However,using this method can lead to potential bias(values can be under or over estimated).There are also high costs involved as it is expensive to interview people individually.

4.Production factor method:This method is based on the fact that many natural resources,processes and qualities are used as a production factors.Te production factor method tries to value natural qualities by valuing their impacts on production costs.The method is meant to determine the value of changes in natural qualities on the economic production system.It is better to investigate all economic effects,such as changes in demand,supply and prices. PFM can only produce cost based estimates of the value of production capacity of nature.

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