LECTURES ECONOMICS MODULE
Videos: valuation of ecosystems
Measure value:
- Willingness to pay different values people place on things
Price IS NOT value
ecosystem services (classes of values)
TOTAL ECONOMIC VALUE
USE VALUES
Direct direct utility from using camping, walking a trail, get wood, hunt
Indirect indirect through another thing we use bees for pollination, mangrove to protect coast, shade from trees
we don’t know the effect until they are gone
NON-USE VALUES
Bequest (non-tangible) which feels better to pass on: parking lot vs. forest
Existence utility from satisfaction from knowing that something exists (whales, Grand Canyon): WTP for living in
a world where the amazon rainforest exists
OPTION VALUES
= value of having the option of using something in the future
e.g. house: you don’t know if you want to buy it and pay the owner to think about it for 3 months.
Summarizing the CV method:
For bequest, existence and option values stated preference methods (= I would pay ... to preserve a forest; WTP / WTA)
Stated bid amount
No response WTP = 0
LECTURE: ENVIRONMENTAL VALUATION I: CONTINGENT VALUATION (CV) Pieter van Beukering
What is the economic value of this coral reef?
In order to answer that question, we need to decide: what does the reef represent to society?
Where to start: tourism, fishing, coastal protection (energy buffer), biodiversity, nursery
how to measure these values??
Total economic value (TEV)
- Use values
o Direct use
o Indirect use
- Non-use values
o Bequest value
o Existence value
Moving towards intangible services, is hard.
e.g. fish you can measure the value of fish in price/kilogram
,TOTAL ECONOMIC VALUE: use values, non-use values, direct use, indirect use, option value, bequest values, existence values
Most studies measure only 1 category. Almost no study calculates the total economic value.
Toolbox:
Valuation is just doing: Value = quantity * price
Complexity is in the quantity or in the price
e.g. in case of the reef price of fish = easy, just go to the market. But how do you determine the Q?
e.g. how much does the reef protect against storms? Nr of houses protected?
Sated: what are you willing to pay for a reef (artificial market)
PHYSICAL LINKAGES (cost estimates)
Market prices
Good: Straightforward and inexpensive
Critique: rarely sufficient as a stand-alone valuation technique captures only direct use values
e.g. we buy wood, but in that price, the value of the complete forest is not included
Replacement cost
The value of a natural reservoir can be estimated as the cost of replacing it with a man-made reservoir
- Critique:
o You assume that the value of the two ‘lakes’ is equal
o Not based on people’s preferences for the goods/services values
o Difficult to find exact replacements of the goods/services
Example: coastal reefs protection value
More frequent floods when coral reefs and mangroves decline costs for building a higher dike
Cost of dike = value of healthy reef & mangrove.
, > price of concrete goes up: the value of coral reefs goes up (= strange disconnect)
Damage cost avoided
= the monetary value of up-stream
If an ecosystem degrades, how much damage is occurring?
Decline in coral reefs: how more often do floods occur and what is the damage that comes with this flood
= way to value the reef
Preventative insurance: your premium is lower when you take care of your reefs. Or use money from premium to re-strengthen
the reefs
- Useful for valuing ecosystems that provide some form of natural protection.
- Critique:
o Most cases of avoided damage remain hypothetical.
Production function approach
Fishery value of a mangrove can be calculated by estimating the lost value of the catch in a degraded or destroyed mangrove
area.
- Production function method values ecosystem services as inputs in production of commercially marketed goods
- Similar to using market prices, yet more indirect valuation
REVEALED PREFERENCE (use values)
Hedonic pricing
Monetary value of environmental attributes can be valued by comparing house prices with different surroundings
- What environmental aspect determine the real estate value?
- Same home located near beautiful park = more expensive difference in price is the valuation of the park
- Complexity:
o Homes are never the same
o Other influences that influence the house price (e.g. negative influences: congested road or polluting factory)
o Not black and white: it may be there, but not very close by or .. (distance decay!)
- You need very comprehensive database with multiple transactions, that takes into account the multiple influencing
factors, home differences, and all other explanatory factors
- This information is usually there, so you can determine the positive and negative aspects.
Travel cost method
= The value of a recreational site can be estimated from the number of visitors and the cost of travelling there
- For valuing recreational sites (eg. Parks, forests, heritage)
- Travel costs to a site can be regarded as the prices of access to the site (indirect method)
- Spatial issues in economic valuation (aggregation)
- Multiply WTP with number of visitors (from different zones)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller student160080. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.50. You're not tied to anything after your purchase.