Czech University of Life Sciences Prague
Faculty of Engineering
NON-MARKET VALUATION METHODS
Author: Bc. Mariia Khrapova
2017 CULS Prague
Table of contents
Introduction
The best time to plant a tree is twenty years ago;
the second-best time is now.
Proverb
The beginning of the 21st century is marked by a whole range of crises: resource, economic, environmental. Despite the seeming incoherence, all of them are a consequence of the exhaustion of socio-economic forms of the development of society within the existing natural-resource and environmental conditions [1].
This problem occurs to a certain extent because of the imperfection of the initial model of economic development. Until the seventies of the twentieth century, labor and capital were considered economic factors of development, while the role of natural resources was not taken into account. The consequences of economic development in the form of various kinds of pollution, environmental degradation and resources were out of consideration.
The ecological economy is a fairly new area of the economy, which takes into account the errors of the market economy and expands economic theory to integrate the earth’s natural systems, human values and human health and well-being [2]. The main difference from the "classical" economy is the ability to quantify the value of ecosystem.
But this assessment is not unambiguous. The main problem is the estimation of indirect benefits received from the ecosystem services. So for example, we can express in monetary terms the amount of timber received from the forest, but it is difficult to determine the market price for the quality of the land under the forest, which determines how much and what trees will grow. There are non-market methods for ecosystem valuation, which is devoted this work.
Terminology
In order to understand how the of non-market valuation methods work, first it is necessary to understand what exactly these methods estimate. This chapter is defines and explains some important concepts related to the ecosystem valuation.
Ecosystem valuation is estimating the value of the various ecosystem services by assigning an economic value to an ecosystem and biodiversity [3].
Ecosystem services (hereinafter referred to as „ES“) are the direct and indirect contributions of ecosystems to human well-being [5].
If we talk about assessment of some goods or service, usually we use term “cost” which means the amount incurred in producing and maintaining something [5]. But for estimation ecosystem services it cannot be used, because most of services cannot be estimate in monetary terms. So, hereinafter the economic value is used as subject/criteria of an ecosystem valuation.
Economic value (hereinafter referred to as „EV“) - willingness to pay to avoid loss or willingness to accept compensation for loss [5], another words it is based on human’s preferences.
The Figure 1 represents the relationship between biodiversity, ES and EV on the example of woodland and wetlands.
Figure 1 Cascade modelfor woodland & wetland management. Source:[7]
| Economic value |
| Values decreasingly tangible |
| Use values |
| Non-use values |
| Philanthropic value |
| Existence value |
| Actual value |
| Optional value |
| Direct Use u |
| Bequest value |
| Altruist value |
| Indirect Use u |
| Consumptive |
| Non Consumptive |
Chart 1 Composition of the Total Economic Value of natural resources.
Adopted form the source:[8]
Direct use values (hereinafter „DUV“) involve an interaction with the final products of nature - it means human’s willigness to pay for them directly comes from the value of a goods and services.
The ecosystem good is any substances from the ecosystem, for example food and raw materials that can be traded on a market. These goods lead to consumptive value (hereinafter „CV“).
Non-consumptive value comes from ES that bring benefits from the direct interation human and nature. It can be research or recreation activities. can be traded to non-marketable i.e. there is no formal market on which they are traded.
Indirect use values - is the willingness to pay for intermediate ecosystem services, in order to get the fullest of goods and services. As an example, to get good quality water from a certain source, it is necessary to maintain the balance of the wetlands in general, as they affect the water quality. Measuring IUV is often much more difficult than measuring DUV. Variability of a lot of factors makes difficult to make an assessment. In some cases, causality between two or more factors is poorly understood. Nevertheless, ecological economics try to use it as one of the objects of non-market valuation.
Option value – is willing to pay over the normal cost of an operation, in order to be able to reduce environmental risks or can be defined as future using of known and unknown benefits [8], [9]. As an example, the optional value of biodiversity can be considered. It is important to maintain biodiversity on the same level, because presumably such species diversity copes with still unknown diseases. And a change in it can bring to manifestation of these hidden diseases.
To my mind the existence of such a “ghostly” value is an assessment of already existing examples from history. For example, Gough Island, where sailors brought ordinary mice, and in the case of the absence of natural predators, their population has increased so much that endangers the survival of several species of seabirds that breed exclusively on the island of Goff. Several small mice after two centuries threatened the extinction of populations numbering more than a million birds.
Non-use values can be nature’s end or intermediate products, but human’s willingness to pay comes from less tangible aspects such as the satisfaction of knowing ES continue to exist (existence value). Bequest value is based on satisfaction of the knowledge that future generation inheriting all ES. Altruistic value comes from the knowledge that different parts of human society have opportunity to enjoy ES.
2 Valuation of ES and its non-productive functions in the Czech Republic[u1]
LES:
Description
Legislation and instutes
The categorization
General classification
Method A
Description