Module: 2: Measuring the Environment

Blooms level : Comprehension

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Concepts in measuring the environment value.

Benefit-Cost Analysis, Contingent Valuation Method:
Travel Cost Method, Hedonic Price method, Preventive
Expenditure method, Surrogate Markets, Property Value
method, Wage-differential Approach, and Opportunity
Cost Method
Environment
• An Environment is everything that is around us, which includes both
living and nonliving things such as soil, water, animals and plants,
which adapt themselves to their surroundings.
Environmental Value
Under this approach, environmental values are determined by an
individual's position on two statistically independent dimensions:-

1. A biocentric dimension that reflects conservation and protection of

the environment (Preservation)

2. An anthropocentric dimension that reflects the utilization of natural

resources.

Anthropogenic – environmental change caused by people directly or indirectly

The framework
The framework places individuals into one of four quadrants.

1. Preservation and Utilization

2. Biocentric and anthropocentric worldviews.

Ad hoc measurements or adaptations of these scales are often created that are best suited
to address specific research questions, limiting the generalizability of findings.
4 Environmental values
Four types of values are most relevant to understanding individuals' climate
actions:-

1. Biospheric (caring about the environment)

2. Altruistic (caring about others)
3. Egoistic (caring about personal resources)
4. Hedonic (caring about pleasure and comfort)

Above Four human values are considered to

underlie individuals' environmental beliefs and behaviours.
Values influence individual decisions about the environment

Theory suggests that three values : —

1. Self-interest

2. Altruism ( selfless concern for the well-being of others ) toward other humans.

3. Altruism toward other species and the biosphere.

Valuation

• Environmental value refers to the non-economic social values

associated with the environment and its goods and services.

• The economic valuation of environmental goods is an important

aspect of environmental economics, as it helps understand the actual
economic value of natural resources.
Environmental Policy in an International Context

Environmental value systems embrace issues :-

1. Defense of amenity
2. Conservation of resources
3. Prevention of risk and concern for survival which are fundamental
aspects of both the material and spiritual quality of life.
Defense of amenity

It is an environmental value system that includes the protection of amenity,

conservation of resources, and prevention of risk.

An amenity is a useful or pleasant facility or service that can include tangible or non-tangible benefits -
Roads, Streets, Open spaces, Parks, Recreational grounds, Play grounds, Gardens, Water supply,
Electric supply, Street lighting, Sewerage, Drainage ….
Valuation methods

Include both demand and non-demand curve approaches, including the

dose-response method ( Hazard assessment ), contingent valuation method,
and hedonic pricing.
The ecological footprint

The ecological footprint is one of the most comprehensive methods to

measure the environmental impact of a person or population.
It is expressed in square meters, and indicates how much of the planet is
needed to regenerate the resources consumed and to dispose the waste.
Cost-benefit analysis

The Cost-benefit analysis is a way to compare the costs and benefits of

an intervention, where both are expressed in monetary units.
Both CBA and cost-effectiveness analysis (CEA) include health
outcomes.
 Contingent Valuation Method
Market valuation of non-market goods .
• Contingent valuation is a stated-preference (survey) method in which respondents
are asked to state their preferences in hypothetical or contingent markets, allowing
analysts to estimate demands for goods or services that are not traded in markets.

• It is a survey -based economic technique for the valuation of non-market resources

, such as environmental preservation or the impact of externalities like pollution.

• While these resources do give people utility, certain aspects of them do not have
a market price as they are not directly sold – for example, people receive benefit
from a beautiful view of a mountain, but it would be tough to value using price -
based models.

.
CVM
• Contingent valuation surveys are one technique which is used
to measure these aspects.
• Contingent valuation is often referred to as a stated preference
model, in contrast to a price-based revealed preference model.
Both models are utility-based.
• The survey asks how much money people would be willing to
pay ( WTP ) (or willing to accept ) to maintain the existence of
(or be compensated for the loss of) an environmental feature,
such as bio diversity.
Travel cost method

• The travel cost method (TCM) is a technique used to calculate the

economic value of environmental goods.

• It's often used to estimate the value of recreation sites, amenities, and
the benefits of environmental quality changes at a recreation site.
TCM

• The TCM was first suggested by the statistician Harold in 1947 , to the
director of the National Park Service of the United States.

• The travel cost method is used to estimate the value of recreational

benefits generated by ecosystems.

• It assumes that the value of the site or its recreational services is

reflected in how much people are willing to pay to get there.
Preventive expenditure method

• The preventive expenditure method is a cost-based valuation method that

assesses the expenditures made to alleviate environmental issues.

• It is also known as the mitigation or defensive expenditure approach.

Preventive expenditure method
• The preventive expenditure method estimates the costs of
preventing a reduction in the level of benefits derived from a
specific area.

• It measures the expenditure for avoiding damage to the natural

environment, infrastructures, or human health
Surrogate market valuation

• Surrogate (a substitute ) market valuation is a method for measuring the value of

unmarketable environmental services.
• It involves looking at the market price of related economic goods.
Property-value method
• In the property-value method, a surrogate market approach
is used to place monetary values on different levels of
environmental quality. The approach uses data on market
prices for homes and other real estates to estimate consumers’
willingness to pay for improved levels of environmental quality,
air, noise ……..
Property-value method

• The property-value method reflects the marginal willingness to

pay for improved local environmental quality in the increased
price of housing in cleaner neighborhoods

• Environmental valuation methods are designed to estimate

values of fairly small changes in the environment.
Wage-differential

The wage-differential approach is a method used in environmental

economics to estimate the monetary value of different environmental
quality levels.

It uses information on wage rate differences for similar jobs in different

areas.
Opportunity cost method

• The opportunity cost method is a method for valuing environmental

protection benefits by considering what is being given up to achieve them.

• In environmental decision-making, opportunity cost refers to the potential

benefits that are lost when choosing one option over another.
• For example, choosing to pursue a particular course of action may result in
the loss of other valuable environmental resources or benefits.
Opportunity cost method

• In the case of non-renewable resources, the opportunity cost is

the value of the ecosystems that will be harmed throughout the
lifecycle of the raw material.