Valuing the Environment: Methodological and Measurement Issues

358 Pages·1994·9.015 MB·English

by  Rüdiger Pethig (auth.), Rüdiger Pethig (eds.)

Valuing the Environment
EUROPEAN SCIENCE FOUNDATION
This series arises from the work of the ESF Scientific Programme on Environment,
Science and Society: an economic and institutional analysis (ESS).
The Scientific Steering Committee of the ESS Programme is composed as follows:
Professor Timothy O'Riordan (Chairman) Professor Helga Nowotny
School of Environmental Studies Institut filr Wissenschaftstheorie und
University of East Anglia Wissenschaftsforschung
Norwich NR4 7TJ Universitat Wien
UK Sensengasse 8
1090Wien
Professor Bruno Dente Austria
Istituto per la Ricerca Sociale
Via XX Settembre 24 Professor Hans Opschoor
20123 Milano RMNO
Italy Huis te Landelaan 492 (7th Floor)
Postbus 5306
Dr Angela Fraschini 2280 Rijswijk
Dipartimento di Economia Pubblica e Netherlands
Territoriale
Universita degli Studi di Pavia Professor Rudiger Pethig
Strada Nuova 65 Wirtschaftswissenschaften
27100 Pavia Universitat Gesamthochschule Siegen
Italy Postfach 10 12 40
Fachbereich 5, HOiderlinstrasse 3
Robin Grove-White 57076 Siegen
Centre for the Study of Environmental Germany
Change
University of Lancaster Professor Arild Underdal
Lancaster LAI 4YF Institute of Political Sciences
UK University of Oslo
PO Box 1097 - Blindem
Professor Karl-Goran MaIer 0317 Oslo 3
Royal Swedish Academy of Sciences Norway
Beijer Institute for Ecological Economics
Box 50005 Dr John H. Smith (Secretary)
104 05 Stockholm European Science Foundation
Sweden I quai Lezay-Mamesia
67080 Strasbourg Cedex
France
Valuing the Environment:
Methodological
and Measurement Issues
Edited by
RUDIGER PETHIG
Springer-Science+Business Media, B.V.
Library of Congress Cataloging-in-Publication Data
Valuing the envlron.ent : methodological and measurement Issues I
edited by Rudiger Pethlg.
p. cm.
ISBN 978-90-481-4345-0 ISBN 978-94-015-8317-6 (eBook)
DOI 10.1007/978-94-015-8317-6
1. Environmental pollcy--Costs. 2. Environmental pollcy
-Research. I. Pethlg. Rudiger.
HC79.E5V2624 1994
363.7--dc20 93-38948
ISBN 978-90-481-4345-0
Printed on acid-free paper
All Rights Reserved
© 1994 Springer Science+Business Media Dordrecht
Originally published by Kluwer Academic Publishers in 1994
Softcover reprint of the hardcover 1s t edition 1994
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Contents
Editor's Introduction xiii
Part I - Basic Issues of Valuing the Environment 1
1. Ecological Dynamics and the Valuation of Environmental Change 3
Rudiger Pethig
1.1. Introduction 3
1.2. The Model 4
1.3. IntertemporalOptimization 7
1.4. Implementation and Evaluation of Optimal Pollution
Control 15
1.5. Second-Best Approaches for Policy and Valuation 18
1.6. Concluding Remarks 20
2. The Value of Non-Market Natural Assets as Production Factor 23
Patrick Point
2.1. Introduction 23
2.2. Some General Remarks on the Evaluation of Non-Market
Natural Assets Services as Production Factors 24
2.2.1. What Is the Role Played by the Environmental
Factor in the Production Process? 25
2.2.2. What Are the Agents and Markets Involved in an
Environmental Impact? 26
2.2.3. Welfare Measure and Type of Environmental Impact 27
2.3 Environmental Factor Demand Derived from the Only
Producer Surplus Change 31
vii
viii
CONTENTS
2.3.1. Measures Based on Input Demands 31
2.3.2. Measures Based on Production Technology
Investigations 32
2.3.3. Measures Based on the Profit Function Variations 38
2.3.4. Possibility to Use Information from the Output Market 42
2.4. Environmental Factor Affecting the Producer and
Consumer Surpluses 44
2.4.1. Welfare Measures, Producer and Consumer Surpluses 44
2.4.2. Supply Models with Exogenous Demand Functions 45
2.4.3. Models with Endogenous Prices 47
2.5. Environmental Factor Value Derived from Changes in
Rents Accruing to the Input Owners 50
2.5.1. Hedonic Model with Assets Incorporating an
Environmental Component 51
2.5.2. Hedonic Evaluations in the Sector of Production 51
2.6. Conclusion 52
3. Valuation and Aggregation 59
Per-Olov Johansson
3.1. Introduction 59
3.2. The Social Welfare Function 60
3.3. Some Illustrations of Social Welfare Functions 63
3.4. Project Evaluations 67
3.5. Compensation Tests 70
3.6. On the Treatment of Altruism in CBA 73
3.7. Pragmatic Views on the Aggregation Problem 77
Part II - Conceptual Problems of Valuation under Uncertainty 81
4. The Need for Alternatives to the Expected Utility Approach in
Environmental Risk Economics or 'Who is Afraid of Russian
Roulette?' 83
Immo Querner
4.1. Introduction 83
4.2. The Expected Utility Approach 88
4.2.1. Basics 88
4.2.2. Assumptions 89
4.2.3. Properties 90
CONTENTS ix
4.2.4. Comparison to 'Bemoulliism' 91
4.3. Criticism of the Expected Utility Approach 93
4.3.1. Basic Experimental Evidence 94
4.3.2. From Clinical Common to Physical Certainty Effects 97
4.4. Vindicating EUA: Is There Really a Need to be Afraid
of Russian Roulette? 102
4.4.1. Term Life Insurance Market 104
4.4.2. Safety Improvements 107
4.4.3. Smith and Desvousges Revisited 115
4.5. Conclusion 118
Appendices 119
5. Welfare Measurement under Uncertainty 129
Rauli Svento
5.1. Introduction 129
5.2. A Generating Mechanism for Money Measures under
Uncertainty 130
5.3. A Comparison of Different Money Measures 133
5.4. Option Value and Flexibility Value 138
5.5. Intergenerational Altruism and Welfare Measurement 144
Appendices 146
6. Valuing Changes in Health: A Production Function Approach 151
Per-Olov Johansson
6.1. Introduction 151
6.2. The Model 152
6.3. Willingness-to-Pay (WTP) Measures 155
6.4. Using Market Data to Value Health Changes 157
6.5. Changes in Expected Income 160
6.6. Valuing Changes in Mortality 162
6.7. Concluding Remarks 163
Appendix 164
Part In - Measuring Values 169
7. Nonuse. Value: Reflections on the Definition and Measurement 171
Mordechai Shechter and Shirra Freeman
7.1. Introduction 171
X CONTENTS
7.2. The Role of Motives in Inducing NUV 173
7.2.1. Altruism 175
7.2.2. Risk and Uncertainty: Another Precursor of Nonuse
Value? 176
7.2.3. Clarification of Terms 177
7.3. On Definitions 177
7.4. Towards Measurement 180
7.4.1. The Choke Price Instrument in Delineating NUV 180
7.4.2. The Issue of Measurement Sequence 182
7.4.3. Uncertainty and Ex Post and Ex Ante Measures 183
7.4.4. Partial Resolutions of the Measurement Quandary 184
7.5. Donations and the Measurement ofNUV 185
7.6. Concluding Remarks 189
8. An Assessment of the Contingent Valuation Method 195
Ruud Hoevenagel
8.1. Introduction 195
8.2. Necessary Elements of a CV Questionnaire 196
8.2.1. Introduction 196
8.2.2. A Description of the Environmental Change 197
8.2.3. A Description of the Method of Payment 198
8.2.4. A Description of the Constructed Market 199
8.2.5. Questions for (Internally) Validating the Elicited
WTP Values 200
8.3. Questionnaire Design Variations 201
8.3.1. The Market Imitated 201
8.3.2. The Elicitation Method Used 202
8.3.3. The Number of Values Elicited 208
8.4. Validity and Reliability of the CV Method 209
8.4.1. Introduction 209
8.4.2. The Reliability of the CV Method 209
8.4.3. The Validity of the CV Method 211
8.5. A Review of Potential CV Biases 216
8.6. An Assessment of the CV Method 221
9. The Use of Stated Preference Methods in the Evaluation of
Environmental Change 229
Alan Pearman
9.1. Introduction 229
9.2. An Assessment of Hypothetical Market Methods 233
9.3. Stated Preference Methods 237
CONTENTS xi
9.3.1. Background 237
9.3.2. What Can SP Offer Environmental Evaluation? 239
9.4. Conclusions 244
Appendix 245
10. A Comparison of Economic Valuation Methods 251
Ruud Hoevenagel
10.1. Introduction 251
10.2. Advantages of the CV Method 252
10.3. Disadvantages of the CV Method 254
10.4. Alternative Valuation Methods 256
10.5. A Comparison 262
10.6. Summary and Main Conclusions 265
Part IV - Energy-Related Valuation Procedures 271
11. Energy Metrics: On Various Valuation Properties of Energy 273
Sylvie Faucheux and Gonzague Pillet
11.1. Introduction 273
11.2. A History of Energy Valuation: From 'Everything
is Energy' to the Role of Environmental Indicator 274
11.2.1. An Analysis of the 'Interchangeability of Energy
and Money' View 275
11.2.2. The Energy Theories of Value 280
11.2.3. Energy Valuation as an Environmental Indicator 285
11.3. Energy Metrics and Analysis: A Typology 289
11.3.1. Enthalpy Valuation and Energy Accounting 290
11.3.2. Exergy Valuation and Energy Calculus 293
11.3.3. The EMergy Valuation Procedure and Eco-Energy
Analysis 296
11.3.4. The Entropy Valuation Method and Entropy Analysis 299
11.4. Conclusion 301
12. Applying EMergy Analysis to Vineyard Cultivation and
Wme Production 311
Gonzague Pillet
12.1. Introduction 311
12.2. Valuation 313