This assignment requires you to consider the issue of environmental valuation and think of an appropriate method that can be employed to place values on these goods and services. Unlike most exercises that recommend a review of existing literature on previous studies on the matter, this assignment offers an opportunity for you to think on your own for creating such a technique.
Use one of the following examples for developing your valuation method.
- A small patch of forest in your neighborhood is to be converted into residential buildings.
In deciding whether or not to undertake this project would require a formal cost benefit analysis. You need to take into account all the benefits and costs associated. The costs generally involve the cost of resources (land, labor, capital) related to cutting the trees, clearing the land for development, and then actually building the houses. The benefits would entail the value of the houses that are built and possibly the sale value of the timber from the trees cut down.
Generally there are too many benefits, which make this exercise quite complicated. It may help if you decide to focus on just one or two of these benefits when coming up with your valuation technique.
- Your neighborhood has very bad air quality. Is it worth cleaning it up? Remember, there is always a cost involved for these kinds of activities. For example the cost of enforcing laws that require reduced emission from cars, factories, etc. Then there is the added cost for the private sector to comply by these rules. Factories may have to purchase cleaner fuels which are more expensive, or buy emission reducing equipment.
Such intervention into the system should only be made if the benefit received from cleaner air is greater than the cost of cleaning it. How much benefit would society receive from cleaning up the air? How would you measure it?
- There is a beautiful landscape in the West of Ireland that has resulted from many generations of traditional farming practices. Unfortunately this landscape is changing because farming is not profitable anymore, which is causing farmers to abandon farming. The result is a degraded landscape that is not picturesque as it used to be. The government is trying to reverse this trend by providing a subsidy to the farmers to encourage the maintenance of this landscape. Every year millions of euros of tax revenue are spent by the government to pay farmers to do this. But is it worth it? Is it worth spending millions of dollars which could have been used for other purposes instead such as building new roads, schools, or spent on health care? How much benefit is there from maintaining this landscape? Is it worth millions? If the landscape were to degrade and look ugly, does it result in millions in lost value?How would you place a value on this traditional countryside landscape?
- A species of Whale in the Pacific is in danger of going extinct. Should we protect it? But what is the value of protecting it? What kinds of benefit do we get, and how much is it worth?
- Should we clean the trash up in Mt. Everest? Again, what is the benefit of doing so? You may want to identify who gets these benefits before you try to estimate how much benefit we get from a cleaner Mt. Everest.