Christopher Fleming and Christopher Ambrey
The method and practice of placing monetary values on environmental goods and services for which a conventional market price is otherwise unobservable is one of the most fertile areas of research in the field of natural resource and environmental economics. Initially motivated by the need to include environmental values in benefit-cost analysis, practitioners of non-market valuation have since found further motivation in national account augmentation and environmental damage litigation. Despite hundreds of applications and many decades of refinement, shortcomings in all of the techniques remain, and no single technique is considered superior to the others in all respects. Thus, techniques that expand the suite of options available to the non-market valuation practitioner have the potential to represent a genuine contribution to the field.
One technique to recently emerge from the economics of happiness literature is the “experienced preference method” or “life satisfaction approach.” Simply, this approach entails the inclusion of non-market goods as explanatory variables within micro-econometric functions of life satisfaction along with income and other covariates. The estimated coefficient for the non-market good yields, first, a direct valuation in terms of life satisfaction and, second, when compared to the estimated coefficient for income, the implicit willingness to pay for the non-market good in monetary terms.
The life satisfaction approach offers several advantages over more conventional non-market valuation techniques. For example, the approach does not ask individuals to directly value the non-market good in question, as is the case in contingent valuation. Nor does it ask individuals to make explicit trade-offs between market and non-market goods, as is the case in discrete choice modeling. The life satisfaction approach nonetheless has some potential limitations. Crucially, self-reported life satisfaction must be regarded as a good proxy for an individual’s utility. Furthermore, in order to yield reliable non-market valuation estimates, self-reported life satisfaction measures must: (1) contain information on respondents’ global evaluation of their life; (2) reflect not only stable inner states of respondents, but also current affects; (3) refer to respondents’ present life; and (4) be comparable across groups of individuals under different circumstances. Despite these conditions, there is growing evidence to support the suitability of individual’s responses to life satisfaction questions for non-market valuation. Applications of the life satisfaction approach to the valuation of environmental goods and services to date include the valuation of air quality, airport noise, greenspace, scenic amenity, floods, and drought.
Ann E. Ferris, Richard Garbaccio, Alex Marten, and Ann Wolverton
Concern regarding the economic impacts of environmental regulations has been part of the public dialogue since the beginning of the U.S. EPA. Even as large improvements in environmental quality occurred, government and academia began to examine the potential consequences of regulation for economic growth and productivity. In general, early studies found measurable but not severe effects on the overall national economy. Although price increases due to regulatory requirements outweighed the stimulative effect of investments in pollution abatement, they nearly offset one another. However, these studies also highlighted potentially substantial effects on local labor markets due to the regional and industry concentration of plant closures.
More recently, a substantial body of work examined industry-specific effects of environmental regulation on the productivity of pollution-intensive firms most likely to face pollution control costs, as well as on plant location and employment decisions within firms. Most econometric-based studies found relatively small or no effect on sector-specific productivity and employment, though firms were less likely to open plants in locations subject to more stringent regulation compared to other U.S. locations. In contrast, studies that used economy-wide models to explicitly account for sectoral linkages and intertemporal effects found substantial sector-specific effects due to environmental regulation, including in sectors that were not directly regulated.
It is also possible to think about the overall impacts of environmental regulation on the economy through the lens of benefit-cost analysis. While this type of approach does not speak to how the costs of regulation are distributed across sectors, it has the advantage of explicitly weighing the benefits of environmental improvements against their costs. If benefits are greater than costs, then overall social welfare is improved. When conducting such exercises, it is important to anticipate the ways in which improvements in environmental quality may either directly improve the productivity of economic factors—such as through the increased productivity of outdoor workers—or change the composition of the economy as firms and households change their behavior. If individuals are healthier, for example, they may choose to reallocate their time between work and leisure. Although introducing a role for pollution in production and household behavior can be challenging, studies that have partially accounted for this interconnection have found substantial impacts of improvements in environmental quality on the overall economy.
Kevin J. Boyle and Christopher F. Parmeter
Benefit transfer is the projection of benefits from one place and time to another time at the same place or to a new place. Thus, benefit transfer includes the adaptation of an original study to a new policy application at the same location or the adaptation to a different location. The appeal of a benefit transfer is that it can be cost effective, both monetarily and in time. Using previous studies, analysts can select existing results to construct a transferred value for the desired amenity influenced by the policy change. Benefit transfer practices are not unique to valuing ecosystem service and are generally applicable to a variety of changes in ecosystem services. An ideal benefit transfer will scale value estimates to both the ecosystem services and the preferences of those who hold values. The article outlines the steps in a benefit transfer, types of transfers, accuracy of transferred values, and challenges when conducting ecosystem transfers and ends with recommendations for the implementation of benefit transfers to support decision-making.
Worldwide, governments subsidize agriculture at the rate of approximately 1 billion dollars per day. This figure rises to about twice that when export and biofuels production subsidies and state financing for dams and river basin engineering are included. These policies guide land use in numerous ways, including growers’ choices of crop and buyers’ demand for commodities. The three types of state subsidies that shape land use and the environment are land settlement programs, price and income supports, and energy and emissions initiatives. Together these subsidies have created perennial surpluses in global stores of cereal grains, cotton, and dairy, with production increases outstripping population growth. Subsidies to land settlement, to crop prices, and to processing and refining of cereals and fiber, therefore, can be shown to have independent and largely deleterious effect on soil fertility, fresh water supplies, biodiversity, and atmospheric carbon.
Along with ceramics production, sedentism, and herding, agriculture is a major component of the Neolithic as it is defined in Europe. Therefore, the agricultural system of the first Neolithic societies and the dispersal of exogenous cultivated plants to Europe are the subject of many scientific studies. To work on these issues, archaeobotanists rely on residual plant remains—crop seeds, weeds, and wild plants—from archaeological structures like detritic pits, and, less often, storage contexts. To date, no plant with an economic value has been identified as domesticated in Western Europe except possibly opium poppy. The earliest seeds identified at archaeological sites dated to about 5500–5200
The Neolithic pioneers settled in an area that had experienced a long tradition of hunting and gathering. The Neolithization of Europe followed a colonization model. The Mesolithic groups, although exploiting plant resources such as hazelnut more or less intensively, did not significantly change the landscape. The impact of their settlements and their activities are hardly noticeable through palynology, for example. The control of the mode of reproduction of plants has certainly increased the prevalence of Homo sapiens, involving, among others, a demographic increase and the ability to settle down in areas that were not well adapted to year-round occupation up to that point. The characterization of past agricultural systems, such as crop plants, technical processes, and the impact of anthropogenic activities on the landscape, is essential for understanding the interrelation of human societies and the plant environment. This interrelation has undoubtedly changed deeply with the Neolithic Revolution.
Reforestation is the natural or intentional restocking of existing forests and woodlands that have been harvested or depleted, and afforestation is the establishing of a forest in an area where there were no trees. For economic and practical purposes, reforestation and afforestation have similar goals and processes and thus can be treated as identical activities. Although reforestation and afforestation have a long history, large-scale reforestation and afforestation activities started with industrialization, which caused scarcity in timber and forest-based ecosystem services. In a unified economic model of reforestation and afforestation, factors influencing investments in reforestation and in afforestation on private and public lands include timber prices, unit reforestation cost, interest rate, the responsiveness of tree growth to silviculture, and the value of nontimber benefits, such as ecosystem services. Market and public policies may facilitate, enhance, or hinder reforestation and afforestation activities, and nontimber benefits are an increasingly important motive for reforestation and, especially, afforestation efforts around the world.
Dominic Moran and Jorie Knook
Climate change is already having a significant impact on agriculture through greater weather variability and the increasing frequency of extreme events. International policy is rightly focused on adapting and transforming agricultural and food production systems to reduce vulnerability. But agriculture also has a role in terms of climate change mitigation. The agricultural sector accounts for approximately a third of global anthropogenic greenhouse gas emissions, including related emissions from land-use change and deforestation. Farmers and land managers have a significant role to play because emissions reduction measures can be taken to increase soil carbon sequestration, manage fertilizer application, and improve ruminant nutrition and waste. There is also potential to improve overall productivity in some systems, thereby reducing emissions per unit of product. The global significance of such actions should not be underestimated. Existing research shows that some of these measures are low cost relative to the costs of reducing emissions in other sectors such as energy or heavy industry. Some measures are apparently cost-negative or win–win, in that they have the potential to reduce emissions and save production costs. However, the mitigation potential is also hindered by the biophysical complexity of agricultural systems and institutional and behavioral barriers limiting the adoption of these measures in developed and developing countries. This includes formal agreement on how agricultural mitigation should be treated in national obligations, commitments or targets, and the nature of policy incentives that can be deployed in different farming systems and along food chains beyond the farm gate. These challenges also overlap growing concern about global food security, which highlights additional stressors, including demographic change, natural resource scarcity, and economic convergence in consumption preferences, particularly for livestock products. The focus on reducing emissions through modified food consumption and reduced waste is a recent agenda that is proving more controversial than dealing with emissions related to production.
Achilleas Vassilopoulos and Phoebe Koundouri
Water accounts for more than 70% of Earth’s surface, making marine ecosystems the largest and most important ecosystems of the planet. However, the fact that a large part of these ecosystems and their potential contribution to humans remains unexplored has rendered them unattractive for valuation exercises. On the contrary, coastal zones, , being the interface between the land, the sea, and human activities competing for space and resources, have been extensively studied with the objective of marine ecosystem services valuation. Examples of marine and coastal ecosystems are open oceans, coral reefs, deep seas, hydrothermal vents, abyssal plains, wetlands, rocky and sandy shores, mangroves, kelp forests, estuaries, salt marshes, and mudflats. Although there are arguments that no classification can capture the ways in which ecosystems contribute to human well-being and support human life, very often policymakers have to decide upon alternative uses of such natural environments. Should a given wetland be preserved or converted to agricultural land? Should a mangrove be designated within the protected areas system or be used for shrimp farming? To answer these questions, one needs first to establish the philosophical basis of value within the ecosystems framework. To this end, two vastly different approaches have been proposed. On the one hand, the nonutilitarian (biocentric) approach relies on the notion of intrinsic value attached to the mere existence of a natural resource, independent of whether humans derive utility from its use (if any) or preservation. Albeit useful in philosophical terms, this approach is still far from providing unambiguous and generally accepted inputs to the tangible problem of ecosystem valuation. The utilitarian (anthropocentric) perspective, on the other hand, assumes that natural environments have value to the extent that humans derive utility from placing such value. According to the total economic value (TEV) approach, this value can be divided into “use” and “nonuse.” Use values involve some interaction with the resource, either directly or indirectly, while nonuse values are derived simply from the knowledge that natural resources and aspects of the natural environment are maintained. Existence and altruistic values fall within this latter category.
Not surprisingly, economists have long revealed a strong preference for the utilitarian approach. As a result, the valuation of marine ecosystems requires that we understand the ecosystem services they deliver and then attach a value to the services. But what tools are available to economists when valuing marine ecosystems? For the most part, ecosystem services are not traded in formal markets and thus actual prices are usually not available. Valuation techniques essentially seek different ways to estimate measures like Willingness To Pay (WTP), Willingness To Accept (WTA), or expenditures and costs. The techniques used for the valuation of ecosystem services can be divided into three main families: market-based, revealed preference, and stated preference. Finally, value-transfer methods are also used when estimates of value are available in similar contexts. All these methods have advantages and disadvantages, with different methods being suitable for different situations. Hence, extra caution is required during the design and implementation of valuation attempts.
The world’s forest cover is approximately 4 billion hectares (10 billion acres). Of this total, approximately one-half is temperate forests. These range from the subtropics to roughly 65 degrees in latitude. As we move toward the equator, the forests would generally be considered tropical or subtropical, while forest above the 65th latitude might be considered boreal. Only a relatively small fraction of the forests that are temperate are managed in any significant manner. The major types of management can vary from serious forest protection to selective harvesting, with considerations for regeneration. Intensive forestry exists in the form of plantation forestry and is similar to agricultural cropping. Seedlings are planted, and the trees are managed in various ways while growing (e.g. fertilizers, herbicides, thinnings) and then harvested at a mature age. Typically, the cycle of planting and management then begins anew.
Approximately 200 million hectares of forests are managed beyond simply minimal protection and natural regeneration. Recent estimates suggest that over 100 million hectares globally are intensively managed planted forests. The largest representatives of these forests are found in the Northern Hemisphere (e.g., the United States), China, and various countries of Europe, especially the Nordic countries. However, Brazil, Chile, New Zealand, and Australia are important producers while being in the Southern Hemisphere. A high percentage of managed forests are designed to produce industrial wood for construction and for pulp and paper production.
Finally, in some countries like China, planted forests are intended to replace forests destroyed decades and even centuries ago. Many of these planted forests are intended to provide environmental services, including water capture and control, erosion control and soil protection, flood control, and habitat for wild life. Recently, forests are being considered as a vehicle to help control global warming. In addition, afforestation and/or reforestation may help address damages after a disturbance such as a fire. In China, the “green wall” has been established to prevent shoreline erosion in major coastal areas.
Edward B. Barbier
Globally, around 1.5 billion people in developing countries, or approximately 35% of the rural population, can be found on less-favored agricultural land (LFAL), which is susceptible to low productivity and degradation because the agricultural potential is constrained biophysically by terrain, poor soil quality, or limited rainfall. Around 323 million people in such areas also live in locations that are highly remote, and thus have limited access to infrastructure and markets. The households in such locations often face a vicious cycle of declining livelihoods, increased ecological degradation and loss of resource commons, and declining ecosystem services on which they depend. In short, these poor households are prone to a poverty-environment trap. Policies to eradicate poverty, therefore, need to be targeted to improve the economic livelihood, productivity, and income of the households located on remote LFAL. The specific elements of such a strategy include involving the poor in paying for ecosystem service schemes and other measures that enhance the environments on which the poor depend; targeting investments directly to improving the livelihoods of the rural poor, thus reducing their dependence on exploiting environmental resources; and tackling the lack of access by the rural poor in less-favored areas to well-functioning and affordable markets for credit, insurance, and land, as well as the high transportation and transaction costs that prohibit the poorest households in remote areas to engage in off-farm employment and limit smallholder participation in national and global markets.