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Environmental Economics

Environmental Economics

When environmental disasters occur, we typically see those that are impacted (via loss of job opportunities, destruction to their surrounding environment and so forth) being compensated. Therefore being given money for the devastation that has been caused to nature. This raises the question as to whether a monetary value should be placed on environmental aspects and goods and who decides this.

Examples of some aspects of the environment that are put for debate to put a monetary value on (Source: Ensia)
Putting a monetary value on ecosystem damage is complex and layered. In fact it is so complex that there is a section of economics created to deal with this issue, environmental economics. Environmental economists distinguish different values in order to calculate a price for whatever aspect of nature they’re assessing:

Use values: the values that arrive from the actual use of a particular environmental good.
  • Direct use values: enjoyment/satisfaction received directly 
  • Indirect use values: nature processes that alter the climate (water regulation, sequestering carbon etc)
  • Option use values: possible direct use values for the future that have not yet been exploited/discovered

Non-use values: the values that do not arise from the use of an environmental good.
  • Existence values: values an individual will assign to an environment and the rights of species to flourish
  • Bequest values: rights of future generations to experience and enjoy nature

The sum total of the use values and non-use values for present and future generations together comprises total economic value. A total economic value contributes to both conservation and economic development.

Example of finding out the TEV of a forest (Source: ResearchGate)
The reason why one might want to find the total economic value is because it is essential when working out the cost-benefit analysis. However agreeing the various costs and benefits among various actors isn’t easy. The economic values that comprise of the total economic value reflect commonly held ethical beliefs and personal values that provide the moral foundation for action. However different people have different values and favour more than others. Some might value use values over non-use values and vice versa. Therefore value-driven beliefs make it extremely hard to accommodate into an economic framework. So let’s say that that an idea of a total economic is accepted, political disagreements over which individual values should count more than others is inevitable.

The following blog will be relating to the argument as to whether or not an economic value should be placed on nature and the environment, listing all the pro’s and con’s . However this is a great blog to start, as it allows insight into the topic and the professional and some of the ‘behind-the-scenes’ actors involved in decision making. The blog after that will go onto discuss the intrinsic values some environmentalists believe needs to be implicated within society.

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Check out my previous blog: https://www.tellusabouttheenvironment.com/2019/11/tellus-agro-ecological-crisis-delhi.html
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