If you think about it the global market system has accustomed us to receive clear and enough detailed information in order to make our assessments and choices based on our financial resources. Typically, each product or service is visible and tangible on the basis of given advantages related to its unique characteristics. But what if they asked you to evaluate a trekking walks in the mountains, a breathing in oxygenated air originated from a forest or a swimming in clear waters surrounded by an intact marine ecosystem? Environmental goods and services are often not associated with any market price. In these cases, there may be uncertainties in determining a market price, and this is made even more difficult by the fact that many environmental goods are legally public goods whose use by one agent does not prevent others from benefiting from them without any possibility to introduce restrictions or prohibitions of access.
On the assumption that it is necessary to settle trade offs in order to understand what is exchanged, we always need to value a good or a service focused on the exploitation of an environmental resource in order to make comparisons and evaluations. The economic sciences have therefore introduced a precise research path in the field proposing various methods. In particular, most of them rely on detecting the willingness to pay in circumstances where markets fail to detect this information. As a matter of fact, ecosystems, such as forests and oceans, play a key role in supporting human life on Planet Earth, offering living beings a set of valuable benefits for their survival that cannot be considered "for granted".
The idea of having these resources always available has led over the centuries to an uncontrolled management of the natural capital by over exploiting ecosystems up to jeopardise their own ability to regenerate. Not by chance, we have been under the condition of overshooting since 1970's of the last century. In other words, we consume resources faster than the time needed to replenish them in the natural state.
What criteria should be used? The main eco-assessment is made with reference to the current generation, but the environmental costs and benefits are transferred to the future generation. Thus, if we do not act with an intra-generational vision we will unbalance the choice unless ensuring that we take action in the name of our successors. To summarise, the economic assessment of any environmental asset that do not have a market value may be more or less imperfect depending on the nature of the asset itself and the corresponding environmental and economic context.
Properly defining the concept of 'value' is prior. Hence, the Total Economic Value (VET) has been developed, representing the sum total of goods and services that a given ecosystem can generate to the direct benefit of human beings. The VET consists of two main items: the value of use and the value of non-use, depending on the real possibility of obtaining an advantage as a result of physical contact with the asset.
The VET ecosystems is made of various elements:
Direct use value = it consists of the benefits of a current, expected or possible consumption of an asset. We refer, for example, to all services such as: supply of drinking water, food, timber as well as a set of cultural services, like the leisure activities.
Indirect use value = it includes all services which are indirectly or not voluntarily used. Notably, the regulatory framework like natural risk mitigation, climate regulation and hydrogeological stability.
Value of use of option = it concerns the value that the asset acquires based on its potential to be used in the future. The value does not refer to the present but to the willing to pay a certain amount of money needed to allow a benefit in the future. For example, the value that is attributed to natural areas of interest to be preserved in order to keep them accessible to next generations.
The value of non-use is closely related to the altruistic component of human behaviour and it consists of:
Value of existence = it is based on the knowledge that the good exists even if it will never be used in the future, being strongly linked to the intrinsic value of an environmental asset. Notably, the value linked to the existence of Glaciers or the Amazon Rainforest.
Legacy value = it is about the concrete chance for future generations to benefit, directly or indirectly, from a certain good, in a perspective of altruistic sharing.
The VET asset is then the outcome of a quite complex evaluation process. Over the years, increasingly effective methodologies are being implemented, depending on what needs to be evaluated, the purpose of the estimate and the availability of qualitative and quantitative data and information. Some approaches are generally followed in this regard.
>> Methods based on the analysis of reference market values = it is possible to use the monetary value of goods or services equal to or similar to those considered. We refer for example to some supply services providing food (e.g.: mushrooms, berries, fishes, etc.) and timber.
>> Methods based on the revenues that the service producer receives or the costs necessary to provide those services (e.g.: the phytodepuration function of some aquatic plant or algae).
>> Methods based on hypothetical markets where it is simulated what could be the behaviour of consumers to varying availability and price of the good, in the absence of a real reference market. Within this category, direct methods can involve interviews and questionnaires like the method of contingency assessment, as well as the cost of travel method widely used to estimate the value of recreational and tourist services offered by protected natural areas.
Determining the economic value of environmental goods that are not listed on the market is therefore essential to allow decision makers to make the best choices aimed at the preservation of natural ecosystems to maintain liveable conditions on Planet Earth and promote more sustainable forms of local and global economy. Knowing how to better manage natural resources through appropriate economic methods is definitely fundamental for our very survival. ***
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By Maurice Abbati
👇 "Communicating the Environment to Save the Planet, a Journey into Eco-Communication" by M. Abbati
Springer International Publishing
