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Valuation & Evaluation

Valuation and Evaluation of Environmental Benefits

There is a large body of research on the economic valuation of environmental resources in developed countries. Most environmental impacts, from air and water pollution, biodiversity, solid waste and health effects, are being addressed. Gradually, economic valuation techniques that emerged in developed countries are being applied in developing country contexts.

Typically, standard methodologies need to be adapted to this new context. For example, in the developed world, valuation studies have focused on the environment as a ‘consumption good’ (e.g. recreation), while in many developing countries natural resources have greater importance as ‘inputs to production’. Hence, there is a greater reliance on the ‘production function approach’ to resource valuation in developing countries. Moreover, familiarity and acceptance of economic valuation by local decision-makers in developing countries is still lacking, especially for non-use values. It is therefore important to build capacity in this area.

A number of CREED projects examined issues of valuation of different ecosystems: mangroves, watersheds, rangelands and tropical forests. Most of the studies concentrated on the estimation of use values using change-in-productivity methods. Considerable emphasis was given to modelling biophysical relationships as an input to valuation. In three linked projects in Brazil, Nigeria and Papua New Guinea, the combination of economic valuation techniques with participatory research methods was explored. One project on mangroves in the Philippines looked at valuation in the broader context of decision-making and applied an approach based on multi-criteria analysis.

In the PREM Programme it is envisaged that there will be further work on valuation, particularly where this concerns a type of ecosystem or environmental problem that has received little attention in academic literature to date, or where a key methodological issue (such as benefits transfer) is addressed. Such issues include, for example, valuation of water-related externalities and the estimation of non-use values such as biodiversity. In line with the broadening of this theme it is expected that the following issues will also be addressed:

· Integration of economic valuation with more general evaluation methods such as multi-criteria analysis, cost-benefit analysis, risk assessment and other decision analysis techniques;

· Critical issues related to economic valuation that have been neglected in mainstream valuation research, such as evaluating the impact of changes in income over time and fluctuations in environmental impact;

· Evaluation of the effectiveness of economic valuation studies in influencing environmental policies and multilateral investments;

· Expansion of the stakeholder dimension of economic valuation, specifically addressing the issue of who wins or loses from environmental change.


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