Economic Valuation of Environmental Conditions

This project is supported by Caltrans and involves other ICE and ESP investigators (Handy, Quinn, Sanchirico, Springborn, Berry) and graduate student Jennifer Lee.

There are several existing approaches for evaluating economic attributes and equivalencies of environmental systems. Many of these approaches measure the value of “ecosystem services” provided by different natural systems as one measure of meeting social goals. By measuring impacts to natural systems, decision-makers can compare outcomes that will emerge depending on the types of actions that are taken at the scale of a single project, or a whole system (e.g., MPO-area highway network). There are several possible systems of analysis that we consider here. These include Caltrans’ current approach to economic evaluations of projects benefits and costs. We also introduce and discuss other market and non-market approaches for valuation, including hedonic model and contingent valuation (e.g., willingness-to-pay). These recognize that many social goals and utilities for ecosystem services and functions may have varying or no obvious fiscal or market value, yet are important to the public for a variety of reasons. In most cases, social goals  or legal standards can be used as guides for the valuation process, with market and non-market components to the overall evaluation for any given ecosystem. All of these analytical approaches can improve the balancing among potentially competing issues in a decision-making process (e.g., choosing among projects or project alternatives), because a common currency can be created to compare economic/ecological costs and economic/ecological benefits.
Project Start Date: July 1, 2008
Project End Date: March 20, 2009

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