ABSTRACT
This chapter reviews the basic concepts of welfare economics, and examines the usefulness of new techniques for extending benefit-cost analysis to include the value of environmental goods and services. Shadow pricing is used most often in impact assessment to value environmental services that do not have market prices and to compensate for distortions in the costs of capital, foreign exchange, labor, and land. The use of low or zero discount rates has two types of effects on natural resources and environmental quality. Environmental economics deals extensively with the use of charges and subsidies to induce an efficient allocation of resources to pollution control. An environmental assessment should address impacts on natural resources as well as environmental goods and services. The change in unit-day value is calculated by multiplying the number of points corresponding to the type and quality category of the recreation by the change in the number of visitor-days resulting from a proposed environmental change.
