ABSTRACT

The premise underlying this book is that estimates of the economic values of environmental and resource services can be a valuable part of the information base supporting resource and environmental management decisions. The importance of this premise is illustrated by a number of current environmental and resource policy issues, all of which involve in one way or another questions of economic values and tradeoffs. Consider these issues:

Achieving the air and water pollution control objectives established by Congress requires massive expenditures on the part of both the public and private sectors. Is this diversion of resources from the production of other goods and services making us better off?

Economists since A.C. Pigou (1929) have advocated placing taxes on emissions of air and water pollutants based on the damages they cause. What tax rate should be placed on these damages? How much do these rates vary across locations and time? An important related question is, are the gains from moving to pollution taxes greater than the costs of estimating the relevant marginal damages?

The development of new reserves of petroleum and minerals is increasingly impinging on wild and natural areas that provide other environmental and resource services. Areas that might be affected include the Arctic National Wildlife Refuge, with its fragile habitat for caribou and other species, and the outer continental shelf, where commercial and recreational fisheries may be threatened by petroleum exploration and production. The 2010 oil spill in the Gulf of Mexico, and associated pictures on the nightly news of impacted wildlife, provided a cogent reminder that these same tradeoffs can occur in areas of existing production as well. Are restrictions on development in ecologically sensitive areas worth the costs they impose on society in the form of reduced availability of, and higher prices for, energy and minerals?

The development and management of large river systems such as the Columbia River basin involves choosing among alternative combinations of hydroelectric power, water supply, and commercial and recreational fishing. There are also proposals to remove existing dams from many rivers. Are the ecological and recreational benefits of removing a dam greater than the costs in the form of reduced power generation and water storage? Is it worthwhile to curb water withdrawals for irrigation or reduce discharges for power production in order to protect populations of salmon and other migratory fish?

The commercial exploitation of some natural resource systems may be proceeding at unsustainable rates. Examples include some tropical forests and many of the world's fisheries. Shifting to sustainable rates of harvest may involve substantial short-term costs in the form of forgone incomes in order to achieve long-term increases in the flows of other ecological services. Are the long-term gains from achieving sustainable rates of harvest greater or less than the short-term costs?

The scientific consensus is that substantial reductions in the emissions of greenhouse gasses will be required to slow or reverse the warming of the global climate. What degree of emissions reduction can be justified by the benefits of slowing or preventing global warming?

Many people are now advocating that countries expand their system of national income accounts to include measures of the values of nonmarket environmental services, and deductions for the costs of environmental degradation and resource depletion. See, for example, Nordhaus and Kokkelenberg (1999). 1 How are these values and costs to be measured?