Tag Archives: environmental valuation

The Valuation of Ecosystem Services in an Intergenerational Perspective

Intergenerational ethicists dealing with environmental problems usually start by asking what moral obligations (for instance, in terms of biodiversity conservation) we have towards future generations. It is assumed that these obligations must have a moral foundation that is context-independent and that environment is one of the possible contexts of application. This approach is intuitively appealing, but it may lead to underestimating the role of contextual variables on individual motivation to act for the environment. Here I approach the problem from a different angle and ask what consequences for intergenerational ethics can be drawn from studying the current instruments used in valuing environmental services.

In the last three or four decades, the socio-economic, moral and policy issues connected with environmental problems have been increasingly visible in academic research, but also in public debates. Apart from the usual (largely neoclassical) treatment of environmental valuation through market prices or contingent methods (‘willingness to pay’ and ‘willingness to accept’), new approaches have been developed.

They focus on a more nuanced understanding of what valuation means, as well as a broader range of valuation methods that question the mainstream reliance on economic assessment as a reliable guide to policy-making. Insofar as they emphasize the strong coupling of ecological and socio-economic systems and the need to integrate ecologic sustainability concerns in sectorial policies, they usually go under the label of ecological economics.

In general, these valuations have referred not to nature or environment as such (whose total value is indefinitely high), but to specific services we derive from them. The Millennium Ecosystem Assessment (2005) has grouped these services under four categories: provisioning (food, timber etc.), regulating (e.g. pollination, flood control), ‘cultural’ (recreation, cultural identity) and supporting (necessary for the functioning of all other services, e.g. soil formation, carbon fixation). The problem is then how to convert the perceived benefits that we get from these services into quantifiable expressions of value. The concept of Total Economic Value (TEV) captures the attractive idea that marginal changes in ecosystem conditions can be translated into a gain or loss of benefits, which are converted into expressions of value using a common metric, usually monetary. We could then compute the total net value (benefits minus costs) and therefore build a consistent utility function which optimizes the allocation of goods by equating the marginal rate of substitution between pairs of goods to the price ratio.

However, all this implies several (problematic) assumptions – for instance, that market prices take into account all relevant information to be included in the environmental valuation. (In particular, the so-called ‘non-use values’ – e.g. the intrinsic value one places on the very existence of some environmental resource, beyond any possible use – are difficult to integrate in TEV-based calculations.) It also ignores post-Keynesian criticisms of neoclassical reliance on equilibrium markets. Current valuation methods are fraught with other problems too: (1) they tend to reflect current preferences and state of knowledge, (2) they are context-dependent and therefore vary spatially and temporally and (3) they are unable to accommodate multi-criteria assessment methods. Nevertheless, although they may disagree on the appropriate methods to be applied, many authors consider environmental valuation a practical necessity: “although ecosystem valuation is certainly difficult and fraught with uncertainties, one choice we do not have is whether or not to do it. The decisions we make as a society about ecosystems imply valuations (although not necessarily expressed in monetary terms)”. (Robert Costanza et al., Nature, 1997, p. 255).

What does this all mean in an intergenerational perspective? First of all, it shows that intergenerational issues are part of a larger methodological debate that touches the core assumptions of mainstream economics. Behavioral research is challenging the traditional model of the ‘rational’ utility-optimizing actor, by pointing out to cognitive limits in acquiring and processing information, cognitive biases (loss aversion, endowment effect, confirmation bias etc.), stereotyping and intertemporal discounting. In particular, data shows that intertemporal choice manifests hyperbolic discounting (i.e. the discount rate for the near future is higher than the one for long term prospects, which can lead to time-inconsistency of choices). The aggregate effects or imperfectly rational agents, which can often lead to dysfunctional market behavior and suboptimal outcomes, have also been studied (for instance, in the context of groupthink or instances of collective euphoria or phobia).

Secondly, by analyzing the specific contribution of different ecosystem services to human welfare and the way this welfare can be sustained over time, it is sometimes possible to derive intergenerational rights and obligations from a broadly-construed ‘environmental duty’, rather than deriving environmental obligations from an intergenerational ethics. Combining the two approaches is practically useful: while some people are motivated mainly by an anthropocentric ethics focused on duties of people, groups and generations towards one another, others will react more vividly to issues such as connectedness to nature and biodiversity protection. (After all, bioethics is one of the fastest developing fields in ethical theory.)

Thirdly, TEV-based methods are obviously not well fitted to address intergenerational concerns, since they generally take the preferences of current generations (as expressed through different valuation methods) as the only possible justification for any obligations towards future generations. As already mentioned, intertemporal discounting and context-dependency can render aggregate preferences inconsistent and thus undermine collective action and policy-making. While monetary valuation is clearly useful in enabling trade-offs between services (including ecosystem services), we should not expect all and everything from it. Multi-criteria assessment and other deliberative methods allow the integration of multiple non-convergent values and preferences. They may provide an essential ingredient for facilitating public participation, in order to protect essential non-market ecosystem services.