Conservation and Sustainable Use of the Biosphere - WBGU

Conservation and Sustainable Use of the Biosphere - WBGU

286 H Valuing the biosphere: An ethical and economic perspective

H 5.3

Overview of the procedure for economic valuation

of the biosphere

The following procedure would be suitable for an

economic valuation of the biosphere (Fromm, 1997):

1. Identification of the benefits granted by the biosphere,

ie the economically relevant functions (on

a quantitative scale). In terms of content, reference

can be made here to the functions of the biosphere

set out and discussed in the previous chapters.

In terms of methodology, reference can be

made to the concept of the total economic value,

which is presented below as a heuristic instrument

for determining the different benefits granted by

the biosphere (Section H 5.4).

2. Review of the applicability of the cost-benefit rationale

to the biosphere. Here, the criteria of the limited

substitutability and of the irreversibility of

damages are the ones that place limits on the

application of the economic rationale. This point

will be discussed in detail because of the importance

of this step in the analysis (Section H 5.5).

3. Monetarization of the benefits created. There are

various valuation methods that attempt, indirectly

via an analysis of market data or directly via survey

methods, to derive an economic value from

individual preferences. The Council has already

described these methods (WBGU, 1994) and

explains them in more detail in a current special

report (WBGU, 2000b). For this reason, these

methods will not be dealt with in more detail here.

4. Calculation of the present values of the monetarized

benefits. If monetarization is the goal, the

time curve of the benefit streams or of the adverse

effect should be taken into account, ie future utility

or disutility factors should be discounted to the

present value. However, at this point it is not

intended to go into the complicated problems

associated with the choice of the appropriate discount

rate needed for weighing up the inter-generational

costs and benefits. Although these problems

are central to all valuation issues, in this

report the valuation aspects specific to the biosphere

shall be at the fore.

If a monetarization procedure is used as the basis for

an economic valuation, it is immediately clear that an

economic valuation does not have to, and should not,

remain limited to monetarization. Instead, in an economic

valuation many other qualitative aspects

should be taken into account besides monetarization,

for instance the identification and description of the

benefits of natural assets, in this case specifically the

benefits of the biosphere (Section H 5.4). An aspect

of quality of this kind is also the second stage of

analysis that indicates the limits of the economic

rationale (Section H 5.5).

H 5.4

Value categories of biosphere services from an

economic perspective

H 5.4.1

Individual values and ‘total economic value’

The various individual ‘values’ that have been developed

in economic valuation theory cover different

dimensions of the problem (eg in terms of time, the

short-term foreseeable use versus the long-term

hoped-for use) and various sections of the biosphere.

In a kind of imaginary experiment, one can assume a

‘Total Economic Value’ (TEV) across all sections and

along the time axis. This ‘Total Value’ is intended to

include all value aspects that determine the demand

for environmental assets (Pearce and Turner, 1990).

Its elements are listed in Fig. H 5.4-1. In summary,

they are (Meyerhoff, 1997):

TEV = [use-dependent values] + [non-use-dependent values]

= [direct values + indirect values + option values] +

[existence value + other non-use-dependent values]

In this context, the – mathematically unnecessary –

brackets indicate a certain affinity of certain types of

values; these will be explained now (with respect to

the value categories, cf the remarks on the economic

valuation of freshwater in the Council’s 1997 report,

WBGU, 1998a). In addition, a reference is always

made between these value categories and the properties

of the biosphere as ‘assets’. That is to say, there

is an examination of the extent to which the asset in

question is a private or public asset. Public assets

(collective assets) differ from private assets in that

there is no rivalry with regard to consumption. Moreover,

the exclusion principle cannot be applied to

them. This distinction between the two types of asset

– although in reality there are mostly mixed forms –

is important both in the development of suitable

approaches for the conservation and use of the biosphere

as well as for the attempt to determine the

economic value of biosphere services. The determination

of individual preferences and the conversion

into monetary values depends heavily on whether

the preferences are expressed on markets (biosphere

services with predominantly private asset character)

or whether the preferences have to be determined in

another way, ie with corresponding valuation methods

(biosphere services with predominantly collective

asset character).

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