Valuation of Biodiversity Benefits (OECD)

(1) Cost and time constraintsThe cost of and the time required to undertake a new CV study have increased, in particularif the study complies with the set of guidelines put forward by the NOAA panel in the US [Arrow etal. (1993)]. For these reasons there is an increased interest in benefit transfer, i.e. transferringestimates from previous valuation studies to value impacts of another project or policy. However, littleis known about the validity of these new estimates. One should be very careful when transferringestimates, particularly for complex goods, goods with a large non-use component, or both, for instancefor ecosystems and biodiversity. More work on the validity of benefit transfers is needed.(2) Methodological problemsMethodological problems due to the uncertainty both in the measurement of biodiversity andhow it is affected by a new project or policy, and the measurement of the economic value ofbiodiversity, may lead to invalid estimates. This is the most important obstacle to the wider use ofbenefits transfer. The validity of economic estimates from CV studies, especially for non-use values,has been questioned. The main question asked by policymakers is: “Can we trust the economicestimates of biodiversity and ecosystems - Will people actually pay the amounts they state they arewilling to pay in CV surveys?” Navrud and Veisten (1997) combined hypothetical donations from aCV study with actual donations to preserve biodiversity in old growth coniferous forests inOslomarka, Norway. The same respondents were asked to actually donate what they stated in the CVstudy to create an upper and lower bound, respectively, for the welfare measure, WTP to preservebiodiversity. Everybody had to pay, if, aggregated WTP for preservation exceeded the social costs ofpreservation. The bound proved to be sufficiently small (i.e. mean WTP of about 3-13euro/household/year) to be informative in a CBA of preserving 13 old growth forest areas. It would beuseful to have more studies comparing actual and hypothetical WTP for biodiversity preservation.(3) Information and communication problemsLack of information about valuation techniques among decision makers at different levelsmakes it difficult to defend the results of valuation studies against, often unjustified, critique fromaffected interest groups. Ethical concerns combined with scepticism towards neoclassical welfareeconomics, which is the foundation of CBA and environmental valuation methods, are the mostimportant reasons for such criticism. Increased and improved dissemination activities, and training ofbureaucrats and decision-makers by valuation researchers, has proved effective in improvingacceptance of environmental valuation techniques in Norway.(4) Administrative constraintsThe lack of legal basis for doing CBAs, and the absence of environmental valuationtechniques in administrative guidelines for CBAs, discourages environmental benefit estimation. InNorway, a theoretical CBA manual, and practical CBA guidelines for evaluation of public projects andpolicies, have been prepared [NOU (1997:27) and NOU (1998:16)]. These manuals have specialsections on valuing environmental impacts. The previous CBA manual, issued in 1979, contained noinformation on environmental valuation techniques. The new CBA guidelines recommend usingenvironmental valuation techniques for local environmental problems, e.g. soiling and noise from roadtraffic and recreational areas. However, they raise caution on including non-use values in CBAsbecause of the uncertainty of CV studies for valuing non-use values (see also (2) above).66