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Abstract

Environmental goods and services which are not priced in traditional economic markets are typically excluded from decision making approaches which are based on monetary values. Benefit-cost analysis, for example, employs monetary estimates of values with and without the project under consideration. The exclusion of environmental values in monetary terms often results in a variety of ad hoc approaches to incorporate these elements in decision making. These approaches range from the application of zero values for the environmental services to the use of measures such as equivalent energy values. Over the past 30 years economists have attempted to derive appraoches to incorporate monetary values of environmental amenities into decision making frameworks. Monetary measures are used as a "metric" so that both market and non-market goods can be represented on a common base. This paper reviews the approaches currently in use to estimate values for environmental goods and services. Direct (contingent valuation) and indirect (travel cost, hedonic price and risk valuation) approaches are examined. The successes and failures are outlined. The conclusions suggest that there are classes of environmental amenities that can be assessed during these monetary tools and there are other classes for which the current techniques are questionable. Avenues for further research are identified.

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