Environmental Engineering Reference
In-Depth Information
Indirect-use values: calculating the indirect-use value of rainfall
To measure the value of an indirect-use good or resource, economists use
changes in the productivity of a direct-use good as an indicator. A produc-
tivity change simply examines the physical relationship between the eco-
system and private goods for which values are known or can be imputed.
For example, in the case of agricultural production, the economic value of
a change in the supply of an environmental resource will be the dif erence
between the proi t made from agricultural production before and after the
environmental change. It is important to note that this method does not
provide the total value of the indirect-use resource, but rather the marginal
value. That is, the change in the value of the good produced, for example,
a crop, for a change in the amount of input of the indirect-use resource.
The following example shows how this evaluation can be carried out.
By a very similar method as described for estimating direct-use values
of ecosystems, indirect-use values can also be measured. The indirect-
use value assessed here is the amount of water present in the ecosystem,
measured as annual rainfall. It is known that the presence of woodland
and forest vegetation in a region maintains rainfall patterns and the local
climate (for example, Myers, 1995). Thus it can be assumed that changing
the area of vegetation cover in a region will have an impact on the rainfall
patterns in that area.
Step 1: Identifying the production function
The amount of a crop pro-
duced is (partially) dependent on the amount of water available through
rainfall. It will also be dependent on other factors such as the amount of
labour and fertilizer used.
This could, for example, be represented as:
Q
5
A
a
W
b
L
c
F
d
S
e
(11.13)
Where:
Q
5 the amount of crop produced (output in kg per year);
A
5 the area of land used (hectares);
W
5 average annual rainfall (millimetres of rainfall per year);
L
5 labour (person hours per year);
F
5 fertilizer (kg applied per year);
S
5 amount of seed sown (kg per year);
a
,
b
,
c
,
d
,
e
5 unknown parameter values to be estimated.
Estimates have already been made of the quantitative relationship
between crop production and water for certain African dry tropical
