Our Environment - Mining and the Environment: From Ore to Metal - page 329

TABLE 7.4
Ways to Calculate the Total Economic Value of an Ecosystem

Methodology Approach Application Data requirement Limitation

Revealed preferences

Production function
(also know as 'change in
productivity')

Trace impact of change
in ecosystem services on
produced goods

Any impact that affects
produced goods

Change in services; impact
on production; net value of
produced goods

Data on change in servi-
ces and consequent
impact on production
often lacking

Cost of illness, human
capital

Trace impact of change
in ecosystem services on
morbidity and mortality

Any impact that affects
health (e.g. air or water
pollution)

Change in services impact on
health (dose-response func-
tion); cost of illness or value
of life

Dose-response function
linking environmental
conditions to health
often lacking; underesti-
mates, as omits preferences
for health; value of life
cannot be estimated
easily

Replacement cost (and
variants, such as relocation
cost)

Use cost of replacing the
lost good or services

Any loss of goods or
services

Extent of loss of goods or
services, cost of replacing
them

Tends to overestimate
actual value; should
be used with extreme
caution

Travel cost (TCM) Drive demand curve from

data on actual travel costs

Any loss of goods or
services

Extent loss of goods or serv-
ices, cost of replacing them

Limited to recreational
benefi ts; hard to use
when trips are to multiple
destinations

Hedonic pricing Extract effect of environ-

mental factors on price of
goods that include those
factors

Air quality, scenic beauty,
cultural benefi ts

Prices and characteristic of
goods

Requires vast quantities
of data; very sensitive to
specifi cation

Stated preference
methods

Contingent valuation (CV) Ask respondents directly

their WTP for a specifi ed
services

Any services Survey that presents scenario

and elicits WTP for specifi ed
service

Many potential sources
of bias in responses;
guidelines exist for reliable
application

Choice modelling Ask respondents to choose

their preferred option from
a set alternatives with par-
ticular attribute

Any services Survey of respondents Similar to those of CV;

analysis of the data gener-
ated is complex

Other methods

Can be very inaccurate,
as many factors vary
even when contexts
seem 'similar'; should
be used with extreme
caution

Benefi ts transfer Use results obtained in

one context in a different
context

Any for which suitable
comparison studies are
available

Valuation exercises at another;
similar site

Source:
Pagiola et al. 2004