Our Environment - Mining and the Environment: From Ore to Metal - page 330

All these proxies can be considered opportunity costs of environmental assets.
Furthermore, different costs of the same impact can also value different functions of an
environmental good or service. For example, the cost of illness, human capital and pro-
ductivity loss, are often complementary in that each reflects a specific aspects of a healthy
life. If more than one approach is used to value different facets of a human health impact,
one has to be cautious not to double count.
Indirect Proxies
Indirect proxies for environmental goods and services are based on the observed behaviour
of individuals with respect to related markets. The Travel Cost Method derives the value
of a recreational site from the revealed information on the time and costs people spent to
get there. Hedonic prices infer the value of an environmental attribute from the price of
a related market good. For example, the noise associated with a particular residential area
will be reflected in lower land and real estate value, everything else being constant. Wages
paid in a safe and quiet factory are expected to be lower than in a dangerous and noisy
factory producing the same quantity and quality products. The residual value method
derives the net price of a natural resource by deducting all the costs from the finished prod-
uct price. An implicit value is obtained from a reverse analysis (bottom-up analysis) simi-
lar to the residual approach but for a project instead of a specific good or service. While
indirect proxy methods involve more calculation they will not necessarily provide a better
estimate of willingness to pay for environmental goods and services than the direct proxies.
They have the advantages however, of relying on observed behaviour and existing market
prices directly related to the environmental attribute being valued. These valuation meth-
ods are more costly, time consuming, and require skilled analysis. Yet, if the information is
available and the analysis is done properly, these methods should provide a better approxi-
mation of willingness to pay than the direct proxy approaches.
No Proxies
Where no proxies are available, the Contingent Valuation Method (CVM) is often the best
valuation approach. It consists of asking people directly, via questionnaires or experimen-
tal techniques, what they would be willing to pay for a benefit or what they would be will-
ing to receive as compensation for a deterioration of their environment. The questionnaire
simulates a hypothetical (contingent) market of a particular environmental good in which
individuals (demand side) are asked to state their willingness to pay / willingness to accept
for a change (improvement or deterioration) in the provision (supply side) of the good in
question. The questionnaire has to provide the institutional context in which the good
would be provided and on the payment vehicle. CVM may apply equally to changes in
public goods such as air quality, landscape, or the existence values of wildlife, as to goods
and services sold to individuals, like water supply and sanitation. It may apply to both use
and non-use values which is not the case for the 'proxy' techniques. A challenge in devel-
oping countries is to modify the technique for cases where people have little income on
which to base a willingness to pay judgement.
Challenges and Limitations in Attaching a Dollar
Value to Nature
Arguably the two main reasons for society's failure to conserve nature are that (1) society
does not realize how valuable nature is, and (2) if society does, it fails to translate the vari-
ous ecological values in dollars.