Geoscience Reference
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wetland, located 40 km Southeast of Florina in Northwest Greece, a region where
future water resources will be especially threatened by climate change.
Because they are not traded, many of the goods and services generated by lakes,
rivers and marginal wetlands are hard to quantify in monetary terms and the
consequent risk of their being neglected in policy making has received attention
from economists. Water is one of the most important natural resources on which
development and indeed survival are based. It is indispensable for domestic use
and at the same time of vital importance to agriculture and industry.
Water resources have been degraded and depleted through shifts in climate and
by more direct human activities. Integrated water resource management, linking
social and economic development with protection of natural ecosystem functioning,
is needed if sustainable development is to be achieved. To design and implement
efficient and effective policies for water resource management, the TEV of the
benefits generated by its several services and functions needs to be determined.
Given that many of these benefits (including indirect ones such as amenity, or general
ecosystem support) are not reflected in market prices, economists attempt to estimate
the true resource value with the use of alternative valuation techniques.
TEV distinguishes between the value that individuals derive from consuming
the environmental resource (use values) and the value that they derive even if
they do not use it (non-use values). Use values can be classified into direct use,
indirect use and option values. Direct use values come from consumption as
drinking water, irrigation or industrial raw material. For most private goods,
value is almost entirely derived from their direct use. Many environmental
resources, however, perform functions that benefit individuals indirectly: indirect
use values of aquatic habitats include benefits such as flood control, nutrient
retention and storm protection. Finally, option value recognizes that individuals
who do not currently use a resource may still value the option of using it in the
future. The option value for water resources therefore represents their potential
to provide economic benefits to human society in the future.
Non-use values (Krutilla 1967) can be classified into existence value, bequest
value and altruistic value. Existence value refers to the value individuals may place
upon the conservation of an environmental resource, which will never be directly
used by themselves or by future generations. Individuals may value the fact that
future generations will have the opportunity to enjoy an environmental resource,
in which case they might express a bequest value. Altruistic value means that even
if the individuals themselves may not use or intend to use the environmental
resource themselves, they may still be concerned that the environmental good in
question should be available to others in the current generation.
The challenge for economic valuation is to assign money value to non-market
goods and services and thus assist policy makers in determining policy priorities.
Over the last several decades economists have developed and refined methods
for estimating the non-market values of goods and services. These non-market
valuation methods can be categorized as revealed and stated preference methods,
depending on whether they are based on existing surrogate markets or constructed
hypothetical markets.
Revealed preference methods work by analysing actual markets that are related
to the non-market resource under valuation. Information derived from observed
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