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On a New Approach to Social Evaluations of Environmental Projects

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Abstract

Conventional cost-benefit rules typically assume that the alternative to the project under evaluation is “doing nothing” or “business as usual”. In this note we contrast this approach to one where the alternative is to provide another environmental good or service. We show that this approach, which draw on methods like Habitat Equivalency Analysis and Resource Equivalency Analysis, imply that all cost and benefit items can be estimated using market prices. This is in sharp contrast to the conventional approach which typically require the use of controversial stated preference techniques to estimate the willingness to pay for non-market goods.

Suggested Citation

  • Johansson, Per-Olov & Kriström, Bengt, 2012. "On a New Approach to Social Evaluations of Environmental Projects," CERE Working Papers 2012:4, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2012_004
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    File URL: http://www-sekon.slu.se/~gbost/CERE_WP2012-4.pdf
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    References listed on IDEAS

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    1. Robin W. Boadway, 1975. "Cost-benefit Rules in General Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(3), pages 361-374.
    2. Zafonte, Matthew & Hampton, Steve, 2007. "Exploring welfare implications of resource equivalency analysis in natural resource damage assessments," Ecological Economics, Elsevier, vol. 61(1), pages 134-145, February.
    3. Jeff Bennett (ed.), 2011. "The International Handbook on Non-Market Environmental Valuation," Books, Edward Elgar Publishing, number 13490.
    4. Dunford, Richard W. & Ginn, Thomas C. & Desvousges, William H., 2004. "The use of habitat equivalency analysis in natural resource damage assessments," Ecological Economics, Elsevier, vol. 48(1), pages 49-70, January.
    5. Cummings, Ronald G & Elliott, Steven & Harrison, Glenn W & Murphy, James, 1997. "Are Hypothetical Referenda Incentive Compatible?," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 609-621, June.
    6. Johansson,Per-Olov, 1993. "Cost-Benefit Analysis of Environmental Change," Cambridge Books, Cambridge University Press, number 9780521447928, October.
    7. Nicholas E. Flores & Jennifer Thacher, 2002. "Money, Who Needs It? Natural Resource Damage Assessment," Contemporary Economic Policy, Western Economic Association International, vol. 20(2), pages 171-178, April.
    8. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, October.
    9. Unsworth, Robert E. & Bishop, Richard C., 1994. "Assessing natural resource damages using environmental annuities," Ecological Economics, Elsevier, vol. 11(1), pages 35-41, September.
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    Cited by:

    1. Desvousges, William H. & Gard, Nicholas & Michael, Holly J. & Chance, Anne D., 2018. "Habitat and Resource Equivalency Analysis: A Critical Assessment," Ecological Economics, Elsevier, vol. 143(C), pages 74-89.

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    More about this item

    Keywords

    Cost-benefit analysis; habitat equivalency analysis; non-market goods; resource equivalency analysis; stated preference methods;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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