Valuing environmental services

The environment delivers a range of services that are valuable, yet these values are often not quantified and therefore neglected in decision making. Failure to consider environmental values against other values can lead to sub-optimal policy and investment decisions. For example, funding may not be provided for environmental projects because the benefits cannot be confidently demonstrated, or non-environmental outcomes may be prioritised because they are simpler to value.

Environmental benefits and costs are challenging to quantify because they are frequently not traded in markets. This means that market prices, which are generally used to quantify other benefits and costs, are unavailable. However, something that is not traded in markets can still be highly valuable. To address this issue, economists have developed a myriad of non-market valuation techniques with over 5000 studies listed in the Environmental Valuation Reference Inventory alone.

Aither has been working on a number of non-market valuation studies. Aither was engaged by Infrastructure Victoria to estimate the value of parks throughout the state. This was the biggest study of its type undertaken, drawing on hundreds of thousands of property sales observations and numerous Victorian government spatial maps. We applied the hedonic pricing method to value parks drawing on the statistical relationships between property values and proximity to parks while controlling for other drivers of property values. The research provides values for different types of parks in various locations that can be used in cost-benefit analysis to ensure that environmental benefits and costs are adequately considered. The research was published here.

Aither also recently completed a project for the Snowy-Monaro Regional Council estimating the benefits of recreational fishing, and how the benefits might change under different investment options. We applied the travel cost and contingent valuation methods, estimating recreational benefits of $2.5 to $4.8 million per year. The Snowy-Monaro report is available here.

If you need to estimate environmental values for a business case, we can help identify a solution that aligns with the type and importance of the benefits or costs being quantified.