This paper takes issue with the Porter-van der Linde claim that traditional benefit-cost analysis is a fundamental misrepresentation of the environmental problem. They contend that stringent environmental measures induce innovative efforts leading to improvements in abatement and production technologies that offset the costs of the regulations. Drawing both on basic economic theory and existing data on control costs, the authors argue that such offsets are special cases. The data indicate offsets are minuscule relative to control costs. There is no free lunch here: environmental programs must justify their costs by the benefits that improved environmental quality provides to society.
In order to address the economic and environmental consequences of our global energy system, we consider the availability and consumption of energy resources. Problems arise from our dependence on combustible fuels, the environmental risks associated with their extraction, and the environmental damage caused by their emissions. Yet no primary energy source, be it renewable or nonrenewable, is free of environmental or economic limitations. As developed and developing economies continue to grow, conversion to and adoption of environmentally benign energy technology will depend on political and economic realities.
The contingent valuation method, wherein sample surveys are used to elicit individuals' willingness to pay for certain types of policies, is playing an important role in government decision-making. The most prominent applications are in the valuation of damages to natural resources from oil spills. But the contingent valuation method will be more important still if it is used to expand the range of impacts included in applied benefit-cost analyses. This paper explains the origins of the contingent valuation method and the route through which it came to be the center of both an academic and a legal debate.
Benefit-cost analysis can play an important role in legislative and regulatory policy debates on protecting and improving health, safety, and the natural environment. Although formal benefit-cost analysis should not be viewed as either necessary or sufficient for designing sensible public policy, it can provide an exceptionally useful framework for consistently organizing disparate information, and in this way, it can greatly improve the process and, hence, the outcome of policy analysis. If properly done, benefit-cost analysis can be of great help to agencies participating in the development of environmental, health, and safety regulations, and it can likewise be useful in evaluating agency decision-making and in shaping statutes.
This paper describes how economists ascribe values to the things people can choose. The economic value of an ecosystem function or service relates to the contribution it makes to human welfare, where human welfare is measured in terms of each individual's own assessment of well-being. After developing how this definition is used, the paper describes problems and opportunities for advancing the state-of-the-art in measuring economic values for nature. These arguments are developed using recent studies that attempted to estimate economic values for ecosystems on a global scale. One implication of this evaluation is that there is a need for greater communication between ecologists and economists. Economic analyses must reflect the intricate web of physical interrelationships linking activities that have harmful effects in one part of an ecosystem to the potential effects on other parts. At the same time, economic values for ecosystems accept consumer sovereignty and should be interpreted as descriptions of the tradeoffs involved in evaluating welldefined changes to specific ecosystems. † Part of the special issue on Economic Valuation.
twelve of the authors were asked by the US Environmental Protection Agency (EPA) to provide advice on the principles to be used in discounting the benefits and costs of projects that affect future generations. Maureen L. Cropper chaired the workshop. Much of the discussion in this article is based on the authors' recommendations and advice presented at the workshop.
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