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REM 363/ENV 399 – Week 10 INTRODUCTION TO ENVIRONMENTAL VALUATION

REM 363/ENV 399 – Week 10 INTRODUCTION TO ENVIRONMENTAL VALUATION. Environmental valuation. “Non-market valuation imputes a price to environmental goods and services not traded in markets” Why value the environment? we do already for natural resources, e.g. timber

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REM 363/ENV 399 – Week 10 INTRODUCTION TO ENVIRONMENTAL VALUATION

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  1. REM 363/ENV 399 – Week 10 INTRODUCTION TO ENVIRONMENTAL VALUATION

  2. Environmental valuation “Non-market valuation imputes a price to environmental goods and services not traded in markets” Why value the environment? • we do already for natural resources, e.g. timber • when we don’t (non-market), environmental values are ignored, e.g. wilderness, biodiversity Uses of valuation • evaluating the full cost of environmental impacts • selecting the best use of natural capital • including the value of the environment in national accounts and sustainability indicators

  3. Valuing an improvement in environmental quality at a “free” recreation site MWTP ($/day) MWTP ($/day) MWTP with improvement Demand curve with improvement 40 30 20 10 0 40 30 20 10 MWTP without improvement Demand curve without improvement 1 2 3 4 5 6 1 2 3 4 5 6 Recreation days per year

  4. X X X X X X

  5. Sample Classification of Total Economic Value (TEV) for Temperate Rainforests Source: adapted from Barbier (1991), Panayotou and Ashton (1992), Myers (1992) and Pearce and Warford (1993) a/ Use values are now usually considered as encompassing option and quasi-option values. b/ Biodiversity is essentially an attribute of the forest; hence, it may also serve important direct and indirect use values. For example, the diversity found in a forest may have direct use value for scientific research, education and as a source of genetic material. Similarly, biological diversity may have an indirect use value in assisting the ecological stability of the entire forest system.

  6. Measuring environmental values • Market price approaches (where already traded), e.g. soil erosion → reduced yield of marketed crops • Possible approaches for non-market valuation: • surrogate markets, e.g. fuelwood & kerosene • constructed market, e.g. survey techniques (wilderness) • cost-based valuation, e.g. costs of preventing/replacing (e.g. wetlands and water treatment) • other methods … • We will consider a more formal classification system next class

  7. The Economics of Old Growth in BC: To Cut or Not to Cut? Duncan Knowler, Associate Professor, REM I would like to acknowledge the research assistance of Kristin Dust on this project and funding from WCWC, Ecojustice and DSF

  8. Chilliwack Forest District & Fraser Timber Supply Area

  9. Sample Classification of Total Economic Value (TEV) for Temperate Rainforests Source: adapted from Barbier (1991), Panayotou and Ashton (1992), Myers (1992) and Pearce and Warford (1993) a/ Use values are now usually considered as encompassing option and quasi-option values. b/ Biodiversity is essentially an attribute of the forest; hence, it may also serve important direct and indirect use values. For example, the diversity found in a forest may have direct use value for scientific research, education and as a source of genetic material. Similarly, biological diversity may have an indirect use value in assisting the ecological stability of the entire forest system.

  10. Assumptions – Management Strategies

  11. Annual Allowable Cut under the SOMPcurr, Suit100, and Terr100 Scenarios (m3/yr) Source: SELES output and Sutherland, et al. (2007)

  12. Conservation Values for BC Old Growth Forest Source: Calish et al. (1978)

  13. Mushroom Picking Assumptions • Average price to chanterelle pickers in 2006 $CAN was $3.54 per lb, or $7.80 per kg • We assumed an average of 6.7 hours per day spent picking from several studies • Chanterelle pickers harvest 4.68 lbs per hour, or about 14.2 kg per day. • Pine mushroom pickers harvest 0.89 lbs per hour, they will harvest about 2.7 kg per day • We assumed average agricultural wages of $10 per hour, for the opportunity cost of pickers’ time • Average daily costs for transportation and materials were assumed at $30 per day.

  14. Source: Kurz et al. (1992)

  15. Carbon Price Assumptions • Carbon ‘price’ is meant to capture the value of damages done by global warming • Some studies imply values in the range of $30 to 85/t C • The Stern Report used a carbon price of as much as $350/t C • We used a range from $20 to $150 per t C

  16. Comparison of the Suit100 and Terr100 Scenarios to the Baseline Scenario (SOMPcurr) assuming Rising Log Prices (Net Present Value in $millions over 100 Years )

  17. Concluding Comments There is a positive cost associated with implementing Suit100 or Terr100 in terms of lost timber value However, over most assumptions there is a net benefit from implementing Suit100 or Terr100 in place of SOMPcurr Limitations include Several missing values for standing forest A lack of current recreation value estimates No precise estimates of areas actually to be logged No consideration of intangibles, e.g. First Nations cultural values This is a “valuation” study and not an “economic impact” study

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