Most environmental goods and services (ENR) are non-market and thus lack a standard price or exchange value hence the need to design methods of valuing the environmental goods and services. Valuation of environmental goods and services is important to inform decision making on sustainable use and management of the environment  and natural resources in the country. It is also vital to cater for environmental degradation and destruction which are usually not reflected in GDP accounts of many countries across the globe. The need to have a stock of wealth of all nations by the world bank also justifies the need for ENR valuation. Most environmental goods due to the lack of standard value are considered as free goods making them vulnerable to destruction by the human beings for agriculture, settlement and industrialisation.

Total value of an environmental resource includes both the use value (the price or the cost people incur to use environmental goods and services such as timber, medicine, food, charcoal, wildlife and tourism) and the non-use value (existence value of an environmental resource – the benefits that accrue due to the existence of an environmental resource such as a forest even though someone will never use it in the near future). Thus, when valuing environmental goods and resources, most values only concentrate on use values and ignore the non-use values such as the biodiversity roles, habitat role of ENR, the regulation role, ecology, scenic beauty, climate regulation role (attraction of rainfall and absorbing hot or high temperatures), production of oxygen and absorption of carbon dioxide among others.

There are thus many methods that can be employed to value environmental and natural resources and among them include: Market based methods, revealed preference methods, stated preference methods, Benefit transfer method and choice experiment methods. Market based methods rely on the market prices for environmental goods and services such as the price of a water, timber and medicine from the environment among others. This has been criticized as it does not cater for the nonuse values. The revealed preference methods are both direct and indirect. The direct revealed preference methods include the simulated market price of the environmental good and competitive market price for the ENR while the indirect revealed methods include: The travel method, hedonic price method and avoidance expenditure method. The Travel Cost Method (TCM) is mainly used to value prices of environmental goods and services where people have to travel and enjoy their services. These include: the national parks, water falls, beaches, scenic beauty and amenity services of environmental goods. The costs and opportunity cost of time that people incur to visit these places can be used to reveal the value that people attach on the environmental goods. In other words, TCM is used to reveal the value associated environmental sites that are used for recreation. Hedonic Price Method (HCM) is used to assess the economic values of environmental aspects that directly affect market prices. Thus uses mkt prices for goods and services to estimate the value of ENR embedded in the observed prices. It is most commonly applied to variations in housing prices that reflect the value of local environmental attributes, property and land prices and wages are used to implicitly value ENR that are difficult to value. On the other hand, Avoidance Expenditure Method estimates the value of natural resources based on the costs of avoiding damages due to lost services. It is based on the assumption that, if people incur costs to avoid damages caused by loss of ecosystem services, then those services must be worth at least what people paid to avoid them. However, this method is most appropriately applied in cases where damage avoidance has actually been, or will actually be, made.

Stated preference methods involve asking people directly their willingness to pay for the environmental goods and services by creating a hypothetical market scenario. The market scenario should reveal the true description of the environmental good being valued. The common method used is the Contingent Valuation Method (CVM). Under this, questions are designed t0 elicit information on both the use and non-use value of ENR. It should be noted that the stated preference methods are preferred for the non-use valuation of ENR. Other methods under stated preference include: contingent ranking where respondents are given a set of hypothetical alternatives, each depicting a different situation with respect to the available ENR amenities and other characteristics. They are asked to rate or rank the alternatives in order of preference, or to simply pick the most preferred alternative. And contingent behavior where Here, individuals are asked how they would change the level of some activity in response to a change in an environmental amenity or quality.

The benefit (value) transfer method estimates the value of ENR by assigning an existing valuation estimate for a similar ecosystem elsewhere while, the Choice Experiment (CE) method of valuing ENR is rooted in the theory of value (random utility theory) and in experimental design. It tries to address some of the limitations of traditional methods such as TCM, HPM and CVM. The choice experiment consists of a finite number of alternatives that make up hypothetical choice situations, called choice sets. Each respondent chooses the preferred alternative for each choice set, it is a structured method for data generation on ENR values. Designing CE requires careful defining of attribute space Including attribute levels relevant to policy questions being asked.

For more information on environmental valuation contact pbabyenda@gmail.com