The conventional markets are valuations that used market prices with and without alterations. When the market for a particular biodiversity does exist, the market price will be used. However, if the market is distorted (due to market failure, externalities, etc.) shadow prices have to be estimated and calculated.
This approach takes into account the impacts of economic activities on production values of goods and services. The economic activities will either increase or decrease the production values, which are traded in the marketplace. The effects of economic activities can be analyzed using conventional cost-benefit analysis. Other measures of estimating the economic impact include the replacement cost of mitigating biological damage, preventive measures, and the damage cost that is avoided. These methods sometimes are classified as cost-based approaches.
Some of the common techniques that fall under the conventional market approach include the following:
- Production Function or Changes in Production
- Market prices
- Replacement cost
- Preventive expenditure
- Human capital
- Benefit transfer method
Read and understand the following slide presentation and note:
Market Based Techniques
Open the pdf file in new window here
Open the pdf file in new window here
Read the following articles:
Brander, L. (2013). Guidance manual on value transfer methods for ecosystem services. Nairobi: United Nations Environment Programme (UNEP).
Bishop, J. T. (Eds.) (1999). Valuing forests: a review of methods and applications in developing countries. London: International Institute for Environment and Development.
Bann, C. (1998). The economic valuation of tropical forest land use options: a manual for researchers. Singapore: Economy and Environment Program for Southeast Asia (EEPSEA).
Retrieved from https://idl-bnc.idrc.ca/dspace/bitstream/10625/13190/1/108380.pdf
Ghermandi, A. (2015). Benefits of coastal recreation in Europe: Identifying trade-offs and priority regions for sustainable management. Journal of Environmental Management, 152, 218-229.
King, D., & Mazzotta, M.J. (2000). Ecosystem valuation. Washington D.C: US Department of Agriculture and NOOA. Retrieved from http://www.ecosystemvaluation.org/market_price.htm
King, D., & Mazzotta, M.J. (2000). Ecosystem valuation. Washington D.C: US Department of Agriculture and NOOA. Retrieved from http://www.ecosystemvaluation.org/productivity.htm
King, D., & Mazzotta, M.J. (2000). Ecosystem valuation. Washington D.C: US Department of Agriculture and NOOA. Retrieved from http://www.ecosystemvaluation.org/cost_avoided.htm
King, D., & Mazzotta, M.J. (2000). Ecosystem valuation. Washington D.C: US Department of Agriculture and NOOA. Retrieved from http://www.ecosystemvaluation.org/benefit_transfer.htm
Taylor H. Ricketts, T.H., Daily, G.C., Ehrlich, P.R., & Michener, C.D. (2004). Economic value of tropical forest to coffee production. PNAS, 101, 12579–12582.
Vincent, J.R., Burwell III, W.B., Tan-Soo, J.S., Ahmad, I., Adnan, N., Pattanayak, S.K., & Thomas, K. (2015). Valuing water puriﬁcation by forests: An analysis of Malaysian panel data. Environ Resource Econ. DOI 10.1007/s10640-015-9934-9.
Dixon, J. A., & Hufschmidt, M. M. (Eds.) (1986). Economic evaluation techniques for the environment. Baltimore: The John Hopkins University Press. ISBN 0-8018-3352-3
Garrod, G., & Willis, K. G. (1999). Economic valuation of the environment: methods and case studies. Cheltenham: Edward Elgar Publishing. ISBN: 1 85898 684 2
Please answer the following self-reflection questions. After formulating your answers, you may post them online at the Knowledge Café for this course as a way to share your ideas and glean knowledge from other students’ responses.
SrQ# 1.1: How do you choose the appropriate valuation method using a market-based approach in valuing provisioning services of forest ecosystem? Elaborate your argument.
SrQ#1.2: Can you use the results of valuation studies from other forest areas in the proposed project? What are the adjustments that need to be done if you want to use this method?
SrQ#1.3: Forests provide important genetic resource material for human well-being. What do you think is the appropriate technique that can be used to value genetic resource from a forest ecosystem?
SrQ#1.4: Valuing regulating services of forest ecosystem can be carried out based on a market-based approach. One of the important regulating services is watershed protection for supplying clean water to downstream users. What method is appropriate to value the regulating service of a watershed?