Value Transfer and Environmental Policy

Increased use of economic analyses in the environment, transport, energy, health and cultural sectors has increased the demand for information on the economic value of environmental and other non-market goods by decisionmakers. Due to limited time and resources when decisions have to be made, new environmental valuation studies often cannot be performed, and decision makers must rely on transfer of economic estimates from previous studies (often termed ‘study sites’) of similar changes in environmental quality to value the environmental change at the ‘policy site’. This procedure is most often termed ‘benefit transfer’, but since damage estimates can also be transferred, I will use the more general term ‘value transfer’. Value transfer increases the uncertainty in the estimated environmental value, and a crucial question becomes: what level of accuracy is acceptable, and how does the need for accuracy vary with the policy use of the value? Results from validity tests of value transfer procedures have shown that the uncertainty in spatial and temporal benefit transfer could be quite large. Thus one should be careful in using value transfer in policy uses where the demand for accuracy is high.

 

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Economy and Environment Program for Southeast Asia