Valuation, appraisal, discounting, obsolescence and depreciation

Abstract

Previous editions of this Journal have drawn attention to the critical role valuation plays in life cycle analysis and environmental impact assessment (see for exampleVolkwkin andKlopffer |1|). In particular, the critical role of valuation has heen highlighed in a number of discussions on ‘valuation step’ within life cycle costing, ‘hedonic and contingency’ assessments of environmental impact and both the utility and welfare of ‘pathway’ analysis/assessment (Krkwitt, Mayerhofer, Trukenmuller andFriedrich, 1998;Powell, Pearce andCraighill, 1997;Volkwein, On in andKlopffer, 1996 |2-4|). Focusing on the utility of market valuation, this paper examines the critique of discounting environmentalists have made in relation to property valuation, investment appraisal and the application of the principle in the income based net annual return model of land use time-horizons and the spatial configuration of building programmes-a criticism implict in ‘valuation step’, ‘hedonic, contingency’ and ‘pathway’ analysis/assessments. It examines the argument put forward regarding the link between the selection of a discount rate, the valuation of property, appraisal of investment and inter-generational downloading of costs associated with the use of land, repair, maintenance and refurbishment of buildings: the downloading of costs, seen by some, to have an adverse impact and work against the introduction of experimental designs aimed at energy saving, clean air environments.