Abstract

Economic valuation of environmental resources (and consequently their degradation) can help make decisions on resource utilization and allocation more meaningful. However, degradation and depletion or restoration and regeneration cannot be always valued through market transactions. This is so because, unlike material artifacts, environmental amenities (clean air, unpolluted beaches etc.) are seldom bought and sold in the market. As a result, there is no comparable estimate of the value of environmental amenities. Decisions on resource utilization, degradation of amenities and resource allocation are often made without any estimate of the value of the amenity in question. In such situations, it is observed that the resource goes unpriced; environmental amenities are often either ignored or treated as having zero value. Consider an air polluting industry, for example. If the economic value of air quality degradation can be incorporated into the cost—benefit analysis the resultant conclusions will be more holistic and comprehensive than compared to one which treats clean air as a ‘free’ resource.

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