Ideal Approach - Step 2: Valuation of Project Benefits

Environmental and Health benefits can be gained by remediating a site. However, to put a value on each of these items requires large amounts of data.

Valuation of Health benefits

To estimate health benefits in monetary terms, a standard technique, used by the World Health Organization (WHO), is the valuation of disability-adjusted life-years (DALY). The DALY combines in one measure the time lived with a disability, and the time lost due to premature mortality, both of which are plausible outcomes of contaminant exposure (WHO 2008). The DALY concept is further described on this page.

The DALY approach is deemed the most appropriate because of

  • its conceptual simplicity; and
  • the availability of DALY estimates.

Valuation of Environmental benefits

The selection of a environmental benefit valuation method depends whether a market exists for it (such as fish production) or not (e.g., maintenance of biodiversity). When markets are not available, prices must be derived from hypothetical markets, using a variety of techniques, such as the contingent valuation method (World Bank 1998). This method requires extensive data requirements.

Total Economic Value

From an economic perspective, the environment is seen as providing a flow of goods and services, physical as well as aesthetic, intrinsic, moral, etc. The total economic value (TEV) is defined as the (discounted) sum of the net values associated with each of these goods and services (Turner et al., 2003; Cavuta 2003). Consequently, estimating the environmental benefits (or costs) of a given project amounts to measuring the variation of the TEV of the environmental assets impacted by the project (i.e., the value of the change caused by the project in the flow of environmental goods and services).


Figure Source: World Bank, Environmental Assessment Source Book Update #23, 1998

The valuation of the various types of environmental benefits could be achieved by using the methodologies listed in the Figure above. However, the key criterium for choosing the most appropriate methodology are the data requirements.

 

References:

[1] For a more comprehensive description of the Total Economic Value, see: Freeman (1993); Perman (2003); Tietemberg T., (1996) Pearce and Warford (1993) and http://www.mfe.govt.nz/publications/water/waitaki-option-existence-values-jan05/html/page3.html.

Valuing Health and Environmental benefits requires a large amount of data
Source: Gret@Lorenz
Hatfield Consultants The World Bank funded by the Canadian POPs Trust Fund through the      
Canadian International Development Agency
Not logged on: log on here