Biodiversity, water and natural resource management

Economic Valuation as incentive measure and support for decision-making


It is possible to employ a broad range of implicit and explicit, quantitative and qualitative evaluation methods for biodiversity policy decision-making. These may include economic (monetary) evaluation methods for cost-benefit analysis, as well as other evaluation methods based either on qualitative criteria (e.g. disclosure, labelling, stakeholder involvement, benefit sharing).

Facts about economic valuation of biodiversity:

Description: Determines monetary values for environmental goods and services for which market values do not exist.

Advantages: Provides important information for decision-making based on the benefits of biodiversity conservation.

Disadvantages: Can be costly to undertake; the results are difficult to communicate; the derived monetary values are often open to challenge; expertise is not always available.

Applicability: Where widely accepted values for the non-market environmental goods and services exist; where decisions will otherwise be taken on the basis of economic valuations with a zero value for environmental effects.

Such analyses are commonly used as the basis for policy decisions already, although they have often been under-utilised for environmental purposes because so many environmental goods and services are difficult to quantify or compare qualitatively, and providing monetary estimates of their benefits and costs can be contentious. However, strong progress has been made in recent years to develop appropriate methodologies to overcome these problems, and economic valuation of the full costs and benefits of projects is now frequently used as an important tool for informing decision-makers. In fact, the Fourth Conference of Parties to the Convention on Biological Diversity in May 1998 specifically recognised that economic valuation of biodiversity and biological resources is an important tool for well-targeted and calibrated economic incentive measures¨.

In principle, a full evaluation of the complete range of biodiversity benefits in a given situation should cover all or most aspects of the natural resources of the ecosystem, including their:

  • use values;
  • amenity values;
  • ecosystem services (e.g. flood control, water purification, soil maintenance);
  • existence, cultural and ethical values; and
    option and quasi-option values.

In practice, this is not so easy to accomplish. As was found in the Norwegian study. The case studies for that project examined specific local aspects of biodiversity, particularly relating to changes (improvements) in the quality of easily identifiable aspects of local biodiversity.