Valuation of environmental impacts and its use in environmental systems analysis tools

Abstract: Valuation of environmental impacts in monetary terms is a both difficult and controversial undertaking. However, the need to highlight the value of ecosystem services in policy decisions has become more and more evident in the face of climate change and diminishing biodiversity in the sea and other ecosystems. Valuing non-market goods and services, like ecosystem services, is a lively research field within environmental economics, and valuation methods have been considerably elaborated in the last ten years. In practical policy analyses, there is often a need for readily available valuations of different impacts. This thesis explores and develops several ways to include valuation of environmental impacts in different policy tools, such as cost-benefit analysis, environmental accounting and life-cycle analysis. The first paper in this thesis is a part of the Swedish attempts to construct and calculate an environmentally adjusted NDP (net national product). This work involved putting a price on non-marketed environmental goods and assets. The valuation methods used in paper I include many of the available methods to value non-marketed goods and services. Valuation of environmental impacts and/or environmental pressures is used in a number of environmental systems analysis tools besides environmental accounting. Examples are Cost-Benefit Analysis, Life Cycle Assessment, Life Cycle Cost analysis, Strategic Environmental Assessment and Environmental Management Systems. These tools have been developed in different contexts and for different purposes; the way valuation is used also differs. In paper II, the current use of values/weights in the tools is explored, as well as the usefulness of a common valuation/weighting scheme and necessary qualities of such a scheme. In the third paper, a set of generic weights meeting these criteria is developed. Some of the generic values in the weighting set are taken from directly from other studies, while some are calculated by applying a benefit transfer method called structural benefit transfer on results from selected valuation studies. The method is tested on a number of valuation studies in the fourth paper. Climate change will have a significant impact on Sweden during this century, both positive and negative. In the fifth paper, a rough estimate of the impacts on man-made capital and human health is presented. The study is an example of an impact assessment including only marketed assets valued with market prices. In the last paper, the economics of sustainable energy use is discussed; what is a sustainable energy price, and how might growth be affected if energy use is limited to a sustainable level? The discussion is based on two different models of thought: a back-casting study, describing how a sustainable future society might look like, and economic scenarios projected with general equilibrium models.