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Monetary-based ($£r) Ecosystem Valuation Methods (a)

	Market Prices – Revealed Willingness to Pay
		1) Market Price Method
		Estimates economic values for ecosystem products or services that are bought and sold in commercial markets.
		2) Productivity Method
		Estimates economic values for ecosystem products or services that contribute to the production of commercially marketed goods
		3) Hedonic Pricing Method
		Estimates economic values for ecosystem or environmental services that directly affect market prices of some other good. Most commonly applied to variations in housing prices that reflect the value of local environmental attributes.
		4) Travel Cost Method
		Estimates economic values associated with ecosystems or sites that are used for recreation. Assumes that the value of a site is reflected in how much people are willing to pay to travel to visit the site.

Monetary-based ($£r) Ecosystem Valuation Methods (b)

	Circumstantial Evidence – Imputed Willingness to Pay
		5) Damage Cost Avoided, Replacement Cost, and Substitute Cost Methods
		Estimate economic values based on costs of avoided damages resulting from lost ecosystem services, costs of replacing ecosystem services, or costs of providing substitute services.
	Surveys – Expressed Willingness to Pay
		6) Contingent Valuation Method
		Estimates economic values for virtually any ecosystem or environmental service. The most widely used method for estimating non-use, or Òpassive useÓ values. Asks people to directly state their willingness to pay for specific environmental services, based on a hypothetical scenario.
		7) Contingent Choice Method
		Estimates economic values for virtually any ecosystem or environmental service. Based on asking people to make tradeoffs among sets of ecosystem or environmental services or characteristics. Does not directly ask for willingness to pay—this is inferred from tradeoffs that include cost as an attribute.
		8) Benefit Transfer Method
		Estimates economic values by transferring existing benefit estimates from studies already completed for another location or issue.

Applying Ecosystem Value Estimates – B-C Analysis:

	Step 1: The first step is to specify and describe the policy or action to be evaluated, including such information as its location, timing, and the people who will be affected.
	Step 2: The second step is to describe and quantify the effects of the policy or program that will lead to benefits and costs to society.
	Step 3: The third step is to estimate the social costs and benefits.
	Step 4: The final step is to compare benefits and costs of the proposed project.

B-C Analysis continued:

	B-C for one or several alternatives
	Compares both benefits & costs
		Bt/(1+r)t, where Bt is the benefit to be received in year t, and r is the discount rate
		Ct/(1+r)t, where Ct is the cost to be received in year t, and r is the discount rate
			n
		B/C =   ·     Bt/(1+r)t , where B/C = present value B/C ratio
		t=0 Ct/(1+r)t
	What is to be B-C goal?
		max.  net PV (PVB-PVC = net PV)?
		Max. B/C ratio?
	How to choose r?  How to treat Ònegative effectÓ  –  as positive costs or negative benefits?  How to treat scale effects?

B-C Analysis vs. Cost-Effectiveness:

	Both B-C and C-E use discounting
	C-E compares several alternatives
	C-E – Maximize benefits with fixed costs/resources, or
	C-E – Minimize cost/resources with fixed benefit
	C-E sometimes can better deal with common asymmetry of benefit and cost data, i.e., often (environmental/ecosystem) costs are better know than (environmental/ecosystem) benefits.

Market Price Method:

Example: Market Price Method (est. pollution costs)

Productivity, Net Factor Income, or Derived Value Methods:

Hedonic Pricing Method: