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5.3.1 Frameworks for Environmental Evaluation Module

Many externalities cannot be directly quantified, because they are based on willingness to pay among 5
those who benefit from a particular ecosystem service. This is best presented in the context of a

broader conceptual framework, which include environmental externalities. The broader framework can
be called “total value,” or Total Economic Value” (TEV) (Pearce 1993; Bateman and others 2003). Pearce
breaks TEV down into use and non-use values, in the following categories:

Use value: Abu Dhabi, UAE

? Direct use value: The value of the use of the resource, for whatever purpose. Agricultural land can
produce crops, but it also can provide biomass for energy generation, perhaps forage for animals,
and so on. Some of these values will be difficult to quantify.

? Indirect use value: These correspond to “ecological functions” (e.g., protecting watersheds from
siltation, maintaining biodiversity). Carbon sequestration was an indirect use value, until there
developed a market for it - at which point sequestration became a direct value.

? Option values: These also are direct values, even though they do not require that there be specific use
at the time of valuation. Option values are those for which individuals are willing to pay to maintain
availability of something for future use, even though the individual has not and may never see or use
it. Old growth forests in British Columbia as valued by a New York taxi driver might be an example.

Non-use values:

? Existence value: This is an indirect value, in contrast to the categories listed above. It is the result
of people’s willingness to pay for something with no expectation that they themselves will benefit
from it. People contribute to organizations to save the Swqatra Island in Yemen or Arab Tiger in
Oman, because they feel that these natural wonders should not be destroyed.

The sum of these categories equals the TEV. However, these are the “economic” values, necessarily an
anthropocentric calculation. There is a category of non-economic values as well, often called intrinsic
values. These values do not depend on human willingness to pay for them, but are intrinsic to the animal,
ecosystem or other part of nature.

A slightly more detailed breakdown of total economic value is given by Bateman and others (2003).
They add the concept of bequest value, which modifies the value of an environmental good to include
the value to those alive now of leaving the good for future generations. This then shows up as both a

use value, and as a non-use value, on the basis that future generations will get both kinds of use from
the asset. The diagram below shows the various components of environmental value (Figure 19).

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