ECONOMIC VALUATION OF ENVIRONMENTAL COSTS: a conceptual framework and estimation methods

Abstract

Natural resources provide society with a great amount of good and
service flows which contribute to general social welfare. Moreover,
such flows constitute or provide support for life on earth, and if only
for this very reason society should seek to preserve this environmental assets. However, since they share some properties of public goods and free access resources, such as non-exlusion and non- rivaly consumption, they lack a proper market to exchange and consequently, their price is unknown. This can lead to the fact that some actions and economic activities produce inadequate uses and over exploitation, thus provoking negative changes in the condition of such resources. In this sense, the main objective of this paper is to establish some conceptual framework for the economic valuation of environmental cost and to describe various pricing methods used in environmental economics and advantages and disadvantages in their application. Finally, the paper proposes some general outlines to follow in the process of economic valuation of environmental impacts