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No. 276: New key figures for nature and the environment - a literature study of possibilities and limitations

Zandersen, M., Lundhede, T., Martinsen, L., Hasler, B. & Termansen, M. 2018. Nye nøgletal på natur- og miljøområdet – et litteraturstudie over muligheder og begrænsninger. Aarhus Universitet, DCE – Nationalt Center for Miljø og Energi, 84 s. - Videnskabelig rapport fra DCE - Nationalt Center for Miljø og Energi nr. 276. http://dce2.au.dk/pub/SR276.pdf 

Summary 

Environmental ’default’ look-up values[1] of environmental costs and benefits are used in socio-economic appraisals of environmental impacts of public or private investments and plans. They are typically used when the costs associated with conducting primary valuation studies or detailed value transfer analysis would be disproportionate to the scale of the impacts being appraised. The environmental look-up values have been developed to ensure that negative as well as positive environmental impacts of projects and initiatives that are not captured by a market price are incorporated in such appraisals.

The Ministry of Environment and Food developed an Environmental Look-Up Value Catalogue (Nøgletalskatalog) in 2014, which was updated in 2016. The catalogue contains default environmental look-up values referring to the damage cost approach (water, air, soil and climate adaptation) and preference-based values (nature, water). For each of the included look-up values the catalogue contains a description of the assumptions underlying the derivation of the values.

The purpose of this report is to gain an overview of existing studies that can potentially be used to improve existing look-up values or establish new look-up values related to nature and the environment. The report is based on a literature review of monetary valuation studies focusing on the value of:

  • recreation and tourism in relation to nature in general and the coastal zone specifically;
  • health effects of nature based recreation and of staying and in nature;
  • improved biodiversity; and
  • improved water quality, including freshwater, coastal waters, open marine waters and groundwater. 

Based on the literature review, the report assesses if there are existing studies, which can be used for establishing new environmental default look-up values or for improving existing values. The report also identifies where new valuation studies could be particularly relevant.

The report first introduces the conceptual framework underlying the valuation of environmental goods and services, presenting different approaches to valuing nature and environmental changes and discussing techniques available for transferring values from existing studies to other contexts (i.e. benefit transfer). Next, the report presents a literature review of relevant Danish and international valuation studies within the selected topics. The report assesses the selected studies in the context of applicability and relevance in relation to developing new, improving existing or supplementing the existing look-up values.

Findings suggest that there are significant opportunities to either update, improve or supplement existing environmental default look-up values with regard to drinking water, nature recreation and coastal waters.

The environmental look-up value for nitrate in drinking water would need to incorporate the latest evidence of carcinogenic effects of nitrate in drinking water. Also, the underlying value of statistical life needs to be adjusted according to the latest guidance on the value of statistical life from the Ministry of Finance. Furthermore, it is recommended to establish supplementary default look-up values for the non-health related benefits associated with clean ground water for drinking water purposes, ground water formation and its importance for surface water and nature. Establishing such supplementary look-up values would however require new and updated valuation studies.

The existing environmental look-up value for changes in the quality of coastal waters is based on revealed preferences of waterfront homeowners. This could be improved by the including other types of values, for instance recreation and non-use values. Several national and international studies, assessing the welfare impacts of improving coastal and open marine water quality in terms of use and non-use values, are available and these could be used as the basis for establishing new and more extensive look-up values.

The environmental look-up value catalogue could also be supplemented with catchment specific shadow prices for reductions in nitrogen loadings. Such shadow prices can be interpreted as approximations of the utility gained from reduced nitrogen loading. This approach represents a second-best approach in cases where it is not feasible to conduct primary valuation studies. Catchment specific shadow prices for reduced nitrogen loading could be established based on the results of an on-going project conducted for the Ministry of Environment and Food. In this project, cost minimization models are used to estimate catchment specific shadow prices. The shadow prices are estimated based on specific maximum loading targets established for individual catchments in Denmark.

The current environmental look-up value for recreation in nature is calculated based on simple average values for individual nature sites and converted to an average per hectare value. This approach could be improved to take into account differences across sites in terms of attractiveness, location and size. Through the development of new benefit transfer functions, it would be possible to make this up-date based on existing data. In addition, the current environmental look-up value for nature-based recreation could be supplemented with look-up values specifically referring to the recreational value of water quality and coastal areas. In the medium term, it should be possible to develop new environmental look-up values specifically capturing the recreational value of water quality and coastal areas, based on existing and on-going valuation studies.

Existing analyses of the socio-economic value of the Danish coasts for tourists have many shortcomings and can be significantly improved, e.g. through an analysis of the economic impacts of tourism within a 3 km zone from the coast across Denmark.

To date, there are no environmental default look-up values regarding health effects of spending time in nature and the value of biodiversity. The report finds that in the short term, it may be possible to develop an approximation of the health effect of spending time and recreating in nature by estimating a default look-up value for ‘increased activity levels’ in relation to access to nature sites. An ideal default environmental look-up value would require more knowledge of the causality between, on the one hand, the establishment of new sites or improvement of access, and on the other hand increased physical activity and improved health.

In relationship to biodiversity, the report finds that, given the present level of knowledge, it is not possible to derive meaningful environmental default look-up values. Numerous valuation studies on the value of biodiversity have been conducted in Denmark over the past 15 years, all showing that the Danish population highly values biodiversity. However, there is a lack of knowledge concerning the underlying biophysical relationships between habitats and survival of species. Such knowledge is a prerequisite for the development of useful and relevant default environmental look-up values for biodiversity.



[1] The terms (default) Environmental Look Up Values (EVL)’ is used by Defra, UK (Eftec 2015). In Denmark, these were first coined ‘enhedspriser’ and later ‘Nøgletal’.