Estimating and Integrating Non-Market Benefits of Forests in Project Appraisal

Forests generate a variety of environmental effects, including watershed protection, air pollution reduction, flooding mitigation, wildlife habitat and public recreation. These environmental benefits are not marketed and not site specific. Thus, they need to be considered from a social perspective. In recent years, a number of applications have been made to estimate non-market environmental values in monetary terms and incorporate these estimates into cost-benefit analyses in forestry research projects. This module provides an introduction to the concepts and methods of non-market valuation by which to estimate the aggregate benefits to society of environmental improvement. In the next section, the categorical framework of economic value is introduced. Non-market valuation methods are then discussed, including the hedonic price method, the travel cost method, the contingent valuation method and conjoint analysis. A contingent valuation survey of the Kakadu Conservation Zone in Australia is examined in particular. A few alternative valuation techniques are next briefly reviewed. Finally, ways of integrating non-market values in project appraisal are discussed.