Environmental Valuation Methods
Environmental economists have developed a number of valuation methods, four of which have been used extensively to value services provided by freshwater ecosystems. Table 1 summarizes these four methods, showing which water-related services are appropriate for the method, and outlining data requirements and method limitations.
The most widely used approach to measuring the economic benefits of environmental conservation is the contingent valuation method. This is a “stated preference method” that allows a sample of people who benefit from a particular resource to tell researchers directly, through surveys, what they are willing to pay for some improvement in environmental quality. One of the strengths of this method is that it can capture both use value (e.g., drinking water use) and nonuse value (protection of threatened aquatic species) (Mitchell and Carson, 1993). Because of this versatility, it is the most widely used method, although it is controversial because, critics say, people are reporting hypothetically on their willingness to pay rather than observed actually spending the money, possibly biasing the resulting valuation estimates (Hanemann, 1995). These concerns can be addressed with careful survey design and implementation (Carson et al. 2001).