Assigning Economic Value to Natural Resources (1994) / Chapter Skim
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9 Valuing Biodiversity: An Application of Green Accounting
9 Valuing Biodiversity: An Application of Green Accounting
Pages 165-178
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From page 165... ...
The realization that short-term flows do not necessarily measure long-term well-being is reflected in the principles of personal, business, and perhaps to a lesser extent national accounting. Accounting measures of "income" include corrections for changes in capital stocks.
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From page 166... ...
The value of a capital asset is the expected net present discounted value of the stream of services that it will provide over its useful life, plus whatever salvage value it might have at the end of that period. It is important to realize that this value is computed "at the margin." That is, when we are talking about valuing capital, we consider the net present discounted value of the stream of services provided by one incremental unit of capital.
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From page 167... ...
· NATIONAL ACCOUNTING: A VERY BRIEF OVERVIEW This paper will be largely devoted to the discussion of an example of the possibilities and potential difficulties of including a particular type of natural capital -- genetic diversity -- in national income accounts. For a discussion of the fine points of the conceptual rationale and practical details of constructing environmentally accurate national income accounts, the reader is referred to the excellent summaries prepared by other authors (see, e.
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From page 168... ...
Thus we have "Hartwick's Rule": intergenerational equity3 can be achieved by investing the scarcity rents arising from the depletion of natural resources in the acquisition of man-made capital assets.4 Hartwick's rule is only meaningful in circumstances in which man-made capital can be substituted for natural assets, however. This may well be the case for fossil fuels and minerals; Daly (1991; see also Daly and Cobb, 1989)
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From page 169... ...
It is this issue that we will address in the remainder of the paper. In doing so, we put aside more complex and possibly metaphysical matters, such as whether or not the objectives implicit in these authors' analyses are in fact appropriate.5 While one might address the matters in either order, suggestions for the measurement and interpretation of national accounts must be both conceptually valid and practically feasible if they are to be of value.
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From page 170... ...
To the extent that the values created by the forest in this context are reflected in marketed products and, moreover, that these values can be captured by the owners of the forest, we might hope that computation of the contribution of these elements to the national accounts would be little more than a report of efficient resource use.8 This would be unlikely to be the case with other rainforest "products." Carbon sequestration, watershed protection, and preservation of biodiversity are all aspects of rainforest performance that are not only not directly compensated, but involved in so complex an array of other production processes as to make the separation of its contribution virtually impossible. Absent the development of markets in these areas- a dens ex machine for which we might earnestly hope, but for which realistic prospects are virtually nil the best we might ~ .
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From page 171... ...
VALUING RESERVES OF BIODIVERSITY We are going to step back from the broad view to consider a much narrower issue. We have argued that accurate accounting is made much more ciifficult in the absence of functioning markets, and, by implication, market prices, for natural assets.
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From page 172... ...
Just as intellectual property (patents, copyrights, and trademarks, for example) exclude non-payers from the use of inventions or innovations, a number or recent national statutes and international agreements are coming to establish the rights of states to their genetic resources and the requirement of their prior informed consent before genetic resources are appropnated.'t Commercially useful compounds are most likely to be found in the areas in which biological diversity is greatest.
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From page 173... ...
We have been discussing the value of a "marginal species," but con sensation of unexplored species must generally take the form of habitat preservation. We might then ask how much of this form of natural capital we wouIct lose by clearing a square kilometer of natural habitat.
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From page 174... ...
one per square kilometer of primary forest preserved. Continuing in the same vein of heroic assumptions, then, even if we are talking about the preservation of a species of higher plant for which tens of billions of dollars in earnings might be anticipated, the expected value lost by losing a square kilometer of habitat for the purpose of preserving higher plants for pharmaceutical research might be negligible.
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From page 175... ...
This will happen at the points at which the establishment of property rights is efficient. Thus, again, we may expect efficient outcomes, and correct national product accounting would record economic activity accurately, but would be of little help in suggesting reallocations of resources.
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From page 176... ...
Accounts might reasonably be expanded to include losses in natural capital in those instances in which values are recorded or might reasonably be backed out from observed statistics for closely related assets. In other, more speculative areas, we might maintain the hypothesis that these assets are not recorded in the accounts because they have yet to realize sufficiently high values on the margin to warrant the establishment of markets.
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From page 177... ...
Solow, 1993, "Measuring Biological Diversity," working paper, Woods Hole Oceanographic Institute. Principe, P., 1989, "Valuing the Biodiversity of Medicinal Plants," 79-124 in O
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