SUSTAINABILITY AND ENVIRONMENTAL VALUATION

For economists, sustainability and environmental valuation are connect ed in two ways. At the micro level, proper environmental valuation is required if projects are to be approved and rejected consistently with sustainability requirements. This is cost benefit analysis. At the ma cro level, many take the view that sustainability requires that nation al income measurement be modified so as to account for environmental d amage. Such natural resource accounting is possible only if environmen tal damage is valued for incorporation into the economic accounts. The paper reviews the techniques that economists have developed for envir onmental valuation. In regard to cost benefit analysis and sustainabil ity, it is noted that the technique on which most interest focuses, th e Contingent Valuation Method, involves the extension of the domain of consumer demand analysis to include the natural environment. Contribu tions questioning the appropriateness of this are reviewed, and it is argued that they merit more attention from economists than they have r eceived to date. In regard to natural resource accounting, it is argue d that while there is little prospect of it achieving what its propone nts claim for it, the modelling that it necessarily implies has the po tential to both clarify valuation issues and play an important role in informing the policy process.