Monetary value of the environment: Theory and method

Commodities and services traded in markets are priced, and economic activity is conducted when people compare and consider the prices and quality/quantity of products on sale. However, it is difficult to form a market for the environmental commodity because of its non-excludability. That is, it can be used without paying a price. Therefore, it becomes difficult to fulfill supply and demand appropriate for its value, and both undersupply and overuse occur. As a result, it has become necessary to determine standards for the adequate supply and use of the environmental commodity by means of economic valuation, comparing and considering its value. Here, various methods to quantify the monetary value have been developed. The preference-independent valuation method evaluates environmental value based on scientific data, while the preference-dependent valuation method is based on peoples’ preferences. This chapter focuses on the latter method.