ECON371/UBCO2024WT1/NewsWiki/group8/Week 1

Source : https://theconversation.com/whats-the-value-of-a-clean-beach-heres-how-economists-do-the-numbers-94805
Problem : The environmental finance challenge addressed in the article is how to assign monetary value to non-market environmental resources such as clean beaches and water, through people’s willingness to pay say in terms of environmental performance, which supports conservation and pollution control decisions through analysis
Summary : This article focuses on how environmental economists measure the value of natural resources. It focuses on non-market goods such as clean water and beaches, by studying how much people are willing to pay to travel to unpolluted areas. Researchers can estimate the financial value of environmental improvements. These insights help guide cost-benefit analysis of environmental policy. It shows that investments in pollution control often have high returns. Reducing and increasing public health and recreational opportunities can save millions of dollars. A study of canceled trips after the BP oil spill shows how major environmental disasters can have severe economic consequences. Overall, the research highlights how much citizens are willing to pay for environmental quality. To help policy makers make informed decisions to protect natural resources that maintain and improve environmental quality. It is not only beneficial to the ecosystem. But it also stimulates the economy by supporting tourism and recreation. This gives policymakers the tools to make more informed decisions about conservation efforts.

Prof: This article is a very good introduction to what we talk about later in the course. The main method described in the travel cost method. One important clarification is that the estimated values of these nonmarket goods and services are not financial values. They are estimated 'monetary equivalents' that provide a dollar representation of how much better or worse off the average person will be as a result of an environmental change.

Economic concepts
1. Willingness to pay (WTP): This is an idea about how much people are willing to pay to improve or maintain a product or service. In the context of the article Economists study how much people are willing to pay for cleaner beaches. Safer water and reduced pollution For example, vacationers may spend more money on trips to cleaner beaches. This shows WTP to improve environmental quality. This concept helps place monetary value on non-market goods, such as clean air or water, that have no apparent value in the market. By quantifying WTP, policymakers can better understand how much society values environmental improvements. and use this information to decide where Resource allocation It helps you know how much they care about things like clean water and how much they are willing to pay to get it.
2. Cost-benefit analysis (CBA): This concept is crucial to making decisions on the value of the project or a rule. This paper evaluates environmental policies, such as proper waste disposal or beach clean-up, under cost-benefit analysis. or control the growth of dangerous algae. CBA expects the benefits to exceed the costs incurred in implementing a policy (such as cleaning the beach of litter or controlling pollution), and so estimates what the people would be willing to pay. Establishments of boat facilities may lead to low pollutant levels of Lake Erie. This could be costly But the potential for better health and improved leisure....Such strategies may well justify the expenditures incurred. The aim is to bring about a situation when it is cheaper to refrain from the action than the benefits derived from the policy are. CBA assists authorities and other organizations to determine whether they should continue with an environmental project. Consider the ultimate expected return on investment against the final costs.

Prof: An important role of CBA is to identify interventions - policies or projects - that increase economic efficiency. If the measured net benefits are positive, then the project increases efficiency. The costs and benefits do not necessarily show up on a financial statement anywhere.

Application of concepts: During the Reagan administration federal agencies were required to perform a cost benefit analysis on new major regulations. This policy was intended to safeguard the environment so that people could enjoy the benefits of a clean beach, forest, or grassland etc., without stunting economic growth. This legislation enables researchers like Timothy Haab, a professor of Environmental Economics to find the cost benefit analysis of cleaning beaches in southern California. Timothy first estimated the increase travel and time costs incurred by people who wanted to avoid trash on thirty-one of California’s beaches. These costs were the public’s willingness to pay to enjoy clean sand and water without the risk of stepping on needles or seeing plastic bottles laid on the sand. Timothy and his team then hired a team to clean and count the trash they collected on California’s beaches. After the job was done, the research team surveyed the public to see which beaches they chose, the travel time to that beach, and the quantity of debris on that beach. Timothy and his research team concluded that visitors to California’s southern beaches would pay an additional $12.91 per trip if each beach had 25% less debris. To sum up all visitors to these beaches this comes to the $29.5 million that the public would be willing to pay to enjoy clean beaches. In the case of the BP oil spill in 2010, the large-scale environmental disaster caused a total economic loss of $252 million to $332 million across Florida. These costs were caused by the cancelled vacation trips and the drop in value of Florida’s coastal towns, not including the damage to the natural resources in the area. This is an example of how projects can go through a cost benefit analysis to see if the value of the project outweighs the aftermath of a project or the risk of another natural disaster like the BP oil spill occurring again.

Prof: What you have written here is more of a summary than a clear application of the concepts.

Conclusion: A lot of environmentalists are scared to put a price on natural resources and value public amenities such has access to clean water, however using the concepts: cost benefit analysis and willingness to pay policy makers can make decisions regarding the costs that the impact of a project has on the environment and the cost of the risk of another disaster such as the BP oil spill had on not only the residents of Florida but also the natural resources and public goods surrounding the area.