Monetary Valuation of the Environment

  • Wolfgang Buchholz
  • Dirk Rübbelke
Part of the Springer Texts in Business and Economics book series (STBE)


This chapter mainly considers the contingent valuation method (CVM) through which agents’ preferences for environmental quality are elicited by survey questions. After describing its microeconomic foundations, the advantages that this widely applied stated preference technique for environmental quality assessment has over revealed preference approaches are highlighted. The chapter then discusses the conceptual and practical problems of CVM studies focussing on the many decisions that evaluators have to make in the design of such studies. The limitations of this technique are pointed out, and it is shown how the quality and validity of CVM studies can be improved by observance of some thoughtful guidelines.


  1. Ahlheim, M. et al. (2010). Labour as a utility measure in contingent valuation studies: How good is it really? (No. 13–2010). FZID discussion papers.Google Scholar
  2. Ahlheim, M., Börger, T., & Frör, O. (2015). Replacing rubber plantations by rain forest in Southwest China—who would gain and how much? Environmental Monitoring and Assessment, 187(2), 3.CrossRefGoogle Scholar
  3. Alberini, A., & Kahn, J. R. (2009). Handbook on contingent valuation. Cheltenham, UK: Edward Elgar.Google Scholar
  4. Andreoni, J. (1990). Impure altruism and donations to public goods: A theory of warm-glow giving. Economic Journal, 100(401), 464–477.CrossRefGoogle Scholar
  5. Arrow, K. J., et al. (1993). Report of the NOAA panel on contingent valuation. Federal Register, 58(10), 4601–4614.Google Scholar
  6. Boyle, K., Bishop, R., & Welsh, M. (1985). Starting point bias in contingent valuation bidding games. Land Economics, 61(2), 188–194.CrossRefGoogle Scholar
  7. Carson, R. T. (2012). Contingent valuation: A comprehensive bibliography and history. Cheltenham, UK: Edward Elgar.Google Scholar
  8. Carson, R. T., Flores, N., & Meade, N. (2001). Contingent valuation: Controversies and evidence. Environmental and Resource Economics, 19(2), 173–210.CrossRefGoogle Scholar
  9. Carson, R. T., & Hanemann, W. M. (2005). Contingent valuation. In K.-G. Mäler & J. R. Vincent (Eds.), Handbook of environmental economics (pp. 821–936). Amsterdam: Elsevier - North Holland.Google Scholar
  10. Cornes, R. C. (1992). Duality and modern economics. Cambridge, UK/New York/Melbourne: Cambridge University Press.Google Scholar
  11. Cornes, R. C., & Sandler, T. (1996). The theory of externalities, public goods, and club goods (2nd ed.). Cambridge, UK: Cambridge University Press.Google Scholar
  12. Desvousges, W. H., et al. (1993). Measuring natural resource damages with contingent valuation: Tests of validity and reliability. In J. A. Hausman (Ed.), Contingent valuation: A critical assessment (pp. 91–164). Amsterdam: North Holland.Google Scholar
  13. Diamond, P. A., & Hausman, J. A. (1994). Contingent valuation: Is some number better than no number? Journal of Economic Perspectives, 8(4), 45–64.CrossRefGoogle Scholar
  14. Ebert, U. (1993). A note on willingness to pay and willingness to accept. Social Choice and Welfare, 10(4), 363–370.CrossRefGoogle Scholar
  15. Freeman III, A. M., Herriges, J. A., & Kling, C. L. (2014). The measurement of environmental and resource values: Theory and methods. New York: Routledge.Google Scholar
  16. Hammitt, J. K., & Zhou, Y. (2006). The economic value of air-pollution-related health risks in China: A contingent valuation study. Environmental and Resource Economics, 33(3), 399–423.CrossRefGoogle Scholar
  17. Hanemann, W. M. (1991). Willingness to pay and willingness to accept: How much can they differ? American Economic Review, 81(3), 635–647.Google Scholar
  18. Hanemann, W. M. (1994). Valuing the environment through contingent valuation. Journal of Economic Perspectives, 8(4), 19–43.CrossRefGoogle Scholar
  19. Hanley, N., Adamowicz, W., & Wright, R. E. (2005). Price vector effects in choice experiments: An empirical test. Resource and Energy Economics, 27(3), 227–234.CrossRefGoogle Scholar
  20. Hausman, J. A. (2012). Contingent valuation: From dubious to hopeless. Journal of Economic Perspectives, 26(4), 43–56.CrossRefGoogle Scholar
  21. Horowitz, J. K., & McConnell, K. E. (2002). A review of WTA/WTP studies. Journal of Environmental Economics and Management, 44(3), 426–447.CrossRefGoogle Scholar
  22. Jakobsson, K. M., & Dragun, A. K. (2001). The worth of a possum: Valuing species with the contingent valuation method. Environmental and Resource Economics, 19(3), 211–227.CrossRefGoogle Scholar
  23. Jehle, G. A., & Reny, P. J. (2011). Advanced microeconomic theory (3rd ed.). Harlow, UK: Financial Times - Prentice Hall.Google Scholar
  24. Johansen, L. (1977). The theory of public goods: Misplaced emphasis? Journal of Public Economics, 7(1), 147–152.CrossRefGoogle Scholar
  25. Johnston, R. J. (2006). Is hypothetical bias universal? Validating contingent valuation responses using a binding public referendum. Journal of Environmental Economics and Management, 52(1), 469–481.CrossRefGoogle Scholar
  26. Jones, B. A., et al. (2017). Estimating willingness to pay for greenhouse gas emission reductions provided by hydropower using the contingent valuation method. Energy Policy, 111, 362–370.CrossRefGoogle Scholar
  27. Kahneman, D. (2011). Thinking fast and slow. London: Allen Lane.Google Scholar
  28. Kahneman, D., Knetsch, J. L., & Richard, H. (1990). Experimental tests of the endowment effect and the Coase theorem. Journal of Political Economy, 98(6), 1325–1348.CrossRefGoogle Scholar
  29. Kahneman, D., Knetsch, J. L. A., & Richard, H. (1991). Anomalies: The endowment effect, loss aversion and the status quo bias. Journal of Economic Perspectives, 5(1), 193–206.CrossRefGoogle Scholar
  30. Kahneman, D., & Knetsch, J. (1992). Valuing public goods: The case of moral satisfaction. Journal of Environmental Economics and Management, 22(1), 57–70.CrossRefGoogle Scholar
  31. Kahneman, D., & Tversky, A. (1979). An analysis of decisions under risk. Econometrica, 47(4), 263–291.CrossRefGoogle Scholar
  32. Kling, C. L., Phaneuf, D. J., & Zhao, J. (2012). From Exxon to BP: Has some number become better than no number? Journal of Economic Perspectives, 26(4), 3–26.CrossRefGoogle Scholar
  33. Kotchen, M. J., & Reiling, S. D. (2000). Environmental attitudes, motivations, and contingent valuation of nonuse values: A case study involving endangered species. Ecological Economics, 32(1), 93–107.CrossRefGoogle Scholar
  34. Krutilla, J. F. (1967). Conservation reconsidered. American Economic Review, 57(4), 777–786.Google Scholar
  35. Lancaster, K. J. (1966). A new approach to consumer theory. Journal of Political Economy, 74(1), 132–157.CrossRefGoogle Scholar
  36. List, J. A. (2003). Does market experience eliminate market anomalies? Quarterly Journal of Economics, 118(1), 47–71.CrossRefGoogle Scholar
  37. Mäler, K.-G., & Vincent, J. R. (Eds.). (2005). The handbook of environmental economics, Vol. 2: Valuing environmental changes. Amsterdam: Elsevier - North Holland.Google Scholar
  38. McFadden, D. (1974). Conditional logit analysis of qualitative choice behavior. In P. Zarembka (Ed.), Frontiers in econometrics (pp. 1395–1457). New York: Academic Press.Google Scholar
  39. Nordhaus, W. D. (2013). The climate casino. Risk, uncertainty, and economics for a warming world. New Haven, CT/London: Yale University Press.Google Scholar
  40. Oerlemans, L. A. G., Chan, K.-Y., & Volschenk, J. (2016). Willingness to pay for green electricity: A review of the contingent valuation literature and its sources of error. Renewable and Sustainable Energy Reviews, 66, 875–885.CrossRefGoogle Scholar
  41. Palmquist, R. B. (2005). Property value models. In K.-G. Mäler & J. R. Vincent (Eds.), Handbook of environmental economics (pp. 763–819). Amsterdam: Elsevier - North Holland.Google Scholar
  42. Phaneuf, D. J., & Smith, V. K. (2005). Recreation demand models. In K.-G. Mäler & J. R. Vincent (Eds.), Handbook of environmental economics (pp. 671–761). Amsterdam: Elsevier - North Holland.Google Scholar
  43. Pittel, K. (2002). Sustainability and endogenous growth. Cheltenham, UK: Edward Elgar.Google Scholar
  44. Randall, A., & Stoll, J. R. (1980). Consumer's surplus in commodity space. American Economic Review, 70(3), 449–455.Google Scholar
  45. Roemer, J. E. (2011). The ethics of intertemporal distribution in a warming planet. Environmental and Resource Economics, 48(3), 363–390.CrossRefGoogle Scholar
  46. Schelling, T. C. (1995). Intergenerational discounting. Energy Policy, 23(4/5), 395–401.CrossRefGoogle Scholar
  47. Seip, K., & Strand, J. (1992). Willingness to pay for environmental goods in Norway: A contingent valuation study with real payment. Environmental and Resource Economics, 2(1), 91–106.CrossRefGoogle Scholar
  48. Shogren, J. F., Shin, S. Y., Hayes, D. J., & Kliebenstein, J. B. (1994). Resolving differences in willingness to pay and willingness to accept. American Economic Review, 84(1), 255–270.Google Scholar
  49. Shyamsundar, P., & Kramer, R. A. (1996). Tropical forest protection: An empirical analysis of the costs borne by local people. Journal of Environmental Economics and Management, 31(2), 129–144.CrossRefGoogle Scholar
  50. Stern, N. (2015). Why are we waiting? The logic, urgency, and promise of tackling climate change. Cambridge, MA: The MIT Press.Google Scholar
  51. Thaler, R. A. (1980). Towards a positive theory of consumer choice. Journal of Economic Behavior and Organization, 1(1), 39–60.CrossRefGoogle Scholar
  52. Thurstone, L. L. (1927). A law of comparative judgment. Psychological Review, 34(4), 273.CrossRefGoogle Scholar
  53. Vickrey, W. (1961). Counterspeculation, auctions and competitive sealed tenders. Journal of Finance, 16(1), 8–37.CrossRefGoogle Scholar
  54. von Ciriacy-Wantrup, S. (1947). Capital returns from soil-conservation practices. Journal of Farm Economics, 29(4), 1181–1196.CrossRefGoogle Scholar
  55. Willis, K. G., & Garrod, G. D. (1993). Valuing landscape: A contingent valuation approach. Journal of Environmental Management, 37(1), 1–22.CrossRefGoogle Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Wolfgang Buchholz
    • 1
  • Dirk Rübbelke
    • 2
  1. 1.University of RegensburgRegensburgGermany
  2. 2.TU Bergakademie FreibergFreibergGermany

Personalised recommendations