Reaching conclusions: the value of valuation

The maths might look pretty but does environmental valuation risk doing more harm than good?

Happy New Year everyone!

As 2014 gets underway, the beginning of second term is drawing closer and, as this is my final year, I’m afraid that means the end for this blog… at least for a while. Over the last few months I’ve touched on a wide range of issues and so I think a few concluding posts are necessary to draw things together.

One of the issues that I’ve examined during the course of this blog is environmental valuation. Although I initially defended valuation as a way of emphasising that environmental policy can achieve economic – as well as environmental – gains, I’ve become increasingly skeptical about its validity and utility. It is clear that some critical ecosystem characteristics – such as environmental resilience – are simply too complex to value and, therefore, environmental valuation will inevitably be a partial exercise. Furthermore, if individual preferences vary, rather than being intrinsic as is assumed in conventional economics, then environmental values that are derived using preferences are also liable to change.

Despite these problems with environmental valuation, an obvious counter-argument is that imperfect numbers are better than no numbers: even if the methods used to derive environmental values are flawed, the fact that the value of the environment is being recognised can only be a good thing. I’m not convinced by this. As long as methodological issues remain unresolved, it’s too easy for politicians to just dismiss environmental values as imprecise. But even if valuation methods could be improved, I find the rationale behind monetisation problematic.

Monetisation, is a way of standardising the magnitude of various changes in terms of a single unit (e.g. £s or $s), in order to facilitate ‘rational’ decision making. Obviously decisions need to be based on some sort of information but why is it necessary to present everything in terms of a single monetary unit? The only reason I can think of is political. Deciding between a series of qualitative scenarios would require politicians to make value judgments that would then have to be justified to the wider public. Allocating each scenario a quantitative value, however, avoids this by turning a subjective decision into an objective one: the best policy is simple that which results in the biggest positive number. This seems problematic because, as I have argued, the numbers that are ascribed to various impacts are far less objective than they may seem.

What is clear is that climate change will have complex impacts and therefore environmental policy decisions will inevitably involve trade-offs. Should renewable energy generation be promoted even if this increases energy prices?  Should carbon emission mitigation or infrastructure adaptation be prioritised? Should the problems of environmental change take precedence over other social issues such as the public health burden of an ageing population? Such tradeoffs will inevitably require politicians to make hard decisions and I believe that, rather than aiming for quantitative objectivity, politicians should be expected to explain and justify the value judgments underpinning their policy choices.

Because environmental valuation encourages political empiricism, I fear it risks turning environmental decision-makers into quants thereby undermining more deliberative approaches that, in my opinion, are far more suited to addressing the challenges posed by climate change.