Applications of Environmental Valuation for Determining Externalit Article

Applications of Environmental Valuation for Determining Externalit Cost - Article Example However the regulators and the companies alike have difficulties in converting the physical consequences of such abating into monetary terms. This becomes necessary to guide the regulators and the companies to fix the priorities in adapting various technologies on the basis of the costs and benefits of the individual processes involved. In the case of goods and services that are being traded in a competitive market it becomes easier to value the externalities. The 'externalities' denote the external effects caused by positive or negative spillovers from the production of a product or service. The agency involved in such production of the product or service may be asked to provide additional technology or processes to reduce the negative impact of such externalities. In this case the cost of such externality will be shifted to the producer. Alternatively the consumer may be charged more to discourage the use of the particular product which has a negative externality and in that case the social cost of the externality is borne by the consumer. But problems may arise when the product or service is not traded in the market. ... In a process of evaluation of the benefits of abatement the first step is to estimate the effect of the emissions on the health, visibility, deterioration of materials and depletion of natural resources and damages to the natural environment. The logical next step is to convert the effect into dollar terms. For instance the deterioration on the steel structures caused by the emission of Sulphur dioxide can be arrived as a percentage on the weight of the structures over a period of year and later on this percentage can be converted dollars. This way the cost of replacing the deterioration of steel structures can be calculated. Thus damage functions can be established for all effects of environmental pollution including the health hazard to human beings caused by air pollution. It thus becomes possible to model all the physical effects which in turn help to arrive at the quantitative effects of changes in various levels of pollution. The final step in assessing the monetary value of th e environment impact can be calculated by ascribing a dollar value to the physical changes. However in spite of spending more time and efforts on the research on the qualitative and quantitative effects of environmental pollution no certain models could be developed. This has made the damage function models somewhat ineffective in estimating the value of environmental impact precisely. Willingness to Pay (WTP) Studies: In the example of steel structures the cost of replacing can be ascertained by taking into account the market value of the replacement or repairs to the structures. This may turn out to be a good estimate of the monetary value of damages. But in those cases where it is difficult to monetize the physical changes like in the case of a health hazard due to pollutions of