Which of the following can be used for valuing environmental amenities?

A. Hedonic pricing

B. Travel cost

C. Contingent valuation

Choose the correct code:

Correct option is C

Introduction

Environmental valuation is the process of assigning monetary values to environmental goods and services that are not typically traded in a formal market.

These methods are essential for Cost-Benefit Analysis (CBA) to ensure that natural resources like clean air, scenic views, or biodiversity are accounted for in policy-making.

Valuation techniques are broadly categorized into "Revealed Preference" (based on actual behavior) and "Stated Preference" (based on hypothetical surveys).

Information Booster

Hedonic pricing uses market prices of properties to estimate the value of local environmental quality.

Travel cost method estimates the value of recreational sites by analyzing the expenses visitors incur to reach them.

Contingent valuation is a survey-based approach used to measure the "willingness to pay" (WTP) for an environmental improvement or "willingness to accept" (WTA) compensation for its loss

Hedonic pricing relies on the principle that the price of a house is influenced by environmental "amenities" (e.g., proximity to a park) or "disamenities" (e.g., noise or air pollution).

The Travel Cost Method assumes that the value of a site (like a National Park) is reflected in the time and money people spend to visit it, creating a demand curve for that site.

Contingent Valuation is unique because it is the only method capable of measuring "non-use values," such as the existence value of an endangered species.

These methods help internalize "externalities"—costs or benefits that are not reflected in the market price of goods.

According to the standards, all three are fundamental tools in Environmental Economics for determining the Total Economic Value (TEV).