Environmental economics has developed methods to use a common indicator (money) for environmental policy decisions. This indicator allows cost-benefit analyses (CBAs) for an objective and realistic evaluation of the economic consequences of different development options. The latter is necessary to avoid decisions in disfavour of nature. This paper gives a broad overview about the advantages and disadvantages of this kind of policy evaluation for non-economists.
Economic valuation of natural resources has not been developed for its own sake. It was elicited by political authorities seeking methods to incorporate non-marketable goods in CBA, as well as by the American administration of justice. In Europe claims for environmental damages are less common, and economic evaluation should take place at the level of projects. Most biodiversity conservation projects are suitable for economic valuation. For political reasons they are designed in a way which suits the requirements for an economic evaluation. Economic evaluation cannot only act as a decision aid. In addition, the estimation of benefits of conservation programs, which otherwise might have been neglected, helps to promote acceptance for these programs. Furthermore economic evaluation is necessary for the development of any kind of green accounting or in order to calculate the incremental costs for biodiversity conservation enshrined in the Convention of Biological Diversity. CBAs based on environmental valuation methods are subjected to controversial discussions. Especially methodological (biases in the estimation of values) and ethical (lexicographic preferences) aspects are criticised. By using CBA these problems should always kept in mind. As a response to these critics recommendations for the application of the contingent valuation method (CVM) have been worked out (see NOAA-Panel). To deal with risk and uncertainty as well as with the irreversibly of biodiversity loss, concepts such as save minimum standard (SMS) and the 'precautionary principle' have been developed. Furthermore, there are legal limits for CBA dealing with natural resources. But without economic valuation of the environment, policy decisions are supported which contradict economic rationality, which has been shown in various studies. (