Valuation of Environment

Environment plays an important role in an economy. First, it contributes to production of output by supplying inputs such as raw materials (minerals, crude oil, coal, forest products, and many others), genetic resources, oxygen and water. Second, it regulates climatic conditions through changes in the levels of carbon dioxide, solar energy, moisture, soil fertility and erosion, etc. Thus, it provides avenues for many other activities such as tourism and recreation. Fourth, it is a carrier of life on earth and provides habitat for people. Fifth, it absorbs the wastage generated during production as well as consumption of goods as a sink for effluents and emissions.

Over time there has been depletion of natural resources and degradation of environment which have adversely affected quality of life. Although its intensity differs across geographical regions, and depends upon the level of economic development &d cultural factors, the problem of environmental degradation has been witnessed everywhere at all levels. A major reason behind environmental degradation is the fact that we presume many environmental actions to be freely available to us and thus assign zero economic value. A proper understanding of the value of environment would help in creation of awareness among stakeholders and allocation of adequate resources towards improvement in the quality of environment.