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Green Accounting in Europe

A Comparative Study, Volume 2

Edited by Anil Markandya and Marialuisa Tamborra

Using spatially desegregated data on measures of pollution to derive economic damage estimates, the main purpose of the book is to gauge the environmental damage sustained as a result of economic activities and to offer an insight into how the information generated can be used in conjunction with conventional economic accounts. The first few chapters review recent developments in both green accounting and pathway analysis. The book goes on to evaluate the progress made in estimating dose response functions and valuing environmental damages. The authors discuss the methodology used for the estimation of damages caused by ambient air pollution and the cost of defensive expenditures. They also present the results of the analysis and draw important policy conclusions for environmental accounting, particularly in the EU.
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Chapter 5: Developments in Valuation

Anil Markandya, Alistair Hunt and Paul Watkiss


Anil Markandya, Alistair Hunt, Paul Watkiss and Fintan Hurley 5.1 INTRODUCTION Since the publication of the results of the first wave of research (Markandya and Pavan, 1999), a number of developments have been made on the valuation side. These are described below for the areas of crops, health and recreation. 5.2 CROPS In Markandya and Pavan (1999) it was acknowledged that the method used for valuing crop damage was flawed, because estimated yield losses were taken and multiplied by the unit value of the crops. This takes no account of changes in relative prices consequent upon changes in air pollution. Such changes can result in increases for some crops and reductions for others. What we are really interested in is the change in consumer and producer surpluses for all crops, when pollution levels are reduced to nonanthropogenic levels. Some work on such changes has been carried out before (see European Commission, 1995). It has not been done, however, for changes in pollution of the kind assumed in the GARP analysis. Hence an exercise was undertaken by the Dutch team to model the pollution changes in a framework where the whole agricultural sector was included and where relative prices were determined as a result of balancing supply and demand. As expected the results are somewhat different from those obtained with the simple partial equilibrium model. The details of the valuation and the estimates obtained are given in Chapter 10. In that chapter a fuller modelling of the agricultural sector reveals...

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