In his textbook Environmental Economics, D. J. Thampapillai (1991) demonstrates two methods of estimating environmental values with respect to the south-eastern forests of NSW. The opportunity cost of the area is the value of forestry operations foregone. He points out that economists at the University of Wollongong have estimated that benefits to Australians from wood-chipping operations in the area are worth $17 million per year, which is based on the amount that comes from taxes and royalties. This does not include wages, because they assume that without a wood-chipping industry local people would be employed elsewhere. Thampapillai argues that the opportunity cost, which is the highest net benefit of any alternative use, is this $17 million less the benefits that would be gained from supplying the timber for wood-chipping from elsewhere in NSW instead. Thampapillai says that the opportunity cost is the lowest value that can be placed on preservation of an area. The real value of saving species in the area is likely to be much higher than the opportunity cost. Another method of valuing the area is through proxy or substitute prices. An example he gives is the value of time spent by those lobbying and campaigning to save the area. If two hundred conservationists spend sixty days each on such activities, and they normally earn $100 per day, they would have sacrificed $1.2 million between them. This can be used to estimate the value of preservation at $1.2 million per year.  |
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