Assigning an economic value to the processes and conditions by which natural systems sustain and fulfil human life is one way of encouraging investment and equitable cost‑sharing in environmental and natural resources management. Environmental valuation techniques attempt to value environmental goods and services in monetary terms so they can be considered in decision-making and management. These techniques can also be used to help formulate incentive programs for native vegetation management. Environmental goods and services such as attractive landscapes, native vegetation and wildlife cannot easily be valued as conventional goods and services. Their value, and the costs of any degradation of these, is therefore not often considered.

The total worth of environmental goods and services is the sum of any ‘use’ benefits which are transacted in the market place, plus the ‘non-use’ benefits, or values: non-use values include option values (retaining the option of its potential or future use), existence value (the benefit of knowing that an environmental resource exists without necessarily having any intention of using it) and the bequest value (the willingness to retain something for the benefit of future generations).

Environmental valuation has the aim of estimating these non-use values. Three ways to do this have been developed over recent decades: market-based methods, surrogate market approaches and simulated market approaches. Both market-based and surrogate markets provide estimates that are grounded in real market prices. Simulated markets are used where actual prices for environmental goods or services are not available. The next best way of estimating the price when a market is not recognised is asking people how much they would be willing to pay for it, which simulates the market.

Contingent valuation (simulated markets) and the travel cost method (surrogate markets) were two commonly used approaches in the 1980s and early to mid 1990s to assess the non-use values of natural areas. This is reflected in the range of Australian and overseas studies referred to in Techniques to Value Environmental Resources: An Introductory Handbook 88 and the on-line database Envalue 89, both of which use examples up to the mid‑1990s. While most of the examples are nearly ten years old, both of these sources contain useful information on the application of valuation techniques. Because of some concerns about the assumptions underpinning techniques such as contingent valuation, other techniques such as choice modelling and benefit-cost analysis are now being increasingly used as part of the ‘toolkit’ to value native vegetation and other natural resources. The information sheet on Techniques for Environmental Economic Valuation 90 provides a more recent summary of the range of environmental valuation techniques available and the Environmental Economics Unit website 91 has links to a number of useful reports and websites on environmental valuation.

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	Discover more about the different environmental valuation techniques and their application, in laypersons’ language, by visiting the Ecosystem Valuation website http://www.ecosystemvaluation.org/.
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Table 5 gives examples of the use of these and other techniques, particularly in relation to native vegetation management at the regional and catchment scale. Two of these studies are described in more detail to demonstrate the results found. The report on the Economics of Remnant Vegetation Conservation on Private Property 92 used three valuation techniques – benefit-cost analysis, contingent valuation and choice modelling to estimate the market and non-market value of remnant vegetation at the property and catchment scale in south‑eastern Australia. Three value components – community willingness to pay, net on-farm costs, and catchment benefits – were integrated into the analysis. The results indicated that, under most conditions, there was a net economic benefit in conserving remnant native vegetation. Another study referred to in Table 1.4 found that in 1998 Brisbane respondents were willing to pay $83 each for an additional 10 per cent tree retention compared to the situation in the Desert Uplands of Queensland 93. The critical next step following analyses such as these is incorporating them into policies and programs for the management of native vegetation. For example, the report on Economics of Remnant Vegetation Conservation on Private Property 94 recommended that the results be incorporated into an incentive policy that contained binding and non-binding management agreements.

Table 5: Valuation techniques used to assess the non-use value of native vegetation.

Benefit-cost analysis  95, Game theory  96
Travel cost  97^,  98, Choice modelling  100^,  101^,  102