CBA Flashcards

1
Q

What is value?

A

Value - the quality (positive or negative that renders something desirable or valuable

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2
Q

What is economic value?

A

Economic Value of Ecosystem Services

  • expressed as exchangeability for other goods, taking into account all relevant costs of the good and social benefits provided by it.
  • but it, of course, doesn’t encompass the whole value
  • Financial ( for institutions) vs. economic (for individuals)
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3
Q

What is maginal value?

A

Marginal Value - the value of the last piece that you consume.

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4
Q

What are the difficulties/problems with valuation of ES?

A

Problems with valuation of ES
Many ES not traded on market because they are either
- public goods: non rivalrous and non excludable
or
- no market exists for the ES (e.g. no market for clean air)
BUTES provide benefit to people so as such they do have an economic value. But it is just difficult to value it properly. Ecocentric value, non-market value and market value.

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5
Q

Why value ES?

A
  • to enhance decision-taking
  • to explain the benefits of environmental policies ( in terms of fiscal account and public support)
  • BUT there is always a risk in valuing ES as it can never capture the whole value of ES
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6
Q

What are the ES value types?

A

Value types

  • use value
  • non-use (existence value)
  • option value
  • total economic value = UV+NUV+OV
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7
Q

What is the total economic value?

A
  • total economic value = UV+NUV+OV
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8
Q

What are the types of use values?

A

Direct value (provisioning services, cultural services) vs. Indirect value (regulating services, cultural services) vs. Non-use value (ecocentric value e.g. cultural service) vs. Option value (provisioning/regulating/cultural services)

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9
Q

What is the process of valuation of ES?

A

Step 1. specification of the boundaries of the systems to be valued.
Step 2. Assessment of ecosystem services in biophysical terms
Step 3. Valuation using monetary, or other indicators
Step 4. Aggregation or comparison of the different values

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10
Q

What are the 2 different types of valuation methods?

A

Revealed preferences ( indirect):
- hedonic pricing (how environmental factors affect the price of a home)
- travel cost method (TCM) - sum of all travel costs by each individual to the recreational site
Stated preferences (direct):
- price data (if there is any)
- contingent valuation method (CVM) - survey which asks how much money is someone willing to pay to maintain the existence of an ES.
- choice modelling - deriving data from the choices of the attributes of an ES that people are willing to pay for.

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11
Q

What is hedonic pricing?

A

hedonic pricing (how environmental factors affect the price of a home)

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12
Q

What is the travel cost method?

A

travel cost method (TCM) - sum of all travel costs by each individual to the recreational site

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13
Q

What is contingent valuation methods?

A

contingent valuation method (CVM) - survey which asks how much money is someone willing to pay to maintain the existence of an ES.

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14
Q

What is choice modelling?

A
  • choice modelling - deriving data from the choices of the attributes of an ES that people are willing to pay for.
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15
Q

What could be a value indicator for groundwater infiltration?
What could be a value indicator for wood production?

A

Avoided costs. Net revenue for the park

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16
Q

What is the cost benefit ratio (NPV)?

A

net present value of costs / net present value of benefits

17
Q

What are amortized costs?

A

translating one-off investment into an annual cost ( e.g. morgage)

18
Q

What are the net annual benefits?

A

Net annual benefits = annual revenues - (operation + maintenance + other recurring costs)

19
Q

What is payback period?

A

Payback period - number of years required to pay back for the investment costs. (costs / net annual benefits)

20
Q

What are the opportunity costs?

A

Opportunity costs - costs related to foregoing an investment

21
Q

What is NPV?

A

NPV -net present value - reflects the monetary value of an investment on the basis of its cash flow during a discounting period and a discount rate

22
Q

What is IRR? And how high should IRR be for a company to invest?

A

Internal Rate of Return (IRR)is the exact discount rate that makes NPV equal 0.
The higher the risk the higher the IRR should be. For the investment to proceed the IRR should be of atleast 15%

23
Q

What is economic value resulting from a market transaction or the supply of an ecosystem service?

A

The sum of consumer and producer surplus.

24
Q

What about inflation when doing CBA?

A

Usually, inflation is ignored, so work in constant prices and indicate which from which year the prices were taken. Though CPI can also be used as an alternative.

25
Q

How can costs and benefits be compared in CBA?

A

Through CB-ratio, NPV, IRR

26
Q

How to value biodiversity?

A

Can only be done through contingent valuation and related methods.

27
Q

How can the function related to the ecosystem service fisheries be defined? And how can they be calculated?

A

The function is ‘capacity to support fisheries’, which can be defined on the basis of the sustainable fish harvest levels of coral reef. Calculation of sustainable fish harvest levels requires fish population models, based on water temperatures, food availability, foodwebs, predation, etc