Applications of Environmental Valuation for Determining Externality Costs

Analyzing the effectiveness of environmental programs and regulations requires comparing the costs and benefits of reducing different pollutants or further abatement. To make useful comparisons, the various benefits from reduced pollution must be translated into dollars. Unfortunately, estimating the dollar value of environmental damages is complicated, controversial, and generally uncertain. Often these estimates have been misused. This paper identifies the need for benefit estimates, shows how they are constructed, and demonstrates how they can be used to improve environmental policy analysis.