State of the Art of Hedonic Pricing

Hedonic pricing methods have become a staple in the environmental economist’s toolkit for conducting nonmarket valuation. The hedonic pricing method (HPM) is a revealed preference approach used to indirectly infer the value buyers and sellers place on characteristics of a differentiated product. Environmental applications of the HPM are typically focused on housing and labor markets, where the characteristics of interest are local environmental commodities and health risks. Despite the fact that there have been thousands of hedonic pricing studies published, applications of the methodology still often grapple with issues of omitted variable bias, measurement error, sample selection, choice of functional form, effect heterogeneity, and the recovery of policy-relevant welfare estimates. Advances in empirical methodologies, increased quality and quantity of data, and efforts to link empirical results to economic theory will surely further the use of the HPM as an important nonmarket valuation tool.

Systemic Change: The Complexity of Business in a Circular Economy

The transition to a circular economy is often associated with appropriate business models, which should, among other things, help to replace the conventional `end-of-life? concept regarding commodities with restoration and environmental design. This systemic change appears to be closely linked to the waste hierarchy: prevention of waste, reuse of old commodities and recycling of waste. The paper shows that there are various problems for businesses to maintain the waste hierarchy in the context of a circular economy. The intrinsic nature of environmental commodities and, in particular, societal path dependencies present some challenges. These societal path dependencies are related to the benefits of decentralized decision-making in a market economy. In the short term, appropriate environmental policies can help alleviate some of these problems, but in the long term, these societal path dependencies need to be reoriented. The paper contains practical examples of all the issues raised.

Use of Property Values and Location Decisions for Environmental Valuation

The economics literature has developed various methods to recover the values for environmental commodities. Two such methods related to revealed preference are property value hedonic models and equilibrium sorting models. These strategies employ the actual decisions that households make in the real estate market to indirectly measure household demand for environmental quality. The hedonic method decomposes the equilibrium price of a house based on the house’s structural and neighborhood/environmental characteristics to recover marginal willingness to pay (MWTP). The more recent equilibrium sorting literature estimates environmental values by combining equilibrium housing outcomes with a formal model of the residential choice process. The two predominant frameworks of empirical sorting models that have been adopted in the literature are the vertical pure characteristics model (PCM) and the random utility model (RUM). Along with assumptions on the structure of preferences, a formal model of the choice process on the demand side, and a characterization of the supply side to close the model, these sorting models can predict outcomes that allow for re-equilibration of prices and endogenous attributes following a counterfactual policy change. Innovations to the hedonic model have enabled researchers to more aptly value environmental goods in the face of complications such as non-marginal changes (i.e., identification and endogeneity concerns with respect to recovering the entire demand curve), non-stable hedonic equilibria, and household dynamic behavior. Recent advancements in the sorting literature have also allowed these models to accommodate consumer dynamic behavior, labor markets considerations, and imperfect information. These established methods to estimate demand for environmental quality are a crucial input into environmental policymaking. A better understanding of these models, their assumptions, and the potential implications on benefit estimates due to their assumptions would allow regulators to have more confidence in applying these models’ estimates in welfare calculations.

Integrated environmental policy: A review of economic analysis

Holistic environmental policies, which emerged from a mere combination of technical activities in waste management some 40 years ago, constitute the most advanced level of environmental policies. These approaches to environmental policy, among them the policies in integrated waste management, attempt to guide economic agents to an environment-friendly behaviour. Nevertheless, current holistic policies in waste management, including policies on one-way drinks containers and waste electrical and electronic equipment, and implementations of extended producer responsibility with further applications to waste electrical and electronic equipment, reveal more or less severe deficiencies – despite some positive examples. This article relates these policy failures, which are not necessarily the result of an insufficient compliance with the regulations, to missing constitutive elements of what is going to be called an ‘integrated environmental policy’. This article therefore investigates – mostly from a practical point of view – constitutive elements, which are necessary for a holistic policy to serve as a well-functioning allocation mechanism. As these constitutive elements result from a careful ‘integration’ of the environmental commodities into the economic allocation problems, we refer to these policies as ‘integrated environmental policies’. The article also discusses and illustrates the main steps of designing such a policy – for waste electrical and electronic equipment and a (possible) ban of Glyphosat in agriculture. As these policies are dependent on economic and political stability with environmental awareness sufficiently developed, the article addresses mostly waste management policies in highly industrialised countries.

Using Ecological Production Theory to Define and Select Environmental Commodities for Nonmarket Valuation

Economic analyses of nature must somehow define the “environmental commodities” to which values are attached. We articulate principles to guide the choice and interpretation of nonmarket commodities. We describe how complex natural systems can be decomposed consistent with “ecological production theory,” which, like conventional production theory, distinguishes between biophysical inputs, process, and outputs. We argue that a systems approach to the decomposition and presentation of natural commodities can inform and possibly improve the validity of nonmarket environmental valuation studies. We raise concerns about interpretation, usefulness, and accuracy of benefit estimates derived without reference to ecological production theory.

Grabbing ‘Green’: Cynical Reason, Instrumental Ethics and the Production of ‘the Green Economy

This paper traces the institutionalization of Environmentalism as a pre-condition for the production of ‘The Green Economy,’ particularly the containment of the oppositional possibilities of an environmentalist politics within the institutional and organizational terrain of a transnational managerial and capitalist class. This is a context in which many environmental organizations – once the site of planning, mobilizing and implementing opposition and resistance to the environmentally destructive practices of corporate industrialism – have become part of a new project of accumulation grounded in enclosure, access and the production and exchange of new environmental commodities. This transformation reflects what Sloterdijk (1988) has termed cynical reason – an enlightened false consciousness; and my concern in the paper is to think through ‘The Green Economy’ and its coincident instrumental ethics as an iteration of cynical reason and an expression of institutionalized power. Specifically, I focus on the development of ‘global environmental governance’ as a statist project that concentrates sanctioning authority and resource allocation in centers of accumulation (e.g., the Convention on Biological Diversity and its funding mechanism the Global Environment Facility) and facilitates the containment of Environmentalism as an oppositional politics through demands that it assume conventional forms of organization, projectification and professionalisation and through facilitating a redefinition and redeployment that shifts environmentalism from a space of hope to an instrumentalist mechanism in rationalist projects of accumulation.