Point of View

Seeing values beyond costs of protecting environment

April 26, 2013 

Environmental regulation is often cited as a factor that stifles job creation and economic growth, and most arguments about the cost of environmental protection are limited to the dollars and cents of pollution controls.

These costs can pass through to consumers in the marketplace as higher electric power rates and higher product prices. The argument continues that with higher product and energy prices, consumers will buy less, manufacturers will produce less and jobs will be lost.

What no one asks is whether North Carolina’s consumers are willing to pay more for goods and services in exchange for better air and water quality and a cleaner and healthier environment. Research has shown there are values other than cost that are important to North Carolina’s consumers when environmental quality is an issue.

An academic study on paying more for environmental quality, conducted by Professor Peace, was published in the Fordham Environmental Law Journal Symposium in 2002. The study involved a random sample of 300 Wake County residents taken from a pool of registered voters, owners of real property and holders of N.C. driver’s licenses. They were asked whether they were willing to pay more for electric power generated by renewable fuel sources, so-called green energy. A majority, 62 percent, said yes, they would pay more.

The findings from a national study, published May 2012 in the journal “Nature Climate Change,” show a national inclination of a willingness to pay more. Interestingly, both studies found that women are more likely than men to have a sharper focus on the effects of pollution on home and family and are more likely to favor paying the higher cost.

Rational choice economic theorists would find it irrational for individuals to be willing to pay higher prices when the benefit of the price increase, better air and water quality, would be enjoyed by everyone. When environmental concerns are at issue, however, the rationale for an additional cost increment may be based on social, ethical or moral values and not strictly financial considerations. This means taking into account quality of life factors like recreation and stewardship of natural resources for future generations.

Economists have used contingent valuation as a nonmarket-based method of determining cost or value in circumstances where assigning a dollar value to something is complicated by the fact that the assets or products being valued are not bought and sold in ordinary commerce and do not have a market price.

Contingent valuation was used to identify dollar damages to the environment from the Exxon Valdez oil spill and the more recent BP Deepwater Horizon disaster. This concept of other values includes existence value, aesthetic value and bequest value.

Existence value can be used, for instance, to value the existence of North Carolina’s oyster beds, black bears or bobwhite quail. Aesthetic value can determine the value to the public of a clear mountain sunset or a clean beach. Bequest value can be used to determine the worth we may assign to passing on to our children and grandchildren a healthy wild game population or fish free of mercury contamination.

We know that our state legislators face the difficult task of balancing environment policy with North Carolina’s economic interests.

At the same time, we urge our environmental law and policymakers to consider all societal costs and values when considering matters affecting our air and water quality, our public health and our environment.

It is certainly worth something to the current generation of North Carolinians to assure that generations to follow can experience nature and natural resources unspoiled by pollution.

Bob Peace is professor emeritus, College of Management, at N.C. State University. Stephen T. Smith is chairman of the N.C. Environmental Management Commission.

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