Commentary
The limits of monetization in valuing the environment
A reply to Gsottbauer et al.
Giorgos Kallisa,b,
⁎, Erik Gómez-Baggethuna,c
, Christos Zografosa
a
ICTA, Universitat Autònoma de Barcelona, Spain
b
ICREA, Institució Catalana de Recerca i Estudis Avançats, Barcelona, Spain
c
NINA – Norwegian Institute for Nature Research, Oslo, Norway
A R T I C L E I N F O
Article history:
Received 28 October 2014
Accepted 29 December 2014
Available online 22 January 2015
Keywords:
Valuation
Cost benefit analysis
Contingent valuation
Pricing
Taxes
Neo-liberalism
Political ecology
We welcome the attention of Gsottbauer, Logar, and van den Bergh
(thereinafter GLV) to our contribution. However, their critique misrepresents
what our article was trying to do, so it merits a response.
Our article offered a framework for assessing the conditions under
which one may, or may not engage with processes that value nature
in money terms. GLV argue that, first, we confuse monetary valuation
methods with pricing policies, and that most of what we have to say
may be relevant for the latter but not for the former. Second, they
argue that the assessment criteria we propose are either obvious or unconvincing.
Third, they contend that the examples we give to illustrate
the applicability of our criteria are not representative. And finally, they
suggest that our concern with whether a particular monetary valuation
study or pricing policy contributes to enclosures and neo-liberalism is
ideological and not scientific. Let us respond to each of those criticisms
in turn.
1. The Scope of the Article
GLV call on us repeatedly for not assessing the pros and cons of specific
monetary valuation methods. They remind us the difference that
different designs make. However, methodology was not the purpose
of our article. In our article we made clear that we consider the methodological
discussion exhausted within ecological economics. Precisely
what we wanted was to shift the focus of ecological economists from
that of practitioners pre-occupied with methods, to the broader sociopolitical
context, within which their practice takes place.
To this end, the innovation of our article was to propose to see monetary
valuation studies as instances of a broader phenomenon. At hindsight,
our choice of the term “monetary valuation” for describing this
broader phenomenon might have been confusing. It made some, though
fortunately not all, think that we refer exclusively to studies and
methods. We were instead referring to what, for reasons of further clarity,
we may now call monetization: the assignment of monetary values
to environmental goods and services. Money values may be assigned
to an environmental good by a study, a price, a market, a tax or simply
by decree or a court. One might conduct a study to assess a money
value for carbon, or establish a carbon market and let it fix that value.
From this perspective, monetary valuation studies and pricing instruments
are different instances of monetization. They do different things,
but have in common the same end-effect: the assignment of a monetary
value to an environmental good or service. Our criteria were meant to assess
when and under what conditions and contexts assigning such a
money sign makes sense, and when not. In this, and only this sense our
criteria were meant to be applicable both to studies and pricing policies.
GLV criticize us for what they see as a blanket-rejection of pricing
and monetary valuation studies. Yet, nowhere in our article did we
claim such a generalized conclusion in favor or against. On the contrary,
we urged for caution both by those who without second thought jump
on the bandwagon of markets and prices, and by those who unconditionally
say “no”, whenever a money sign appears. We wanted to explore,
when, and under what contexts, monetization makes sense, and
when not. GLV protest that environmental taxes, subsidy-based Payments
for Ecosystem Services (PES), or well-designed water prices do
not contribute to the commodification of nature that we criticize. But,
precisely, this was our point too, and this is why we provided as examples
that conform to our criteria a well-designed water policy and a
non-market PES.
2. The Criteria
We offered four criteria: whether an act or process of monetization
improves environmental conditions; whether it contributes to equality;
whether it reduces the plurality of different ways of valuing nature;
and whether it contributes to political projects of enclosure,
Ecological Economics 112 (2015) 170–173
⁎ Corresponding author at: ICTA, Universitat Autònoma de Barcelona, Spain.
http://dx.doi.org/10.1016/j.ecolecon.2014.12.013
0921-8009/© 2014 Elsevier B.V. All rights reserved.
Contents lists available at ScienceDirect
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commodification and privatization (for short-hand, “neo-liberal”
projects). GLV had problems both with the criteria and the way we
applied them.
GLV argue that no scientists would be involved in a monetary valuation
study, if they did not believe it would improve the environment.
We contest this assertion: ever since Beckerman or Nordhaus, the purpose
of monetary valuation has been as much to prove that it is cheaper
to destroy the environment or “wait and see”, rather than to sacrifice
growth. There are several examples of monetary valuation and cost–
benefit studies used to justify development projects that damaged the
environment, from the Severn river barrage in England (Hanley and
Spash, 1993), to net present valuation of forests in India (Temper and
Martinez-Alier, 2013) and the use of the Stern report to justify new airport
lanes for London on the basis that lost time by the “jet classes” is
more expensive than deaths from climate change in Bangladesh
(Spash, 2013). Not all monetary valuation studies have this intent, or
this result: we take issue only with those that do have it. And we urge
practitioners to pay attention to the purpose their studies serve, and
the context in which they take place.
Our normative criterion of equality was dismissed by GLV because
they content that “all serious, effective regulation will [anyway] involve
distributional effects”. Our paper was not concerned with “all” environmental
regulation, but only with that which assigns a monetary value to
nature. And our criterion was not whether monetization has any distributional
effect, but whether it has a progressive effect, meaning redistribution
to those who have less. In that case we approve it. If it is
regressive, we reject it.
Concerning the third criterion, plural languages of valuation, we understood
this to be a foundational criterion for ecological economics
(Spash, 2012; Martinez-Alier et al., 1998; Norgaard, 1989) and did not
provide much explaining. GLV claim that “other, non-monetary valuation
approaches” have problems too. This is the subject of a different
paper, that GLV are more than welcome to write. We were concerned
here with those approaches that monetize, not with all approaches.
Our point was not that other valuation approaches are better, but that
when one single approach and logic start colonizing and displacing
others, then this is a problem. It brings value reductionism. GLV claim
that “many if not most political decisions related to rights and safety
are made without any previous monetary assessments”. This is good,
and it should continue being like that.
In many instances in their commentary, they argue that one can design
a price or a monetary valuation study in a way that would contribute
to equality or maintain a plurality of ways of valuing. Well, when
one does so, then this is more likely to satisfy our criteria for accepting
monetization. Of course, when we assess a hypothetical policy, we cannot
consider all other contextual factors that might change; so often we
used in our article “ceteris paribus” clauses, i.e. we assessed monetization,
assuming other factors equal. This is a standard way of arguing in
science. Ceteris paribus, paying in money for something that was previously
provided collectively (and possibly financed by general revenue)
will increase inequality since the poor have less purchase power, unless
the collective provision was for some reason more regressive (Hirsch,
1976; Sandel, 2012). This defies our second criterion. Shifting for example,
from a water pricing system where prices are low because costs
were subsidized by general (progressive) taxation to one where each
user pays for their consumption is, other factors equal, regressive, and
this can only be partially alleviated by block pricing.1
Of course, it all depends
on the specifics: if a water utility introduces full cost pricing and
then gives water for free to the bottom 50% of consumers subsidized by
the 10 or 1% of the richest consumers, this will obviously satisfy our
equality criterion. Our point was precisely to evaluate each case separately
and carefully.
3. The Examples
The examples we gave were not meant to be “exhaustive” or “representative”
(GLV's words). They were meant to be illustrative; illustrative
of cases where monetization should be rejected and cases where it
could be endorsed (under conditions). GLV often call on us for proving
that all monetary valuation studies or all PES have the effects we suggest.
We could not do this, we had since there are no sufficient metaanalyses
testing the effects of monetary valuation studies or PES. We
did not aspire to provide the ultimate word on the usefulness or not of
monetary valuation or PES. What we wanted was to illustrate with examples
types of cases that can go right and types of cases that can go
wrong.
More specifically, the intention of the examples was to illustrate two
things.
First, that it makes a big difference whether monetization involves
an explicit commensuration of nature with money, or whether instead
the use of money is purely instrumental and subjected to other logics
and ways of valuing, as for example is the case with an environmental
tax or a court fine. If what is expressed in money terms is the value of
an investment, the cost of damage or the level of a fine, then this is
good. If what is expressed is the intrinsic value of an environmental feature,
then this is a problem, and it defies our third criterion.
Second, we wanted to show that context matters. If a monetary valuation
study is carried within a socio-political context that favors regulation
and taxation, and not neo-liberal deregulation, then it is more likely
to conform with our criteria; if the opposite, then no. Same with water
pricing reforms: if they take place within a context of privatization,
and their objective is profit and capital accumulation, then they are unlikely
to satisfy our criteria. If they are part of an overall process of conserving
water and distributing access more equally among users, then
they may be useful instruments.
It is true that we did not give examples of a monetary valuation or a
cost–benefit study (though we did give an example of the use of monetary
valuation studies in the Chevron court case in Ecuador, that we approved
of). This is because we agree with Plumecocq (2014) that such
studies have received more attention than is necessary in the pages of
this journal. We did refer however to the Costanza et al. (1997) study.
And actually, we were much kinder to it, than GLV suggest, if one compares
our verdict to that of other ecological economists. Unlike what
GLV understood from our paper, we did recognize that the Costanza
study itself may have been neutral with respect to regulation versus
commodification. We criticized it however, because in the context within
which it took place, a period of deregulation of environmental law in
the U.S. and a Congressional wave against so-called “command and control”
regulation in favor of market instruments, its effects could not have
been neutral. Costanza and environmental economists did unfortunately
important intellectual and discursive work in establishing a frame
and a worldview that see nature as commensurable with money. To
say that this had nothing to do with the subsequent explosion of PES
and market schemes, or the exponential use of valuation studies and
CBA in environmental policy, is naïve. Accepting however that this
may not have been the initial intention of Costanza, we referred to the
“tragedy of well-meant valuation” (Gómez-Baggethun and Ruiz-Pérez,
2011), which despite good intentions does the discursive work necessary
for commodification.
4. A New Example
Since GLV want to see our framework applied to a monetary valuation
study, let us give an example that will be familiar to them: a
1
On a side note, let us point that block pricing is unlikely to be as progressive as taxation.
Water is charged per household, and larger families, often of lower income, end up
paying more per person with block tariffs, than smaller (or single) households, that generally
tend to be of higher income. This could be addressed with adjusting prices to the
number of household members, but monitoring and administering such a system could
be very expensive and uncertain.
171G. Kallis et al. / Ecological Economics 112 (2015) 170–173
contingent valuation of beach erosion in the coast of Croatia that two of
them co-authored (Logar and van den Bergh, 2012). Remember, our
goal here is not to assess the methodological rigor of this study, which
we have no reason to doubt, but its relevance. Would such a study contribute
to our four goals? Should environmentalists or authorities engage
with it?
The study asks respondents how much they would be willing to pay
for a fee to access a beach that is currently public.2
The fee would pay to
protect the beach from erosion. Concerning our first criterion, ex-ante
we do not have reasons to question the intentions of our colleagues to
contribute to environmental improvement. It does strike us as strange
though that, on their own admission, they did not know if the beach
at stake suffered from erosion (pebbled beaches, as the one concerned,
normally do not erode). Ex-post, the verdict is open on whether the
study made any difference to Croatia's coastal environment. From the
article we learn that erosion is an issue in other beaches in the area.
Yet there is no information given on its causes. So it is very hard to
judge why and how enclosing the beaches and applying fees would address
the problem, other than by raising funds for the authorities to
bring the sand back, which is however only a temporal solution to
erosion.
Second, in terms of equality, the Croatia study does not incorporate
any of the elements GLV suggest that valuation studies could have in
order to account for distribution (income-based weights, etc.). Furthermore,
if the beach fee were to be implemented, then, other factors equal,
it would likely have a regressive effect, since each and every user, independent
of income, would be charged to access a popular beach that is
now freely available to anyone and conserved by public funds, i.e. paid
by progressive taxation.
In terms of the third criterion the study seems to fare relatively well.
It does not assume commensurability between the coastal environment
and money. It only values how much users would be willing to pay for a
public investment, i.e. for the municipality to bring sand back to the
beach. On the other hand, the study does not make any effort either to
integrate monetary valuation with the non-monetary valuing schemes,
such as forums or referenda, that GLV say in their commentary are available
and can be used in a plural spirit alongside monetary valuation.
Finally, concerning context we know very little about Croatia in
order to judge. We do note though that there exist processes of privatization
and concerns about the selling out of Croatia's coast (Ballinger,
2003). The study evaluated however a municipal fee, and not a private
or hotel fee, which is good. Ex-post one would have to see what role
this study, and studies like this, played in policy debates about the enclosure
of Croatia's coasts and the institutionalization of access fees
that Ballinger refers to.
The study therefore passes criterion 3, fails criterion 2, potentially is
irrelevant in terms of criterion 1, and its relation to criterion 4 requires
more information than what is provided in the article. Overall, we are
skeptical of its usefulness. One might argue indeed that this was a purely
experimental study investigating the effects of uncertainty on stated
preferences, and therefore not meant to be directly useful, but useful
through methodological innovation. Fair enough. But one might also
then question why conduct studies that have no relation with, or contribution
to the local context. Even if our preference for action-based or
policy-relevant research is subjective, we still wonder why the researchers
of the Croatia study devoted their scarce time to a methodological
detail of a tool that at best, can assess only a small part of
complex policy decisions from only one dimension (monetary value),
and not for example, on developing multi-dimensional or referendalike
tools. This would be much more consistent with the preference
they express in their most recent commentary for methods that handle
all “standard criteria for evaluating policy instruments suggested in
textbooks on environmental economics”, such as “environmental
effectiveness”, “efficiency” and “distribution” (Gsottbauer et al., 2015in
this issue). Contingent valuation does not.
5. On Ideology
GLV suggest that our negative take on enclosures and neo-liberalism
is ideological, by which they mean biased. Our short essay here is not
the place to evaluate the social and environmental record of neoliberal
reforms. Let us accept that our criteria are partly ideological, as
all normative criteria are. What surprises us is that GLV insinuate that
somehow their approach is less ideological or biased than ours (if they
would accept that theirs is ideological at all). They cannot see how “a
valuation study that considers the option of a property right conveys a
neo-liberal … viewpoint” (Gsottbauer et al., 2015-in this issue). So, we
will try to help them see this point.
The Croatia study could approach coastal erosion (assuming there
was one), by evaluating a whole range of policy instruments: a beach
fee, taxes and tax-funded state investments, regulation to zone or prohibit
eroding activities, a tax on the tourism entrepreneurs that profit
from the beach or on those who build on the coast, or a requirement
to local businesspeople to set up a fund and protect the beach. These
are all different options, with very different distributive consequences,
starting from different ideological premises on what is just and who
should pay what. Logar and van den Bergh (2012) sidestep such complex
issues, defending their choice on the basis that as a matter of fact
“there are many cases in which public funds for natural resource management
and preservation are insufficient [and since] such sites generate
benefits … to their users, it is not unreasonable to ask them to pay
part of the costs associated with the specific resource management or
conservation” (p. 186). Accordingly, they had no reservations to tell
their interviewees “that the costs of beach protection against erosion
cannot be covered from the town budget, so that the town authorities
have decided to ask people who actually use the beach to pay for
these costs in the form of a (higher) beach entrance fee” (p. 187),
though this was something they did not know. In other words, they
took for granted that public funds are somehow exogenously running
out, and not e.g. because of the diminishing power of public institutions,
tax avoidance and tax havens by wealthy Croatians, or deregulation of
corporate capital flows. They also assumed that users should pay themselves
for public services rather than the state secure them in common
and fund them through progressive taxation or by asking the economic
actors that benefit to pay them. And they assume that this is representative
of “many cases”. That states are running out of money and that individuals
should themselves assume the costs of the welfare state are
central premises of the neo-liberal doctrine (Harvey, 2005).
GLV argue that there is nothing ideological in studies such as theirs,
since respondents can attach a low value to the property option, or prefer
another instrument. Preferring another instrument was not an option
in the Croatian study. And even if it were, it would start at a
disadvantage, given the biased information the researchers gave to the
interviewees. They told them that the beach will disappear in ten
years unless action is taken now (a completely hypothetical statement),
and that neither the municipality nor anyone else could pay for it. Is it a
surprise then that a well-meant citizen will agree to pay something?
The argument also that if people did not agree they could give a low
value has also – at least – three drawbacks. First, it assumes “one dollarone
vote” as the basis for the expression of collective choice. Second, it
conflates willingness to pay for something, with support of the instrument
through which this something is to be paid. The only vehicle people
were given to express their care for the environment in the Croatian
case was money; and then their expression of care is taken as a tacit
support of the only institutional instrument given to them, the property
right. Third, it is a strange logic one that suggests that if people are not
willing to pay for something, it should not be enclosed, but if they do,
it should. The underlying concern seems to be with making money.
2
The study also asked the same question, for comparative methodological reasons that
need not concern us here, to users of a nearby beach that does have a fee.
172 G. Kallis et al. / Ecological Economics 112 (2015) 170–173
GLV would argue that people, if they don't like the money vehicle or
the property option, they still have the choice to “protest” (sic). In the
Croatia study 12.5% refused to give a value for a fee, responding that
they were not the ones who should pay for the beach maintenance, or
expressing disbelief in the fictitious erosion problem, or saying that
the beaches are public goods (Logar and van den Bergh, 2012, 186).
Suppose though for a moment that the tables were turned, and the
question was “This beach is to remain free and public; how much should
the wealthier 1% of our community be taxed to pay the costs of its
preservation?” Would 87.5% of respondents protest and ask to pay
themselves? The way a study is structured pre-figures what it thinks
the solution to the problem should be. The way the Croatian study
was structured was neither neutral nor purely scientific; it was as ideological
as our concern with neo-liberalism.
By no means do we suggest here that Logar and van den Bergh had
an explicit political agenda. When they were designing the study they
were probably following standard practice and methodological
expediency. A main feature of ideology, especially of the ideology
dominant in a particular era or community, is precisely its “taken-forgrantedness”,
the fact that it appears as common sense, “the natural
thing to do” in a given circumstance. Unlike GLV, we do not see in ideology
a deficiency of scientific practice. We recognize that it is an unavoidable
feature of any scientific endeavor, and we wish that practitioners,
of monetary valuation in this case, were conscious, aware and transparent
of the ideas that pre-condition their research rather than deny them
and, even worse, charge as “ideological” – which in their understanding
of the term, means biased and less scientific – those who contest them.
6. Conclusions
Commenting on our paper, Gsottbauer et al. (2015-in this issue)
attempted to give a “fair and consistent criticism of all valuation languages”.
Their article gave a long bulletpoint list of methodological
criteria to assess and classify different types of monetary valuation studies.
We are happy that they did this, though it had nothing to do with
the original intentions of our article, which escaped them. We were
not interested on criteria to evaluate and improve the methodological
rigor of monetary valuation studies, but on a framework for assessing
the usefulness of different tools and processes that monetize nature;
from monetary valuation studies, to carbon markets and water prices.
Our criteria were anchored in political ecology and ecological economics.
Our normative framework is no more subjective or ideological
than studies, which assume that states are running out of money, and
that people should pay the bill, asking them then how excited they
are about it. The difference is that we make our values explicit; whereas
our colleagues keep them hidden in their pre-analytical vision, possibly
unaware of the ideological choices that pervade any axiomatic framework
(Bromley, 1990).
We did not purport to give a general assessment of all monetary valuation
studies or pricing policies. We intended to give a framework for
assessing the usefulness of concrete cases and we illustrated how this
can be done, with examples.
Hopefully, those practitioners who share similar values and concerns
with us have found something useful in our analysis.
Acknowledgements
This work benefited from two EU FP7 actions: OpenNESS
(EC-308428) and the Marie Curie Initial Training Network ENTITLE
(289374).
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