Page 122 - Materials Chemistry, Second Edition

L1644_C03.fm Page 97 Tuesday, October 21, 2003 3:11 PM

the equations of economic balances and that monetization gives support to solving
the allocation problems of public funds for the protection of life.
However, lacking a common reference for comparison of different impact end-
points inevitably involves a value judgment. Monetization is just one option; there-
fore, the following critical points must be mentioned against the monetization of
environmental damages:

• On a more fundamental level there are doubts whether the monetary
evaluation of human health and the environment is ethically defendable.
• The assignment of economic values to human health and the environment
is not necessarily a guarantee for a sustainable development; they are
considered insufficient for the prescription of environmental policies.

It is out of the scope of this book to take the part of a particular point of view.
The decision-maker must make the choice. Monetization methods will be briefly
presented according to the state of the art; other weighting schemes exist and some
of them are presented in this chapter.
In principle, two fundamental concepts exist in the science of environmental
economics for the monetization of environmental damages:

• In the direct measurement of damages the costs are directly quantified in
the market, for example, costs of illness (COI).
• In the case of environmental impacts that individuals consider damages
but which cannot be measured directly in the market, another perspective
is taken. It is considered that the function of the willingness to pay (WTP)
for the reduction of the emission is equal to the marginal damage function
for the increment of emissions.

With regard to environmental damages, the most important concept is the value
of statistical life (VSL). The loss of a statistical life is defined as the increment of
the number of deaths expressed as 1/certain number of inhabitants. This corresponds
to the probability to die by a factor of 1/n, where n corresponds to a certain number
of inhabitants as a reference group. The focus of scientists evaluating the statistical
life can be distinguished between the WTP approach and the human capital concept
in which a salary not received essentially assesses the statistical life. When using
VSL to evaluate the death of a person due to environmental damages, the age of the
person is not taken into account. Therefore, the YOLL principle has been established.
It is possible to estimate YOLLs based on VSL if data on the age of the reference
group affected by environmental damages are available.
Another important point for the monetization of environmental damages is the
discount rate. Discounting is the practice of giving a lower numerical value to benefits
in the future than to those in the present. This fact has many consequences when
applied to the monetization of environmental damages because these often occur in
the near or even far future.
The damage evaluated today (X ) that will occur in t years is quantified by
0
Expression 3.4, which means, for example, that at a 10% discount rate (r), 100 U.S.$

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