How do you assess damages to a natural resource?

Previously published Slate articles made new.
May 3 2010 6:23 PM

How Much Is Louisiana's Coastline Worth?

Assessing damages to natural resources.

An oil rig exploded 50 miles off the Louisiana coast in April, exposing the state's fragile wetlands to hundreds of thousands of gallons of oil. A week prior, two men were fined after their ship damaged the Great Barrier Reef. Christopher Beam explained how to assess the monetary damage to our natural resources. The original article is reprinted below.

Australian police arrested two Chinese men after their ship ran aground on the Great Barrier Reef, creating a 2-mile scar. One man faces a maximum fine of $51,000, while the other could serve up to three years in prison and pay a $220,000 penalty. How do you put a dollar value on a natural resource?


Ask the markets. One simple approach is to figure out how the environmental damage directly affects various economic activities. When the tanker Exxon Valdezspilled 11 million gallons of crude oil off the coast of Alaska in 1989, a court initially ordered the company to pay more than $5 billion to fishermen who could no longer catch fish and to other businesses hampered by the spill. (The award was eventually reduced to $500 million.) A court might therefore choose to calculate damage to the reef by measuring how much it affects, say, diving companies that benefit from its beauty. Another way to assess value is by measuring the replacement cost. If you cut down your neighbor's trees, for example, you might have to pay the cost of planting new ones. Of course in this instance, the natural resource cannot be rebuilt.

Courts also consider indirect economic damages. That means thinking about the value of a natural resource in more holistic, interconnected terms—an approach known as "ecosystem valuation." When evaluating damage to a rain forest, for example, a court might consider not just the value of the timber but also the oxygen it generates, the food it produces, or any possible drugs that might be developed from the exotic plants found there. In a famous 1997 article in Nature, Robert Costanza added up the values of all the ecosystems of the Earth and estimated that the entire biosphere is worth $33 trillion a year on average.

Market-based approaches only work, however, if there's an actual market connected to a resource. How do you measure the value of something abstract, like a bird not having oil spilled on it? The answer: Conduct surveys. This technique, known as "contingent valuation," involves asking people how much they would be willing to pay to preserve a natural resource—even if its preservation doesn't affect them economically. That amount is the resource's "existence value." After the Exxon Valdez spill, for example, the state of Alaska commissioned a survey that found that the median American household was willing to pay $48.91 to prevent a similar spill. They then multiplied that by the 90 million households in the U.S., and got an estimated existence value of $2.81 billion. This technique is contentious, but courts often take existence value into account when measuring environmental damage.

Got a question about today's news? Ask the Explainer.

Explainer thanks Benjamin Barros of Widener Law School, Robert Glicksman of George Washington University Law School, Michael Greenstone of MIT, and James Salzman of Duke University School of Law.

Like Slate on Facebook. Follow us on Twitter.



Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

How Tattoo Parlors Became the Barber Shops of Hipster Neighborhoods

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
  News & Politics
Oct. 1 2014 7:26 PM Talking White Black people’s disdain for “proper English” and academic achievement is a myth.
Buy a Small Business
Oct. 1 2014 11:48 PM Inking the Deal Why tattoo parlors are a great small-business bet.
Oct. 1 2014 6:02 PM Facebook Relaxes Its “Real Name” Policy; Drag Queens Celebrate
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
Brow Beat
Oct. 1 2014 9:39 PM Tom Cruise Dies Over and Over Again in This Edge of Tomorrow Supercut
Future Tense
Oct. 1 2014 6:59 PM EU’s Next Digital Commissioner Thinks Keeping Nude Celeb Photos in the Cloud Is “Stupid”
  Health & Science
Oct. 1 2014 4:03 PM Does the Earth Really Have a “Hum”? Yes, but probably not the one you’re thinking.
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?