Relative Price Changes of Ecosystem Services: Evidence from Germany

Jonas Heckenhahn and Moritz Drupp

No 9656, CESifo Working Paper Series from CESifo

Abstract: Discounting future costs and benefits is a crucial yet contentious practice in the appraisal of long-term public projects with environmental consequences. The standard approach typically neglects that ecosystem services are not easily substitutable with manufactured goods and often exhibit considerably lower growth rates. Theory has shown that we should either apply differentiated discount rates, such as a lower environmental discount rate, or account for increases in relative scarcity by uplifting environmental values. Some governments already integrate this into their guidance, but empirical evidence is scarce. We provide first comprehensive country-specific evidence, taking Germany as a case study. We estimate growth rates of 15 ecosystem services and the degree of limited substitutability based on a meta-analysis of 36 willingness to pay studies in Germany. We find that the relative price of ecosystem services has increased by more than four percent per year in recent decades. Heterogeneity analysis suggests that relative price changes are most substantial for regulating ecosystem services. Our findings underscore the importance of considering relative price adjustments in governmental project appraisal and environmental-economic accounting.

Keywords: willingness to pay; discounting; relative prices; ecosystem services; substitutability; growth; cost-benefit analysis (search for similar items in EconPapers)
JEL-codes: D61 H43 Q51 Q54 Q58 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-agr, nep-env, nep-eur and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Relative Price Changes of Ecosystem Services: Evidence from Germany (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9656

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