The origin of existence value can be traced to John Krutilla who in 1967 proposed that economists should not just assign values to goods and services that are directly consumed, but should also attribute a value to the knowledge that a particular wilderness, endangered species or other object in nature exists (Nelson, 1996). Option and existence values of forests relate primarily to non-use values and to the role that forests play in the global context. The option value reflects the value of the environment as a potential source of benefit, in the future, as opposed to actual present use value. Existence value is the satisfaction people obtain from an amenity for various reasons other than their expected personal use. According to Chopra (1993): "option values become significant when accelerated deforestation begins to deplete forest resources. Existence value measures the value of forests as carbon sinks, and as preservers of biodiversity."

Apart from expectations of drug discovery and genetic pools for agriculture, biological diversity conservation has been advocated mainly on the basis of its existence value. The way to value it has been through assessing how much people are willing to pay to ensure that an area continues to exist undisturbed regardless of whether or not people are going to make use of or even visit that area. Van Wilgen et al. (1996) contend, however, that "existence values are becoming increasingly difficult to quantify and to defend, particularly in developing countries, where basic human needs and economic growth are the overriding concerns."

McNeely (1992) suggests that many of the benefits earned from existence values "are being earned by ‘free riders’, who obtain them without having to pay the costs involved". The free riders may be national or international. One author has suggested, for example, that conserving the tiger in India is of much greater importance to comfortable urban dwellers than to the local people who lose livestock or even family members to tigers. Similar problems face small farmers in Africa. In Mozambique, for example, because of the semi-arid conditions of the country, farmers grow their crops close to or along the rivers. Thus, they can have their entire crop destroyed by elephants and rhinoceros when they go to drink water. This was shown in a survey carried out by Nhantumbo in 1994/95 within and surrounding the Maputo Reserve located in the Maputo Province (pers. comm.).

A1.8.1 Elements of option and existence values

Option and existence values refer to fundamental issues of the value of life for its own sake and to the importance of keeping options open for the future. What are these options for the future? Economic and socio-cultural factors influence people’s perception of the importance of forests. These factors in turn interact with and are related to a great diversity of needs and concerns. This suggests that there are no universally accepted option and existence values. It is likely that indigenous people who live in the forest have a much stronger perception of option and existence values because the forest resources can mean their own survival. However, these are values to which it is almost impossible to assign a monetary value. They are inherent to the forest and to what it represents for these people. Within this context, even if a monetary value could be placed, it is unlikely that normal rules of time discounting would apply to option and existence values.

A1.8.2 Basis for assessing option and existence values

Although widely used, the concept of existence value has been the focus of criticism by some economists who argue that it is inconsistent with accepted economic theory and in practice will often yield implausible results (Nelson, 1996). These values can be controversial and their valuation a challenging task, particularly in a developing country context. This is so because most of these countries are faced by major problems such as large foreign debts, population growth, poverty and resource degradation which, in turn, set in motion a downward spiral of even greater poverty and greater environmental degradation. In such a situation, it is unlikely that they can take a long-term view. Moral and equity considerations are also very important for this type of value.

A1.8.3 Benefits and costs

As in the case of carbon sequestration and biological conservation, many of the benefits of existence value go to people who do not pay the costs involved. As stated earlier, conserving the tiger in India or elephant in Africa is of much greater importance to distant urban dwellers than to the local who suffers loss of crops, stock or human life.

A1.8.4 Constraints to realization of option and existence values

As mentioned, measurement of option and existence values is a challenging task, particularly in a developing country context where arguments based on option and existence values are unlikely to sway decision-makers of these countries. The values are unlikely to be substantiated by quantitative proofs that economic benefits may be forthcoming in the short term. These points are summarized in box A1.6.

Box A1.6. - Considerations in valuation of option and existence values

- They are abstract values. Economic and socio-cultural factors influence people’s perception of the importance of the forest and interact with a great diversity of needs and concerns. This suggests that there is no single option or existence value;

- They are difficult to quantify. Values can be controversial and valuing them a challenging task. (For example, what is the meaning of an option or existence value of a forest when this value is the result of a survey carried out in another region or even in another country?)

- Given the problems faced by most developing countries and the lack of quantitative proofs that economic benefits may be forthcoming in the short term, it is unlikely that arguments based on option and existence values would influence their decision-makers.

- Many values are inherent to the forest and to what it represents for different people. So it is difficult to place monetary values as well as unlikely that normal rules of time discounting would apply to option and existence values;

- The concept of existence values has been criticized by some authors who argue that it is inconsistent with accepted economic theory and in practice will often yield implausible results;

- In all situations, seek the value perception of a wide range of interest groups before presenting an estimate.