Uncertain Future Preferences and Conservation

An important problem in environmental economics arises from the irreversibility of consuming or destroying certain resources. Extractive resources like oil are a clear example. Even for environmental resources the same seems to be true in a number of important cases, for example biodiversity, current climate conditions, or complex ecological systems. Irreversibility imposes a severe externality across different generations; future generations will suffer from the destruction of a unique asset like Amazonia, and it is not clear how such a loss could be compensated in terms of other goods. If such an asset is destroyed, then it is not possible subsequently to restore it. In contrast, if the asset is preserved, then it is possible to “use” the asset at a subsequent date. If there is uncertainty about future preferences or valuations, then preservation provides a type of insurance which is not available if the irreversible decision is carried out.