Putting a price tag on environmental damage.

Cost estimates of damage to the environment may be underestimated significantly by those charged with putting a price tag on ecological disasters. According to Daniel W. Bromley, a resource economist and former director of the University of Wisconsin-Madison Institute for Environment Studies, the consequences from mishaps such as groundwater pollution and oil and chemical spills may be off by a factor of three to five, meaning estimates of perceived damage could be millions or tens of millions of dollars too low in a given situation. "Damages can be estimated in different ways. It all depends on what questions are asked" and what criteria are applied by the courts and policymakers.

The problem is emerging as a contentious public policy issue as Federal laws on liability for environmental damage are implemented. With the establishment in 1980 of the Comprehensive Environment Response, Compensation and Liability Act and the Oil Pollution Act of 1990, the rules of the game changed, and pulluters became liable for harm inflicted on the environment. Federal agencies, primarily the Department of the Interior and the National Ocenic and Atmospheric Administration, are writing rules to give these legislative mandates operational force.

"It used to be that tanker accidents resulting in spills didn't cost oil companies anything except the lost values of the oil and the ships. It didn't cost them anything in terms of environmental damages. Now, if your tankers run aground, it's going to cost you something." The question is, how much?

Bromley points out that putting a price tag on natural resources is far more difficult than simply asking someone what they might pay for a given resource, the practice now used by the courts and regulatory agencies to determine what damages must be paid for a pollution event. "When you ask people how much they would pay for something...