Risk Management

Risk management, the process of decision‐making that attempts to minimize risks without undue harm to other societal values, should be performed independently of risk analysis (NRC 1983). Since, however, the effectiveness of a risk analysis depends on the successful interaction of the risk analyst and the risk manager, we discuss risk management briefly. The risk analysts do not perform the decision‐making process for the risk manager, and the risk manager does not dictate what data, models, and assumptions the analysts use, but they must communicate for the risk analysis to be relevant and the decision to be well‐founded.

As detailed earlier, this relationship should have begun with the definition of the source, environment, and endpoints of concern. Because these activities of the scientist/risk analyst require that value judgments be made that are not based on science, the only way to avoid improper injection of the analyst’s values is by interjecting the values of the risk manager through either policy statements or ad hoc judgments. However, risk managers often are not environmental scientists, so the risk analysts are obliged to assist the risk managers in acquiring enough scientific background to make informed judgments. In addition, the risk analyst must understand the needs and interests of the risk manager well enough to perform the risk characterization.

Figure 5.6 is a simple diagram of the factors involved in setting criteria for the allowable concentration of chemical in air, water, or other ambient medium. The ideal input from the risk analysis is a function relating the probability of unacceptable effects on the endpoint of concern to the criterion level or, more likely, functions for each of a number of endpoints. One former director of the EPA has said that the probability distributions are clearer to decision‐makers than numeric values (Ruckelshaus 1984). From this function, the risk manager may choose a criterion that is unlikely to be overprotective from the upper end of the curve, one that is unlikely to be under protective from the lower end of the curve, or an intermediate criterion. Although not all risk managers are equally comfortable with probabilities, pressure on regulatory agencies to acknowledge and quantify uncertainty is increasing (Finkel 1990).

In addition to the results of the human health and ERAs, the decision will be based on a variety of social, political, legal, engineering, and economic considerations. Legal considerations include the phrasing of the law being implemented and any judicial decisions that indicate the appropriate degree of protection. The principal engineering consideration is the availability of practical technologies to meet the criterion. The cost of meeting the criterion and the value of the resource at risk may be the subject of a formal risk–benefit or cost–benefit analysis. Other, more nebulous considerations include the degree of public concern and the political philosophy of the currently governing administration. The manager may set a criterion or may defer a decision and require that more testing, measurement, or research be performed to reduce the contribution of uncertainty to the slope of the function.

Valuation of Ecological Resources

In order to perform cost‐benefit analyses or to set fines or compensation levels for environmental damage, it is necessary to predict, measure, or estimate the potential or actual loss of value of the system, and then convert that loss into monetary or equivalent units. Many ecologists and environmentalists have objected to the practice of placing monetary values on components of the natural environment, because they feel that economic analyses inevitably undervalue the environment relative to the value of a new chemical or development, or relative to the costs of treatment or cleanup. A counter argument is that decision‐makers inevitably consider economics in their judgments and, if environmental scientists do not develop methods for monetarizing the values of the environment, decision‐makers are likely to underestimate the economic value of the environment. In the United States, for example, the EPA is required to justify new environmental regulations by performing cost‐benefit analyses.

A fundamental argument against valuation of environmental components is that they have intrinsic values that are independent of human values (Rolston 1988). However, even if this premise is accepted, it is impossible for a human to determine what a forest’s values are (i.e. would it rather be old growth or young and vigorously growing?), so a poetic description of the intrinsic worth of a forest is not utilitarian, but it is no less anthropocentric than a dollar value. All value systems devised by humans are inevitably based on human values.

In valuing ecological resources, it is helpful to consider that there are various classes of utilitarian and nonutilitarian values that can be assigned. Each class of environmental values must have its own methods of estimation and valuation.

Utilitarian

Utilitarian values are often classified in terms of commodities, potential commodities, recreation, and services of nature.

Commodity Values 

Trees, rangeland, commercial fish, and other species and communities are sold or leased, so they have market values that are easily determined by conventional market surveys.

Potential Commodity Values 

Plants and animals are sources of chemicals that may be marketed directly or be synthesized and marketed as drugs, pesticides, etc. In addition, all species constitute genetic resources that may be useful for genetic engineering of crops, livestock, industrial microbe, etc. Hence, all species have potential commodity values that are very difficult to estimate. However, this value is lost only in cases of extinction.

Recreation 

Fish and wildlife have recreational value for fishermen, hunters, bird watchers, and others who enjoy seeing animals in their natural habitats. Natural areas have recreational value for campers, hikers, and students of the environment.

Services of Nature 

Ecosystems moderate floods, control the local and global climate, degrade and sequester pollutants, reduce soil and nutrient loss, and perform other services that have palpable economic benefits. These can be estimated as costs of replacing the service (e.g. additional waste treatment) or costs resulting from the lack of the service (e.g. flood damage).

Nonutilitarian

Nonutilitarian values range from the existential and aesthetic to the scientific and cultured.

Existence 

Species and ecosystems have value to many people simply because they exist. Those people may not expect to see a golden lion marmoset or the Arctic National Wildlife Refuge, but they would experience a loss if the marmoset became extinct or the refuge was converted to an oil field.

Aesthetic 

The aesthetic experience provided by organisms and ecosystems has a value equivalent to that of paintings or dance performances, but it is not so easily quantified.

Scientific 

Both species and ecosystems may have scientific value because they may serve as a particularly apt illustration of an unrecognized property of nature or because they are the subjects of long‐term studies which may be disrupted. Of these, only the commodity values and recreational values are reasonably well characterized by existing methods. Research is needed to determine whether defensible methods can be developed for estimating losses of the other values, and monetarizing those losses. It can be argued that attempts to monetarize nonmarket values are inherently artificial and the balancing of apples and oranges should be performed by decision‐makers rather than economists (NRC 1975). Other issues relating to category errors, as well as to the appropriateness of discounting any values and to obligations to future generations are discussed by Costanza (1991), Desvousges and Skahen (1987), and many contributors to the journal Ecological Economics.

Cultural and Ethical 

Certain ecosystems and species have cultural significance. This value is illustrated by the greater emotional impact in the United States of the decline of the bald eagle than the concurrent and more serious declines of the peregrine falcon and brown pelican.

Finally, it should be emphasized that cost‐benefit analysis should not be considered to be the sole reliable basis for decision‐making. It is one input that describes one particular criterion. In particular, it ignores moral and ethical considerations. Many, if not most, members of modern Western cultures would argue that we have moral duties toward the environment that supersede considerations of utility. However, these duties must be balanced against duties toward the poor, the hungry, practitioners of traditional cultures, etc. (Randall 1991). Therefore, environmental values are not absolute, even in moral terms, but must be balanced against competing values. Complexities like these put risk management beyond the scope of formal analysis.