Valuation of natural resources: efficiency and equity

Adequate pricing of environmental goods is essential for the sustainable management of natural resources. It is not easy, however, to place a value on natural resources, because the excludability problem makes it difficult to protect natural resources from unpaid use and to exercise property rights over them. This article discusses the achievements and limitations of current natural-resource policies from the perspectives of efficiency and equity. It argues that a trust fund operating via market-based transactions is a promising approach to help to achieve simultaneously the goals of efficiency, sustainability, and poverty reduction, provided that property rights to the environmental resources are distributed fairly within current generations, as well as between present and future generations.