Replacement cost, economic value estimations using

Over the past half century, the held of economics has developed a rich and extensive literature that advances the theory and methodology of estimating values associated with the myriad unmarketed yet economically valuable benefits provided by nature. While the literature is vast, the number of approaches available to estimate the economic value of ecosystem services remains limited to only a handful, each with its own strengths and weaknesses (for comprehensive reviews, see Mitchell and Carson, 1989 Freeman, 1993 Smith, 2000 Mathis et al., 2003). These include replacement costs and avoided costs analysis, factor income analysis, hedonic pricing, contingent valuation, and travel costs analysis. A discussion of these approaches follows later in this section. Although there is often considerable debate about the methods used and the accuracy of the values derived, there is little doubt that the unpriced economic value of ecosystem services is enormous.9... 

The following example illustrates the type of economic analysis involved in determining if a replacement should be made A company is using a piece of equipment which originally cost 30,000. The equipment has been in use for 5 years, and it now has a net realizable value of 6000. At the time of installation, the service life was estimated to be 10 years and the salvage value at the end of the service life was estimated to be zero. Operating costs amount to 22,000/year. At the present time, the remaining service life of the equipment is estimated to be 3 years. 

The ROHS Directive would impose substitution on the use of lead, mercury, cadmium, hexavalent chromium, and brominated substances polybrominated diphenyl ethers (PBDE), and polybrominated biphenyls (PBB) in electrical and electronic equipment. The Directive would allow the Commission to establish maximum concentration values, where the presence of specific materials or components is tolerated. Industry welcomes this option because heavy metals covered by the Directive are present in most materials as naturally occurring substances. As for the economic implications, the Commission recognized that substantial costs would be incurred for replacing lead in solders and estimated the additional operating costs of using tin-based solders or other alternatives would be about 150 million Euros per year. 

---