The Mechanism of Attributing Economic Value to the Natural Environment

The absence of costs of externalities generated in the environment by business operations results in suboptimal resource allocation in Pareto terms as well as in Kaldor-Hicks terms, the destruction of valuable natural areas and the reduction in biodiversity. The article examines the existing solutions to the problem of the conversion of externality costs occurring in the environment into private costs. It also presents the idea of a mechanism, which could raise the value of natural areas to such a level that the risk of their development would be significantly reduced