Andrea Beltratti, Graciela Chichilnisky Andgeoffrey Heal

An important problem in environmental economics arises from the irreversibility ofconsuming or destroying certain resources. Extractive resources like oil are a clear example. Even for environmental resources the same seems to be true in a number of important cases, for example biodiversity, current climate conditions, or complex ecological systems. Irreversibility imposes a severe externality across different generations ; future generations will suffer from the destruction of a unique asset like Amazonia, and it is not clear how such a loss could be compensated in terms ofother goods. If such an asset is destroyed, then it is not possible subsequently to restore it . In contrast, if the asset is preserved, then it is possible to "use" the asset at a subsequent date . If there is uncertainty about future preferences or valuations, then preservation provides atype ofinsurance which is not available ifthe irreversible decision is carried out. Such an intuitive form of insurance policy has been related to the concept of option value. Amongst the earliest studies of these issues were [1, 7, 17, 18, 20, 26]. Subsequent works that built on these contributions include [4, 5, 11, 12, 21, 23, 24, 27, 28]. An extensive survey of the concept and the meaning of option value is provided in other chapters of this book (those by Chichilnisky and Heal and Vercelli) to which we refer the reader. None of the previous papers, however, take into account the fact that generations yet to be borne mayvalue natural resources andenvironmental assets quite differently from us . They may value them more because ofan enhanced appreciation ofthe relationship betweenhumanity andthe rest ofnature : they may value them less because their world maybe more synthetic and created than ours, and they may be pleased with that. Casual empiricism suggests that in fact over the last few decades, the citizens of industrial countries have rediscovered the importance of environmental assets such as clean air and water, biodiversity, rain forests, and many others . The value placed on these appears to have increased substantially, suggesting the possibility of further