Method Factsheet - Shadow Pricing

Shadow pricing is highly appropriate to elicit monetary values and anthropocentric instrumental values of nature's benefits. When society sets environmental targets on the provision of non-marketed ecosystem services it is an implicit valuation of the services. The shadow price is the marginal cost of obtaining an additional unit of the ecosystem service by implementing the environmental target. As an additional unit of the targeted ecosystem service restricts production of other marketed ecosystem services, the change in the mix reflects the relative values. The shadow price society 'pays' for provision of the ecosystem services is the loss from not obtaining the value from producing marketed goods.