Replacement cost
Replacement cost is a variant of opportunity cost as an accepted economic approach to ascertaining the value of resources. It differs from the latter because it does not consider alternative uses of a specific resource but the cost of providing a similar resource as a substitute. This cost can represent the value of the original resource. There are two problems with this method of valuation. The first is that it is suitable where resource are easily reproducible, for instance an artificial boating lake, but is inappropriate for natural environments where the resources are unique, such as an ancient woodland containing species of wildlife only found in it and that has taken many centuries to evolve to its present ecological system. Second, it suffers from the same shortcomings as the opportunity cost approach in that non-use benefits and externalities would normally not be included, if market-based replacement cost is considered. This problem can be overcome by applying one of the methods for estimating total economic value, such as CVM, in which case the whole valuation exercise might as well be conducted in this way, thus making the calculation of replacement cost redundant.