Valuing the environment: Methods

Valuing the environment: Methods

ex ante vs. ex post • ex ante valuation: desirability of proposed action • ex post analysis: judge either the success or the damage done by implemented actions

types of values / total WTP • use: direct use of resource • fish / timber harvested / water extracted • option • can use it in the future • nonuse • preserving something will never use • e.g., existence value • TWP = use + option + nonuse

classifying valuation methods

revealed preference • based on actual observable choices • actual resource values can be inferred • how much did fisherman lose from oil spill? • how much did catch decline? • what is value of lost consumer surplus? (area under demand curve): market price

stated preference • used when value is not directly observable • value of northern spotted owl • survey respondents for WTP to preserve this species: contingent valuation

contingent valuation (direct, stated) • major concern is survey bias • strategic bias • to influence an outcome • information bias • little or no experience • starting point bias • depends on definition of range • hypothetical bias • contrived set of choices (no consequences)

travel cost (indirect / revealed) • infer the value of recreational resource using info on how much visitors spent getting to a site • construct demand curve for wtp for visitor day • How far did they travel • Entrance fee • Account for different stops, etc.

hedonic property value(indirect / revealed) • use multiple regression analysis to tease out environmental component of value • use housing prices and break price into components (# bedrooms, baths, lot size, crime rates, school quality, air quality, etc) • measure marginal wtp for discrete changes in each attribute • coqui frogs as a form of noise pollution

hedonic wage(indirect / revealed) • similar idea, except isolate component of wage that serves to compensate workers in risky occupations for taking on the risk • high risk => high wage • Tobacco CEO’s

averting / defensive expenditures (indirect / revealed) • those designed to reduce damage caused by pollution by taking averting / defense action • air purifiers / bottled water • air conditioners to drown out coqui calls? • lower bound estimate

attribute based models(indirect / stated) • useful when project options have multiple levels of different attributes • survey based, but choosing different states of the world • each state of the world has set of attributes and a price

conjoint analysis:how to manage a forest?

conjoint analysis: sample questionnaire

benefit transfer • transfers existing benefit estimates in new study • used when gathering primary data too expensive / too little time • make sure • services being valued are comparable • relevant population is comparable • if not, are you able to make justifiable adjustments?

issues in benefit estimation • primary vs. secondary effects • how far do you go? • tangible vs. intangible • sensitivity analysis for intangibles (don’t ignore)

issues in cost estimation • easier than benefits! • approaches: survey vs. engineering • survey: ask how much • engineering: catalog possible technologies and estimate cost of purchasing and implementing them • combined approach often best

expected value • much scientific uncertainty in future costs • e.g., climate change, arrival of brown tree snakes • assess likelihood of possible outcomes (assign probabilities) • expected present value of net benefits:

cost-effectiveness analysis • if bca unavailable or not reliable • set a policy target on some other basis than benefits and costs • max acceptable pollution level? • critical number of species to preserve? • cost effectiveness analysis finds lowest cost means of accomplishing objective

impact analysis • if both bca and cost effectiveness not possible • attempts to quantify consequences of various actions • makes no attempt to convert all of consequences into $$$ • not necessarily optimal • leaves much up to policymaker

Valuing the environment: Methods