Nonmarket Valuation Methods Theory and Applications.

Transcription

1 Nonmarket Valuation Methods Theory and Applications Mikołaj Czajkowski

2 Environmental Protection and Economics

3 Value of environmental goods? Human activity Environment Optimum Human activity vs. changes in the environment Rational decisionmaking Welfare

4 Rationality

5 Cost benefit analysis Cost Benefit analysis Compare all costs vs. all benefits (including environment, health, etc.) Net benefits of the project Discounting Alternatives Decision making

6 Economic Valuation Economic valuation Comparisons Monetary units Controversies Economic value Market goods price Nonmarket goods...

7 Nonmarket goods valuation methods Indirect (surrogate markets) Productivity Method Avoided Damage Method Substitute Cost Method Hedonic Price Method Travel Cost Method Direct (hypothetical h markets) Contingent Valuation Method Choice Experiment

8 Travel Cost Method Environmental goods Costs Recreation E.g. urban forest, park etc. Travel ldt data > > valuation No. of tourists Location (distance) Cost Time Problems (lower bound, other travel goals, value of time)

9 Selected WEEC Travel Cost Method studies Puszcza Białowieska: 287 mln PLN/a Pieniny: 140 mln PLN/a Oligocene water wells: 0,1 01PLN/l

10 Hedonic Price Method Hedonic Price Method Real estate market Ecologic attributes of some goods Wages influenced by work conditions Controlling for all the other attributes of a good Data > Statistical analysis > Aggregated value

11 Selected WEEC Hedonic Price Method Studies Airbags value of statistical life 4 mln PLN Work accidents (risk of death) value of statistical life 2,5 5 mln PLN Apartments in Warsaw and parks,,p pollution, traffic, stacks

12 Contingent Valuation Method What is your maximum willingness to pay for? True welfare measure compensated or equivalent variation Problems Hypothetical questions Strategic answers WTA/WTP

13 Exxon Valdez

14 Consequences of theaccident Spectacular scale but no one directly suffered Ecological organizations sued Exxon Estimated damages to the environment $3 15 bln Adjudge damages $4,5 bln Scientific panel CVM verified Currently the method considered reliable (referendum format, closed ended questions, credible scenarios)

15 Selected WEEC Contingent Valuation Method studies The Baltic See eutrophication (1994) the first in Poland and one of the first in Europe ~ 169 PLN/a/person Efficient protection of Biebrza wetlands ~ 100 PLN/a/person/ Clean water in Polish rivers + tap water ~78 and ~81 PLN/a/household / Reduction in air pollution in the cities (selected health symptoms reduced) ~ PLN/a/person Value of life year lost in the context of air quality improvement PLN

16 Choice Experiment Method Basis Every good decomposed into finite number of attributes Each attribute can take specified levels Goods described by means of attribute levels Alternatives respondents choose from Goods described as alternatives Tradeoffs Modelling preferences (utility functions) MRS Simulations, elasticities, marginal effects Monetary values

17 Choice Experiment Method Advantages Choosing alternatives more natural for respondents Many choice sets with many alternatives from one respondent Hypothetical questions (+/ ) Flexibility Environmental and resource economics Transport Marketing Public health

18 Valuing Biodiversity thechallenge Biodiversity recognition Convention on Biological Diversity, 1992 Measures for implementing the Convention on Biological Diversity, 1998 OECD, Valuation of Biodiversity Benefits: selected studies 2001 World Summit on Sustainable Development 2002 Biodiversity decreasing levels The need for measuring and economic valuation

19 Valuing Biodiversity thechallenge The definition Species level diversity vs. full picture vs. general public The challenge

20 Site selection Forests = 65% of biodiversity resources in Poland Białowieża Forest most recognised and ecologically valuable Considered the last natural lowland forest in temperate climate Europe Public debate context

21 Białowieża Forest ha 16% national park Richness of species known species > total Natural dynamics Ecological structures and functions

22 Study design Attributes considered: Familiar species of wildlife: rare, common Unfamiliar species of wildlife: rare, common Quality of species habitat Ecosystem processes Habitat for endangered and protected plant and animal species (red list) Forest stand structure Landscape diversity Amount of dead wood

23 Studydesign design theattributes Natural ecological processes status quo 16% partial improvement 30% substantial improvement 60% of the area Rare species of fauna and flora status quo decline threatening total extinction partial improvement nurturing and tending allowing for maintaining current standings and improvement of their quality substantial improvement nurturing and tending allowing for maintaining current standings as well as their expansion

24 Studydesign design theattributes cont. Ecosystem components status quo lack of some components and decrease in quality of the existing ones minor improvement regeneration of deteriorated components on 10% partial improvement on 30% Cost substantial improvement on 60% of the area additional compulsory tax 10 years 5 levels

25 Experimental design Alternatives: Status quo (no variation) Extension of the national park Other form of protection Opt out: I don t want to pay anything at all Orthogonal fractional factorial design: 32 choice sets Blocked into 8 questionnaire versions

26 The questionnaire June 2007 Face to face surveys Professional polling agency Random sample of 400 adult Poles 1600 choice observations

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28 Results nested logit model Variable Coefficient Standard Error b/st.er. P[ Z >z] NEP NEP SPE EC EC EC FEE PARK Log likelihood function Pseudo-R 2 (adj) Protest responses removed 368

29 Results welfare measures (PLN) Variable ab Coefficient e Standard d Error b/st.er. P[ Z >z] WTP(NEP1) WTP(NEP2) WTP(SPE) WTP(EC1) WTP(EC2) WTP(EC3) WTP(PARK) PLN 0.30 EUR 0.50 USD 2.80 SEK

30 Conclusions First biodiversity valuation study in Poland Values difficult to compare but plausible Set of attributes describing biological diversity Multi Level, not only species structural, species and functional diversity Natural processes (passive protection) important Species good proxy for biodiversity? Way of protection matters label effect

31 Nonmarket Valuation Methods Conclusions