Using discrete choice method to calculate generic values for water         

This project is funded by the EPA under the Science, Technology, Research & Innovation for the Environment (STRIVE) Programme 2007 – 2013

In this project the choice experiment methodology is used to elicit the general willingness to pay of the Irish public for water related features. The results of the choice experiment (CE) are expected to contribute to improving the quality of decision making in areas that affect overall water quality. Despite a number of studies that have previously estimated economic values associated with particular water features, no studies has attempted to estimate generic values for a range of water features for the general population of Ireland. This research seeks to fill this gap in the literature. SEMRU researchers will also explore how different payment mechanisms used in the CE influence resulting estimates. The analysis of preference for the payment vehicle used in the CE is also timely given the current debate in relation to the government’s proposals to possibly introduce household water charges. However the project will not be investigating the issue of drinking water charges. The CE analysis will also be used to provide a ranking of values associated with different water attributes as well as to determine how robust results are to different model specifications.

 Project objectives

• Review national and international literature to identify attributes that can be used for a generic valuation of water resources and to ascertain payment vehicle effects in stated preference studies with an emphasis on CE.        
• Develop and implement a high quality CE survey to elicit generic values of water and to provide information on a nationally representative sample of Irish citizens and their preferences for water features.
• Provide estimates of the money value that Irish citizens place on certain attributes of water and present a ranking of preferences as well as WTP for generic water quality features.
• Provide recommendations for decision makers preparing cost benefit analyses as part of the requirements of the Water Framework Directive (WFD).

Background 

There are a number of Irish studies that evaluate water resources using techniques other than CE. To date many of them focus on valuing water-based leisure activities. Examples include the use of the travel cost method to estimate individuals’ WTP for kayaking (Hynes and Hanley, 2006) and salmon angling (Curtis, 2002). There are also several economic studies in Ireland that involve some form of economic appraisal of water based activity but that do not measure directly water related benefits (Lawlor et al., 2007; Bullock et al., 2008). In the case of Ireland, water attribute valuation studies using CE are limited. Campbell (2006) and Doherty (2010) carried out Irish CE studies on the values of rural environmental landscape improvements, and farmland walking trails, respectively. Whilst neither of these studies focussed primarily on water attribute valuation, both found evidence that water based features were more highly regarded by the general public than non water based features.

Elsewhere, the first study that applied a CE to the valuation of environmental assets was by Adamowicz et al. (1994) in Alberta, USA. Since this study, CEs have become an established and accepted method for valuing non-market environmental assets including water attributes. There is no common approach to water valuation in the CE literature. For example, some authors disaggregate water quality into its elements and include them as attributes in the experiment (Hanley et al., 2006; Alvarez-Farizo et al., 2007). Others adopt a more holistic approach to describing water quality (Brouwer et al., 2010). Another substantial source of variation that exists in the CE literature for water valuation is that there is no uniform approach concerning the scale of the “good”. For example some studies focus on the entire river catchement (Hanley et al., 2006), sub-basin zones (Brouwer et al., 2010) or on components of the river basin (Poirier and Fleuret, 2010).

According to the Water Framework Directive (2000/60/EC), integrated catchment management plans must be prepared for all EU river basin districts in order to achieve ’good ecological status’ (GES) by 2015. ’Good ecological status’ is a broader measure of water quality than those used in previous water related legislation, as it goes beyond the attainment of specific chemical or biological measures by aiming for holistic improvements in ecosystem functioning across entire river basins. In particular, the Water Framework Directive (WFD) sets out to provide for sustainable use of water by member states while concurrently protecting aquatic ecosystems and their dependent habitats. A stipulation of the WFD is that it calls for a consideration of the economic costs and benefits of improvements to ecological status in catchment management plans, along with the introduction of full social cost pricing for water use ( http://www.wfdireland.ie/).

This project proposes to identify the economic values of achieving ’good ecological status’ for water bodies in Ireland. As ’good ecological status’ is a broad measure of water quality, these values will be calculated at the ecosystem level and because the WFD covers all freshwater sources, the project aims to calculate values for generic water attributes for the entire country. We also intend to identify how citizens trade off good ecological status against other potential benefits from water such as recreation and to determine citizens’ preferential payment methods for water quality and for the overall management of Ireland’s water bodies. Given the lack of Irish CE studies relating to water attributes, this project will provide a considerable contribution to the stated preference literature. Its findings will also result in recommendations for decision-makers undertaking cost-benefits analyses under the rhetoric of the WFD.

References 

Adamowicz, W., Louviere, J. and Williams, M., 1994. Combining revealed and stated preference methods for valuing environmental amenities. Journal of Environmental Economics and Management, 26:271-292.

Alvarez-Farizo, B., Hanley, N., Barberan, R. and Lazaro, A., 2007. Choice modeling at the "market stall": individual versus collective interest in environmental valuation. Ecological Economics, 60:743-751.

Brouwer, R., Martin-Ortega, J. and Berbel, J., 2010. Spatial preference heterogeneity: a choice experiment. Land Economics, 86:552-568.

Bullock, C., Kretsch, C. and Candon, E., 2008. Benefits and costs of biodiversity in Ireland, Report to Government of Ireland.

Campbell, D., 2006. Discrete choice experiments applied to the evaluation of rural environment landscape improvements, Queen's University, Belfast.

Curtis, J., 2002. Estimating the demand for salmon angling in Ireland. Economic and Social Studies, 33:319-332.

Doherty, E., 2010. Using discrete choice experiments to elicit preferences for farmland walking trails in Ireland, National University of Ireland, Galway.

Hanley, N., Wright, R. and Alvarez-Farizo, B., 2006. Estimating the economic value of improvements in river ecology using choice experiments: an application to the water framework directive. Journal of Environmental Management, 78:183-193.

Hynes, S. and Hanley, N., 2006. Preservation versus development on Irish rivers: whitewater kayaking and hydro power in Ireland. Land Use Policy Journal, 23:170-180.

Lawlor, J., McCarthy, C. and Scott, S., 2007. Investment in water infrastructure: findings from an economic analysis of a national programme. Journal of Environmental Planning and Management, 50:41-63.

Poirier, J. and Fleuret, A., 2010. Using the choice experiment method for valuing improvements in water quality: a simultaneous application to four recreation sites of a river basin. . 59th Conference of Association Francaise de Science Economique, Nanterre Universite

Personal Involved 

Stephen Hynes – link

Cathal Buckley – link

Geraldine Murphy – link

Edel Doherty – link

Daniel Norton – link   

Useful Links 

EPA website – link

Text of the Water Framework Directive – link

Details of the Water Framework Directive in Europe - link

Details of the Water Framework Directive in Ireland - link