Newsletter No 1 March 2011

Spatial effects in stated preference studies for environmental valuation

Marije Schaafsma

scheldeOn the 26th of January 2011 Marije Schaafsma defended her PhD entitled “Spatial effects in stated preference studies for environmental valuation”. The main research question was if the reliability and validity of Stated Preference studies would improve by controlling for spatial effects, including substitution and distance effects, in the design and analysis of valuation studies. A recently published paper in H2O [link] led to a few days of commotion in the days before the defence.

What was the thesis about?

Understanding the spatial nature of the environmental services and the spatial distribution of the associated benefits is paramount for reliable estimation of both individual and total willingness-to-pay (WTP). The identification of the economic jurisdiction, consisting of those people who are affected by environmental changes, is necessary to aggregate estimates of individual WTP over the relevant population to estimate the total economic benefits (or costs). Vital questions are how many people are willing to pay for improving water quality at site A, how far from this site are people no longer willing to pay, for instance, because the site is too far away, how much are people willing to pay for site A, if they live near alternative sites providing similar amenities? In spite of the vast body of literature on environmental valuation using stated preference (SP) methods, the number of empirical studies addressing these questions adequately is very limited, and the effects of distance and the availability of substitutes are often ignored.

The case studies focused on water quality changes in the Netherlands. Water resources provide a wide range of environmental services with associated human benefits, such as better recreational possibilities or higher biodiversity. Under the implementation of the European Water Framework Directive, all water bodies in the EU should be of ‘good ecological status’ in 2015. This objective will require major investments in water management. Are the investments worthwhile? To answer this ex ante policy question, SP studies can provide information about the social welfare changes of future water quality improvements. By asking people in well-designed questionnaires how much they value changes in recreational and environmental amenities, the benefits of the investments, as seen by society, can be assessed and compared to the costs.

One of the case studies of the thesis was conducted in the Rhine basin and assessed public preferences for different ecological improvement scenarios at eleven lakes in the Green Heart in the Randstad, such as the Loosdrechtse and Vinkeveense Plassen. For the case study in the Scheldt basin, a choice experiment was developed in which respondents were asked to express their WTP for achieving improved ecological quality at three alternative study sites: the beaches near Breskens, the Braakman-creek and the tidal mudflats of Saeftinghe. These sites are located in a confined geographical area along the Dutch part of the Scheldt estuary and are well-known among the local population.

Why the commotion?

Besides being well-known, the three sites case-study sites in the Scheldt are also subject to locally contested policy proposals. The Saeftinghe-site has recently received renewed media attention, because the neighbouring Hedwige-polder may be converted to a nature area, by so-called ‘ontpoldering’. The Netherlands agreed with Belgium to dredge the shipping lane through the Westerschelde to allow bigger container ships to reach the port of Antwerp in Belgium. Nature lost due to dredging must be compensated elsewhere, and flooding the Hedwige-polder was considered to be the most suitable option according to the responsible committee Nijpels. The public debate in Zeeland on ‘ontpolderen’ is fierce and polarised, with nature conservationists on one side, and on the other side farmers and groups against returning previously acclaimed land to the sea. The protests of the latter groups against the policy proposals, successfully seeking media-attention to promote their views, led the current Minister to reconsider the proposed and alternative solutions. But is the majority of the population really against flooding?

The results of the survey held in the Scheldt river basin suggested, that the respondents in Zeeland (Zeeuws-Vlaanderen, Walcheren, Zuid-Beveland) attach a positive WTP to expanding Saeftinghe by flooding the Hedwige-polder. That is, respondents consider the improvements in recreation and nature to be beneficial. In the H2O article, we argued that this survey was representative, and in fact provided respondents an opportunity to express their opinion without being constraint by peer pressure, as would be the case in public hearings on these policy plans. The results of the article were picked up by a local newspaper and provoked many reactions from both supporters and opponents of the conclusions, questions in the Zeeuwse Provinciale Staten, even inspiring a local poet. Other media followed and sprouted a debate about the application of SP results in environmental valuation.

Indeed, it may be the case that public opinion has changed since the survey was held in 2006. Also, the SP methods remain subject to debate, although often more in the political than academic arena. However, benefits of environmental changes should not be ignored in decision-making and SP methods are the only available option to value future environmental changes with associated non-use values, including biodiversity and environmental conservation for future generations. Moreover, the survey design followed the most recent academic standards and, in addition, careful attention was given to the site- specific characteristics, including their substitutes.

What do the results of the thesis tell us?

The main conclusion of the thesis is that accounting for the effects of distance and substitutes causes significantly different individual and aggregated WTP estimates for water quality changes. WTP values for ecological quality changes are site-specific and depend on the type of water body where these changes take place. In other words, there is no single economic value for achieving ‘good ecological status’ under the WFD. Furthermore, the effect of distance-decay is highly site-specific. The results suggest that appling a generic distance-rule to all water bodies in order to assess the relevant population with positive WTP would lead to unreliable estimates of total economic benefits. Finally, the availability of substitutes has a significant impact on WTP: the higher the supply, the lower the price.

Contact: Marije Schaafsma