Nick Hanley

Using Choice Experiments to Value the Environment

This paper we outline the “choice experiment” approach to environmental valuation. This approach has its roots in Lancasters characteristics theory of value, in random utility theory and in experimental design. We show how marginal values for the attributes of environmental assets, such as forests and rivers, can be estimated from pair-wise choices, as well as the value of the environmental asset as a whole. These choice pairs are designed so as to allow efficient statistical estimation of the underlying utility function, and to minimise required sample size. Choice experiments have important advantages over other environmental valuation methods, such as contingent valuation and travel cost-type models, although many design issues remain unresolved. Applications to environmental issues have so far been relatively limited. We illustrate the use of choice experiments with reference to a recent UK study on public preferences for alternative forest landscapes. This study allows us to perform a convergent validity test on the choice experiment estimates of willingness to pay.

Economic Valuation with Stated Preference Techniques

This manual offers a detailed, up-to-date explanation of how to carry out economic valuation using stated preference techniques. It is relevant for the application of these techniques to all non-market goods and services including air and water quality; provision of public open space; health care that is not sold through private markets; risk reduction policies and investments not provided privately; provision of information as with the recorded heritage, the protection of cultural assets and so on. The resulting valuations can be used for a number of purposes including, but not limited to, demonstrating the importance of a good or service; cost–benefit analysis; setting priorities for environmental policy; design of economic instruments; green national/corporate accounting, and natural resource damage assessment.

PREFERENCES, INFORMATION AND BIODIVERSITY PRESERVATION

This paper considers the nature of preferences for the preservation of biodiversity, and the extent to which individuals are well-informed about biodiversity. We present evidence that the elicitation of monetary bids to pay for biodiversity preservation, as required for cost-benefit analysis, fails as a measure of welfare changes due to the prevalence of preferences which neoclassical economics defines as lexicographic. That is, a significant proportion of individuals refuse to make trade-offs which require the substitution of biodiversity for other goods. In addition, we show that understanding of the biodiversity concept is extremely limited, raising concerns over a reliance on stated preferences, as revealed in contingent valuation studies, for decision-making on this issue. Results from two samples (students and the general public) are described.

Using conjoint analysis to quantify public preferences over the environmental impacts of wind farms. An example from Spain

This paper focuses on the effect on peoples utility of the potential environmental impacts of wind farm developments. We report on research designed to provide insight into their preferences, and we show how two alternative choice modelling techniques can be used to estimate them. Our results show that significant social costs in the form of environmental impacts can be associated with wind farm developments. As relative environmental values are revealed by these methods, it would be possible to develop wind farms in such a way that minimises the total social costs of the investment and which maximises its net benefits.

Aggregating the benefits of environmental improvements: distance-decay functions for use and non-use values.

One of the main problems in using environmental cost-benefit analysis is deciding on the relevant population: whose benefits should we count? This is important since aggregate benefits depend on both per-person benefit and the number of beneficiaries. Yet this latter term is often hard to evaluate. Distance-decay functions are one way of addressing this problem. In this paper, we present estimates of distance-decay functions for a particular environmental improvement, namely a reduction in low flow problems on the River Mimram in Southern England. We do this both for users and non-users, in the context of a contingent valuation study of the benefits of improving low flow conditions. We test whether distance-decay effects for mean Willingness to Pay are stronger for a single environmental good (the River Mimram, in this case) than for a more inclusive set (here, all rivers in Thames region which suffer from low flow problems). Finally, we explore the impact on part-whole bias, in terms of the relationship between WTP for an individual site and WTP for a more inclusive group of sites, of allowing for distance-decay effects.

Modelling Recreation Demand Using Choice Experiments: Climbing in Scotland

This paper is concerned with the use of thechoice experiment method for modelling thedemand for recreation, using the example ofrock-climbing in Scotland. We begin byoutlining the method itself, including itstheoretical and econometric underpinnings. Datacollection procedures are then outlined. Wepresent results from both nested and non-nestedmodels, and report some tests for theimplications of choice complexity andrationality. Finally, we compare our resultswith a revealed preference data model based onthe same sample of climbers.

Valuing the Benefits of Coastal Water Quality Improvements using Contingent and Real Behaviour

Recent moves in the European Union have beenmade towards a toughening of legislation onbathing water quality. This has focussedpolicy-makers thoughts on the welfare benefitsresulting from such improvements, especiallygiven their cost. Our paper uses a combinedstated and revealed preference approach tovalue coastal water quality improvements,focussing on an area of Scotland which hasconsistently failed to meet standards under theBathing Waters Directive. We combine data onreal behaviour with data on contingentbehaviour using a random effects negativebinomial panel model. This allows us to predictboth the change in participation (trips) shouldwater quality be improved, and the welfareincrease per trip. Our model includes allowancefor the existence of substitute sites, and forchanges in recreational behaviour during abeach visit.

Valuing the non-market benefits of wild goose conservation: a comparison of interview and group-based approaches

Wild geese graze on improved pastures and young cereal crops and hence can cause considerable damage to agriculture, particularly in areas close to roosting sites. This study uses contingent valuation (CV) to establish whether government compensation payments currently made to farmers represent ‘value for money’ by estimating the value placed on goose conservation by the general public. Benefit estimates from a conventional interview approach are compared with a group-based approach, called the ‘Market Stall (MS)’. This involves two 1 h meetings held 1 week apart and differs from conventional interviews in that participants are given more time to consider their preferences and to discuss their WTP question with other household members. We argue that this type of group-based approach to environmental valuation offers important advantages over individual interview approaches, especially for unfamiliar and/or complex environmental goods.

Assessing the success of agri-environmental policy in the UK

This paper considers alternative means for assessing the success of “agri-environmental” policy (AEP), which has become an increasingly-important aspect of agricultural and environmental policy throughout Europe, and which has probably developed more extensively in the UK than elsewhere. After a brief description of the main elements of AEP in the UK, we consider two broad classes of assessment method, those based on efficiency and those based on effectiveness. The latter class of methods has dominated appraisal so far in the UK, primarily through participation measures. We outline the limitations of these, and then consider evidence of policy efficiency gained through cost–benefit analysis techniques. Finally, we suggest how a combined approach could be used to appraise three possible changes to UK agri-environmental policy.

Improving the Process of Valuing Non-Market Benefits: Combining Citizens’ Juries with Choice Modelling

We attempt a first combination of the participatory technique known as the “citizens’ jury” with choice modelling, a stated-preference technique increasingly favored by environmental economists. Our application is conducted in the context of water quality improvements under the Water Framework Directive, the most significant reform in water legislation in the European Union for many years. We compare results with those of a conventional choice experiment. We find that the choice experiment format can be successfully implemented in a “jury” setting, and that moving from an individual to a collective choice setting produces a change in both values and preferences. (JEL Q51)