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Valuation of Regional Ecological Response to Acidification and Techniques for Transferring Estimates

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The absence of estimates of the economic value of improvements in ecological systems has so far hindered policymakers’ attempts to set policy goals with economic efficiency in mind. The proposed research will be anchored to the team’s recently completed contingent valuation (CV) study of the total value of ecological improvements from reduced acidification in the Adirondacks. We will supplement this study with a choice experiment (CE) survey in the Adirondacks and both a CV and a CE survey in the Southern Appalachian Mountain region. For the latter region, a new effort to describe the state of the science and translate this to attributes suitable for valuation will be lead by our natural science team members.

Approach:
The results of these surveys will be compared in various ways. After testing for construct validity, we will test convergent validity of the two valuation approaches by comparing the CE and CV results in a given area. To address benefit transfer issues, the survey results from each survey type in one area will be transferred to another area and compared to the direct survey results for that other area. Some of these transfers will be conducted by using the functional benefit transfer approach, which adjusts for both demographic and attribute differences across areas. Traditional and Bayesian pooling techniques will also be used in another set of transfer exercises. Further, shadow prices estimated in the CE studies will be compared for shared attributes. In addition to developing methodologies for some of the above activities, we will examine approaches to treating uncertainty in ecological outcomes in a CE analysis (i.e., by making uncertainty an attribute) and a new approach to addressing prior beliefs by respondents (what we term “expansive priors”).

Expected Results:
This research will provide estimates of WTP for ecological changes resulting from reduced acidification in the Adirondack Park and Southern Appalachian region on a geographic and temporal scale that would be expected to result from current legislative or regulatory proposals. This would provide first-ever comprehensive data for benefit cost analysis with respect to the effects of acidification, which for three decades has been a central issue in air pollution policy. Important methodological advances include benefit transfer methods using small-sample studies that could reduce the cost of valuing benefits in new regions.

Supplemental Keywords:
contingent valuation, choice experiments, conjoint, acidification, ecological benefits, nonmarket valuation, benefits transfer, , Economic, Social, & Behavioral Science Research Program, Scientific Discipline, RFA, Social Science, decision-making, Economics & Decision Making, Ecology and Ecosystems, Economics, econometric analysis, benefits assessment, constructivist approach, environmental policy, willingness to pay, valuation, choice experiment, Bayesian approach, contingent valuation, economic benefits

Metadata

EPA/NSF ID:
R832422
Principal Investigators:
Krupnick, Alan J.
Banzhaf, Spencer
Burtraw, Dallas
Cosby, Bernard
Driscoll, Charles T.
Evans, David
Siikam�ki, Juha
Technical Liaison:
Research Organization:
Resources for the Future
Funding Agency/Program:
EPA/ORD/Valuation
Grant Year:
2004
Project Period:
October 1, 2005 to September 30, 2008
Cost to Funding Agency:
$717,929
Project Status Reports:
2006

Objective:
Policymakers advance economic efficiency and welfare when they seek to set policy goals that account for the marginal costs of pollution controls and the marginal benefits of resulting improvements in environmental quality. The absence of estimates of the economic value of improvements in ecological systems has so far hindered policymakers’ attempts to do this. This research aims to develop primary valuation estimates and employ benefit transfer techniques to value improvements in ecological resources that have been affected by acidification. Further, as valuation of ecological benefits is highly controversial and uncertain, the research intends to provide methodological breakthroughs to improve the credibility of both original research and benefit transfer applications.

The research will supplement a recently completed contingent valuation (CV) study in the Adirondacks with a choice experiment (CE) survey in the Adirondacks and conduct both a CV and a CE survey in the Southern Appalachian Mountain region. For the latter region, a new effort to describe the state of the science and translate this to attributes suitable for valuation is being lead by our natural science team members.

The results of these surveys will be compared in various ways. After testing for construct validity, we will test convergent validity of the two valuation approaches by comparing the CE and CV results in a given area. To address benefit transfer issues, the survey results from each survey type in one area will be transferred to another area and compared to the direct survey results for that other area. Some of these transfers will be conducted by using the functional benefit transfer approach, which adjusts for both demographic and attribute differences across areas. Traditional and Bayesian pooling techniques also will be used in another set of transfer exercises. Further, shadow prices estimated in the CE studies will be compared for shared attributes. In addition to developing methodologies for some of the above activities, we will examine approaches to treating uncertainty in ecological outcomes in a CE analysis (i.e., by making uncertainty an attribute) and a new approach to addressing prior beliefs by respondents (what we term “expansive priors”).

Progress Summary:
We have made substantial progress in two main areas of research. One is in the construction of a comprehensive review of the science pertaining to all aspects of acidification in the Southern Appalachian Mountain Region. Research for this summary involved a comprehensive literature review and many field interviews during several multi-day field trips, as well as extensive conversation and collaboration between the science advisors on the study and the economists involved in survey design. A side benefit of the field interviews is that they generated an audience that is interested in the progress of the project and will be useful for reviewing the science summary.

The science summary is a unique document because it builds a bridge between the physical science and social science by providing the background that will allow researchers to accurately summarize the crucial elements of ecological status and improvement in the stated preference survey. Complex issues such as the characterization of baselines and trends, and other major factors that simultaneously affect the resources, all affect how individuals perceive degradation of a resource and its potential improvement. In addition, characterizing underlying uncertainty about the science is important for valuation because such values in prior surveys are sensitive to uncertainties. The summary of the science provides a foundation to draw from as we explore these issues thoroughly in focus groups and in the survey design phase of the project. The summary has been completed in draft form and is under internal review. It will be sent to external review in winter 2007. We will use this document to make decisions about how to characterize information in the survey.

The second main accomplishment was the development of a new technique for understanding preferences and attitudes toward resources over space. This technique requires individuals to use a featureless map to locate favorite or important resources in the area of interest. One important question that is addressed directly by this method is the degree to which individuals perceive important resources as only in the state in which they reside versus being more regional in nature. If their perceptions and attitudes are more state-based, the survey will be easier to design. A series of about a dozen individual mapping exercises has been completed, leading to an internal summary report. Based on the success of the first wave of interviews, another dozen or so will be completed. This information will lead to a separate paper, and also directly contribute to design of the CV and CE surveys.

We have been delayed with respect to development of the actual survey, although this has no budget implications. The delay is due in part to the difficulty of establishing a venue for initial focus groups in the Washington, DC region. Our intention is to hold focus groups locally in order to save money, and when survey design is mature to then hold a series of in situ focus groups. The conducting of focus groups also is affected by completion of the science summary, which has been a critical path activity. Also, we note that we received supplementary funding that helped contribute to the development of the science summary.

The science summary for the Southern Appalachian Mountain Region will be completed and sent to external review involving the many parties we interviewed and to at least one external scientific expert for comment before publication in the first half of 2007 as a report from Resources for the Future.

A technical memorandum updating a previous summary of the science for the Adirondack region will be finished and sent to reviewers in the winter of 2007. It will serve as background and as an internal report. It will not be published independently.

Future Activities:

1. In winter 2007, the science summaries will be sent to external review and they should be completed in the first half of the year.
2. The second round of mapping interviews will be completed in early 2007, and a draft manuscript for submission will be completed by summer.
3. We will hold our initial convenience focus groups based on an initial survey design in the first half of 2007.
4. A decision about which instrument to implement first, and in which region, will be made based on the progress in the focus groups. We expect to have completed survey development for two of the instruments during 2007 and to have pre-tested at least one instrument, so that administration can be conducted late in the year.

Supplemental Keywords:
contingent valuation, choice experiments, conjoint, acidification, ecological benefits, nonmarket valuation, benefits transfer, , Economic, Social, & Behavioral Science Research Program, Scientific Discipline, RFA, Social Science, decision-making, Economics & Decision Making, Ecology and Ecosystems, Economics, econometric analysis, benefits assessment, constructivist approach, environmental policy, willingness to pay, valuation, choice experiment, Bayesian approach, contingent valuation, economic benefits

Project Reports:

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