Australasian environmental economics: contributions, conflicts and ‘cop-outs’

Australian and New Zealand environmental economists have played a significant role in the development of concepts and their application across three fields within their subdiscipline: non-market valuation, institutional economics and bioeconomic modelling. These contributions have been spurred on by debates within and outside the discipline. Much of the controversy has centred on the validity of valuations generated through the application of stated preference methods such as contingent valuation. Suggestions to overcome some shortcomings in the work of environmental economists include the commissioning of a sequence of non-market valuation studies to fill existing gaps to improve the potential for benefit transfer.bioeconomic modelling, institutional economics, non-market valuation, Environmental Economics and Policy,

Location differences in communities’ preferences for environmental improvements in selected NSW catchments: A Choice Modelling approach

To elicit household willingness to pay (WTP) for improvements in environmental quality in three NSW catchments (Lachlan, Namoi and Hawkesbury-Nepean), a choice modelling (CM) study was conducted. This report presents results of research designed to investigate variations in WTP across different communities. The communities included local residents, distant/urban and distant/rural residents. Nine split samples were established to test for ‘location effects’. The analysis involved both conditional logit and random-parameters logit models. Natural resource management (NRM), including Catchment Management Authorities (CMAs), can use the non-market values obtained from this study to guide their investment decisions.Choice modelling, location effects, non-market valuation, catchment planning, environment, Environmental Economics and Policy, Research Methods/ Statistical Methods,

Willingness to pay for recycling food waste in the Brisbane Region

Kerbside recycling in Australia has focused on paper, cardboard, plastics and bottles and in some areas green waste. Another area for potential kerbside recycling is organic waste. This study uses a dichotomous choice contingent valuation format with follow-up open-ended willingness to pay question to estimate the household willingness to pay for the introduction of a kerbside recycling scheme for kitchen waste. Two provision rules were used. The first sample split contained a majority decision rule while the second sample split contained a provision rule where participation is voluntary. Households across the Brisbane statistical sub-division currently pay in the order of $250 per annum for their kerbside waste collection scheme. This study indicates that on average Brisbane households would be WTP an additional$32 to $35 per year for a general waste bin where food waste is split from general waste. There was no significant difference in results between sample splits with majority or voluntary provision rules. Whether the provision of a food waste recycling scheme is economically efficient requires a consideration of all the potential costs and benefits. Other relevant costs and benefits for inclusion in a benefit cost analysis would include those associated with bin replacement, any additional collection and transport costs, composting costs, revenues from compost sales and avoided landfill costs. If a compulsory food waste recycling scheme could be provided to all households for less than$32 to $35 per household per annum then the benefits of the scheme would exceed the costs and would be considered to be economically efficient and desirable from a community welfare perspective. Given the difficulties of estimating precise WTP values from dichotomous choice data, any BCA of a compulsory scheme incorporating the results of this study should undertake sensitivity testing that includes the range of values reported including dichotomous choice and open-ended means to determine the robustness of BCA results to variations in the welfare estimate. Notwithstanding, the results of any BCA, decision-makers also need to be cognisant of the high proportion of respondents who did not support a kerbside food waste recycling scheme. The data from the study could also be used to undertake a BCA of a voluntary scheme.Environmental Economics and Policy,

Valuing New South Wales rivers for use in benefit transfer

The results from seven choice modelling applications designed to value improved river health in New South Wales are reported. These applications were designed to provide value estimates that could be used, through benefit transfer, to value improvements in the health of other rivers within the state. Because of limitations on the number of rivers that could be valued and populations sampled, a pooled model for use in benefit transfer was also estimated. The results indicate that both use and non‐use values were found to exist for all catchments. In addition, value estimates were found to differ across catchments when populations resident within catchments were sampled. However, when populations resident outside catchments were sampled for two of these catchments, value estimates were found to be statistically similar. This indicates the importance of valuing improved river health in specific catchments by sampling populations within catchments. Yet, it also indicates that it is less critical to conduct multiple surveys of residents outside catchments to value improved river health.Resource /Energy Economics and Policy,

Effects of alternative elicitation formats in discrete choice experiments

An elicitation format prevalently applied in DCE is to offer each respondent a sequence of choice tasks containing more than two choice options. However, empirical evidence indicates that repeated choice tasks influence choice behavior through institutional learning, fatigue, value learning, and strategic response. The study reported in this paper employs a split sample approach based on field surveys using a single binary elicitation format with a majority vote implementation as the baseline to expand the research on effects of sequential binary DCE formats. We provide evidence for effects caused by institutional learning and either strategic behavior or value learning after respondents answered repeated choice questions. However, we did not find any indications for strategic behavior caused by awareness of having multiple choices. The choice between a sequential and a single elicitation format may thus imply a trade-off between decreased choice accuracy and potentially increased strategic behavior due to an incentive incompatible mechanism. Further research is needed to explore strategic behavior induced by incentive incompatible elicitation formats using alternative approaches that are not compromised by a confounded baseline, that facilitate the differentiation between value learning and strategic behavior, and that allow the use of less restrictive model specifications. Such research should also investigate the effects of varying incentives induced by the order in which choice questions are presented to respondents.discrete choice experiments, split sample approach, elicitation format, incentive compatibility, strategic behavior, learning effects, panel mixed logit models, Environmental Economics and Policy,

Scale and scope effects on communities’ values for environmental improvements in the Namoi catchment: A choice modelling approach

This report presents results of research designed to investigate variations in willingness to pay (WTP) estimates across different scales and scopes of environmental investments. The goal is to help catchment management authorities better prioritise their natural resource management actions at both catchment and farm levels. Five split samples were used to test for scale and scope effects. A choice-modelling (CM) analysis was used to elicit household WTP for improvements in environmental quality attributes in the Namoi catchment. The approach was developed so that value estimates could be more accurately transferred between different action scopes.choice modelling, scale effect, scope effect, embedding, non-market valuation, catchment planning, environment., Community/Rural/Urban Development, Environmental Economics and Policy, Research Methods/ Statistical Methods,

Cost-Benefit Analysis of the protection of Malleefowl in the Lachlan Catchment

A cost-benefit analysis (CBA) of an investment in the protection of malleefowl and associated native vegetation in the Lachlan Catchment’s central-west yielded a benefit-cost ratio of 1.4. The CBA is based on project expenditures over the past four years coupled with benefit estimates from a recent Choice Modelling study in the Lachlan Catchment. The project targets the protection of malleefowl on private land which has not yet been surveyed but where the species is known to be present. The CBA is subject to significant uncertainty due to a lack of available data. Nonetheless, sensitivity analysis indicates that the BCR is consistently larger than unity, if marginal in some cases. This suggests that the project is a worthwhile investment at this early stage. Furthermore, greater gains may be achieved by addressing the numerous threats facing the species and its habitat. The increased cost of such an investment may be more than offset by the gains in benefits due to relatively conservative assumptions associated with the benefit calculations in the BCA.Cost-benefit analysis, Benefit-cost ratio, Choice modelling, Malleefowl, Lachlan Catchment, Environmental Economics and Policy,

Testing construct validity of verbal versus numerical measures of preference uncertainty in contingent valuation

The numerical certainty scale (NCS) and polychotomous choice (PC) methods are two widely used techniques for measuring preference uncertainty in contingent valuation (CV) studies. The NCS follows a numerical scale and the PC is based on a verbal scale. This report presents results of two experiments that use these preference uncertainty measurement techniques. The first experiment was designed to compare and contrast the uncertainty scores obtained from the NCS and the PC method. The second experiment was conducted to test a preference uncertainty measurement scale that combines verbal expressions with numerical and graphical interpretations: a composite certainty scale (CCS). The construct validity of the certainty scores obtained from these three techniques was tested by estimating three separate ordered probit regression models. The results of the study can be summarised in three key findings. First, the PC method generates a higher proportion of ‘yes’ responses than the conventional dichotomous choice elicitation format. Second, the CCS method generates a significantly higher proportion of certain responses than the NCS and the PC methods. Finally, the NCS method performs poorly in terms of construct validity. Overall, the verbal measures perform better than the numerical measure. The CCS is a promising method to measure preference uncertainty in CV studies. To better understand its strengths and weaknesses however, further empirical applications are needed.preference uncertainty, contingent valuation, numerical certainty scale, polychotomous choice method, composite certainty scale, climate change, Australia., Environmental Economics and Policy, Research Methods/ Statistical Methods, Q51, Q54,

Framing for incentive compatibility in choice modelling

The incentives that motivate respondents to reveal their preferences truthfully have been a long-standing area of research in the non-market valuation literature. A number of studies have been undertaken to investigate incentive compatibility in nonmarket valuation. Most of these used laboratory environments rather than field surveys (e.g. Carson and Burton, 2008, Harrison, 2007, Lusk and Schroeder, 2004, Racevskis and Lupi, 2008). Only a few studies investigating incentive compatibility have considered multi-attribute public goods with an explicit provision rule in a choice experiment (Carson and Groves, 2007, Collins and Vossler, 2009, Carson and Burton, 2008). The design of a choice modelling study that avoids strategic behaviour has proven particularly difficult because of multiple choices and difficulties in developing a majority voting provision rule. This study investigates the impact of the inclusion of a framing statement for incentive compatibility in a field survey choice modelling study. An incentive compatible statement (provision rule) that sets out to respondents the rule relating to when the good under consideration will be provided was employed. The impact of a provision rule across three alternative choice modelling multiple choice questionnaires was tested by comparing results between split samples with and without a provision rule. Four split samples were used to test the impact of a provision rule on preferences across different communities including local/rural residents and distant/urban residents. A choice modelling analysis that involved a conditional logit model and a random parameter model was used to elicit household willingness to pay for improvements in environmental quality in the Hawkesbury-Nepean catchment. The results of the study show that the inclusion of a provision rule had an effect on preferences in the distant/urban communities. However, the impact of a provision rule in the local/rural community sub-samples was negligible. This study suggests that the impact of a provision rule should be analysed in the context of different community characteristics.Choice modelling, Incentive comparability, Provision rule, Non-market valuation, Environment, Environmental Economics and Policy,

Environmental value and valuation over time

Time and value are related concepts that influence human behaviour. Although classical topics in human thinking throughout the ages, few environmental economic non-market valuation studies have attempted to link the two concepts. Economists have estimated non-market environmental values in monetary terms for over 30 years. This history of valuation provides an opportunity to compare value estimates and how valuation techniques have changed over time. This research aims to compare value estimates of benefits of a protected natural area. In 1978, Nadgee Nature Reserve on the far south coast of New South Wales was the focus of the first application of the contingent valuation method in Australia. This research aims to replicate that study using both the original 1978 contingent valuation method questionnaire and sampling technique, as well as state of the art non-market valuation tools. This replication will provide insights into the extent and direction of changes in environmental values over time. It will also highlight the impact on value estimates of methodological evolution. These insights will help make allocating resources more efficient.Environmental values, temporal variability, non-market valuation, contingent valuation method, choice experiments, incentive compatibility, natural resource management., Environmental Economics and Policy, Land Economics/Use,