Describe 2-3 environmental problems you think might be conducive to using CV, and 2-3 environmental problems definitely not conducive for CV.

Describe 2-3 environmental problems that you think might be conducive to using CV, and describe 2-3 environmental problems definitely not conducive for this.

References:

(1) http://www.ecosystemvaluation.org/contingent_valuation.htm#case1

(2) Franz Hackl & Gerald J. Pruckner, 2005. "Warm glow, free-riding and vehicle neutrality in a health-related contingent valuation study," Health Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 293-306.

(3) Josephine Borghi, 2008. "Aggregation rules for cost-benefit analysis: a health economics perspective," Health Economics, John Wiley & Sons, Ltd., vol. 17(7), pages 863-875.


(4) Julio Videras & Ann Owen, 2006. "Public Goods Provision and Well-Being: Empirical Evidence Consistent with the Warm Glow Theory," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1531-1531.


The contingent valuation method (CVM) is conducive if used to estimate economic values for some kinds of ecosystem and environmental services and estimates both use and non-use values. The contingent valuation method involves directly asking people, in a survey, how much they would be willing to pay for specific environmental services. Because it requires asking people for the amount of compensation they would be willing to accept to give up specific environmental services or the “contingent” valuation willingness to pay, contingent on a specific hypothetical scenario, they must be direct users of the environmental service. The CV has been defined as a “stated preference” (1) method, because it asks people to directly state their values, rather than inferring values from actual choices. CV is proper to use on environmental events were the “public” has direct or indirect interest or involvement.

Definition of problems conducive to CV (hypothetical):

1. The CAP board is in the need to determine how much water to allocate to Tempe for the Town Lake. The water quantity affects the food supply for nesting and migratory birds. Thus, they use CV to measure the use and non-use values citizens have regarding the willingness to pay for increase water flows to the Lake.

2. The Energy Commission of AZ has to determine, for licensing permits to be issued, how much water can flow over a fall in a recreation area. The decision will not only impact the recreation area (visually, use, visitor numbers, environmental resources, etc) but determine the quantity of water SRP can house under a reservoir upstream.

3. Colorado State has to determine the costs they are willing to pay for restoring and keeping snow slopes. They need to determine the cost in their budget to maintain these slopes open for tourists. They need to determine these expenses based on CV surveys, which estimate the expected revenue they are going to receive or the sum of the willingness to pay of future tourists and outdoor recreationists that are to use these resources. The survey targets the users of these.

Definition of problems NOT conducive to CV (hypothetical):

CV determination of costs may be a lengthy and time consuming endeavor. The CV proper use might be closely related to what questions are asked; therefore it might not be a method to be used in:

1. The Arizona office of the EPA needs to determine the value of “air visibility” or the effect on the brown cloud. They want to impose a cost to future construction. The use of CV might not be the recommended methodology for public might not have a clear idea or value for air visibility, for it does not have a direct link to air quality or pollution standards. CV assumes that people understand the good in question and will reveal their preferences in the contingent market just as they would in a real market. However, most people are unfamiliar with placing dollar values on environmental goods and services. Therefore, they may not have an adequate basis for stating their true value.

2. Another example that literature (2, 4) details for NOT using CV is that of an environmental issue that may be subject to bias, or heavily influence by a political or emergency event. If you surveyed people right after the Katrina event about wanting to contribute (survey all Americans, independent of their residence location) or their willingness to pay for wetland restoration for specific areas affected by the Katrina hurricane , their response by be influence by the media dissemination of the effects and damages. However the preferences might not translate to actions or their willingness to accept higher taxes to cover for that willingness to pay.

3. If people are surveyed about their willingness to pay for a state-of-the-art waste water treatment, they may be willing to pay for the technology (although more costly) of a methane filter vs. sand filters. However if the survey also includes the location for this plant is to be in their “back yard” the environmental willingness to pay may be muddled by NIMBY public outcry.