National Water Quality Values in New Zealand: Policy-Relevant Stated Preference Estimates
Paper Number: 2022-02
Document Date: 05/2022
Author(s): Patrick J. Walsh, Dennis Guignet, and Pamela Booth
Subject Area(s): water pollution, recreation, visibility, existence/nonuse values, valuation methods, costs of pollution control, benefit-cost analysis
JEL Classification: Q25, Q51, Q58
Keywords: Water quality, benefit-cost analysis, stated preference, choice experiment, willingness to pay, valuation
Abstract: Governments need tools to analyze trade-offs and inform freshwater policy. Although there is a large stated preference (SP) literature valuing changes in freshwater quality, the estimates often cannot be transferred to policy analyses. Obstacles to benefit transfer include (i) difficulties in scaling up local estimates to the national level, (ii) the use of water quality attributes that cannot be linked to policy-relevant measures, and (iii) surveys with water quality changes that don’t represent realistic policy. Focusing on rivers and streams in New Zealand, a country that has received international attention for efforts to protect its water resources, we develop and implement a nationwide discrete choice SP study that can be more appropriately used in benefit transfer. The stated provision mechanism and environmental commodity being valued are specified at the regional council-level, which is the administrative unit for policy implementation. The survey is administered on a national scale, to just over 2,000 respondents. Therefore, our results can easily be applied to regional freshwater policies or scaled up to inform federal actions. The discrete choice experiment attributes – nutrients, water clarity, and e. coli – were chosen because they align with government policy levers and were found to be the most relevant and salient to the general public. Estimation results suggest people are willing to pay for improvements in all three water quality attributes with magnitudes that are roughly comparable to a recent Auckland referendum vote on a water quality tax. We also find that willingness to pay varies across regions, types of recreation that a user engages in, and other respondent characteristics, although notable unobserved heterogeneity remains unexplained. To illustrate the utility of our study, we apply the results to a recent policy analyzed by New Zealand’s Ministry for the Environment and estimate nationwide annual benefits of NZ $115 million ($77 million USD).
This paper is part of the Environmental Economics Working Paper Series.
National Water Quality Values in New Zealand: Policy-Relevant Stated Preference Estimates (pdf)