Towards a Comprehensive Valuation of Water Management Projects When Data Availability Is Incomplete—The Use of Benefit Transfer Techniques

Abstract

In this paper we deal with the problem of missing data in environmental cost-benefit analysis. If government pursues the goal of maximizing social welfare, this implies that public funds should be allocated to those uses where they generate the highest net social benefit. This criterion makes it necessary to conduct cost-benefit analyses for public projects. While the assessment of project costs is typically rather straightforward, a comprehensive assessment of the project benefits is more complicated because one has to consider that also people living far away from the project site might benefit from that project. Neglecting these so-called passive use benefits would lead to a systematic undervaluation of environmental projects, thereby reducing their chances of being realized. A comprehensive cost-benefit analysis would, therefore, require benefit assessment studies in all areas where passive use values might occur. Obviously, this would be impossible. In this paper we show how the assessment of the social benefits from environmental projects can be enhanced even with an imperfect database by using benefit transfer techniques. This is also illustrated empirically using an example from Northwest China.

Keywords

• sustainable water management
• contingent valuation method
• benefit transfer
• passive use values