Eliciting policy-relevant stated preference values for water quality: An application to New Zealand

Abstract

Governments need tools to analyze trade-offs for freshwater policy, yet valuation estimates from the literature can be difficult to deploy in a policy setting. Obstacles to benefit transfer include (i) difficulties in scaling up local estimates, (ii) water quality attributes that cannot be linked to policy, and (iii) surveys positing large, unrealistic water quality changes. Focusing on freshwater rivers and streams in New Zealand, we develop and implement a nationwide discrete choice stated preference study aimed at future 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 with three attributes – nutrients, water clarity, and E. coli levels – which were chosen to align with government policy levers and salience to the public. Estimation results demonstrate positive and significant willingness to pay values for improvements in each attribute, with magnitudes that are comparable to a recent referendum vote on a water quality tax. 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).

Keywords

• stated preference
• water quality
• benefit–cost analysis
• environmental policy