Developing a choice experiment to value the benefits generated from water management and improved scientific information on climate change. Eva Kougea and Dr. Prof. Phoebe Koundouri 1 1 Director of Research unit on Economic, Social, Environmental/Ecological Sustainability (RESEES), Web Page: 1 st International Conference on Sustainable Watershed Management, September 2011, Istanbul, Turkey ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS Department of International and European Economic Studies

Water resources can be seen as a multi-attribute environmental commodity Public Good features Missing properties rights and externalities Prices are not the correct signals We need to retrieve Total Economic Value Economic valuation techniques Water as an economic good

Total Economic Value Components Environment Structure & Processes Environmenta l Functions Human Benefits Anthropocentric Values Use Non-Use Values

CEM is a survey-based technique which can estimate the total economic value of an environmental stock/flow or service and the value of its attributes, as well as the value of more complex changes in several attributes. Lancaster Theory of Value Random Utility Theory E.g. Each respondent is presented with a series of alternatives of the environmental good with varying levels of its price and non- price attributes and asked to choose their most preferred option in each set of alternatives. Choice Experiment Method (CEM)

Construction of the Questionnaire Site Description Good to be valued Attributes to be valued Scenarios Choice Cards Debriefing and Attitudinal Questions Socio – Economic Characteristics

Rokua Case Study Valuing Ecosystem Services under Scientific Uncertainty and Conflict of Socio-Economic Values Groundwater Dependent Ecosystem Main Economic Sectors at Work: Forestry, Peat-Harvesting, Tourism, Recreation, Environment PROBLEMS: PROBLEMS: Water quantity problems for aquifer, lakes & springs; disturbing water dynamics DANGER: DANGER: loosing ecosystem goods and services, e.g. recreation Lake Ahveroinen at Rokua esker. Uncertainty is an issue!

Considering Uncertainty possible future environmental gains after implementing a revised water management future environmental damage, if no action is taken VALUE OF SCIENTIFIC INFORMATION Scientific uncertainty is not inherited to the system like other elements of uncertainty A gain in scientific understanding can reduce the level of uncertainty Is a way to reduce uncertainty? YES Rokua is an environment with great uncertainty with respect to both:

1. Restrict peat land drainage in the groundwater area 2. Expansion of the conservation area and compensation when legally required 3. Restoration (technical solutions) of peat lands, groundwater and lakes level Good to be valued Revision of management practices that: will achieve the targets of the WFD and GD and sustain ecosystem functions that support goods & services. Proposed measures were determined during discussions with experts

Management Attributes  Water Quantity Increased, Same as Now, Restricted  Recreation Increased, Same as Now, Low  Total Land Income Same as Now, Restricted  Investment on Research High, Medium, Low  Price (one-off payment) 10, 20, 50, 100 €

AttributesScenario AScenario BScenario C Water quantitySame as Now IncreasedLimited RecreationIncreasedSame as now Low Total Land IncomeSame as now Restricted Investment on Research LowMedium Price (one-off payment) 50100None I preferScenario AScenario BScenario C Sample Choice Card

Additional Questions Debriefing Questions to explain why respondents were or were not WTP Attitudes, opinions, knowledge and uses Environmental Behavior Socio-economics characteristics Age, education, job and income

Please tell us what you think about the following statements? Strongly Disagree DisagreeNeither Agree Nor Disagree AgreeStrongly Agree Do not know I do think I should pay for maintaining a better water status I do not have the financial capability to participate I find the outcome of the proposed management scenario uncertain or too far into the future Debriefing Questions

AlwaysOftenSometimesRarelyNeverDo not know Buy Organic products Donate to env. orgs Buy env. based journals Recycle household waste How often does your household do the following? Attitudinal Questions

Population and Sample The pre-testing survey was carried out during April Face to face interviewing process. PopulationRokua’s local people and visitors Pilot Sample 37 individuals Main Sample 171 individuals

PRE-TESTING PILOT SAMPLE

Respondents’ ProfileFrequencyDistribution (%)[1][1] Gender: Male1951,35% Female 1848,64% Education Level: Less than upper secondary school (up to 18 years) 513,51% Upper secondary school (up to 18 years) 1951,35% University Degree1129,72% Postgraduate12,7% Occupation : Full-time job12,7% Part-time job12,7% Pensioner718,91% Student2670,27% [1][1] Sum of the percentages may not add up to 100 due to rounding up. Profile of respondents

Respondents’ ProfileFrequencyDistribution (%) Income: Less than euros1437,83% [10.000] – [20.000] euros1643,24% [20.000] – [30.000] euros38,1% [30.000] – [40.000] euros12,7% [50.000] – [60.000] euros25,40% [60.000] – [70.000] euros12,7% Profile of respondents (cont)

Choice experiment data were coded continuously according to the levels of the attributes [0 - Restricted, 1 - Same as Now, 2 - Increased] Pilot survey data were analyzed using a multinomial logit model including all the experimental design variables in linear form. The model is specified so that the probability of selecting a particular scenario is a function of attributes of that scenario. Analysis of Pilot Survey Data

VariableCoefficientStandard Error Water quantity * Recreation * Land Income ** Research ** Cost * Log-likelihood R2R Sample size296 Results – Multinomial Logit * 5% significance level with two tailed test; **Insignificant

Marginal Willingness to Pay Marginal price is the marginal benefit from a discrete one level change in an attribute (or WTP for a one level improvement) all else being constant. For the linear utility function: MWTPi=-βi/βcost MWTP is 79,86 (s.e. 19,49) euro/respondent for an improvement in water quantity MWTP is 61,17 (s.e. 19,24) euro/respondent for an increase in recreation

Economic estimates give information regarding the best use of available resources i.e. the option that has the lowest opportunity cost or the lowest valued to be sacrificed. Contribute to public debate and awareness concerning specific (environmental) problems. Monetary value assessment allows the ranking of alternative policy options allowing the implementation of cost-benefit analysis or comparison of costs and benefits in another way for policy guidance. Valuation Results in Policy Design

Pre-testing suggested that respondents would have no difficulties with the environmental changes caused by the revision of water management. The questionnaire logic is correct and is ensured that information given to the respondents is comprehensive and easy to understand BUT this is an ongoing project and no conclusion regarding the results can be made Analysis of the main survey sample is expected to reveal informative results that will help to shape future land use and ecosystem protection policies. CONCLUSIONS

ACKNOWLEDGMENTS GENESIS: Groundwater and dependent ecosystems: New Scientific basis on climate change and land-use impact for the update of the EU Groundwater Directive; 7th Framework Program, European Union WP6: Groundwater systems management: scenarios, risk assessment, cost- efficient measures & legal aspects Special Thanks to: Project Coordinator: Prof. Bjørn Kløve, (UOULU); Norwegian Institute for Agricultural and Environmental Research (Bioforsk)Bjørn Kløve WP-6 Coordinator: Prof. Manuel Velazquez, UPVLC – Universidad politecnica de Valencia (Spain) Manuel Velazquez University of OULU for the implementation of the questionnaires: Pertti Ala-aho, Pekka Rossi, Riku Eskelein, Timo P. Karjalainen

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