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Economic
Evaluation of Forest Environmental Attributes -
'Non-use' values are the existence, bequest, option and altruistic benefits we obtain from the existence of (for example) threatened species that we do not 'use'. Decision-makers may intuitively give a positive value to non-use features, but that is highly subjective and variable - a systematic study is far preferable. If decision making does not adequately account for values not traded in markets, poorly-based decisions could be made, environmental goods under-supplied to the community, and public expenditure allocated inefficiently.
Professor Jeff Bennett and Dr Rob Dumsday led the study for URS Australia Pty Ltd, using Choice Modelling questionnaires to evaluate these forests' environmental attributes. Each attribute had several levels representing realistic improvements achievable over 20 years with sufficient funding. People responding to the questionnaire stated their willingness to make an annual payment of $0, $20, $50 or $100 to protect the attributes. Respondents were to treat the hypothetical payments as if they were real taxes or charges to be spent on improved management and possibly industry adjustment. [More on Choice Modelling and the questionnaire]
The environmental attributes in the East Gippsland Forests area were:
Information Posters - A coloured poster with a map, general context and factual information about the attributes was given to each household which received the questionnaire. An expert committee including senior DSE scientists developed the information.
Questionnaires - Each 16-page questionnaire had introductory statements about the survey, poster, attributes and scenarios, the five choice sets, socio-economic and context questions.
Field Survey in November 2006 - Separate populations were sampled in Wodonga, Echuca, Mildura, Bairnsdale, Melbourne, rural areas along the Murray and rural areas in East Gippsland. Questionnaires were delivered to houses in randomly selected streets, then picked up later. Responses and Analysis - 1,045 River Red Gum Forest questionnaires were returned, and 723 for East Gippsland Forests. This level of response was excellent, return rates being 70% - 80% in regional cities, 60% for East Gippsland rural areas, and around 50% from Melbourne. The Murray rural area responses were too few for statistical analysis. Econometric models integrated socio-economic data, gauged statistical significance and produced an average amount per household for each attribute. Most environmental attributes and socio-economic parameters had statistically significant coefficients. The full URS report presents all model coefficients and whether significant at 1%, 5% or 10% levels. Results - The results are presented as implicit prices - what each household would be willing to pay for each attribute, in $ per year per specified unit of the attribute, over 20 years. Implicit prices for each attribute differ between samples - see details of results. Most implicit prices are: positive (indicating respondents' willingness to pay for better protection); statistically significant (showing the results can be confidently used); and modest - they are not large numbers which might appear unrealistic. Provision of more camping facilities along the Murray River was an exception, with negative, non-significant values. Application of the Results - An immediate use of this study is as a component of the Benefit-Cost Analysis for VEAC's current River Red Gum Forests Investigation Draft Proposals Paper. This study provides sound, reliable $ values for non-market environmental features for the River Red Gum Forests area. The results can be applied directly to various DSE and Government studies and processes where proposed land or water uses may affect the attributes above or their equivalents. This study has now established the reference point for such studies, with non-market prices determined by the Victorian community. The methodology and Final Report were peer reviewed by Professor John Rolfe of Central Queensland University. The project was overseen by a Steering Group of senior VEAC and DSE staff. Please contact Simon Ransome, VEAC at simon.ransome@dse.vic.gov.au if you have any queries about this project.
More on 'Non-market' values Non-market features include 'use' and 'non-use' values. Non-market 'use'
values are either direct (eg ecotourism and bushwalking) or indirect (eg
some ecosystem services).
Such values, with
different emphases, underpin why people value non-use features. More on Choice Modelling and the Questionnaire Choice Modelling (CM) is a 'stated preference' technique which estimates the economic value of features that cannot be priced by markets. Households responding to the questionnaire state their willingness to pay, in this case, for protection of specified environmental attributes. CM avoids several difficulties associated with another stated preference technique, contingent valuation. CM is a better technique where the study area, attributes and responses are complex. Rather than simply asking the open-ended "How much would you pay for…?", CM provides respondents with sets of choices between scenarios with different levels of protection for several attributes, for different annual payments. In the questionnaire, each choice question includes a status quo option providing no new initiatives and costing $0, and two options with different levels of enhanced management for four environmental attributes, costing between $20 and $100. Many respondents chose the status quo for one or more questions. Those preferences were counted as a willingness to pay $0. Some chose to pay $20, $50 or $100 for different scenarios, contributing to an overall average price per household. For each of the River Red Gum and East Gippsland Forests, there were 5 versions of the questionnaire, each with 5 choice questions. The study used econometric modelling to analyse responses to the 50 choice questions, integrate relevant socio-economic data, and measure the statistical significance of the outcomes. The CM analysis allows respondents' trade-offs between various attributes to be identified, rather than just broadly indicating support for 'the environment' or the status quo. Results Results - The implicit prices indicate what each household would be willing to pay for each attribute, in $ per year per specified unit of the attribute, over 20 years. Implicit Price
Estimates for River Red Gum Forests
Implicit
Price Estimates for East Gippsland Forests
Significance levels indicated by: * 0.1, ** 0.05, *** 0.01
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Page last reviewed - 26 June 2007 |
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Public
land has many values. Its resources have market values. But we also value
its biodiversity, landscapes and recreation. VEAC, DSE and the Government
need to gauge the $ values of such non-market features, to assist in evaluating
competing alternative uses. When faced with hard decisions which hinge
on such values, it is not helpful or true to say environmental features
have zero value, or infinite value, or that they cannot be valued.