Tools for Better Decision Making: Bridges from Science to Policy - Climate Change Impacts on Freshwater Ecosystems - page 271

behaviour in the surrogate markets is used to estimate willingness to pay (WTP),
which represents an individual's valuation of, or the economic benefits derived
from, the environmental resource. The essence of the Stated Preference (SP)
approach is that the market for the good is 'constructed' through the use of a
hypothetical scenario. Consequently, stated preference techniques circumvent
the absence of markets for environmental goods and services by presenting
consumers with hypothetical markets in which they have the opportunity to pay
to use or protect, or accept compensation for the loss of the environmental good
or service in question. Two approaches used to derive such values are the
Contingent Valuation (CV) method and the Choice Experiment (CE) method.
In a CV study, respondents are asked their maximum WTP (or minimum
willingness to accept (WTA) in compensation) for a predetermined increase or
decrease in environmental quality. They are offered a change in the quantity or
quality of a good at a given cost, and either accept or refuse the payment of the
suggested cost. To provide an accurate WTP measure, the survey must meet the
accepted standards of survey research (Arrow et al . 1993). In a CE study,
the environmental resource is defined in terms of its attributes and the levels
these attributes would take with and without sustainable management of the
resource. Attributes of a water resource could include biodiversity and water
quality, whereas levels of biodiversity could, for example, include the number of
endangered bird species conserved. A monetary cost/benefit attribute is also
included to allow for the estimation of WTP or WTA values. Experimental design
methods (Louviere et al . 2000) are used to construct different profiles of the
environmental good in terms of its attributes and levels of these attributes. Two
to three such profiles are assembled in choice sets, which are in turn presented to
the respondents, who are asked to state their preferences in each choice option.
Statistical analysis is used to estimate the factors that affect choice of an
environmental good as a function of its attributes and the levels these attributes
take. Respondents' WTP or WTA for a change in any one of the attribute levels
is calculated as the trade-off they make between the level of that attribute and the
monetary cost/benefit attribute.
The WTP or WTA values estimated from CV and CE studies can then be used
in Cost Benefit Analysis (CBA). CBA is an analytical tool based on welfare theory,
which is conducted by aggregating the total costs and benefits of a project or
policy over both space and time (Hanley & Spash 1995). A project or policy
represents a welfare improvement only if the benefits net of costs are positive.
Different management options will yield different net benefits and the option
with the highest net benefits is the preferred or optimal one.
A CE was implemented to address the issue of efficient management of the
Cheimatitida wetland (Birol et al . 2006a). Based on expert consultations,
literature review and discussions with local people, four wetland attributes that
are expected to generate non-use values were selected. These were: (i) biodiversity;
(ii) open water surface area; (iii) inherent research and educational values that
can be extracted from the wetland; and (iv) values associated with environmentally-
friendly employment opportunities. The levels these attributes would take, with
and without sustainable management efforts, were determined with wetland
experts at the Greek Biotope and Wetland Centre. The fifth attribute was a