Using contingent valuation in the design of payments for environmental services mechanisms: a review and assessment

Whittington, Dale and Pagiola, Stefano (2011): Using contingent valuation in the design of payments for environmental services mechanisms: a review and assessment.

Abstract

In this paper we review CV studies conducted in the context of PES programs, almost all of which attempt to estimate the demand of downstream water users for upstream watershed protection and, more generally, for improved water services. Our objective is to assess the quality of these CV-PES studies, and their usefulness for designing PES programs.

• Item Type: MPRA Paper
• Language: English
• Keywords: payments for environmental services; contingent valuation; stated preferences; water users; willingness to pay
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects

References

., M. Hanemann, J. Swait, R. Johnson, D. Layton, M. Regenwetter, T. Reimer, and R. Sorkin. 2005. “Decision strategy and structure in households: A ‘groups’ perspective.” Marketing Letters, 16(3-4):387-399.

Akter, S., J. Bennett, and S. Akhter. 2008. “Preference uncertainty in contingent valuation.” Ecological Economics, 67:345–351.

Alberini, A., and J.R. Kahn (eds.). 2006. Handbook on Contingent Valuation. Cheltenham: Edward Elgar.

Alberini, A., K. Boyle, and M. Welsh. 2003. “Analysis of contingent valuation data with multiple bids and response options allowing respondents to express uncertainty.” Journal of Environmental Economics and Management, 45:40–62.

Alpízar, F., and R. Madrigal. 2007. “Valoración económica de servicios ambientales hídricos en paisajes intervenidos, cantón de Esparza, Costa Rica.” Turrialba: CATIE.

Alpízar, F., and M. Otárola. 2007. “Estimación de la voluntad de pago de clientes de la JASEC para financiar el manejo ambiental de las subcuencas del sistema hidroeléctrico Birris, Costa Rica.” In: IUCN (ed.), Valoración Económica, Ecológica y Ambiental: Análisis de Casos de Iberoamérica. Heredia: Editorial de la Universidad Nacional.

Amponin, J.A.R, M.E.C. Bennagen, S. Hess, J. Di, and S. dela Cruz. 2007. “Willingness to pay for watershed protection by domestic water users in Tuguegarao City, Philippines.” PREM Working Paper No.07/06. Amsterdam: IES.

Arias-Rojo, H.M. 2007. “Estudio de valoración y demanda de servicios ambientales hidrológicos en el área promisoria de servicios ambientales ‘Zapalanimé-Saltillo’.” Guadalajara: CONAFOR.

Arrow, K., R. Solow, P. Portney, E. Leamer, R. Radner, and H. Schuman. 1993. “Report of the NOAA Panel on Contingent Valuation.” Federal Register, 58:4601-4614.

Asquith, N.M., M.T. Vargas, and S. Wunder. 2008. “Selling two environmental services: In-kind payments for bird habitat and watershed protection in Los Negros, Bolivia.” Ecological Economics, 65(4):675-684.

Bateman, I., R.T. Carson, B. Day, M. Hanemann, N. Hanley, T. Hett, M. Jones-Lee, G. Loomes, S. Mourato, E. Ozdemiroglu, D.W. Pearce, R. Sugden, and J. Swanson. 2002. Economic Valuation with Stated Preference Techniques: A Manual. Cheltenham: Edward Elgar.

Barrantes, G., and L. Gámez. Forthcoming. “The payments for water services program of Heredia’s public service utility.” In: G. Platais and S. Pagiola (eds.), Ecomarkets: Costa Rica’s Experience with Payments for Environmental Services. Washington: World Bank.

Bennagen, M.E., A. Indab, A. Amponin, R. Cruz, R. Folledo, P.J.H. van Beukering, L. Brander, S. Hess, A. van Soesbergen, K. van der Leeuw, and J. de Jong. n.d. “Designing payments for watershed protection services of Philippine upland dwellers.” PREM Project Report. Amsterdam: IES.

Bennett, M.T., 2008. “China's sloping land conversion program: Institutional innovation or business as usual?” Ecological Economics, 65(4):699-711.

Berggren, M., and S. Stahl. 2003. “Paying for environmental services: A choice experiment in Turrialba, Costa Rica.” Masters Thesis, Department of Environmental Economics. Gothenburg: Gothenburg University.

Blackburn, M., G. Harrison, and E. Rutstrom. 1994. “Statistical bias functions and informative hypothetical surveys.” American Journal of Agricultural Economics, 74:1084-88.

Blackman, A., and R.T. Woodward. 2010. “User financing in a national payments for environmental services program: Costa Rican hydropower.” Ecological Economics, 69(8):1626-1638.

Boland, J., and D. Whittington. 2000. “The political economy of increasing block water tariffs in developing countries.” In: A. Dinar (ed.), The Political Economy of Water Pricing Reforms. Oxford: Oxford University Press.

Calderon, M., L. Camacho, M. Carandang, J. Dizon, L. Rebugio, N. Tolentino. 2006. “Willingness to pay for improved watershed management: Evidence from Metro Manila, Philippines.” Forest Science & Technology, 2(1):42-50.

Camhi, A., and S. Pagiola, 2009. “Payment for Environmental Services mechanisms in Latin America and the Caribbean: A compendium.” Washington: World Bank.

Campos-Benhumea, J.C. 2007. “Estudio de valoración y demanda de servicios ambientales hidrológicos en el área promisoria de servicios ambientales ‘El Cielo-Ciudad Victoria’.” Guadalajara: CONAFOR.

Carlsson, F., P. Frykblom, and C. Lagerkvist. 2005. “Using cheap-talk as a test of validity in choice experiments.” Economic Letters, 89:147-152.

Carson, R.T., W.M. Hanemann, R.J. Kopp, J.A. Krosnick, R.C. Mitchell RC, S. Presser, P.A. Ruud, and V.K. Smith. 1994. “Prospective interim lost use value due to DDT and PCB contamination in the Southern California Bight.” La Jolla: Natural Resource Damage Assessment.

Carson, R., and T. Groves. 1997. “Incentive and informational properties of preference questions.” Environmental and Resource Economics, 37(1):181-210.

Champ, P.A., K.J. Boyle, and T.C. Brown (eds.). 2003. A Primer on Nonmarket Valuation. Dordrecht: Kluwer Publishers.

Cisneros, J, F. Alpízar, and R. Madrigal. 2007. “Valoración económica de los beneficios de la protección del recurso hídrico bajo un esquema de pago por servicios ecosistémicos en Copán Ruinas, Honduras.” Turrialba: CATIE.

Contreras-Benítez, H.A. 2007. “Estudio de valoración y demanda de servicios ambientales hidrológicos en el área promisoria de servicios ambientales ‘Sian Ka’an-Cancún’.” Guadalajara: CONAFOR.

Cruz M., F.J., and S. Rivera R. 2002 . "Valoración económica del recurso hídrico para determinar el pago por servicios ambientales en la cuenca del Río Calan, Siguatepeque, Honduras." Tegucigalpa: ESNACIFOR.

Cummings, R., and L. Taylor. 1999. “Unbiased value estimates for environmental goods: A cheap talk design for the contingent valuation method.” American Economic Review, 89(3):649-665.

Echavarría, M. 2002. “Water user associations in the Cauca Valley, Colombia: A voluntary mechanism to promote upstream-downstream cooperation in the protection of rural watersheds.” Land-Water Linkages in Rural Watersheds Case Study Series. Roma: FAO.

Engel, S., S. Pagiola, and S. Wunder. 2008. “Designing payments for environmental services in theory and practice: An overview of the issues.” Ecological Economics, 65(4):663-674.

González-Ortiz, M.A. 2007. “Estudio de valoración y demanda de servicios ambientales en el área promisoria de servicios ambientales ‘Copalita-Huatulco’.” Guadalajara: CONAFOR.

Griffin, C., J. Briscoe, B. Singh, R. Ramasubban, and R. Bhatia. 1995. “Contingent valuation and actual behavior: predicting connections to new water systems in the State of Kerala, India.” World Bank Economic Review, 9(3):373-393.Hanemann, W.M., and B. Kristrom. 1995. “Preference uncertainty, optimal design, and spikes.” In: P.-O. Johnansson, B. Kristrom, and K.-G. Maler (eds.), Current Issues in Environmental Economics. Manchester: Manchester University Press.

Harrison, G.W. 2006. “Experimental evidence on alternative environmental valuation methods.” Environmental and Resource Economics, 34(1):125–62.

Johnson, N., and M.E. Baltodano. 2004. “The economics of community watershed management: some evidence from Nicaragua.” Ecological Economics, 49:57-71.

Kaplowitz, M., and F. Lupi. 2008. “Local markets for payments for environmental services in Costa Rica.” East Lansing: Michigan State University.

Kristrom, B. 1997. “Spike models in contingent valuation.” American Journal of Agricultural Economics, 79(3):1013-1023.

Krosnick, J.A., A.L. Holbrook, M.K. Berent, R.T Carson, W.M. Hanemann, R. J. Kopp, R.C. Mitchell, S. Presser, P.A. Ruud, V.K. Smith, W.R. Moody, M.C. Green, and M. Conaway. 2002. “The impact of no opinion response options on data quality: Non-attitude reduction or an invitation to satisfice?” Public Opinion Quarterly, 66:371–403.

Labao, R., H. Francisco, D. Harder, and F. Santos. 2008. “Do colored photographs affect willingness to pay responses for endangered species conservation?” Environmental and Resource Economics, 40(2):251-264.

Li, C., and L. Mattson. 1995. “Discrete choice under preference uncertainty: an improved structural model for contingent valuation.” Journal of Environmental Economics and Management, 28:256–269.

List, J. 2001. “Do explicit warnings elicit the hypothetical bias in elicitation procedures? Evidence from field auctions of sports cards.” American Economic Review, 91:498-507.

Loomis, J., and E. Ekstrand. 1998. “Alternative approaches for incorporating respondent uncertainty when estimating willingness to pay: The case of the Mexican Spotted Owl.” Ecological Economics, 27:29-41.

López-Paniagua, C., M.J. Gonzalez-Guillén, J.R. Valdez-Lazalde, and H.M. de los Santos-Posadas. 2007. “Demanda, disponibilidad de pago y costo de oportunidad hídrica en la Cuenca Tapalpa, Jalisco.” Madera y Bosques, 13(1):3-23

Louviere, J.J., D.A. Hensher, and J.D. Swatt. 2000. Stated Preference Methods: Analysis and Applications. Cambridge: Cambridge University Press.

Lundine, J. 2005. “An economic estimation of small land owner willingness to accept a reforestation project.” Masters Thesis, Department of Agricultural, Environmental, and Development Economics. Columbus: Ohio State University.

Madrigal, R., and F. Alpízar. 2007. “diseño y gestión adaptativa de un esquema de pagos por servicios ecosistémicos en Copán Ruinas, Honduras.” Turrialba: CATIE.

Mendoza Gutierrez, G.A. 2006. “Demand for water in Queretaro, Mexico: A study of the preferences for water supply improvements.” Masters Thesis, Department of Rural Economy. Edmonton: University of Alberta.

Mitchell, R.C., and R.T. Carson. 1989. Using Surveys to Value Public Goods: The Contingent Valuation Method. Washington: Resources for the Future.

Moreno-Sanchez, R., R. Maldonado, S. Wunder, and C.A. Borda. 2009. “Do environmental service buyers prefer differential rates? A Case study from the Colombian Andes.” Documentos CEDE No.2009-23. Bogotá: Universidad de los Andes.

Muñoz-Pina, C., A. Guevara, J. Torres, and J. Brana. 2008. “Paying for the hydrological services of Mexico's forests: Analysis, negotiations and results.” Ecological Economics, 65(4):725-736.

Obando, M. 2007. “Evolución de la experiencia de los PSA hídricos en Nicaragua: El caso de la microcuenca Paso de los Caballos, Municipio de San Pedro del Norte, Chinandega.” Serie Técnica No.2/2007. Tegucigalpa: PASOLAC.

Ortega-Pacheco, D.V., F. Lupi, and M.D. Kaplowitz. 2009. “Payment for environmental services: Estimating demand within a tropical watershed.” Journal of Natural Resources Policy Research, 1(2), 2009:189-202.

Pagiola, S. 2008. “Payments for environmental services in Costa Rica.” Ecological Economics, 65(4):712-724.

Pagiola, S. 2010. “Payments for Environmental Services in Saltillo.” Washington: World Bank.

Pagiola, S., and G. Platais. 2007. Payments for Environmental Services: From Theory to Practice. Washington: World Bank.

Peprah, G. 2009. "Investigating the feasibility of instituting payment for environmental services (PES) scheme in Ghana: The Weija watershed case study." Masters Thesis, Geo-Information Science and Earth Observation. Enschede: International Institute for Geo-Information Science and Earth Observation.

Pizano-Portillo, A. 2007. “Estudio de valoración y demanda de agua en el área promisoria de servicios ambientales Cerro Grande-Colima, Jalisco.” Guadalajara: CONAFOR.

Porras, I., and R.A. Hope. 2005. “Using stated choice methods in the design of payments for environmental services schemes.” Edinburgh: IIED.

Prabhu, V. 2010. “Tests of intrahousehold resource allocation using a CV framework: A comparison of husbands’ and wives’ separate and joint WTP in the slums of Navi-Mumbai, India.” World Development, 38:606-19.

Puente-González, A. 2007. “Estudio de valoración y demanda de servicios ambientales hidrológicos en el área promisoria de servicios ambientales ‘Pico de Orizaba-Coatepec’.” Guadalajara: CONAFOR.

Ready, R., J. Whitehead, and G. Blomquist. 1995. “Contingent valuation when respondents are ambivalent.” Journal of Environmental Economics and Management, 29:181-197.

Retamal, R., R. Madrigal, F. Alpízar, and F. Jiménez. 2007. “Oferta de servicios ecosistémicos hídricos en el municipio de Copán Ruinas: ¿dónde se generan? ¿cómo protegerlos? ¿cuánto pagar por ellos?” Turrialba: CATIE.

Rodriguez, F., D. Southgate, T. Haab, and J. Lundine. 2009. “Is better drinking water valued in the Latin American countryside: Some evidence from Cotacachi, Ecuador.” Water International, 34(3):325-334.

Saldivar-Valdés, A. 2007. “Estudio de valoración y demanda de servicios ambientales hidrológicos en el área promisoria de servicios ambientales ‘Cumbres de Monterrey-Monterrey.” Guadalajara: CONAFOR.

Salzman, J. 2005. “Creating markets for ecosystem services: Notes from the Field.” New York University Law Review, June:870-961.

Samnaliev, M., Stevens, T.H. and More, T. 2006. “A comparison of alternative certainty calibration techniques in contingent valuation.” Ecological Economics, 57:507-519.

Shultz, S., and B. Soliz. 2007. “Stakeholder willingness to pay for watershed restoration in rural Bolivia.” Journal of the American Water Resources Association, 43(4):947-956.

Southgate, D., and S. Wunder. 2009. “Paying for watershed services in Latin America: A review of current initiatives.” Journal of Sustainable Forestry, 28(3-5):497-524.

Southgate, D., T. Haab, J. Lundine, and F. Rodríguez. 2009. “Payments for environmental services and rural livelihood strategies in Ecuador and Guatemala.” Environment and Development Economics, 15:21-37.

Subade, R. 2007. “Mechanisms to capture economic values of marine biodiversity: The case of Tubbataha Reefs UNESCO World Heritage Site, Philippines.” Marine Policy, 31:135-142.

Vargas-Pérez, E. 2007. “Estudio de valoración y demanda de servicios ambientales hidrológicos en el área promisoria de servicios ambientales ‘Amanalco-Valle de Bravo.” Guadalajara: CONAFOR.

Wang, H. 1997. “Treatment of don’t know responses in contingent valuation surveys: A random valuation approach.” Journal of Environmental Economics and Management, 32(2):219-232.

Whitehead, J.C., J.C. Huang, G.C. Blomquist, and R.C. Ready. 1998. “Construct validity of dichotomous and polychotomous choice contingent valuation questions.” Environment and Resource Economics, 11:107-116.

Whittington, D. 2002. “Improving the performance of contingent valuation studies in developing countries.” Environmental and Resource Economics, 22(1-2):323-367.

Whittington, D. 2004. “Ethical issues with contingent valuation surveys in developing countries: A note on informed consent and other concerns.” Environmental and Resources Economics, 28(4):507-515.

Whittington, D., W.M. Hanemann, C. Sadoff, and M. Jeuland. (2009). "The Challenge of Improving Water and Sanitation Services in Less Developed Countries." Foundations and Trends in Microeconomics. 4 (6-7): 469-609.

Whittington, D. 2010. “What have we learned from 20 years of stated preference research in developing countries?” Annual Review of Resource Economics, 2:209-36.

Whittington, D., C. Suraratdecha, C. Poulos, M. Ainsworth, V. Prabhu, and V. Tangcharoensathien. 2008. “Household demand for preventive HIV/AIDS caccines in Thailand: Do husbands’ and wives’ preferences differ?” Value in Health, 11(5):965-974.

World Bank, 2007. “Venezuela expanding partnerships for the national parks system project: Project Appraisal Document.” Report No.37502-VE. Washington: World Bank.

Wunder, S. 2005. “Payments for environmental services: Some nuts and bolts.” CIFOR Occasional Paper No.42. Bogor: CIFOR.