ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS Department of

ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS Department of International and European Economic Studies 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: http: //www. aueb. gr/users/resees 1 st International Conference on Sustainable Watershed Management, September 2011, Istanbul, Turkey

Water as an economic good • 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

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

Choice Experiment Method (CEM) 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 nonprice attributes and asked to choose their most preferred option in each set of alternatives.

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: Water quantity problems for aquifer, lakes & springs; disturbing water dynamics DANGER: loosing ecosystem goods and services, e. g. recreation Uncertainty is an issue! Lake Ahveroinen at Rokua esker.

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

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. 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 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 €

Sample Choice Card Attributes Scenario A Scenario B Scenario C Water quantity Same as Now Increased Limited Recreation Increased Same as now Low Total Land Income Same as now Restricted Investment on Research Low Medium Price (one-off payment) 50 100 None I prefer Scenario A Scenario B Scenario C

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

Debriefing Questions Please tell us what you think about the following statements? Strongly Disagree 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 Neither Agree Nor Disagree Agree Strongly Agree Do not know

Attitudinal Questions How often does your household do the following? Always Buy Organic products Donate to env. orgs Buy env. based journals Recycle household waste Often Sometimes Rarely Never Do not know

Population and Sample Population Rokua’s local people and visitors Pilot Sample 37 individuals Main Sample 171 individuals The pre-testing survey was carried out during April 2011. Face to face interviewing process.

PRE-TESTING PILOT SAMPLE

Profile of respondents Respondents’ Profile Frequency Distribution (%)[1] Male 19 51, 35% Female 18 48, 64% Less than upper secondary school (up to 18 years) 5 13, 51% Upper secondary school (up to 18 years) 19 51, 35% University Degree 11 29, 72% Postgraduate 1 2, 7% Full-time job 1 2, 7% Occupation Part-time job : Pensioner 1 2, 7% 7 18, 91% 26 70, 27% Gender: Education Level: Student [1] Sum of the percentages may not add up to 100 due to rounding up.

Profile of respondents (cont) Respondents’ Profile Distribution (%) Less than 10. 000 euros 14 37, 83% [10. 000] – [20. 000] euros Income: Frequency 16 43, 24% [20. 000] – [30. 000] euros 3 8, 1% [30. 000] – [40. 000] euros 1 2, 7% [50. 000] – [60. 000] euros 2 5, 40% [60. 000] – [70. 000] euros 1 2, 7%

Analysis of Pilot Survey Data 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.

Results – Multinomial Logit Variable Coefficient Standard Error Water quantity . 97952533* . 15748047 Recreation . 75020358* . 14224992 Land Income -. 00137413** . 17571583 Research . 17444622** . 12148421 Cost -. 01226514* . 00357471 Log-likelihood -224. 9661 R 2 0. 28898 Sample size 296 * 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

Valuation Results in Policy Design 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.

CONCLUSIONS 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.

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

Thank you !