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EIA Doe Guideline
EIA Doe Guideline
DEPARTMENT OF ENVIRONMENT
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT
PUTRAJAYA
JUNE 2008
PREFACE
The Guidelines on the Economic Valuation of the Environmental Impacts for EIA
Projects Prescribed Activities contain advice and instructions to assist project
initiators in the identification, quantification, and where possible the monetization
of the environmental impacts of the project. Project initiators should appoint
registered consultants with the required expertise to implement these Guidelines
as such economic valuation of the environmental impacts of the project
constitutes a component of EIA reports per requirements of the Handbook of
Environmental Impact Assessment Guidelines
These Guidelines consist of eight chapters as follows:
Chapter 1
This chapter provides the rationale and objective, and describes the
content of these Guidelines;
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
ii
This is the first edition of the Guidelines on the Economic Valuation of the
Environmental Impacts for EIA Projects in Malaysia. As experience develops with
their implementation, this edition will be updated as and when deemed necessary
by the Director General of Environmental Quality.
iii
TABLE OF CONTENTS
Preface
Table of contents
List of Tables
List of Figures
List of Boxes
List of Acronyms
ii
iv
viii
ix
x
xi
Chapter 1
Introduction
1.1
Background
1.2
Applicability of the Guidelines
1.3
Objective of the Guidelines
1.4
Content of the Guidelines
1
1
2
2
2
PART A
Chapter 2
5
5
7
12
15
Chapter 3
16
iv
16
16
18
18
21
22
22
22
25
26
27
28
28
29
29
29
30
30
PART B
31
Chapter 4
32
32
35
Chapter 5
36
36
37
37
38
39
39
39
39
39
40
Chapter 6
42
42
44
44
47
47
47
48
48
49
49
50
50
50
51
51
52
52
52
55
55
55
56
57
57
58
6.6
6.5.3
Strengths and limitations of the methodology
(i) Strengths
(ii) Limitations
6.5.4
Recommendations to project initiators
Travel cost methodology
6.6.1
When to use this methodology
6.6.2
How to use this methodology
(i) The zonal travel cost approach
(ii) The individual travel cost approach
(iii) The random utility approach
6.6.3
Strengths and limitations of the methodology
(i) Strengths
(ii) Limitations
6.6.4
Recommendations to project initiators
60
60
61
61
61
61
62
64
66
66
67
67
67
68
Chapter 7
69
69
69
69
70
70
71
73
73
73
73
Chapter 8
75
75
75
76
77
77
78
78
78
78
PART C
SUMMARY OF RECOMMENDATIONS
79
Chapter 9
Summary of recommendations
80
89
90
91
92
References
Additional references
Websites of interest
Glossary
vi
Annex 1
Annex 2
vii
95
107
LIST OF TABLES
Table 3.1
Table 3.2
Table 4.1
Table 6.1
Table 9.1
Table 9.2
viii
29
30
34
43
81
82
LIST OF FIGURES
Figure 2.1
Figure 2.2
Figure 2.3
Figure 2.4
Figure 2.5
Figure 2.6
Figure 2.7
Figure 2.8
Figure 2.9
Figure 3.1
Figure 3.2
Figure 3.3
Figure 3.4
Figure 3.5
Figure 4.1
Figure 4.2
Figure 6.1
Figure 6.2
Figure 6.3
ix
5
8
9
10
10
10
13
14
15
17
20
23
23
24
33
35
52
54
65
LIST OF BOXES
Box 2.1
Box 3.1
Box 3.2
Box 3.3
Box 6.1
Box 6.2
Box 6.3
Box 6.4
11
21
26
27
42
45
46
60
LIST OF ACRONYMS
CVM
DOE
EIA
NOAA
NTFPs
TCM
VSL
xi
Chapter 1
Introduction
1.1
Background
The last of the above five objectives clearly requires not only the identification of
the (physical) environmental impacts of the project, but further requires that these
impacts be monetized and transformed into environmental costs (negative
environmental impacts) and environmental benefits (positive environmental
impacts).
It is of importance to note that the above five objectives do not call for the
undertaking of a cost-benefit analysis of the project. While not denying the
importance of cost-benefit analysis in guiding the allocation of scarce private and
public sector resources, the focus of EIA lies in the identification, quantification,
and monetization (economic valuation) of the environmental impacts of the
project. Undoubtedly, such economic valuation would in most circumstances be a
component of a broader and more comprehensive cost-benefit analysis. But this
economic valuation in and by itself does not constitute a cost-benefit analysis.
1.2
The need for economic valuation must be determined during the scoping
exercise. The need shall be based on the projects expected impacts e.g on the
productivity of land (such as agricultural productivity) and water (such as fisheries
productivity). health and others. These impacts have to be clearly identified,
quantified, and transformed into environmental costs or benefits following the
procedures described in these Guidelines.
1.3
Part A first presents the general framework guiding the economic valuation of
environmental impacts (Chapter 2). Part A also discusses issues common to all
methodologies. In particular, it discusses issues pertaining to choice of scope of
analysis, both geographical and stakeholders. It also discusses the appropriate
scenario setting for the identification and quantification of the environmental
impacts of the project (with project versus without project). It describes the
techniques of discounting and shows how to consider changes in prices over
time. Finally, Part A discusses the necessity to undertake sensitivity analysis
(Chapter 3).
Part B presents the various methodologies available to undertake the economic
valuation of the environmental impacts of the project. An introduction to the
methodologies is presented in Chapter 4. Four types of methodologies are
described: the change of productivity methodology (Chapter 5), revealed
preferences methodologies (Chapter 6), stated preferences methodologies
(Chapter 7), and the benefit-transfer methodology (Chapter 8).
In each chapter of Part B, the methodologies are first described in details.
Second, specific recommendations are made to project initiators regarding the
presentation and discussion of the results of their economic valuation in their EIA
reports.
Concluding remarks and recommendations are presented in Chapter 9.
PART A
INTRODUCTION TO THE ECONOMIC VALUATION OF
ENVIRONMENTAL IMPACTS
Chapter 2
The concept of total economic value
2.1
Ecosystems
Structure
Processes
Economic values
To the extent that the above goods and services contribute to human welfare and
well-being, they are said to be source of economic values.
A further premise is that changes in the flow of goods and services provided by
the environment impact the nature and extent of the economic values associated
with these goods and services. More specifically, adverse changes in this flow of
goods and services are associated with a reduction in economic values (and
therefore a reduction in human welfare), while positive changes in this flow are
associated with an increase in economic values (and therefore an increase in
human welfare). In other words, adverse changes are considered as costs (or
environmental costs), while positive changes are considered as benefits (or
environmental benefits).
Such changes in the flow of goods and services provided by the environment are
occasionally triggered by natural events. For example, tropical storms may
adversely impact the flow of agricultural outputs.
Such changes may also be triggered by human actions. Such is the case with
development projects which may positively or negatively impact the flow of goods
and services produced by the environment.3 For example, a development project
1
may impair the ambient quality of surfaced waters which may then reduce the
possibility of using the water for crop irrigation.
In such circumstances, a key issue is to identify and quantify the changes in the
flow of goods and services produced by the environment which are impacted by
a development project, and then to monetize these changes into costs or
benefits.
If the environment produces a large number of goods and services which are
used in a multiplicity of different ways, then different types of economic values
will be associated with these good and services. As illustrated above, a body of
surfaced water may be used in many different ways and produce many different
types of goods and services each with its own economic value. The total
economic value of the environment is made of the aggregation of all these
different economic values.
2.2
The concept of total economic value is now generally recognized as being the
most suitable framework guiding the economic valuation of environmental
impacts. As illustrated in Figure 2.2, the total economic value of the environment
is made of different types of economic values, each corresponding to the
different use that is made of the environment. We provide below a brief
description of each of these economic values
Guidelines are presented in the context of the EIA process in Malaysia, human action is here
understood to be development projects (or prescribed activities as defined by the Environmental
Quality Act).
Figure 2.2
Total economic value and its components
Direct
use values
Consumptive
direct use value
Non-use
values
Option
value
Bequest
value
Existence
value
Non-consumptive
direct use value
Each of these activities generates economic values which are then referred as
the consumptive direct use value of the environment.
Non-consumptive direct use value refers to the economic value of those goods
and services produced by the environment without actual extraction or
abstraction taking place. Examples of non-consumptive direct use, among
numerous others, include:
Recreational swimming;
In each of these examples, note that the resource (water or bird) is not extracted
or abstracted despite the direct use that is made of it. Each of these activities
generates economic values which are then referred as non-consumptive direct
use values.
The sum of consumptive and non-consumptive direct use values defines the
direct use value of the environment.
Figure 2.3
Direct use value
Direct
use value
Consumptive
direct use value
Non-consumptive
direct use value
Indirect use value results from the use of services provided by the environment
and ecosystems. Examples of indirect use (use of services), among numerous
others, include:
In each of these examples, note that even though there may not be direct contact
with the resource, this resource (mangrove swamps, forest, or ozone layer in the
above examples) is producing a service which is actually use by human beings
and is therefore source of economic values which are then referred as indirect
use values.
Option value refers to the benefit of potentially using a resource at a later point
in the future. For example, protected areas may be set aside for conservation
purposes not only for the direct and indirect values they may currently generate,
but also for keeping the option possible (in the future) to conduct these or other
activities.
The sum of direct, indirect, and option values defines the use value of the
environment.
Figure 2.4
Use value
Use
value
Indirect
use value
Direct
use value
Option
value
Non-use values refer to the fact that some individuals in our societies obtain
satisfaction (welfare) simply from knowing that the existing flow of goods and
services produced by the environment is maintained as it currently is even if
there is no current or potential use of these goods and services by themselves
(existence value), or is maintained to keep the option opened for use by future
generations (bequest value).
Figure 2.5
Non-use value
Non-use
value
Bequest
value
Existence
value
The sum of use and non-use values defines the total economic value of the good
and services produced (delivered) by the environment.
Figure 2.6
Total economic value
Total economic
value
Use
value
10
Non-use
value
Box 2.1 presents an example of the total economic value framework applied to
wetlands. A key issue pertains to the actual estimation of the economic values
presented in this chapter. Part B is devoted to the presentation of methodologies
to do so. But before doing so, Chapter 3 discusses issues of interest to all
valuation methodologies.
Box 2.1
Example of the total economic value framework applied to wetlands
11
2.3
12
Figure 2.7
Measuring changes in economic values
(adapted from Freeman, 2003)
Increase in the discharge of industrial
pollution into surfaced waters
Changes in non-use
Future use of surfaced waters
13
Note that it is not changes in the environment that is of interest, but instead
changes in the use that human beings makes of the goods and services
produced by the environment.
This last point is clear when noting the definition of environmental effect and
environmental impact presented in the existing EIA Guidelines (Glossary of
Terms)
ENVIRONMENTAL EFFECT
A process such as soil erosion, accumulation of pollutants, or
relocation of people that is modified by mans actions.
ENVIRONMENTAL IMPACT
The net change (good or bad) in mans health or well-being,
including the ecosystems on which mans well-being depends, that
results from an ENVIRONMENTAL EFFECT. Environmental impact
should take into account the change in environmental quality that
would have occurred naturally, without mans action.
Figure 2.8
Environmental effect, impact, and human well-being
ENVIRONMENTAL EFFECT:
Soil erosion;
Land conversion;
Reduction of air quality;
Reduction of water quality;
Pollution of groundwater;
Increase in noise level;
Etc.
ENVIRONMENTAL IMPACT:
Reduction in agricultural yield;
Reduction in fisheries yield;
Increase in the number of asthma
attacks;
Increase in the number of gastrointestinal diseases;
Etc.
CHANGE IN HUMAN
WELL-BEING
14
2.4
STEP 2
QUANTIFICATION OF
ENVIRONMENTAL IMPACTS
STEP 3
ECONOMIC VALUATION OF
ENVIRONMENTAL IMPACTS
15
Chapter 3
Approaching the economic valuation of
environmental impacts: Issues of common interest
This chapter discusses issues which must be addressed at the outset of the
economic valuation process and are common to all economic valuation
methodologies.
3.1
Scope of analysis
As indicated in Chapter 1, the EIA Guidelines specifies that one of the objectives
of environmental impact analysis in Malaysia is:
To identify the environmental costs and benefits of the project to
the community.
A key issue pertains to the identification of the community, or in other words of
who to include (whose impacts to include; whose environmental costs and
environmental benefits to include) in the analysis.
As indicated in the Glossary of Terms of the EIA Guidelines, the word
community is understood to stand (most often) as an abbreviation of Human
Community, where Human Community is defined as:
Any diverse group of people sharing the environment. The
community may be local as in village or international as for example
the Straits of Malacca. The community may be homogeneous
(same race, same religion, same socio-economic position) or
heterogeneous.
When considering the appropriate scope of analysis (who to include), both
geographical scoping, and stakeholder scoping must be made very clear.
3.1.1 Geographical scoping
While environmental impacts may occasionally be limited to a narrow
geographical area in the vicinity of the project, in other circumstances these
impacts may extend well beyond a narrowly defined area to cover an entire
watershed, airshed, state, country, or even be global. Misspecifying the
geographical scope of the EIA (most often by limiting unduly the geographical
area of interest) can lead to significant under-estimates of the environmental
costs and environmental benefits of the project.
Unfortunately, there is no easy rule to guide the selection of the appropriate
geographical scope of the EIA. While local governments may wish to limit the
16
Group the environmental impacts (both positive and negative) into those
occurring: (1) Within the local community where the project is located; (2)
On other local communities within the state where the project is located;
and (3) On other states of Malaysia (Figure 3.1);
Select the same geographical scoping for the identification of both the
positive and negative environmental impacts.
Figure 3.1
Geographical scoping of environmental impacts
17
18
Note that in most circumstances, this is unlikely to be before and after the
project. The before and after comparison:
implicitly assumes that the environment in the future is going to remain the
same as it is today.
Suppose a road or bridge project aims to reduce traffic congestion between two
cities of Peninsular Malaysia. Suppose further that this reduction in traffic
congestion is expected to have a positive impact on ambient air quality by
reducing vehicular emissions of pollution. A key issue pertains to quantifying this
improvement in ambient air quality. For this purpose, a reference scenario must
be established.
As illustrated in Figure 3.2, without the project it may be unlikely that air pollution
concentration would remain at existing levels. In fact, one may reasonably expect
that without the project, traffic congestion would get worse, and that air pollution
concentration would concurrently get worse as well. In such situations, the
scenario of reference is not the existing levels of pollution, but is instead the
expected level of pollution if there were to be no project.
Note in Figure 3.2 that even if pollution concentration were to be higher with the
project, one would not conclude that the project resulted in an increase of
pollution concentration. In the example presented in Figure 3.2, the project would
still reduce pollution concentration when compared to a scenario where there
were to be no project.
19
Figure 3.2
With project versus without project
Expected pollution
concentration
without project
Impact of
the project
Existing
pollution
concentration
Expected pollution
concentration with
project
Today
20
Box 3.1
Example of with versus without project
In a detailed EIA report submitted to DOE, one read the following:
The project site is mainly under agriculture and secondary forest. At
lowers slopes, durian trees were planted (some still in production) and at
a later stage other fruit trees as well as other agricultural cash crops were
added.
There is expected to be a loss in terms of agricultural productivity as a
result of development in the area. Durian and other fruit crops will be
removed in the process of development but it is expected that this loss is
insignificant as the area has not been maintained and the crops that are
present are old and near the end of their peak productivity.
While one may argue or disagree with the conclusion that this loss is
insignificant, the approach used to identify the potential loss of agricultural
productivity is correct. Assuming indeed that the best use of this land is its
existing land use, then the study aimed to identify what is likely to happen to
agricultural productivity in the future without the project (the crops are old and
near the end of their peak productivity) versus with the project.
3.3
The market price of a specific commodity may vary for two different reasons.
First, it may vary simply because of changes in the general price level and in
more or less the same proportion as these changes in the general price level
(when this change in the general price level is upward, it is referred as inflation).
Such changes are referred as changes in nominal prices.
Second, it may vary because of changes in the supply and/or demand for the
commodity. Such changes are referred as changes in real prices.4
Since inflation impacts all prices in more or less the same manner, there is no
need to incorporate inflation in the process of undertaking the economic valuation
of the environmental impacts of the project. As such, there is no need to attempt
4
For example, the significant increase in the price of oil observed over the period 2006-2008
does not result from inflationary pressure but mostly from an increase in the demand for oil. This
change in the price of oil is not a change in nominal price but is a change in real price. Note that
the expressions real price and constant price are often used interchangeably. They should not
be. As the case of the price of oil shows clearly, there is no reason to expect that real prices are
constant.
21
forecasting future inflation rates or future changes in prices, except for those
changes in real prices. Specific recommendations are:
3.4
In this section we address issues which arise from the fact that environmental
costs and environmental benefits may arise at different points in time, some in
the near future, and others in a more distant future. These issues arise from
observing that RM 1 million of environmental costs or benefits today is not the
same as RM 1 million of environmental costs or benefits in 1 or 2 or 10 years
from now.
3.4.1 Discounting and present value
Discounting is simply a technique which allows to measure in a common unit of
measurement (todays dollars) costs or benefits which are taking place at
different points in time. The value today of future environmental costs and
benefits is known at the present value of these environmental costs and benefits.
3.4.2 The mechanics of discounting
Discounting is simply compound interest in reverse. The mechanics of
compounding is presented in Figure 3.3. RM 100 earning 10% per year will be
worth RM 110 in one year from now, 121 in two years from now, and more
generally will be worth RM 100(1.1)t in t years from now. With compounding, one
estimates the future value of RM 100 received today.
22
Figure 3.3
The mechanics of compounding
Year 0
100
Year 1
100(1+r)
Year 2
Year 3
Year 4
100(1+r)(1+r)
100(1+r)(1+r)(1+r)
100(1+r)(1+r)(1+r)(1+r)
100(1+r)2
100(1+r)2(1+r)
100(1+r)2(1+r)(1+r)
100(1+r)3
100(1+r)3(1+r)
100(1+r)4
Year 1
Year 2
Year 3
Year 4
100
100
100
100
100
100 / (1+r)
100 / (1+r)2
100 / (1+r)3
100 / (1+r)4
1 / (1+r)
23
Year 1
Year 2
Year 3
Year T
C0
C1
C2
C3
CT
B0
B1
B2
B3
BT
= C0 +
T
=
t =0
C3
C1
C2
CT
+
+
++
2
3
(1 + r ) (1 + r )
(1 + r )
(1 + r ) T
C0
(1 + r ) t
Present value of
environmental benefits
= B0 +
T
=
t =0
B3
B1
B2
BT
+
+
++
2
3
(1 + r ) (1 + r )
(1 + r )
(1 + r ) T
B0
(1 + r ) t
24
Some economists have argued for the use of a time declining discount rate. Weitzman (1998)
and Gollier (2002) provide a rationale for the use of such discount rate.
25
Box 3.2
Discounting and inflation
Suppose that the real discount rate is noted by r, while the nominal discount rate
is noted by m. Suppose further that prices are expected to rise at a constant
rate g in future years (g is the expected inflation rate).
Then, if conducting the analysis in nominal terms, the present value of a flow of
benefits from t = 0 to t = T is:
B1 (1 + g ) B2 (1 + g ) 2 B3 (1 + g ) 3
BT (1 + g ) T
PV = B0 +
+
+
++
(1 + m)
(1 + m) 2
(1 + m) 3
(1 + m) T
According to Fishers Law, (1 + m) = (1 + r )(1 + g ) . Substituting this expression into
the above equation yields:
PV = B0 +
B3 (1 + g ) 3
B1 (1 + g )
B2 (1 + g ) 2
BT (1 + g ) T
+
+
+
+
(1 + r )(1 + g ) (1 + r ) 2 (1 + g ) 2 (1 + r ) 3 (1 + g ) 3
(1 + r ) T (1 + g ) T
PV = B0 +
B3
B1
B2
BT
+
+
++
2
3
(1 + r ) (1 + r )
(1 + r )
(1 + r ) T
Hence, doing the analysis in real terms (using prices and discount rate measured
in real terms) yields the same outcome as using nominal prices (without inflation)
and a nominal discount rate. Doing the analysis in real terms has the advantage
that one does not need to forecast inflation rates in the distant future.
3.5
Box 3.3
Discount rate and the indefinite future
Suppose that a project involves an environmental cost or benefit of RM 100
millions in 100 years from now. The present value of this cost or benefit will not
be very large for any discount rate between 3% and 8%, and would be
decreasing significantly as the discount rate increases from 3% to 8% as shown
below.
Present value of RM 100 millions received
in 100 years from now
Discount rate
3%
4%
5%
6%
7%
8%
Each of the steps leading to the estimation of the environmental costs and
benefits of the project (identification, quantification, and monetization) is
undertaken in a context of uncertainty as well as with incomplete and sometimes
unreliable information. For this reason, it is always prudent to estimate costs and
benefits under a series of different assumptions as to what may be the
environmental impacts of the project.
27
Project initiators are not formally required to follow any specific format or
instructions when undertaking and presenting the economic valuation of the
projects environmental impacts in their EIA reports. However, in order to
facilitate the understanding of this economic valuation and discussions with DOE,
the following recommendations are presented.
3.7.1 With respect to the scope of analysis
Aim first to identify the environmental impacts of the project, not to select
the geographical scoping of the project;
Group the environmental impacts (both positive and negative) into those
occurring: (1) Within the local community where the project is located; (2)
On other local communities within the state where the project is located;
and (3) On other states of Malaysia. On the basis of this information,
define the appropriate geographical scoping of the project for purpose of
the EIA process;
28
Environmental
Costs
Environmental
Benefits
Year 0
C0
Year 1
C1
Year 2
C2
Year 3
C3
Year 4
C4
Year T
CT
B0
B1
B2
B3
B4
BT
29
Table 3.2
Present value of environmental costs and benefits calculated for different
discount rates
3%
Discount rate
5%
6%
4%
7%
8%
PV of Environmental
Costs
PV of Environmental
Benefits
The appropriate time horizon to select should coincide with the expected
duration (in time) of the environmental impacts of the project.
Provide a range for the present value of environmental costs and the
present value of environmental benefits depending on different
assumptions as to the impact of the project on the environment.
30
PART B
METHODOLOGIES FOR THE ECONOMIC VALUATION OF
ENVIRONMENTAL IMPACTS
31
Chapter 4
Introduction to the methodologies for economic valuation
4.1
32
Figure 4.1
Economic values and methodologies
Use value
Direct use
value
Consumptive
direct use value
Change of
productivity
Non-consumptive
direct use value
Change of
productivity
Revealed
preferences and
stated preferences
methodologies
Indirect use
value
Non-use
value
Bequest
value
Stated preferences
methodologies
Existence
value
33
Table 4.1
Environmental impacts and methodologies
Environmental
effects
Air pollution
Examples of
environmental impacts
Health impact
Infrastructure damages
Water pollution
Amenity impacts
Health impact
Water resources
Agricultural losses
depletion
Soil erosion / degradation Agricultural losses
Noise pollution
Loss of forested areas
Loss of coastal
ecosystems
Increase vulnerability to
disasters
Health impacts and
discomfort
Degraded forests
Degraded ecosystems
Economic valuation
methodologies
Cost of illness
Averting behavior
Contingent valuation
Cost of replacement
Hedonic prices
Contingent valuation
Cost of illness
Averting behavior
Contingent valuation
Change of productivity
Cost of replacement
Change of productivity
Cost of replacement
Averting behavior
Hedonic prices
Hedonic prices
Averting behavior
Change of productivity
Replacement costs
Travel cost
Contingent valuation
Change of productivity
Travel cost
Contingent valuation
34
Figure 4.2
Identification, quantification and economic valuation II
4.2
Identification of the
environmental impacts
Quantification of the
environmental impacts
Monetization of the
environmental impacts
Task of economist
Identify all environmental impacts of the project and assess which data is
currently available in order to quantify the environmental impacts (changes
in physical terms);
Ensure that the team of experts is appropriate to the task at hand and that
the economist is a member of the team from the very outset of the EIA
process to ensure that the data necessary for purpose of economic
valuation is indeed collected.
35
Chapter 5
Change of productivity methodology
5.1
Soil erosion (on-site impact). The quantity and quality of soil affects
agricultural productivity. Hence, the loss of soil (erosion) is likely to have
an impact on agricultural productivity or on the cost of conducting
agricultural production;
In order to avoid unduly burdening the text with both adverse and positive environmental
impacts, most of the text will directly address adverse environmental impacts as these may be
more appropriate given the context in which these Guidelines are going to be used.
36
In all of the above examples, note that the goods or services produced by the
environment are used (with other inputs such as labor and capital for example) to
produce goods which are commercially transacted (rice, fruits, fish, electricity,
etc.) and for which there exists market prices. One way (but not the only way) to
provide an economic valuation of the environmental impact is to assess the net
economic value of the lost output (net economic value of the fisheries lost; net
value of the agricultural production lost; net value of the hydro-power lost, etc.).8 I
5.2
37
productivity of the resource. This may be the most difficult step when
implementing this methodology. It consists in asking and attempting to answer
questions such as (for example):
How much agricultural yield would be lost (in quantity terms) if ambient
water quality were to degrade as a result of wastewater discharges from
the proposed project?
How much fisheries would be lost (in quantity terms) if ambient water
quality were to degrade as a result of wastewater discharges from the
proposed project?
How much agricultural yield would be lost (in quantity terms) if the project
were to increase soil erosion?
How much energy from the downstream hydro power dam would be lost if
the project were to increase soil erosion upstream?
Under the assumption that future land productivity were to be equal to the existing level of
productivity.
38
39
Estimate the existing annual level (on average) of productivity (by means
of time series data over the last 5 years approximately);
In almost all cases, monetizing the estimated change in productivity will involve
the following:
Collect information about recent and existing market prices for the
commodity whose productivity is impacted, as well as for the inputs
necessary to the production of this commodity (e.g. labor, machinery,
etc.);
Before using market prices, adjust these prices at least for the presence of
taxes, and if possible of subsidies and any other policies which may
impact market prices;
Multiply the net economic value per unit of output by the total estimated
quantity of lost (or gained) output in any given year;
40
Given the outcome of the sensitivity analysis, give a possible range for the
estimated economic value of the change in productivity.
41
Chapter 6
Revealed preferences methodologies
6.1
Increases in air or noise pollution may adversely impact the market value
of surrounding properties;
In each of the above examples, one observes individuals changing their behavior
as a result of the change in environmental quality. The economic costs
associated with this change in behavior may reveal the extent to which
individuals wish to avoid the negative change in environmental quality.
42
Five methodologies are generally considered to fall within the group of revealed
preferences methodologies. These are:
Revealed behavior
Cost of treating illness
Methodology
Cost of illness
Defensive expenditure
Resource productivity
(agricultural, fisheries)
Cost of avoiding
reduction in productivity
Replacement cost
Property value
Changes in property
values
Hedonic pricing
Recreational sites
Travel cost
Participation in
recreational activity at the
site
43
(2)
44
Box 6.2
The costs of river sedimentation:
The case of Beaufort (Sabah)
Beaufort is located downstream the Padas River catchment in Sabah. As a result
of numerous activities including logging upstream the catchment, the Padas
River experiences high levels of sedimentation. In order to remove the sediments
from the water before it be provided to its customer, the Beaufort Water Supply
Company must use large quantities of alum and lime. Over the period 2001-2005
the following expenditures have been incurred:
Alum and lime expenditures in Beaufort
2001
2002
2003
2004
2005
Total quantity
Average annual
expenditures
Alum
Quantity
Expenditures
(kg)
(RM)
549,000
424,267
593,950
459,004
782,100
600,736
782,100
604,406
786,400
607,729
3,493,550
539,228
Lime
Quantity
Expenditures
(kg)
(RM)
177,025
84,264
189,750
90,321
250,475
119,226
307,675
146,453
389,675
185,485
1,314,600
125,150
In addition to the above costs, the water intake must be cleaned as sludge
accumulates and reduces the water flow. Over the period 2001 2005,
desludging took place 8 times for an annual average cost of approximately
RM8,800. Finally, during periods of shutdowns (for desludging purposes), the
company is under the obligation of providing water to its domestic customers. It
does so by trucking water to households. Over the period 2001 2005, the
annual average cost of this activity reached RM375,040.
On the basis of the above estimates, the presence of high concentration of
sediments in the Padas River costs the Beaufort Water Supply Company
approximately RM1.05 million per year. This economic cost is a part (and in all
likelihood not the only component) of the total cost of river sedimentation in the
Padas Catchment. It may also be interpreted as the potential benefit of a project
(or policy) which would aim to reduce river sedimentation in the Padas River.
It is of importance to note that the replacement cost methodology does not truly
provide an assessment of the economic value of purified water, or electricity, or
storm protection services. It simply provides an assessment of the economic cost
(or benefit) of producing the same services (which may or may not be desired)
with alternative means of production. To the extent that the services is desired
and that the least-cost alternative means of producing this service is examined,
this cost may provide a minimum economic value of these services (since society
would be willing to invest at least this amount to continue providing the service).
46
Once these services or impacts are clearly understood, then one may proceed to
the second step.
Step 2:
Identify the alternative means by which the same services as those produced by
the environment (in terms of both quantity and quality) could be provided.
Step 3:
Estimate the costs of these alternative means by which the services could be
produced. The least costly alternative means to produce the same service (and
assuming that the service is indeed desired by society) provide an estimate of
the economic value of the ecological services.
6.2.3 Strengths and limitations of the methodology
(i)
Strengths
47
Limitations
Even if society were willing to pay for providing the goods or services by
alternative means of production, one could not say that this estimated cost
provides a measure of the economic value of the goods or services. In
other words, costs are normally not a measure of the benefits (e.g. the
cost of consuming meat generally does not provide a measure of the
benefits of consuming meat). However, in appropriate circumstances, it
may be said that the estimated cost provides a lower bound estimate of
the economic value of the goods or services produced by the
environment; 10
In some situations, it may be difficult or impossible to find alternative
means which would produce the goods or services in exactly the same
quantity and quality as produced by the environment. In such
circumstances, it may not be possible to say that the estimated cost of
producing this alternative service represents a lower bound value of the
goods or services produced by the environment since in fact these goods
or services are not exactly the same.
10
For example, many would argue that the consumption of fish raised in hatcheries is not the
same as the consumption of wild fish whose production could be adversely impacted by
fisheries. If this were to be the case, then the cost of producing fish in hatcheries would not be an
appropriate estimate of the economic value of wild fish.
48
pay for the continued provision of these goods and services by alternative
means of production;
Assess the least cost of providing the same goods or services as currently
produced by the environment.
6.3
49
What is the expected change in air quality or water quality which may
happen as a result of the project?
Once these changes are clearly identified, then one may proceed to the second
step.
Step 2:
Since the expected change in environmental quality is assumed to impact
peoples behavior, an important and key step is to identify the population which
may be exposed to the expected change in environmental quality. This relates to
the issue of geographical and stakeholder scoping. In the case of air pollution,
the exposed population may be considerably removed from the project site itself.
Step 3:
Observe (essentially by means of surveys) the actions and activities that
individuals are doing in order to avoid exposure to the degraded environmental
quality.
Step 4:
Measure the costs for the individuals of undertaking these actions of activities.
6.3.3 Strengths and limitations of the methodology
Given the methodological similarities of this methodology with the replacement
cost methodology, it shares a similar set of strengths and weaknesses.
(i)
Strengths
50
Limitations
A key limitation of this methodology (as for the replacement cost methodology) is
the following:
Identify in terms of both area and numbers, the population which may
experience the change in environmental quality;
51
6.4
Changes in environmental quality may have impacts on health and the types and
frequency of various diseases that individuals may experiment. While the
defensive expenditure methodology relies on estimating expenditures undertaken
to avoid exposure and falling sick, the cost of illness methodology simply relies
on estimating expenditure associated with treating the illness (Figure 6.1).
For the most part, examples when the application of the cost of illness
methodology is appropriate are similar to those presented earlier for the
application of the defensive expenditure methodology. A key difference however
is when illness involves mortality instead of morbidity. We discuss this issue
below.
Figure 6.1
Defensive expenditure and cost of illness methodologies
Pollution
Exposure
Defensive
expenditure
methodology
Illness
Cost of
illness
methodology
52
What is the expected change in air quality or water quality which may
happen as a result of the project?
Once these changes are clearly identified, then one may proceed to the second
step.
Step 2:
The second step is to identify the impacts that these changes in environmental
quality may have on health or the types of illnesses which may be experienced.
For example, a change in air pollution such as ground-level ozone which may
result from a road project may have an impact on the incidence of asthma while a
change in water pollution may have an impact on various types of gastrointestinal diseases.
Step 3:
As for the defensive expenditure methodology, since the expected change in
environmental quality is assumed to impact peoples behavior (that is, treating
illness), an important and key step is to identify the population which may be
exposed to the expected change in environmental quality. This relates to the
issue of geographical and stakeholder scoping.
Step 4:
Observe (essentially by means of surveys) the actions and activities that
individuals are doing in order to treat illnesses.
Step 5:
Measure the costs for the individuals of undertaking these actions of activities.
As indicated in Figure 6.2, it is important to recognize that the cost of illness is
made of different components. First, individuals must incur a direct cost to seek
treatment for the illness. This is made of both medical and non-medical cost.
Second, there may be an indirect cost associated with the illness in that
individuals may be losing valuable productive time while treating the illness. This
cost must also be included in the cost of illness.
A further important issue must be considered. The Government of Malaysia
provides extensive subsidies to the health sector. For example, government clinic
consultation fees were maintained at RM1 in 2007. While the direct cost paid by
patients visiting these clinics is thus capped at RM1, the actual cost (for society)
of providing such services is higher than RM1.11 The cost of illness measured
under the cost of illness methodology must capture both the cost (direct and
11
It was recently asserted that the cost of each medical consultation in government hospitals cost
between RM20 and RM30 (Sunday Star, February 17, 2008, quoting the Women, Family and
Community Development Minister).
53
indirect) incurred by those experiencing the illness and the extent of the subsidy
provide by the state to treat such illnesses.
Figure 6.2
Components of the cost of illness
Cost of illness
Direct cost
Indirect cost
Cost of seeking
treatment, diagnosis
of illness, and
treating illness
Direct non
medical costs
Hospital inpatient
Transportation to
Physician inpatient
seek medical
Physician outpatient
services
Emergency outpatient
Medical supplies
Diagnostic tests
Drugs and medicines
In some circumstances, changes in environmental quality have impacts not on
the probability of illness, but on the probability of death. When this occurs, a key
issue pertains to providing an economic valuation of such impact.
For this purpose, the concept of Value of a statistical life (VSL) has been
developed to assess the economic value of changes in such probability. It is
important to note that this is not the value of life, nor the value of the life of a
specific individual (that is the value of changing the risk of mortality from one to
zero for a specific individual). The VSL represents what a society would be willing
to pay to reduce the probability of dying which would result in saving one life.
54
Strengths
Limitations
55
A key limitation of this methodology (as for the replacement cost methodology
and the defensive expenditure methodology) is the following:
Identify in terms of both area and numbers, the population which may
experience the change in environmental quality;
56
6.5
57
Note that the interest here is not in market prices per se, but in the fact that such
changes in prices resulting from changes in environmental quality indicate reveal
individual preferences for environmental quality. This is why this methodology
falls under the category of revealed preferences methodology.
6.5.2 How to use this methodology
While the hedonic pricing methodology is intuitively easy to understand, its
application requires considerable statistical expertise. It is not the intent of these
Guidelines to provide technical details pertaining to the implementation of the
methodology. Project assessors requested to implement this methodology
(where appropriate) will in most likelihood be able to access such expertise. The
key steps involved in using this methodology are discussed below in nontechnical terms.
Step 1:
The first step to undertake when implementing the hedonic pricing methodology
is to specify the possible relationship between the market prices of properties
and the characteristics which may impact those prices. This is known as a
hedonic price function.
For example, if the project were to be a landfill, it may be thought that the market
value of properties may be impacted depending on their location (distance)
relative to the landfill. In such circumstances, the hedonic price function may be
as:
House price depends on (is a function of; is determined by):
58
Step 2:
The second step has to with data collection. The nature of the hedonic price
function determines which data should be collected. For each observation (or
market transaction), one would collect the price of the house as well as
information about each characteristic specified in the hedonic price function. In
order to be reliable, the dataset must contain a few hundreds of such
observations collected by means of surveys.
Step 3:
Once the data has been collected, the third step consists in analyzing the data.
Statistical (econometric) expertise is required to undertake this particular step.
This is normally done by using regression analysis. Regression analysis
measures the portion of the property price which is attributable to each
characteristic impacting house values. From this regression analysis, the analyst
will calculate the value (or hedonic price) of the distance from landfill.
Step 4:
Finally, using the estimated hedonic price, the analyst needs to measure the
demand curve for environmental quality in which the hedonic price depends on
household income, other household characteristics, and of course in the context
of the above example, distance from the landfill.
59
Box 6.4
Regression analysis with the hedonic pricing methodology
Suppose that the hedonic price function is simply stated as:
P = f(Size, Rooms, Mat, DKM)
where P is the price of the house; Size is the square footage of the house;
Rooms is the number of bathrooms; Mat is the nature of the construction
material; and DKM is the distance from a landfill.
The analyst may then specify the following hedonic price model:
P = 0 Size 1 Rooms 2 Mat 3 DKM 4 e
P
DKM
Strengths
60
(ii)
Limitations
Identify in terms of both area and numbers, the population which may
experience the change in environmental quality and the types of
properties where this population in which this population is currently living;
6.6
The travel cost methodology (TCM) attempts to estimate the economic value of
sites which are essentially used for recreation purposes (such as beaches, coral
reefs, or protected areas). It does so by assuming that the economic value
(willingness to pay) to visit a recreational site must be at least as much as the
cost incurred by individuals to visit the site.
This methodology should therefore be used only when a change in
environmental quality (negative or positive) brought upon by a project has the
potential to impact the quantity of trips to a recreational site, or the enjoyment
experienced at a recreational site.
The travel cost method can be used to estimate the economic benefits or costs
resulting from:
61
A zonal travel cost approach which uses mostly data collected from actual
visitors at the site itself;
An individual travel cost approach which can use data collected from
visitors at the site itself, or can use data from using a more detailed survey
of potential visitors in a given population;
62
other locations visited during the same trip, and amount of time spent at
each;
substitute sites that the person might visit instead of this site, and the
travel distance to each;
other reasons for the trip (is the trip only to visit the site, or for several
purposes);
quality of the recreational experience at the site, and at other similar sites
(e.g., fishing success);
This data can be collected either on-site or through general population surveys.
Each survey type has its own advantages and disadvantages.
For example, while general population surveys (individual travel cost approach)
have the potential to be more broadly representative of a population, they may
suffer from biases such as respondent recall bias if the site in question is
infrequently visited or disproportionately zero visits if a large proportion of the
survey sample is not visiting the site at all. Furthermore, general population
surveys are typically more demanding in terms of data collection.
On the other hand, on-site surveys (zonal travel cost approach) have the
advantage of precision regarding the time, date and certainty of visit. Moreover,
they are based on the response of actual visitors to the site. However, they run
the risk of over-sampling only those in the population who are avid users of the
site while not sampling other visitors of the site who happen not to visit the site at
the time of the survey, or other potential visitors should constraints to the
participation decision be relaxed.
It is not the intent of these Guidelines to provide technical details pertaining to the
implementation of the methodology. Project assessors requested to implement
63
The zonal travel cost method is the simplest and least expensive travel cost
approach. It will estimate a value for recreational services of the site as a whole,
and therefore can be used if an entire recreational site were to disappear or be
created as a result of a project.
It cannot easily be used to assess the economic benefit or the economic cost of a
positive or negative change in quality of recreation for a site.
The zonal travel cost method is applied simply by collecting information on the
number of visits to the recreational site from groups of individuals (zones)
traveling different distances to the access the site. Because the travel and time
costs will increase with distance, this information allows calculating the number of
visits at different travel costs (prices). This information is used to construct the
demand function, and estimate the economic benefits, for the recreational
services of the site.
The zonal travel costs approach was recently used in a recent application of the
TCM in Taman Negara Pulau Pinang. The survey is attached in Annex 1.
Step 1:
The first step is to define a set of zones surrounding the site. The precise ways of
defining these zones may depend on the location of the site relative to population
centres. For example, in the case of a recreational area located inland, these
zones may be defined by concentric circles around the site; in the case of a
beach, these zones may be defined by semi-squares around the beach (Figure
6.3).
Note that the zones need not be limited to a particular local community, state, or
country. These zones may even include foreign points of origin. This issue refers
again to the scoping issues.12
The key issue in defining these zones is that the travel cost to the recreational
site should be relatively the same for all people within each zone.
Step 2:
The second step is to collect information from visitors to the site. It is generally
impossible to survey all visitors to a particular recreational site. Hence, a key
12
For example, a large number of visitors to Johor national parks originate from Singapore while
a significant proportion of visitors to Taman Negara Pulau Penang originate from Australia,
Western Europe and the Middle East.
64
issue in this data collection process is to ensure that the sample of visitors who
are surveyed is representative of the entire population of visitors. The number of
visitors interviewed thus needs to capture the characteristics of the population of
visitors, and need to be sufficiently large to produce results which are statistically
significant (in general, this would imply surveying at least 400 visitors).
Step 3:
Once the data has been collected, then the data needs to be analyzed in order to
assess the nature of the relationship between the travel cost and the visitation
rate, while all other possible variables which may impact visitation rates (such as
income, age, education level, etc.) are accounted for. This step will yield a trip
generating function. This step is done by regression analysis.
Figure 6.3
Defining zones
Site
Zone 1
Zone 2
Zone 3
Zone 3
Zone 2
Zone 1
Beach
65
Step 4:
Using the results of the regression analysis, the fourth step is to construct the
demand function for visits to the site. This demand function establishes the
relationship between the visitation rate and the travel costs. The slope of this
demand function will indicate by how much the visitation rate would fall if travel
cost were to increase by RM1; or by how much the visitation rate would increase
if travel cost were to fall by RM1.
Step 5:
Finally, the last step is to calculate the total economic benefit of the site to visitors
by calculating the consumer surplus, or the area under the demand curve.
(ii)
The individual travel cost approach is similar to the zonal approach, but uses
survey data from individual visitors in the statistical analysis, rather than data
from each zone. This method thus requires more data collection and slightly
more complicated analysis, but will give more precise results. The steps are
similar to Step 2 to 5 presented in the zonal travel cost approach. The difference
is that one does not define a zone but base the analysis on individual rather than
zonal data.
(iii)
The random utility approach models the choice of a recreation site from among a
set of alternative sites as a utility-maximizing decision. In other words, it assumes
that individuals have the choice between different sites and make trade-offs
between site quality and the cost of travel to the site. A key difference between
this approach and the previous two approaches is that the random utility
approach requires information not only on the site which may be impacted by a
project, but on all possible sites that a visitor may have selected.
As such, the random utility approach is the most complicated approach to
estimate the economic value of a recreational site. But it is also the best
approach unless it is assumed that no other sites could be substitutes to the site
of interest.
The random utility approach is the best approach to estimate the impact of
change in site quality on recreation demand. The outcome is a set of probabilities
of the likelihood of visiting a particular site and changes in these probabilities as
site quality changes.
66
Strengths
Limitations
The methodology implicitly assumes that the time spent traveling is a cost.
However, for some individuals, the journey itself may have value, and not
be cost. In such cases, the trip should be considered as multi-purpose;
The zonal and individual travel cost approaches (though easier to use
than the random utility approaches) are not well suited to measure the
impact of changes in environmental quality. In such circumstances, the
random utility approach (or the contingent valuation approach described in
the next chapter) is better suited;
67
If use of the site may be severely impaired by the project, use the zonal or
individual travel cost approach; if changes in environmental quality will
impact enjoyment of the site, use the random utility approach;
Document in a careful manner the existing use of the recreational site, and
the characteristics of the existing population of visitors;
In all cases, ensure that the sample of actual or potential visitors to the
site is truly representative of the population of visitors;
68
Chapter 7
Stated preferences methodologies
7.1
As indicated above, CVM can be used to estimate both use and non-use values.
It is also occasionally combined with revealed preferences methodologies (such
as the travel cost methodology) in the context of a single data collection effort.
CVM has been used in a very large number of different applications including
issues pertaining to water quality, air quality, outdoor recreation, biodiversity,
health impacts, natural resources damages, sanitation improvements, etc.15
13
69
Step 1:
The first step is to define and set-up the hypothetical situation to which the
respondent will be asked to consider. This hypothetical situation has to be
defined very clearly and very precisely. Furthermore, the respondent to the
survey must clearly understand the nature of the change in environmental quality
that will be suggested.
Step 2:
The second step, as for all survey exercises (such as the travel cost
methodology and to a certain extent the hedonic pricing methodology presented
earlier), consists in the nature and size of the sample. Key is that the sample be
representative of the entire population of interest, and that it be of sufficient to
yield results which are statistically significant.
Step 3:
The third step is to determine the method by which the survey is going to be
conducted. Options include: by mail, phone or in person interviews. The choice
among these options may depend on the budget available to conduct the survey
and also on whether or not support material or visual aid (such as photographs
for example) will be used to in the course of the survey.
Mail surveys are generally the least expensive, and can be sent to thousands of
potential respondents. However, they typically suffer from low response rates.
Telephone surveys may be less expensive, but do not allow using of visual aid.
In-person interviews are generally the most effective for complex questions,
because it is often easier to explain the required background information to
70
respondents in person, and people are more likely to complete a long survey. On
the other hand, in-person interviews are more expensive to conduct.
Step 4:
The fourth step is the actual survey design. This is the most important and
difficult part of the process, and itself is made is several steps.
It will generally start with focus group discussions in order to ensure whether
potential respondents will fully understand the issues presented to them, and to
test the wording of the various questions to eliminate possibilities that the
questions be misunderstood. These discussions will lead to the development of a
first complete draft of the survey which will be pre-tested and then finalized.
A key issue in the context of the survey design pertains to what is referred as the
elicitation method, or how precisely will the willingness-to-pay question be
presented to the respondent. There are essentially 3 ways of presenting this
question to the respondent (there may be some variations around these 3
methods):
As indicated earlier, CVM (or willingness-to-pay study) is not simply about asking
a few hundred individuals how much they would be willing-to-pay to have access
to a cleaner beach, or less polluted air. It is generally a complicated, lengthy, and
expensive process. In order to collect useful data and provide results which are
reliable and can effectively be used in the policy arena, the sample of
respondents must be properly selected, and the survey must be properly
71
72
Strengths
Unlike the concept of consumer surplus, results obtained from CVM are
relatively easy to understand since they can be presented as average
willingness-to-pay per person or per household, and then aggregated over
a population.
(ii)
Limitations
When conducted properly, a CVM study can be very expensive and timeconsuming, because of the extensive pre-testing and survey work. A
proper CVM must be conducted by individuals who are experts in the
conduct of such surveys;
.
7.2.4 Recommendations to project initiators
73
The CVM survey must clearly specify by which mechanism this payment
will be made (for example, it could be a one-time donation to a fund; or it
could be a surcharge in monthly utility bills);
The survey must create confidence that the stated payment will in fact be
used for the purpose described in the survey. If respondents do not
believe their contribution will be used for the stated purpose, they may
under-state their true willingness-to-pay;
74
Chapter 8
Benefits transfer methodology
8.1
The benefits transfer methodology will never yield better estimates than original
(primary) studies. However, it may quickly provide some estimates which may be
sufficient to make some decisions. A key objective should therefore be to
increase the reliability of the estimated environmental costs and benefits based
on numbers from studies done elsewhere, and at a previous time.
Step 1:
Identify as precisely as possible the change in environmental quality which may
result from the project during both its construction phase and operation phase.
The nature of this expected change in environmental quality and its potential
impact on the delivery of environmental goods and services which will guide the
research of similar studies which may already have been done elsewhere.
Step 2:
Once the changes in environmental quality have been clearly identified, the
second step is to identify existing studies or values which have already been
conducted on similar types of changes in environmental quality, or to measure
similar economic values.
For this purpose, existing database of economic valuation studies may be of
great use. Two such extensive electronic databases can currently be used:
75
http://www.evri.ca
The Environmental Valuation Reference Inventory (EVRI) is a searchable
database of empirical studies on the economic value of environmental benefits
and human health effects.16 It has been developed specifically for the purpose of
using the benefits transfer methodology. It contains in excess of 1,500 studies.
Each study is summarized by topic, by area, by method, and by results. It is
however accessible only to subscribers.
http://envirovaluation.org/
This website, entitled Environmental valuation and cost-benefit news, is
perhaps the most extensive source of information on the web on empirical
economic valuation studies and cost-benefit analysis. It covers thousands of
economic valuation and cost-benefit studies throughout the world. It does not
however attempt to summarize and compile these studies specifically for the
purpose of conducting benefits transfer as does the EVRI database.
Step 3:
Once relevant studies have been identified, the third step is to decide whether or
not the economic values found in those studies can reliably be used and
transferred to the site of interest. A key issue is whether or not the impacted site
by the project shares a sufficient number of characteristics with the sites found in
existing studies.
Step 4:
The final step is to proceed with the transfer of values. Three approaches may be
used to do so.
8.2.1 Transfer without adjustment
The easiest and quickest way to proceed is to take the estimated economic
values in other studies and to apply them without any forms of adjustment to the
site under study. Needless to say, such benefits transfer may yield substantial
errors since one may expect economic values to be different as a result of at
least different impacted population (different level of income, different level of
education, age, etc.), ad well as different site characteristics.
16
EVRI is the outcome of a collaboration between Environment Canada, the United States
Environmental Protection Agency, the United Kingdom Department of Environment, Food, and
Rural Affairs, the New South Wales Department of Environment & Climate Change, and the
France Ministere de lEcologie, du Developpement et de lAmenagement Durables.
76
77
8.3
The benefit transfer methodology may not yield accurate benefits of the
environmental costs and environmental benefits since the site under study
will never be exactly the same as the sites from which benefit or cost
numbers are being transferred from;
If the original studies from which benefit or cost numbers are being
transferred from are not good or reliable, then the methodology will not
yield reliable estimates of the environmental costs and benefits for the site
under study;
8.4
Discuss clearly the similarities and differences between the sites found in
existing studies and the site impacted by the project;
Proceed with benefits transfer and discuss clearly whether the actual
economic values may be higher or lower than the values thus estimated.
78
PART C
SUMMARY OF RECOMMENDATIONS
79
Chapter 9
Summary of recommendations
In these Guidelines on the Economic Valuation of the Environmental Impacts of
Prescribed Activities, the conceptual framework as well as specific
methodologies were presented to undertake the economic valuation of the
environmental impacts of projects, or in other words to estimate the
environmental costs and environmental benefits of the project. As indicated in the
Handbook of Environmental Impact Assessment Guidelines, such economic
valuation remains a key objective of the EIA process in Malaysia.
As pointed out, the choice of which methodology to use when undertaking the
economic valuation of environmental impacts is dictated by the nature of the
expected impacts and its resulting effect on the ways by which human beings
use the goods and services produced by the environment.
As indicated at the outset, these Guidelines aim to provide practical advice to
project initiators on the topic of economic valuation of a projects environmental
impacts. In doing so, it is understood that the expertise to undertake and review
such economic valuation is currently limited but is expected to increase with
experience. It is also understood that in some circumstances, the lack of time or
resources may impede the undertaking of the economic valuation of
environmental impacts. Finally, it is also understood that the economic valuation
methodologies presented in these Guidelines vary considerably in terms of the
required technical and economic expertise for their proper implementation. As
indicated in Table 9.1, while some economic valuation methodologies may be
relatively easy to implement, others require a significant degree of expertise.
80
Table 9.1
Technical and economic expertise required
Required
scientific or
technical
expertise
Low
Medium
High
Low
Cost of illness
Hedonic pricing
Replacement
cost methodology
Averting and
mitigating
expenditure
Change of
productivity
Benefit-transfer
High
Travel cost
Contingent
valuation
Along with project initiators, DOE must therefore assess in each specific case,
the extent to which efforts must be undertaken to proceed with the economic
valuation of the projects environmental impacts. At the outset, methodologies
requiring low economic and technical expertise will be a clear requirement.
Table 9.2 presents a summary of all recommendations made in these Guidelines.
81
Table 9.2
Summary of recommendations
Recommendations to Project Initiators
Chapter 3: Approaching the economic valuation of environmental impacts: Issues of common interest
Aim first to identify the environmental impacts of the project, not to select the geographical
The scope of analysis
scoping of the project;
Group the environmental impacts (both positive and negative) into those occurring: (1) Within the
local community where the project is located; (2) On other local communities within the state
where the project is located; and (3) On other states of Malaysia;
The scenario of
reference
Identify clearly the groups of individuals who may be excluded from the process of identifying,
quantifying, and monetizing the environmental impacts of the project.
In order to identify and quantify the extent of the projects environmental impacts, project
initiators should clearly specify and compare the following two scenarios:
Scenario 1: Expected changes in environmental quality and the associated environmental
impacts if there were to be no project (without project scenario)
Inflation
As a level of reference, use the level of prices as observed at the time of preparing the EIA
report.
Present the undiscounted stream of environmental costs and environmental benefits of the
project, in each of the period in these the costs and benefits are taking place (Table 3.1);
82
Discount rates ranging from 3% to 8% should be used to calculate the present value of the
environmental costs and of the environmental benefits.
Calculate and display the present value of the environmental costs and environmental benefits
using a discount rate ranging from 3% to 8% (Table 3.2);
The economic valuation of environmental impacts does not a cost-benefit analysis. As such, the
calculation of the net present value (present value of benefits minus present value of costs) is
not of direct relevance to this analysis.
The appropriate time horizon to select should coincide with the expected duration (in time) of the
environmental impacts of the project;
If some environmental impacts are expected to be of a temporary nature (for example, during the
construction phase of the project), then for these impacts the appropriate time horizon to select
is the number of years these impacts are expected to last;
Sensitivity analysis
If some environmental impacts are expected to be permanent, then using a time horizon of
between 30 to 50 years is generally sufficient to provide an adequate estimate of the present
value of these impacts.
Provide a range for the present value of environmental costs and the present value of
environmental benefits depending on different assumptions as to the impact of the project on the
environment.
83
outset of the EIA process to ensure that the data necessary for purpose of economic valuation is indeed collected.
84
Given the outcome of the sensitivity analysis, give a possible range for the estimated economic value of the change in
productivity.
85
Identify in terms of both area and numbers, the population which may experience the change in environmental quality;
Identify the nature of the activities which may be undertaken by individuals to treat illnesses if they were exposed to the
degraded environmental quality, and the costs of undertaking these measures. Such assessment may be undertaken for the
entire population being exposed, or it may be assessed on the basis of a representative sample, and then extrapolated to the
entire exposed population;
Remember that the cost of illness methodology requires that subsidies paid by the government for the treatment of illnesses
also be included in the calculation of the cost of illness
86
nature of the goods or services which may be impacted by a change in environmental quality;
Determine both the appropriate nature of the sample, as well as the sample size large enough to yield credible and significant
results. Simultaneously, determine whether to conduct in-person interviews, telephone surveys, or mail surveys. If resources
allow, in-person interviews are preferable to telephone or mail surveys. If resources do not allow, then telephone surveys are
generally preferred (if there is no need for visual aid while conducting the survey);
Prepare a draft of the survey and conduct comprehensive pre-testing of the survey to ensure that respondents understand all
questions. The survey must be clear, and the respondents must fully understand the nature of the problem they are asked to
consider. When appropriate, this may be done using photographs, videos, or other multi-media techniques, as well as written
and verbal descriptions;
In general, when actually eliciting the willingness-to-pay, it is preferable to use the close-ended approach in which respondents
are asked whether or not (Yes or No) they would be willing a specified amount for the environmental change;
The CVM survey must clearly specify by which mechanism this payment will be made (for example, it could be a one-time
respondents do not believe their contribution will be used for the stated purpose, they may under-state their true willingness-topay;
87
The survey should include validation questions to verify comprehension and acceptance of the scenario, and to elicit
socioeconomic and attitudinal characteristics of respondents, in order to better interpret variation in responses across
respondents;
Survey design, survey implementation, and the analysis of survey results must be conducted by individuals with expertise in
thus estimated.
88
89
Additional References
There exist a very large number of documents on the economic valuation of
environmental impacts. We provide below a short list of references which the
interested reader may wish to consult for further and more detailed information.
Dixon, J.A., Scura, L.F., Carpenter, R.A., and P.B. Sherman (1995), Economic
Analysis of Environmental Impacts, Earthscan Publications Ltd, London.
Hutton, G, and L. Haller (2004), Evaluation of the Costs and Benefits of Water
and Sanitation Improvements at the Global Level, World Health Organization,
Geneva.
McNally, R., and M.S. Othman (2002), Environmental Economics: A Practical
Guide, WWF, United Kingdom.
National Research Council (2005), Valuing Ecosystem Services: Toward Better
Environmental Decision-Making, National Academy of Sciences, National
Academies Press, Washington, D.C.
Pearce, D., Atkinson, G., and S. Mourato (2006), Cost-Benefit Analysis and the
Environment: Recent Developments, Organisation for Economic CoOperation and Development, Paris.
United Nations Environment Program (2000), Environmental Valuation: A
Worldwide Compendium of Case Studies, J. Rietbergen-McCracken and H.
Abaze (eds), Earthscan Publications Ltd, London.
90
Websites of interest
http://envirovaluation.org/
This website, entitled Environmental valuation and cost-benefit news, is
perhaps the most extensive source of information on the web on empirical
economic valuation studies and cost-benefit analysis. It covers thousands of
economic valuation and cost-benefit studies throughout the world.
http://www.evri.ca
The Environmental Valuation Reference Inventory (EVRI) is a searchable
database of empirical studies on the economic value of environmental benefits
and human health effects. It has been developed specifically for the purpose of
using the benefits transfer methodology. It contains in excess of 1,500 studies.
Each study is summarized by topic, by area, by method, and by results. It is
however accessible only to subscribers.
http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/homepage
This is the website of the National Center for Environmental Economics of the
U.S. Environmental Protection Agency.
http://noep.mbari.org/nonmarket/
This is the website of the U.S. National Ocean Economics Program. It reviews
applications of economic valuation methodologies to ocean activities, in particular
recreational activities.
http://www.csc.noaa.gov/coastal/economics/envvaluation.htm
This is the website of the Coastal Services Centre of the National Oceanic and
Atmospheric Administration. It provides good general readings on environmental
valuation.
91
Glossary
Benefits transfer methodology
The benefits transfer methodology estimates economic values by transferring
existing benefit estimates from studies already completed for another location
or issue.
Bequest value
The value that people place on knowing that future generations will have the
option to enjoy something.
Consumer surplus
The difference between the price actually paid for a good, and the maximum
amount that an individual is willing to pay for it.
Contingent valuation methodology (CVM)
A method, usually in the form of a survey questionnaire, of eliciting values for
environmental goods and services based upon hypothetical situations. CVM
may be the only means of estimating the passive or non-use values for
environmental goods/services.
Defensive expenditures methodology
The defensive expenditures methodology uses the calculation of defensive
expenditures to prevent the degradation of an environmental good/service or
the quality of that good/service in order to determine the value of a particular
environmental good or service such as air or water quality.
Demand curve
The graphical representation of the demand function.
Demand function
The mathematical function that relates price and quantity demanded for goods
or services. It tells how many units of a good will be purchased at different
prices. The market demand function is calculated by adding together all of the
individual consumers demand functions.
Discount rate
The rate used to reduce future benefits and costs to their present time
equivalent.
Existence value
The value that people place on simply knowing that something exists, even if
they will never see it or use it.
92
93
Stated preferences
Stated preferences methodologies use discrete choice methods to model
stated preferences for alternative goods or environmental scenarios. Stated
and revealed preference methods may be combined.
Supply curve
The graphical representation of the supply function.
Supply function
The mathematical function that relates price and quantity supplied for goods or
services. The supply function tells how many units of a good that producers
are willing to produce and sell at a given price.
Total economic value the sum of all types of use and non-use values for a
good or service.
Travel cost methodology
The travel cost methodology estimates economic values associated with
ecosystems or sites that are used for recreation. It assumes that the value of a
site can be deduced from how much people are willing to pay to travel to visit
the site.
Use value
Value derived from actual use of a good or service. Uses may include indirect
uses. For example, enjoying a television show about whales provides an
indirect use value for the whales.
Willingness to pay
The amountmeasured in goods, services, or dollarsthat a person is willing
to give up to get a particular good or service.
94
Annex 1
Penang National Park travel cost survey
Survey ID Number:
____________________
____________________
Date:
Start Time:
___:___
Verbal Agreement
Tourist Survey for Penang National Park
Good morning [afternoon].
My name is [_____].
As you may know, Penang National Park was created in 2003, and it is the most recent national
park created in Malaysia. The Park authorities are currently in the process of finalizing the Parks
development plan, and it is in this context that we would welcome your comments and
suggestions. I am working with a team of researchers and our purpose is to get a better
understanding of the profile of the visitors coming to Penang National Park.
We are interviewing both national and international visitors to the Penang National Park, and you
have been selected just by chance. If you wish to stop the interview or do not wish to answer a
specific question, this is entirely up to you.
All the information you provide will be strictly confidential. Your name or address will
never be requested in the course of this survey.
The interview will take about 20 minutes.
Would you be willing to be interviewed? (If no, sorry. stop the interview)
95
Other: __________________________
Question 2
2A:
____________________
2B:
____________________
Question 3
Resident: _____
If visitor, go to Question 4.
Question 4
If resident, go to Question 5.
4A:
If more than 1 time: How many times in the last 3 years: _____
Question 5
5A:
If more than 1 time: How many times in the last 3 years: _____
96
Question 6
In the course of this trip, are you visiting Penang only or are you also visiting
other parts of Malaysia or are you also visiting other countries of South East
Asia?
Penang only: _____
Malaysia only: _____
Which
other
parts
of
______________________________
SE
Asia
are
you
visiting?
7C
What is the duration of your entire trip to SE Asia (number of days)?
______________
7D
______
8B
_________
How many days are you spending in total in Malaysia, including Penang?
Question 9
Question 10
For this trip to South East Asia, did you buy a package tour including airfare and
accommodations, or did you buy airfare separately from accommodations?
97
____________________
If airfare separate from accomodations, go to Question 11.
If package tour, go to Question 14.
Question 11
11A
__________
What is the total airfare for this trip to South East Asia (note currency)?
11B
11C
How did
_____________________
you
come
from
city
mentioned
above
to
Penang?
Was the airfare from [city mentioned above] to Penang included in the overall
airfare of your trip to South East Asia? _____
If included, do you know by how much your airfare increased because of your
trip to Penang?
Dont know: _____; If know, write down the amount: ________
If not included, what was the airfare from [city mentioned above] to Penang?
__________
Question 13
13A
__________
What was the total cost of transport from [city mentioned above] to Penang?
13B
Question 14
14A
Airfare:
__________________
_____;
Accommodation:
____;
Food:
_____;
Other
(list):
14B
What is the total cost of the package tour (note currency)? ______________
14C
Do you know by how much the cost of your package tour increased because of
your trip to Penang?
Dont know: _____; If know, write down the amount: ________
98
Go to Section 3
15B
15C
What is the duration of your entire trip to Malaysia (number of days)?
______________
15D
Question 16
For this trip to Malaysia, did you buy a package tour including airfare and
accommodations, or did you buy airfare separately from accommodations?
____________________
If airfare separate from accomodations, go to Question 17.
If package tour, go to Question 20.
Question 17
11A
What is the total airfare for this trip to Malaysia (note currency)? __________
11B
11C
How did
_____________________
you
come
from
city
mentioned
above
to
Penang?
Was the airfare from [city mentioned above] to Penang included in the overall
airfare of your trip to Malaysia? _____
If included, do you know by how much your airfare increased because of your
trip to Penang?
Dont know: _____; If know, write down the amount: ________
If not included, what was the airfare from [city mentioned above] to Penang?
__________
Question 19
99
19A
__________
What was the total cost of transport from [city mentioned above] to Penang?
19B
Question 20
20A
Airfare:
__________________
_____;
Accommodation:
____;
Food:
_____;
Other
(list):
20B
What is the total cost of the package tour (note currency)? ______________
20C
Do you know by how much the cost of your package tour increased because of
your trip to Penang?
Dont know: _____; If know, write down the amount: ________
Go to Section 3
_________________
Question 22
22A
22B
22C
Question 23
For this trip to Penang, did you buy a package tour including transport and
accommodations, or did you buy transport separately from accommodations?
____________________
If transport separate from accomodations, go to Question 24.
If package tour, go to Question 25.
Question 24
24A
__________
What is the total transport cost for this trip to Penang (note currency)?
24B
________
What is the total cost of accomodations for this trip to Penang (note currency)?
100
24C
24D
If no, what would be your best estimates of the total cost of meals while in
Penang? ______________
Question 25
25A
Airfare:
__________________
_____;
Accommodation:
____;
Food:
_____;
Other
(list):
25B
What is the total cost of the package tour (note currency)? ______________
25C
If the package tour does not include meals, what would be your best estimates of
the total cost of meals while in Penang?
___________________
Question 27
27A
27B
Question 28
Question 29
Question 30
101
What was the total cost of the package (note currency)? ____________
For how many people? ____________
31B.
_____;
Boating / paddle boating: _____; Other (specify) _____________________
Question 32
32A
What means of transportation did you use to get to this Park?
_________________
32B
32C
How long did it take to travel from your starting point to Penang NP?
____________
32D
32E
If yes, how much did you spend on meals and beverage? __________
In general, do you believe that national parks and other protected areas should be
allowed to request visitors to pay entrance fees to recover some of the costs of
maintaining the quality of the park?
No: _____; Yes: _____
Question 34
In addition to entrance fees, do you believe that national parks and other
protected areas should be allowed to request visitors to pay additional fees for
special activities such as boating, or camping?
No: _____; Yes: _____
Question 35
Would you find it surprising if there were no entrance fee to visit Penang NP?
No: _____; Yes: _____
102
Question 36
Assume that there was an entrance fee to use the Penang NP. This fee would not
include fees for boating or camping. It would simply give you the right to walk,
picnic, take pictures, and generally enjoy the natural beauty of the park. The
entrance fee would be per person, valid for one day.
I am going to list to you entrance fees. Please tell me if: (1) you would enter the
Park for sure; (2) you would probably enter the park; (3) you would probably not
enter the park; or (4) you would surely not enter the park.
Entrance fee
Per person (RM)
Will enter
for sure
Will
probably
enter
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
25
30
40
50
75
100
150
200
400
600
800
1000
103
Will
probably not
enter
Will not
enter for
sure
Female: _____
37B
_____;
What is your age? Under 20: _____; 20 30: _____; 30 40: _____; 40 50:
Above 50 60: _____; Above 60: _____
37C
37D
How many people comprise your current household (including yourself)? ______
37E
What is the highest level of education that you have completed? (Please
check one)
1.
2.
3.
4.
5.
6.
37F
None: _____
Incomplete secondary school: _____
Completed secondary school: _____
Professional technical education: _____
Institute / University: _____
Postgraduate: _____
What kind of job(s) do you have? (List & check all that apply)
1. Management: _____
2. Large business owner: _____
3. Small business owner/ Retail sales: _____
4. Specialist /Professional: _____
5. Clerical: _____
6. Factory worker: _____
7. Farmer/Agricultural worker: _____
8. Unemployed: _____
9. Dont work (pensioner, student, housewife etc.): _____
10. Other (specify) ______________
Question 38
38A
USD
(per _______)
0 1000
1000 2000
2000 3000
4000 5000
5000 7500
7500 10000
10000 15000
15000 20000
20000 30000
30000 40000
40000 50000
50000 75000
75000 100000
Greater than 100000
30000 40000
40000 50000
50000 75000
75000 100000
Greater than
100000
Not satisfied
Information centre
Parking area
Walking area
Hiking trails
Resting place (chairs,
tables)
Garbage bins
Signboards
Toilets
Camping
Cleanliness
Staff services
105
Satisfied
Very satisfied
Section 7.
1.
Was the person who answered the questions irritated or nervous during the interview?
Yes
No
2.
Do you think that it was easy for the respondent to answer the questions concerning
number of visits regarding entrance fees and National Park level changes?
Yes
No
NA/Missing
3.
Was the person who answered the questions looking bored or tired during the interview?
Yes
No
4.
Are you certain that the interviewee was answering to the questions honestly and truly?
1
Very
Uncertain
5.
2
Moderately
Uncertain
3
Neutral
4
Moderately
Certain
5
Very
Certain
Who else was listening while you conducted this interview with the respondent? (Check
all that apply)
No one
Spouse
Other adult family members
Other adults
Children
Other (specify) ________________________
106
Annex 2
Lake Sevan contingent valuation survey
Verbal Agreement
Enumerator Survey for Lake Sevan Economic Valuation Project
(Read) My name is _____, and I am working with a team of researchers investigating the
environmental, cultural and historical benefits of Lake Sevan. We are interested in understanding
how people feel about Lake Sevan.
We are interviewing many different households in Yerevan, the Lake Sevan area and in other
areas of Armenia. We are also planning to survey those of the Diaspora in USA and France.
Your household was selected just by chance.
If you wish to stop the interview or do not wish to answer a specific question, this is entirely up to
you. All the information you provide will be strictly confidential.
The interview will take about 30-40 minutes.
Are you willing to be interviewed? (If no, sorry. stop the interview)
Can you make decision on your household expenditures? (If no, sorry. stop the interview)
107
ID#
________________
Name of the Enumerator: ____________________
Location: ____________________ Cluster: _______
Date: ___/___/___
Start Time: ___:___
Introduction
As you may know, the quality of Lake Sevan is deteriorating. Lake Sevan and its resources are
currently deteriorating from an environmental and recreational perspective. In the last 50 years,
the level of the lake dropped by 18 m. Its' surface area has decreased significantly and the volume
of water in Lake Sevan fell by more than 40%, and there is a possibility that the level of water
will continue to decline in the coming years.
1.
Were you aware that the level of water in Lake Sevan has decreased so much in
the past?
Yes
No
99. I am not sure
A key research issue to us is understanding exactly how much Lake Sevan means to the
Armenian people from a historical, cultural and recreational perspective, and how much Armenia
people support for protecting the lake.
In the following, we would like to ask you questions about your views on Lake Sevan protection
and your willingness to support for a Lake Sevan Protection Plan. For our analyses, we also
would like to have some information about your household as well as your recreational use of
Lake Sevan in the past and in the future.
I.
2.
The next question is about your views on Armenian priorities. Suppose the
Government of Armenia got enough money to help with three of the following
problems: (Show the list)
(1) Stabilizing the economy
(2) Unemployment
(3) Social protection programs
(4) Health care
(5) Education
(6) Water supply
(7) Roads / Public transportation
(8) New housing / Housing maintenance
(9) Environmental Issues
(10) Problems of Lake Sevan
(11) Other (specify) ________________________________
2.1.
Which of these problems is the most important to solve first? # ______ 99.
Dont know
108
2.2.
Which of these problems is the most important to solve second? # ______99.
Dont know
2.3.
Which of these problems is the most important to solve third? # ______ 99.
Dont know
3.
Have you ever heard about any environmental issues in Armenia on TV, the
radio, newspapers, magazines, or by community groups in the past 12 months?
Yes
No
(Skip to question 6)
99. I am not sure
(Skip to question 6)
4.
5.
If YES, what were the issues you recall being most often discussed?
__________________________________________________________________
__________________________________________________________________
____________
6.
Which three of the environmental issues listed below do you consider to be the
most significant in your area?
__ Water pollution and lack of treatment of wastewater
__ Loss of forests and wildlife
__ Solid waste disposal and poor garbage collection
__ Air pollution caused by cars
__ Air pollution caused by factories
__ Nuclear radiation
__ Soil contamination
__ Toxic waste
__ Other (specify) ____________________________
6.1.
6.2.
6.3.
(Read) For each of the following statements, please indicate your opinion on a scale of
'strongly agree' to 'strongly disagree'. (Please circle one)
109
7.
8.
99
Dont
Know
2
Disagree
3
Neutral
4
Agree
5
Strongly
agree
99
Dont
Know
2
Disagree
3
Neutral
4
Agree
5
Strongly
agree
99
Dont
Know
2
Disagree
3
Neutral
4
Agree
5
Strongly
agree
99
Dont
Know
12.
5
Strongly
agree
11.
4
Agree
We, as Armenians, should sacrifice some of our income and standard of living so
that the next generation may benefit from a better environment.
1
Strongly
disagree
10.
3
Neutral
No matter what the environmental damages may be, Armenia needs to exploit its
natural resource base such as forests, water and land to increase jobs and incomes.
1
Strongly
disagree
9.
2
Disagree
2
Disagree
3
Neutral
4
Agree
5
Strongly
agree
99
Dont
Know
Endangered or threatened species have a right to exist even though they may be of
no use to mankind.
1
Strongly
disagree
2
Disagree
3
Neutral
4
Agree
110
5
Strongly
agree
99
Dont
Know
II.
While dealing with its severe economic situation, the government of the Republic of Armenia
recently expressed the interest to adopt a restoration plan using a number of actions to protect
Lake Sevan from further, and perhaps irreversible, degradation and to make an attempt at
improving the quality.
The plans actions currently under discussion include:
a. Limiting annual water releases to stabilize the level of the lake;
b. construction of the Vorotan Tunnel;
c. completion of the Yeghvard reservoir;
d. combinations of the above.
With different combinations of these actions, two targets which may be achieved are: 1)
stabilizing the level of the lake and preventing any further lowering of the water level; and 2)
raising the level of the lake by 3 meters in the next 15 years.
Without any action, the water level of the lake is predicted to drop by 2 meters more in the next
10 years.
13.
proposal
3. No, I am not aware of this proposal
14.
Do you think that, without any action, the value of Lake Sevan as an important
cultural heritage site for the people of Armenia would be significantly damaged?
1. Yes, very significantly
2. Yes, slightly
3. No, the value would not be damaged even with further water level
decrease 99. I am not sure
15.
In your opinion, has the environmental condition of Lake Sevan been getting
better, getting worse, or staying the same, over the past five years?
1. Getting worse
2. Staying the same
3. Getting better
99. I dont know
16.
Do you think that, if the water level of Lake Sevan is to be protected, there will be
less water for irrigation purposes today, but may be more water in the future?
Yes
No
99. I am not sure
17.
Do you think that, if the water level of Lake Sevan is to be protected, there will be
less water to produce energy along the Hrazdan river today, but may be more
water in the future?
111
Yes
No
18.
How often have you heard about environmental problems with Lake Sevan on
TV, the radio, newspapers, magazines, or by community groups in the last 12
months?
__ Never
__ A few times (1-5)
__ Several times (6-10)
__ Many times (11-20)
__ More than 20 times
99. __ I dont know
19.
Do you generate any income from the lake such as fishing or providing services to
tourists, etc.?
Yes
No
99. I dont know
20.
21.
If YES, please tell me why. Please choose three answers from the following list.
To use Lake Sevan for recreational purposes for my family
Others to be able to use the lake for recreation
To preserve the historical and cultural value of Lake Sevan
To protect fish and animal habitats that rely on the lakes health
To protect human health by the improvement of water quality
To stabilize water quantity for farm irrigation and hydroelectric use
To protect Lake Sevan for future generations
Other reasons (specify): _______________________________
99. I dont know
21.1. First? # ______ 99. Dont know
21.2. Second? # ______99. Dont know
21.3. Third? # ______ 99. Dont know
22.
If NO, please indicate below the statement that most closely reflects your
thinking.
__ I do not think that the water quantity and quality issues are important
__ I think that there are other more important problems that should be
addressed first
(specify):_________________________________________________
__ Other reasons for saying no (specify):
______________________________
112
____________________________________________________________
99. __ I dont know
23.
As for deciding on which action plan should be adopted, do you think its a good
idea to use a public referendum in Armenia?
Yes
No
99. I am not sure
III.
113
Plan Implementation:
To implement such a plan, a Lake Sevan Trust Fund would be established. Citizens in Armenia
would be asked to pay a separate monthly bill (like telephone bill) for 3 years that would go
into the Trust Fund. The Fund's sole purpose would be to finance the efforts of the action plan
and would contribute all of the proceeds to the plan.
The Fund would be managed and administered by a Board of Governors comprising various
interest groups so as to minimize any possible bias and to create an atmosphere of trust. Although
this list is not exhaustive, the Board would at the very least consist of people form the Ministry of
Nature Protection, environmental and community groups from the USA, France and Armenia as
well as local residents of the Sevan basin area. Each member of the Board would have an equal
vote and there would not be any overriding veto power by any one individual in the Board, thus
there would be no overruling Chairman present in the Board. The activities of the Board would be
completely transparent and all the activities supported by the Fund would have to be approved by
a unanimous decision of the Board. You could thus have complete trust in the allocation of the
money toward protecting and restoring Lake Sevan.
[Do you have any questions? About any of the impacts, the costs, the Board of Governors etc.?]
114
Current situation
& No Change
Current status
Action Plan:
3 meters Increase in 15 years
Expected impacts
No Action:
2 meters Decrease in 10 year
Change (m)
Expected impacts
+6
+5
+6
+5
+4
+3
+2
+4
+3
+2
+1
0
-1
-2
-3
Change (m)
+6
+1
0
-1
Power generation:
small decrease today,
some increase in the
future
-2
Power generation:
small decrease today,
larger decrease in the
future
+3
+2
0
-1
-2
-3
Agriculture irrigation:
less water use today
and even less
availability in the
115
+4
+1
-3
Agriculture irrigation:
less water use today,
but greater
availability in the
+5
24.
Would you vote in favor of this plan IF it did not cost your household anything?
(Please check one)
Yes
25.
(Go to 28)
If your household was asked to pay a monthly bill of [..................] AMD for 3
years to the Lake Sevan Trust Fund, would you vote for increasing the water level
by 3 meters in 15 years?
Yes
26.
No (Go to 28)
No
What then would be the maximum amount you are willing to pay monthly for 3
years for the water level increase by 3 meters in 15 years? ___________ AMD / $
99. I don't know
27.
How certain or sure are you of your stated willingness to pay in question 26?
(Please circle one)
1
Very
Uncertain
2
Moderately
Uncertain
3
Neutral
4
Moderately
Certain
5
Very
Certain
(Read) Some people have told us they would support the plan because the restoration of
Lake Sevan is a high priority for them. Others say they would not support the plan
because they have so many other things to spend their money on, and the restoration plan
will have to wait until the Armenian economy is stronger. Some people have told us that
they would not support the plan because they are not convinced that the money would be
used for improvements in the lake.
28.
If the cost of the plan to Armenians in Armenia were zero, how strong do you
think the public support in Armenia would be for increasing the level of the lake
by 3 meters?
1
99
116
Very
Weak
29.
Moderately
Weak
Neutral
Moderately
Strong
Very
Strong
Dont
Know
Are there any direct negative impacts of limiting water releases from the lake and
constructing Vorotan Tunnel on your household income?
1. Yes
2. No
99. Dont know /Not sure
30.
Do you think there would be an increase in your future household expenditure associated
with this Lake Sevan Action Plan (excluding payment to trust fund; for example electricity
price increases or a price for irrigation water)?
1. Yes
2. No
99. Dont know /Not sure.
31.
The target of this action plan is to increase the water level by 3 meters in 15 years.
How easy or difficult do you think this target can be met by implementing this
plan?
1
Very
Easy
32.
4
Difficult
5
Very
Difficult
99
Dont
Know
2
A little
Worse
3
No change
4
A little
improvement
5
A large
improvement
99
Dont
Know
How would you project the change of the quality of the water with the increase of
water level by 3 meters?
1
A lot
Worse
34.
3
Not easy
Not difficult
How would you project the change of the historical, cultural and symbolic value of
the lake with the increase of water level by 3 meters?
1
A lot
Worse
33.
2
Easy
2
A little
Worse
3
No change
4
A little
improvement
5
A large
improvement
99
Dont
Know
How would you project the change of the quality of the ecosystem, including fish,
birds and grass, etc., of the lake associated with the increase of water level by 3
meters?
1
A lot
Worse
2
A little
Worse
3
No change
4
A little
improvement
5
A large
improvement
99
Dont
Know
117
35.
How would you project the change of the quality of the lake for recreational use
that may be associated with the increase of water level by 3 meters?
1
A lot
Worse
2
A little
Worse
3
No change
4
A little
improvement
5
A large
improvement
99
Dont
Know
36.
Are there any possible direct damages to your household, economically, with the
increase of water level by 3 meters (for example some properties may be damaged
by the increase)?
1. Yes, a lot
2. Yes, a little
3. No
99. Dont know
37.
Do you think that the governing board of the Trust Fund as we described before
can do a good job in managing the implementation of the action plan?
1
No
Surely
38.
2
No
To some
extent
3
Neutral
4
Yes
To some
extent
5
Yes
Surely
99
Dont
Know
How realistic do you think it is for the trust fund management to collect monthly
payments as you may have agreed?
1.
No problem, it can be collected
2.
There will be some problems, but still possible
3.
There will be a lot of problems and it is not realistic
99. Dont know
39.
Do you think that if the action plan were to be implemented only by the Armenian
government, it can be appropriately implemented?
1
No
Surely
40.
2
No
To some
extent
3
Neutral
4
Yes
To some
extent
5
Yes
Surely
99
Dont
Know
With your understanding of the current situation in Armenia, do you think that the
action plan as we described before can be finally implemented?
1
No
Surely
2
No
To some
3
Neutral
4
Yes
To some
5
Yes
Surely
99
Dont
Know
118
extent
extent
41.
Do you think your household can generate any income directly by using the lake in
the future after the water level be increased (such as fishing, services, etc.)?
1. Yes
2. No
99. Dont know /Not sure
42.
Do you think your household will use the lake for recreational purposes in the
future?
1. Yes
2. No
99. Dont know /Not sure
If the respondent indicated that they would not be willing to pay anything, skip to
question 47.
43.
Considering your maximum willingness to pay per month, the highest amount you
indicated before, is this amount a significant expense relative to your other bills and
expenses?
Yes
No
99. I don't know
44.
Which of your expenses would you reduce in order to contribute towards the
plan? (List & check as many that may apply)
__ Food
__ Clothing
__ Gasoline/Transport
__ Savings
__ From all of them
__ I do not have to decrease any monthly expense
__ Other (specify) ________________________
99. __ I don't know
45.
46.
Considering the maximum amount you are willing to pay and the potential decrease
in the ability to pay other expenses, would you like to change your willingness to
pay answer?
119
Yes
No
99. I don't know
47.
What are those major factors determining the maximum amount you are willing to
pay for the Lake Sevan action plan? (even if your willingness to pay is zero)
__________________________________________________________________
__________________________________________________________________
48.
Please make a list of additional information that you would require before making
your choice on how to vote (For example, if you have any uncertainty about the
plan, any environmental impacts, the trust fund, etc).
__________________________________________________________________
__________________________________________________________________
_____________________________________________________________
0. I dont need (Go to question 50)
99. I don't know (Go to question 50)
49.
If we were able to provide more information on the items you listed above, would
you be more certain about your willingness to pay or make your decision any
easier?
Yes
No
99. I don't know
IV.
Socio-economic Characteristics
50.
Gender of respondent:
51.
52.
How many people stay and reside in your household in total (including yourself)?
Male
Female
_____
53.
How many adults stay and reside in your household (18+ years)? _______
54.
55.
What is the highest level of education that you have completed? (Please check
one)
__ None
__ Incomplete secondary school
__ Completed secondary school
__ Professional technical education
__ Institute / University
__ Postgraduate
120
56.
What kind of job(s) do you have? (List & check all that apply)
1. Management
2. Large business owner
3. Small business owner/ Retail sales
4. Specialist /Professional
5. Clerical
6. Factory worker
7. Farmer/Agricultural worker
8. Unemployed
9. Dont work (pensioner, student, housewife etc.)
10. Other (specify) ______________
57.
58.
59.
Please tell me whether this household or any member of it has the following
working items:
Yes No
Yes
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
2
For your entire household, what was your average monthly income in the past
year from all sources?
__ Less than $50 (< 25,000 drams)
__ From $50 - 100 (25,000 - 50,000 drams)
__ From $101 - 150 (50,500 75,000 drams)
__ From $151 - 200 (75,500 100,000 drams)
__ From $201 400 (100,500 200,000 drams)
__ From $401 600 (200,500 300,000 drams)
__ Above $601 800 (300,500 - 400,000 drams)
__ Above $801 1000 (400,500 - 500,000 drams)
121
Does the household currently receive any of these allowances from the state? (List
them)
Yes
61.2.
62.
63.
Does any member of the household currently have work for which he/she is paid a
wage?
Yes
No (Skip to question 64)
63.1. Total amount of wages per month for all people
_____________
AMD/dollars per month
99. Dont
know
122
64.
Did your household receive money or other assistance from a spouse living
abroad, relatives or friends (including those living overseas)?
Yes
No (Skip to question 65)
64.1.What is the value of this assistance (including cash, gifts, or other assistance)
______________ AMD/dollars in
last year
99. Dont
know
65.
Does your household have any other income (temporary work, agricultural sales,
own business, rent out, seasonal income, sales of property, etc.)?
Yes
No (Skip to question 66)
65.1.
66.
For your entire household, what were your total expenditures in the past month?
1. Less than $10 (< 5,000 drams)
2. $10 - 50
(5,000 - 25,000 drams)
3. $51 - 75
(25,500 - 37,500 drams)
4. $76 - 100 (38,000 - 50,000 drams)
5. $101 - 200 (50,500 - 100,000 drams)
6. $201 - 300 (100,500 - 150,000 drams)
7. $301 - 500 (150,500 - 250,000 drams)
8. Above $500 (> 250,000 drams)
99. Dont know
67.
68.
How did your total household income change from the year before?
1
Significantly
worsened
69.
2
Worsened
3
No change
4
Improved
5
Significantly
Improved
99
Dont
Know
How would you describe the quality of your living condition relative to others in your
city/village?
1
99
123
Very
Bad
70.
Bad
Good
Very
Good
Dont
Know
Over the next 5 years, how do you think your household's income may change?
1
Significantly
worsened
71.
Average
2
Worsened
3
No change
4
Improved
5
Significantly
Improved
99
Dont
Know
Approximately how much did you pay for your household electricity bill last
month? ___________ AMD
99. Dont know
72.
Approximately how much did you pay for your last household water bill last
month? ___________ AMD
99. Dont know
73.
74.
If you sold your house today, what do you think its market value would be?
_______________ dollars
99. Dont know
75.
If you decided to rent your house today, how much rent do you think you could
collect for it? ________________ dollars per month
99. Dont know
If you owned this house and decided to sell it today, how much do you think you
could sell it for (market price?) ________________ dollars 99. Dont know
77.
If you wanted to borrow $1000 from a bank for one to two years, would this be
possible? (List & check one)
__ Yes, quite easy to do
__ Yes, but not easy
__ Yes, but very hard
__ Impossible
99. __ Don't know/Not sure
78.
79.
124
80.
Would you say that you are generally concerned about the quality of the
environment on earth?
Yes
No
V.
82.
How many trips did you make in the past 12 months? __________
83.
84.
Approximately how many trips did you take per year in the past 3 years?
___________trips per year
I would like to ask you some questions about your most recent trip.
85.
Including yourself, how many people were traveling with you on your last trip?
total________ people in the group,
including ________members of your household
86.
How long did you stay at Lake Sevan during your last trip? ___________days
87.
What activities did you do during your last trip at the lake? (Check all that apply)
1.
2.
3.
4.
5.
6.
7.
8.
88.
To relax
Enjoying natural beauty and climate
Swimming / Beaching
Boating / Paddle boating
Picnicking / BBQ
Fishing
Visiting historical sites (i.e. churches, etc)
Other (specify) ____________________________________________
If you had worked during your most recent trip to Lake Sevan, how much money would
you have earned? ___________________________ AMD 99. Dont know
Costs:
89.
Yerevan
90.
What means of transportation did you use to get to the lake and what did it cost to
you (round trip)?
90.1. Transportation type:
Public Transport
Private Vehicle
How long did it take to travel from your starting point to Lake Sevan?
_____ hour
_____minutes
92.
93.
Was your last trip to Lake Sevan organized by yourself or was it a part of a
planned travel package organized by a travel company?
1. By me, my family, friends (Skip to question 96)
2. Package only to Lake Sevan
3. The trip was a part of a planned travel package organized by a travel
company
94.
What was the total cost of the package? ________________AMD/$ per person
95.
Accommodations
Meals /Beverages
Just snacks
126
4.
5.
6.
7.
8.
9.
10.
11.
Transportation
Entrance fee / Parking fee
Beaching fee
Picnicking fee
Boating / paddle boating
Fishing
Visiting historical sites
Other (specify) _____________________
96.
Please tell me how much you paid for each of these items during the whole trip
(without fees included in the package):
Item
Accommodation (rest home, hotels,
camping etc.)
Food you brought with you
Food at Lake Sevan
Beverages you brought with you
Beverages at Sevan
Entrance/parking fees
Beaching fee
Picnicking fee
Boating/paddle boating
Fishing
Visiting historical sites
(churches, donations, etc)
Other, specify___________________
97.
Do you remember how much you spent in total during the most recent trip,
including transportation costs (for all expenses)?
If YES, the total amount:
$0
(Skip to question 99)
Less than $5 (< 2,500 drams)
$6 10
(3,000 - 5,000 drams)
$11 20
(5,500 10,000 drams)
$21 50
(10,500 25,000 drams)
$51 100
(25,500 50,000 drams)
$101 200
(50,500 100,000 drams)
$201 300
(100,500 150,000 drams)
$301 500
(150,500 250,000 drams)
$501 1000 (250,500 500,000 drams)
Greater than $1000 (>500,000 drams)
99.
Dont know
(Skip to question 98)
98.
Would you say this total expenditure was only for yourself, your household
members here at the lake, or the whole group coming with you?
127
1.
2.
3.
4.
5.
99.
Was there anyone else who also paid for anything during your visit to the lake?
1. Yes, a lot
2. Yes, some
2. No
Hypothetical questions
100.
101.
Do you think that a change in the water level of the lake such as a 3 meter
increase or 2 meter decrease would have affected your number of visits to the
lake in the past 12 months?
1. Yes, sure
(Go to question 102)
2. Yes, probably
(Go to question 102)
3. No, probably not (Skip to question 103)
102. Now consider the following changes that could occur to the Lake. And assume that
there was an entrance fee to use the Lake Sevan area for recreational purposes. The
entrance fee would be imposed per person for entering the Lake Sevan area. Please
tell me how these entrance fees would have influenced the number of trips you
would have taken in last 12 months, with different water levels of the lake.
( Ask and fill by rows )
Entrance fee
Per person
(AMD)
0 (current)
100
200
300
128
500
1000
2500
5000
10000
25000
50000
(Skip to question 104)
103.
Now consider the following changes that could occur to the Lake. Assume that
there is an entrance fee to enter the Lake Sevan area for recreational purposes.
The entrance fee would be imposed per person for entering the Lake Sevan area
for recreational purposes. Please tell me how these entrance fees would have
influenced the number of trips you would have taken in last 12 months.
0 (current)
100
200
300
500
1000
2500
5000
10000
25000
50000
104.
Entrance fee
Per person
(AMD)
(as #82)
# of visits/last 12
months
How much certainty do you have about the numbers of trips you would have
taken in the last 12 months?
1. Im pretty sure about my answers
2. I think my answers are roughly correct
3. I have no idea about those numbers, I simply gave a random guess
4. Other (specify) _______________________
105.
When considering the number of trips above, what are the main features or
activities that made you choose to go to Lake Sevan? (Check all that may apply)
1. To relax
2. Enjoying natural beauty and climate
3. Swimming / Beaching
4. Boating / Paddle boating
129
5.
6.
7.
8.
Picnicking / BBQ
Fishing
Visiting historical sites (i.e. churches, etc)
Other (specify) ____________________________
Future visits:
106.
If the level of the lake were to rise by 3 meters, do you think this would affect your
decision to visit Lake Sevan in the future?
1. Yes
2. No
(Go to question 108)
99. Dont know (Go to question 108)
107.
How many trips would you plan on taking in the next 12 months assuming the
imagined changes in Lake conditions occur very quickly after the water's rise?
_______ trips in the next 12 months 99. Dont know
108. Which future activities do you think the increase will affect the most and what way?
Activities
Relax
Enjoying natural beauty and climate
Swimming/beaching
Boating
Picnicking
Fishing
Visiting historical sites
Other/specify:_________________
Thank the respondent for his/her participation and provide the incentive.
VI.
109. Was the person who answered the questions irritated or nervous during the
interview?
Yes
No
110.
Do you think that it was easy for the respondent to answer the questions
concerning number of visits regarding entrance fees and lake level changes?
Yes
No
NA/Missing
130
111. Was the person who answered the questions looking bored or tired during the
interview?
Yes
No
112. Are you certain that the interviewee was answering to the questions honestly and
truly?
1
2
3
4
5
Very
Moderately
Neutral
Moderately
Very
Uncertain
Uncertain
Certain
Certain
113.
Who else was listening while you conducted this interview with the respondent?
(Check all that apply)
No one
Spouse
Other adult family members
Other adults
Children
Other (specify) ________________________
131