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Værdisætning af beskyttelse og rensning af grundvand

Summary

The benefits of groundwater protection are estimated in order to measure whether there are welfare gains associated with increased protection of the groundwater resource, as compared to purification of groundwater for drinking water purposes. The term ”groundwater” refers to the groundwater resource in Denmark and local groundwater pollution problems are not considered. The study assesses only the benefits, and not the costs, of achieving these benefits.

Danish drinking water policy is based on the assumption that the public prefers clean groundwater to water that has been treated. These preferences have never actually been explored by Danish valuation studies.

Besides elicitation of WTP for groundwater protection and purified water, an additional objective of the study is to compare the results obtained by the two methods, choice experiments and contingent valuation, and to analyse and assess the apparent differences.

The effects being valued comprise both changes in drinking water quality and surface water quality, represented by the living conditions for flora and fauna in lakes and watercourses in Denmark. The indicators for the quality of lakes, watercourses and drinking water are expressed in general terms, and not specifically for a certain area, as valuation is based on a general description of Danish drinking water quality and the quality of surface waters, i.e. watercourses and lakes. As a consequence the results can be used at a general level, but not to value changes in specific areas.

The use of qualitative indicators as opposed to quantitative indicators, such as limit values, has been selected because qualitative indicators are found to be more suitable when the aim is to assess the value of general protection of surface waters as opposed to more specific cases, e.g. valuation of quality changes of a specific lake or watercourse. Danish surface waters, e.g. lakes, different widely from each other because of variations in the prevailing natural conditions (depth, nutrient richness, size), making it impossible to characterise them by using the same indicators. Furthermore, it was found, in testing the questionnaires, to be least demanding cognitively to use qualitative indicators. The indicators comprise choices between naturally clean drinking water of good quality caused by protection versus uncertain quality of drinking water, uncertainty relating to fulfilment of the limit values of nitrate and pesticides in the future where the present protection level is maintained. Protection is also valued in relation to water that is purified and treated to remove pesticides and nitrates. The information supplied to the respondents explains that, under current conditions, a range of measures is carried out with regard to protection of groundwater against pollution from pesticides and nitrogen. They are informed that when a groundwater borehole is found to be polluted, it is closed and a new one is established. Furthermore, it is explained that it is uncertain whether clean drinking water can be provided in sufficient amounts by this protection level in the future. There is, therefore, a risk that tap water will exceed current limits for pesticides and nitrogen content in the future.

The respondents are also informed that by implementing on measures, primarily in agriculture, naturally clean drinking water can be secured both now and in the future. At the same time, very good conditions can be secured for animal and plant-life in watercourses and lakes. This means that animal and plant-life will be more natural, varied and balanced, and affected by human activity to only a slight to average degree.

The respondents are, furthermore, informed that the general conditions for animal and plant-life in watercourses and lakes are not good the present and that, under the current level of protection, animal and plant-life is in a state of imbalance in many places, and differs markedly from how it would appear under natural conditions. The primary reason for changes in the conditions of the aquatic environment is human activity.

In the CV survey, the respondents are provided with this information directly, and they are asked to choose how much they would pay for groundwater protection from a payment card listing 11 levels, ranging from 0 to 2,400 DKK/year pr. household, representing additions to their water bill. In the CE survey the respondents are asked to choose between alternatives where the levels of drinking water quality, surface water quality and price are varied systematically.

In the CE survey, the indicator levels are designed so as to approach the descriptions in the CV survey. The quality levels “good drinking water quality now and in the future”, “uncertain quality now and in the future” and “purified water” describe drinking water. Surface waters are described by “very good conditions for flora and fauna in waterways and lakes”, by “slight imbalance, markedly different would be so under natural conditions” and “bad conditions”. The price consists of six levels, ranging from 0 to 2,400 DKK/year pr. household again representing additional payments to the water bill. In both of the surveys the respondents are informed that it is assumed that the Danish consumer should cover the costs of protecting the groundwater, as well as those for purification. This would take place in the form of a fixed annual sum pr. household claimed once a year via the water bill. In other words, a payment additional to the annual water bill is used as the payment vehicle in both surveys. On average, Danish households pay 4,000 DKK/year in water service and supply bills.

The Danish drinking water policy and the hypothesis of this study are based on the assumption that the public prefers clean groundwater to water that has been treated by purification methods to remove nitrates and residues from pesticides. This policy assumption and hypothesis is supported by the results of the CE study, i.e. the estimated willingness to pay for groundwater protection is higher than the willingness to pay for purified water. The result cannot be supported directly by the CV study as the WTP for effects of groundwater protection comprise effects on both drinking and surface water. However, the WTP for protection also exceeds that for purification in the CV study, although it has to be remembered that the WTP comprises both the effects on drinking water and surface water quality. The results are apparent from Table 0.1.

Table 0.1. WTP-results from ce and cv, DKK/year per household

The WTP results represent water service payments in addition to households' present annual water bills, and reflects the respondents' willingness to pay for the good, “good drinking water quality” – obtained by protection or purification, as well as good living conditions for flora and fauna in lakes and watercourses. The initial average payment of 4,000 DKK/year represents the present cost of water delivery and wastewater disposal, as well as some of the costs for the present level of drinking water protection.

As apparent from Table 0.1., the CE has resulted in positive WTP estimates for groundwater protection, split into WTP estimates for both “naturally clean groundwater for drinking water supply“ and “very good conditions for plant and animal life”. Using the CV method, the value of the total good “groundwater quality” is estimated, and this WTP estimate cannot be split into different attributes (characteristics).

As mentioned above, it is explained in the CV-valuation scenario that both drinking water quality and surface waters will be influenced positively by an increase in groundwater protection over current levels of protection. As apparent from the results in Table 0.1., the CE results for groundwater protection of both surface water (plant and animal effects) and drinking water quality are more than four times greater than the CV WTP estimate.

The CE result for naturally clean water resulting from protection of the groundwater resource represents a marginal increase of almost 50%; from 4,000 to 5,899 DKK/year. It is apparent that the WTP for groundwater protection exceeds the WTP for purification. However, the WTP for purified water from the CE survey is only 30% of the total WTP for groundwater protection.

As mentioned, one of the hypotheses in this study is that consumers prefer clean groundwater to purified water, and this hypothesis is supported by the CE method. Another hypothesis is that the value associated with clean drinking water exceeds the value associated with good quality of surface waters. This hypothesis is once again supported by the CE results which indicate that the WTP for good conditions in surface waters accounts for 63% of the WTP for good drinking water quality obtained by protection. One explanation for this difference is that clean drinking water influences human health and hence private goods more directly than the quality of surface waters does, both for present and future generations. Seen in relation to foreign valuation studies, as well as Danish, the results are in accordance with the assumptions.

Both the CV and the CE surveys find correlations between the household WTP and household income, education level of the respondent and household water consumption, i.e. the WTP increases with income level, educational skills as well as water consumption. Furthermore, the WTP of females is higher than that for males. Both age and children in the household are insignificant factors, i.e. the WTP is not dependent on whether there are children in the household or the age of the members of the household. Furthermore, the results of the estimations indicate that WTP differs between households in urban and rural areas, as the WTP is higher in urban than in rural areas.

Standard neo-classical assumptions support that open-ended CV results, which the CV-payment card answers used in the present study can be interpreted as, are lower than results from dichotomous choice formats and other choice methods. In other words, the results are in accordance with theory.

However, this conclusion does not suggest whether the CE results or the CV results are the most reliable. The literature provides no conclusive evidence on the reasons for the differences between the results. However, empirical results can be used to shed light on this and to support the results: In former water quality surveys, mean water values obtained by CV were three to four times lower than those obtained from the contingent ranking method. Contingent ranking is a choice modelling approach similar to CE.

In the empirical literature, the differences are explained by a number of factors. One explanation for lower WTP estimates from CV compared with CE is that CV may create incentives for respondents to understate their true willingness to pay. In past empirical research, these differences are explained by the facts that substitutes are expressed more explicitly in CE than in CV and, hereby, respondents are encouraged to make trade-offs. As choices than include price attributes are different from direct elicitations of willingness to pay, the prices often carry more weight and are given more attention in CE surveys. The last explanation is that it is easier to express indifference to choices in CE than in CV, and protest behaviour is a greater problem in CV compared with CE.

It is, therefore, proposed in this report to use the results from the CE compared with those from the CV method.

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Version 1.0 August 2005, © Miljøstyrelsen.