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Economic Valuation of Water Quality Improvements in New Zealand

Efficient decision making in environmental management requires good data on the costs and benefits of changes in environmental quality. However, full assessment of the benefits of better water quality has been a challenge because some of the component values cannot be directly measured. The advent of non-market valuation techniques has made it possible to estimate these values. In this thesis, the travel cost random utility model and fishing choice data from the National Angling Survey are used to assess the benefits of better water quality for trout anglers in the Rotorua Lakes and a choice experiment is used to assess the benefits of cleaner streams for Karapiro catchment residents. We also explore three methodological aspects which may affect non market value estimates, namely within season variability, scale heterogeneity across individuals and respondent perceptions of the status quo. Accounting for within-season variability in site attributes that are variable across the season may reduce multicollinearity. We find that differences in welfare estimates between models accounting for within-season variability and those that do not may result from differences in attribute and collinearity levels or the combined effect of both. We assess whether benefit estimates remain stable over time using models that account for scale heterogeneity across individuals and demonstrate that ignoring scale heterogeneity across the sampled population may result in researchers erroneously concluding that estimates of marginal willingness to pay are stable over time. A choice experiment on preferences for stream water quality is used to assess the effects of respondent’s perception of status quo conditions on welfare estimates. The results build on earlier findings which suggest that failure to take account of respondents’ beliefs leads to biased welfare estimates. Overall we find that lakes with better water clarity, that are larger in size, with bigger fish, more facilities and more forest cover are preferred. Similarly, streams with water quality that is suitable for swimming and where trout are found, are preferred. We estimate the aggregate annual benefit for anglers of a one metre increase in water clarity in all the Rotorua Lakes which currently have poor or average water water quality to be NZ$2.3 million. The travel cost RUM is also used to assess the overall benefit that trout anglers obtain from each lake. The annual level of these benefits totals NZ$21.7 million.
Type of thesis
Mkwara, L. A. (2015). Economic Valuation of Water Quality Improvements in New Zealand (Thesis, Doctor of Philosophy (PhD)). University of Waikato, Hamilton, New Zealand. Retrieved from https://hdl.handle.net/10289/9319
University of Waikato
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