Valuing Our Natural Environment Final Report ... - HM Treasury

Valuing Our Natural Environment – Final Report - Annex1
approaches. However, it would appear that is necessary to trade-off this ‘real’ market data
with data from hypothetical markets in order to account for non-use values, which can form
a substantial proportion of total economic value and provide justification for preservation
of the natural environment. Much emphasis should also be placed on ensuring that practical
application of the CVM are guided by current best practice, particularly since the method is
a focal point for much discussion concerning the measurement of individual’s preferences.
This may imply that the approach is relatively expensive to undertake, although the cost of
undertaking a CVM study should be viewed in comparison to the actions which are the
concern of the decision-making context.
A1.1.6.14 Conflicts and synergies with other methods
The CVM is flexible. For instance, one-to-one in-depth interviews, focus groups and
workshops could be used to investigate methodological issues such as consumer versus
citizen preferences. CVM studies may also be carried out in conjunction with travel cost
studies or avertive expenditure studies since data necessary for these studies could be
collected through a CVM questionnaire.
A1.1.7 Choice Modelling
A1.1.7.1 Objectives
The term choice modelling covers a set of stated preference techniques which, via the use
of surveys, elicit respondent’s values for environmental goods and services by asking them
to choose between different scenarios characterised by different levels of environmental
attributes and different associated costs.
A1.1.7.2 Value concept encapsulated
Depending on survey design, both direct and non-direct use elements of total economic
value may be estimated. Note however, that not all choice modelling approaches yield
estimates of value consistent with economic theory (see below).
A1.1.7.3 Theoretical basis
Choice modelling approaches are based around the notion that any good can be describe in
terms of it characteristics (or ‘attributes’) and the levels that these characteristics take.
For example, a lake may be described in terms of its ecological quality, chemical water
quality of appearance. Likewise, woodland can be described in terms of its species
diversity, age and recreational facilities. The following briefly summarises the different
choice modelling approaches (see Bateman et al., 2002):
• Choice experiments – in this approach respondents are presented with a series of
alternatives and are asked to choose their most preferred. In order for estimates of
economic value to be derived, a baseline option corresponding to the status quo or a
‘do nothing’ option is included in the choice set presented to respondents. With choice
experiments, respondents are required to trade-off changes in attribute level against
the cost of these changes. In addition, though, the baseline option implies that
respondents can opt for the status quo at no additional cost. Data from choice
experiments is typically analysed by econometric techniques based on the theory of
rational probabilistic choice, enabling estimates of willingness to pay to be derived for
different attributes of environmental goods and services.
• Contingent ranking – in this approach respondents are required to rank a set of
alternative options. Each alternative option is characterised by a number of attributes
which vary in level across different options. In order for results from contingent ranking
exercises to be consistent with economic theory, one of the options presented to
respondents must represent the status quo. If the status quo is not included, then
respondents are effectively ‘forced’ to choose one of the alternative options (neither of
which they may actually prefer).
eftec A22
December 2006