Working Group III: Mitigation

Other reports in this collection Benefit Transfer

The valuation of improvements in environmental quality can be expensive. As research budgets are tight, economists explored the concept of “benefit transfer” as a cost-effective alternative to new non-market valuation studies (Desvousges et al., 1992; McConnell, 1992). The term benefit transfer reflects its purpose: transfer the estimated economic value from one environmental good or site to another. Benefit transfer reduces the need to design and implement a new and potentially expensive valuation exercise for the second site. A general four stage process (Atkinson et al., 1992):

  • defines the purpose and desired precision of the benefit estimates;
  • develops the transfer protocol for the question in hand;
  • identifies existing studies that satisfy the protocol; and
  • selects the appropriate statistical transfer method that allows for efficient extrapolation of economic data.

Consider the transfer of health risk estimates. For instance, an estimate of WTP for a given risk reduction from contaminated water in Wyoming could be transferred to a reduced risk of poor water quality in Mongolia, as long as the transfer protocol is satisfied. This protocol can be rather strict, however. For a health risk, the researcher must first specify the commodity. This includes defining the response (death or illness) and causal agent (e.g., chemical), as well as understanding the probability and severity of the risk and risk reduction methods, the temporal dimensions of the risk, whether the risk is voluntary or involuntary, and the exposure pathways and exposure levels. Once the risk is defined, the sample and site characteristics have to be classified, including socioeconomic and location particulars. Finally, the protocol has to address the market and exchange mechanisms that define the frame of how risk is reduced. Three elements are likely to matter–the set of risk reduction mechanisms (e.g., mitigation and adaptation options), the measure of value (e.g., WTP or WTA), and the exchange institution or “payment vehicle” (see Kask and Shogren, 1992).

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