Yesterday I sent a message to the RESECON listserv asking for examples of nonuse values being included in benefit-cost analyses of actual policy decisions. After a flood of replies, I was able to finish my presentation and sent this message off to RESECON earlier today:
Thanks for your response to my request (I’ve been overwhelmed!). In addition to a number of journal articles (which are great but not what my audience of undergrads will get the biggest kick out of) I received the suggestions below. Here is a link to my draft presentation: http://econ.appstate.edu/EE_and_BCA.pptx. Comments welcome!
The examples are below.
There have been several EPA rules that estimate nonuse benefits. For instance, from the Metal Products and Machinery rule (http://water.epa.gov/scitech/wastetech/guide/mpm/index.cfm):
EPA also estimated nonuse benefits from improved water quality in the nations surface water resulting from the final rule. Empirical estimates from surface water valuation studies indicate that nonuse values for water resources may be substantial because people who do not use or expect to use affected waterways for recreational or other purposes may still valueprotecting habitats and species impacted by effluent discharges (Harpman, et al., 1993; Fisher and Raucher, 1984; Brown,1993). The Agency estimated that nonuse benefits will range from $293,252 to $787,190 and from $191,053 to $512,852,based on the traditional and post-stratification extrapolation, respectively.
EPA's Office of Water primarily uses two methods to estimate nonuse benefits in rules. The first (although they may have stopped doing this) adds 50 percent of the value of recreation benefits as nonuse benefits implied by the Fisher and Raucher (1984) study (see the Metal Products and Machinery rule for an example:
http://water.epa.gov/scitech/wastetech/guide/mpm/upload/2003_04_09_eeba_part3.pdf). They may have stopped using this procedure, I'm not sure.
The second is the direct incorporation of SP studies which include nonuse values. Many rules used the Mitchell-Carson study (the CAFO rule, for one) although now they use a meta-analysis that includes SP. The Construction and Development rule has the most up-to-date version of their estimates (see Appendix E of http://water.epa.gov/scitech/wastetech/guide/construction/upload/2008_11_25_guide_construction_proposed_proposed-env-20081120.pdf)
If you have any old Choices laying around, check this article by Walter Milon.
Milon , J., and A.W. Hodges (2000) Who wants to pay for Everglades restoration? Choices, Second Quarter, 2000, p 12-16.
There’s a text version online at findarticles.com without the graphics. The take home message, as I recall it, is that a very large portion of the benefits required to justify the Comprehensive Everglades Restoration Program (CERP) were non-use, and they were simply assumed to exist. http://findarticles.com/p/articles/mi_m0HIC/is_2_15/ai_66918325/
Milon discusses the problems associated with this approach and states: “Public policy cannot be based on a presumption of very large nonuse benefits for each and every ecosystem restoration project.”
This is the Final EIS for the West Tavaputs Plateau Natural Gas Full Field Development Plan in Utah. The BLM did – amazingly – do an estimate of the foregone passive use benefits. Go to Chapter 4 (Environmental Consequences) and see pages 4-282 and 4-283. It’s a very rough treatment, and I can’t say that the inclusion of these values made any difference in the final decision, but it’s an amazing first step for an agency that would never have even considered these values even 5 years ago!
Some economic analyses prepared for EPA effluent guidelines.
Most recent (and perhaps sophisticated approach) listed first, with others produced 5-10 years prior.
Looks like Interior was required to allow it by law but a quick scan doesn't turn up the following implementation...
The Loomis and Caban OWLECON study/tool looks to have been actually
There are a number of examples where total value (including what appears to be a large nonuse component) have been used in making benefit estimates.
The most prominent example may be the study (Carson and Mitchell, "The Value of Clean Water: The Public's Willingness to Pay for Boatable, Fishable, and Swimmable Quality Water," WATER RESOURCES RESEARCH, VOL. 29, NO. 7, PAGES 2445-2454, JULY 1993.
This was study was the primary basis for the benefit estimate that went to Congress:
United States Environmental Protection Agency, 1994. President Clinton's Clean Water Initiative: Analysis of Benefits and Costs. EPA 800-R-94-002 (NTIS Document No. PB94-154101). Washington DC: Office of Water, United States Environmental Protection Agency. 168 pp.... as well as for a number of formal EPA assessments of the benefits of different water pollution control regulations involving particular industrial sectors such as steel.
There are at least two applications that I recall, both from the EPA's Office of Air Quality Planning and Standards.
1. Navajo Generating Station a.k.a. Arizona SO2 FIP, Grand Canyon Analysis. Here BCA could be used in the decision making process unlike the NAAQS rule-makings. Non-use benefits were a driver in this analysis. This was one of 5 case studies evaluated in a book by Dick Morgenstern of RFF. President George H.W. Bush was at the rim of the Grand Canyon along with Leland Deck, Bruce Polkowsksy (rule writer), and about 70 others to celebrate the 75 anniversary of GCNP and the rule.
2. Regional Haze Rule. Again, BCA could be used in the decision making process. Stephen Polasky was at Council of Economic Advisors and in the room when I briefed the interagency economists on this study. Later, others I was invited to go to Shendoah National Park where Al Gore and Carol Browner celebrated Earth Day and the signing of the regional haze rules.
I dug up a couple references online related to this but not anything specifically EPA:
I wouldn't know much about The US and Europe, but no n-market valuation is used a lot in cost-benefit analyses of environmental projects in Australia.
A couple of examples:
The Victorian Environmental Assessment Council (part of the Department of Environment) commissioned a study on the non-use values of Victorian Rivers: http://www.veac.vic.gov.au/documents/VEAC_Final_CM_report_1_June_07.pdf
The CSIRO have a range of people working on non-market valuation. This is an example of a study that was done for the Department of Water, Land and Biodiversity Conservation:
Victorian Environmental Assessment Council (part of the Department of Environment) commissioned a study on the non-use values of Victorian Rivers: http://www.clw.csiro.au/publications/consultancy/2005/value_of_habitat_and_agriculture.pdf
A specific Cost Benefit Study that incorporated non-market values was done in the Mary River for the Australian Greenhouse Office (McInnes, R., 2004, Cost-benefit analysis of Mary River salinity mitigation, Canberra)
A final example is a study that was commissioned by the Environment Protection and Heritage Council of NSW to estimate non-market values of EWaste recycling. These value estimates were used in a cost-benefit analysis of implementing a new recycling scheme: http://www.ephc.gov.au/sites/default/files/PS_TV_Comp__Willingness_To_Pay_For_EWaste_Recycling_Final_Report_Choice_Modelling_study_200907.pdf
The draft of the Cooling water intake structure rule had a non-use value section but after comments it was dropped from the final.
A summary of much of this can be found in the RfF report Reforming Regulatory Impact Analysis where a summary is on page 171. It is downloadable at http://www.rff.org/RFF/Documents/RFF-Rpt-ReformingRIA.pdf
I would look into the various benefit cost analysis done by the US EPA Office of Water. We attempted to get nonuse values explicitly included in the original 316(b) Phase II and III benefit cost analyses. Various types of analysis and discussion of nonuse values made it into the final rule benefit cost analysis, but the nonuse value estimates themselves were not included in the final benefit/cost accounting. In the ongoing revision of the 316(b) benefits analysis the Office of Water is again attempting to incorporate nonuse values through a stated preference survey and/or benefit transfer. Required analyses and approvals, however, are not yet complete. OW has done a number of recent CBAs though, and some of these may have included nonuse value estimates (if so, likely through benefit transfers).