Measuring the Value of the Environment: Part V (Benefit Transfer) (Belated)

Last year we offered a series of posts on one issue that occupies a lot of environmental economists' time and effort: benefit-cost analysis.* However, when it actually comes time to use benefit estimates for benefit-cost analyis, we typically don't conduct primary CVM, TCM, HPM or ABM studies. We use studies like these conducted for some other purpose. This practice is called benefits transfer. We use benefits transfer on the Env-Econ blog often.

So what is benefits transfer? And how good is it?

The benefit transfer approach to environmental benefit estimation was developed for situations in which the time or/and money costs of primary data collection is/are too high. With benefit transfer, environmental benefit estimates from existing case studies are used to inform policy for another case study. Benefit transfer has been widely used to inform policy analysis since the 1950s, at least.

Here is a conclusion from a book chapter by Chris Dumas, Pete Schuhmann and myself:

The successful application of benefit transfer methods remains a challenge. ... benefit transfer methods typically obtain accuracy within an order of magnitude. The role of the benefit estimate in the policy process and the costs of a wrong decision are the two major issues that must be addressed when deciding whether to use a benefit transfer method instead of collecting primary data. Typically, benefit cost analysis is only one input into the policy decision process. When government ... policy decisions do not hinge on whether the present value of net benefits is positive or negative, in other words, when the benefit cost analysis is advisory, the use of benefit transfer is a an acceptable approach to obtain order of magnitude estimates of benefits.

In March 2005 the USEPA staged a workshop that looked at the current state-of-the-art in benefits transfer, "Benefits Transfer and Valuation Databases: Are We Heading in the Right Direction?":

The objective of the workshop was to provide a forum for informed discussion regarding the practice of benefits transfer, the use of valuation databases for such, and the general relevance of valuation and benefits transfer to environmental decision making. The workshop centered around a series of presentations delivered by a multidisciplinary group of experts and practitioners from around the world. The presentations covered topics that included:

1. the current state and relative strengths of valuation databases such as EVRI, ENVALUE, Review of Externality Data, New Zealand non-Market Valuation Database, and Value Base Swe
2. the need for and use of benefits transfer around the globe
3. development and validation of benefits transfer methods
4. alternative environmental decision making approaches, and
5. the premises underlying benefits transfer.

The proceedings document for this workshop is now available for download in pdf format. The final agenda and PowerPoint presentations from the workshop are also available online.

So, you can see about benefits transfer for yourself.

*Note: this post has been delayed for a calendar year, for some unknown reason.