PRINCIPIOS COMUNES A TODA SOCIEDAD
C. L A PERSONALIDAD JURÍDICA DE LAS SOCIEDADES
The previous three sections review the origin and development of PES, the Chinese indigenous policy instrument of Ecological Compensation which has a similar idea to PES and the existing literature of SLCP, the largest PES program in China. These sections serve as the policy context of this study. This section focuses on the literature regarding the methodological aspect of this study.
2.4.1 Major Economic Valuation Methods for Ecosystem Services
As mentioned in the Introduction chapter, this study aims to investigate public WTP for water protection. WTP is a welfare measure of the monetary value of ecosystem service, thus the methods for estimating WTP belong to the family of economic (monetary) valuation methods. The history of economic valuation for environmental goods/services can be traced back to the 1960s (Liu et al. 2010). Since then, a number of valuation methods have been developed. Generally, these methods can be classified into two groups, i.e. the Revealed Preferences Methods and the Stated Preferences Methods.
The Revealed Preferences Methods infer people’s WTP for ecosystem services’ values from their behaviours in real or surrogate markets (Pearce and Seccombe-Hett 2000). Major revealed preferences methods include the Hedonic Pricing Method and the Travel Cost Method. The Hedonic Pricing Method reveals the values of ecosystem services through the prices people pay for other goods in the market which are associated to the valued services (Farber, Costanza and Wilson 2002). For example, it is common to use this method to value local environmental resources such as aesthetic views and urban wetlands through the variations in housing prices (Mahan, Polasky and Adams 2000; Birol, Karousakis and Koundouri 2006). However, if the service is provided far away from the consumer like the case of this study, its value can hardly be captured by this method. The Travel Cost Method estimates the values of recreational sites/amenities by the cost people pay to visit them (Farber, Costanza and Wilson 2002). As indicated by its name, this method cannot be used to value the ecosystem services that do not involve any travel.
On the other hand, the Stated Preference Methods elicit people’s WTP for ecosystem services through hypothetical survey questions, and they can be used to value ecosystem services that cannot be traded in either real or surrogate markets (Birol, Karousakis and Koundouri 2006). Therefore, the stated preference methods are also referred to as Non-market valuation methods. Contingent Valuation and Choice Experiments are two major non- market valuation methods and they are introduced as follows.
2.4.2 Contingent Valuation
Contingent Valuation constructs hypothetical scenarios to ask how much people are willing to pay (accept) for a certain increase/decrease in ecosystem services (Portney 1994; Carson 2000; Carson and Hanemann
2005). After nearly 50 years of development, the Contingent Valuation Method has become a widely accepted economic valuation method. In the U.S., it has become a standard tool in institutional decision-making for large- scale infrastructure projects at both the federal and state level. In Europe it has regularly been used since the 1980s. Contingent Valuation studies have also been used in developing countries such as the Philippines since the early 1990s (Bateman, Willis and Arrow 2002).
In comparison, Contingent Valuation studies in China did not appear in the literature until the early 2000s (Xu et al. 2003). This may be attributed to the different socio-economic context of China, where the market economy was only kick-started by the “Open and Reform” policy in 1978. Both policy makers and the public were unfamiliar with and even suspicious of the idea of using surveys to assign monetary values on public goods. However, in the past decade, China has witnessed an accelerated reform toward market economy after joining the World Trade Organization, a growing awareness of public participation in policy making and the development of ecosystem services valuation study in academia (Liu and Costanza 2010). Some researchers have started to conduct Contingent Valuation surveys to investigate individuals’ or households’ WTP for urban green spaces (Chen, Bao and Zhu 2006; Chen and Jim 2008; Chen and Jim 2011), biodiversity conservation (Chen and Jim 2010), air quality improvement (Wang and Mullahy 2006; Wang and Zhang 2009; Du and Mendelsohn 2011; Yu and Abler 2010; Hammitt and Zhou 2006), water pollution reduction in lakes (Zhen et al. 2011), ground water preservation (Wei et al. 2007), protection of natural reserves (Han et al. 2011), and health insurance (Barnighausen et al. 2007; Ying et al. 2007).
These studies have, to some extent, demonstrated the applicability of using Contingent Valuation for cost-benefit analysis and providing policy suggestions in the context of China. However, there are gaps in the literature. Firstly, many studies have used payment cards or open-ended questions to elicit respondents’ WTP, rather than the closed-ended referendum form of questions which are more reliable (Arrow et al. 1993a; Carson 2000; Hoyos and Mariel 2010). Secondly, the study areas of these studies were confined to a few cities (such as Beijing and Guangzhou) and regions despite China’s vast territory and significant income differences between different regions. Thirdly, only a few existing studies have been based on real environmental initiatives to produce results that are of high relevance to policy making. Therefore, there is a need for more careful
designed case studies to examine the heterogeneity in residents’ WTP in multiple study sites.
Particular focus is given to Contingent Valuation studies on water quality improvement (summarized in Table 2.1) in China.
Table 2.1 WTP Studies on Water Quality Improvement in China
Study Time of
Survey Valued Services
Wang et al.
(2013a) 2007
Rural households’ WTP for improving water quality of two major local rivers from Grade IV a to Grade III, Yunnan Province, Southwest China
Wang et al.
(2013b) 2007
Rural and urban households’ WTP for improving water quality of Puzhehei Lake from Grade III to Grade II, Yunnan Province, Southwest China
Zhao et al.
(2013) 2008
Urban households’ WTP for restoring ecosystem services of a urban river in Shanghai, East China a
Zhang (2011) 2008
Urban households’ WTP for improving water quality of Tai Lake (reaching at least Grade IV), East China
Jiang, Jin and
Lin (2011) 2009
Urban households’ WTP for ensuring water quality of upstream Min River at Grade III, Fujian
Province, Southeast China Shang et al.
(2012) 2011
Urban households’ WTP for improving river network c, Shanghai, East China
a
Surface water quality is classified into Grade I to V in China and Grade I is the highest water quality. Water used for tap water should be at Grade III or above.
Interestingly, none of these studies were conducted in North China, perhaps because water quantity is a more pressing issue in North China while water quality is a more urgent issue in South China. Therefore, this study can also increase the knowledge of residents’ WTP for water protection in the north of China. The estimated WTP in these studies will be used to compare with the results of this study in Chapter 6.
2.4.3 Choice Experiments
Choice Experiment is a relatively new tool in the family of non-market valuation methods, which can be seen as an extension or variant of the traditional Contingent Valuation method. This method has its roots in
Lancaster’s characteristics theory of value, the random utility theory and experimental design (Adamowicz et al. 1998; Louviere, Hensher and Swait 2000). In a Choice Experiment survey, respondents are asked to choose between different bundles of (environmental) goods, which are described in terms of their attributes/characteristics and the levels they take. One of these attributes is usually price. By repeating such choices and varying attribute levels, the researcher can infer the useful information of the implied ranking of these attributes, the marginal WTP for an increase or decrease in any significant attribute, and the implied WTP for a program which changes more than one attribute simultaneously.
Choice Experiments was thought to be first introduced into environmental research by Adamowicz, Louviere and Williams (1994) from marketing and transportation research areas. In the past 15 years, the CE method has been used in valuing ecosystem services or environmental protection activities including inter alia recreational hunting (Boxall et al. 1996) and climbing (Hanley, Wright and Koop 2002), ecotourism (Hearne and Salinas 2002), forest and wildlife protection (Adamowicz et al. 1998), fisheries management (Wattage, Mardle and Pascoe 2005), wetland management (Birol and Cox 2007), water supply (Scarpa, Willis and Acutt 2007), improvement of river ecology (Hanley, Wright and Alvarez-Farizo 2006) and landscape (Scarpa, Campbell and Hutchinson 2007).
Generally speaking, the existing Choice Experiments studies focused on the demand side of ecosystem services but largely overlooked the supply side of ecosystem services, i.e. what do farmers want from environmental schemes that are designed to ensure the provision of ecosystem services (Espinosa- Goded, Barreiro-Hurle and Ruto 2010). A few examples can be found in recent literature (Beharry-Borg et al. 2013; Ruto and Garrod 2009), but much more efforts are needed to fill this gap.
Detailed introduction and explanation of the economic models used for Contingent Valuation and Choice Experiments will be provided in Chapter 3.