Morsa case study status report (Deliverable D29) Norwegian AQUAMONEY case study on valuation of environmental and resource costs of water services Author Date David N. Barton 10.05.07 Contact information AquaMoney Partners Colophone This report is part of the EU funded project AquaMoney, Development and Testing of Practical Guidelines for the Assessment of Environmental and Resource Costs and Benefits in the WFD, Contract no SSPI-022723. General Deliverable D29. Case study report Deadline 17th April Complete reference Barton (2007). Morsa case study status report. Norwegian AQUAMONEY case study on valuation of environmental and resource costs of water services. Status Author(s) Date Approved / Released D.N. Barton 17.04.07 Comments Date Reviewed by Pending for Review Second draft First draft for Comments Under Preparation Confidentiality Public Restricted to other programme participants (including the Commission Service) Restricted to a group specified by the consortium (including the Advisory Board) Confidential, only for members of the consortium Accessibility Workspace Internet Paper Copyright © 2006 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the copyright holder. Content Summary II 1. INTRODUCTION - GENERAL CASE STUDY CHARACTERISTICS 1.1 Location of the case study area 1.2 Geographical characteristics 1.3. Water system characteristics 1.3 Characterisation of water use 1.4 Cost recovery of water and sewage fees in Morsa 2. PRESSURE, IMPACT, AND RISK ANALYSIS WITH REGARDS TO THE WFD ENVIRONMENTAL OBJECTIVES 2.1 Significant pressures impacting on water status 2.2. Impacts on surface and groundwater bodies 2.3. Water bodies at risk of not achieving a good status 2.4. Diagnosis of water quality and ecological issues (aquatic and related terrestrial ecosystems) 2.5. General trends and future pressures 3. POLICY ISSUES 3.1 Water management framework and major issues 3.2 Water policy and research relevance in the basin 3.3 Information sources and stakeholder involvement 4. ERC ANALYSIS AND METHODOLOGICAL ISSUES 4.1 List of main water-related goods and services provided in the basin 4.2 Objectives: type of ERC analysis to performe 4.3 Proposed methods and tools for the valuation of ERC 4.3.1 Choice experiment 4.3.2 Benefit transfers 4.3.3 Mitigation cost 4.4 Methodological issues 4.4.1 Methodological steps preparing CE studies 4.4.2 Target group(s) 4.4.3 Sample size requirements 4.4.4 Valuation scenario(s) design in relation to ERCB & WFD 4.4.5 Spatial implementation scale 4.4.6 Temporal issues 4.4.7 Methodological tests (e.g. sensitivity to scope, distance-decay etc) 4.4.8 Value transfer tests 4.4.9 Aggregation and use of GIS (feasibility of a GIS based value map) 4.4.10 Planning of activities and their timing 4.4.11 Other issues Appendix 1 Appendix 2 4 4 4 4 6 8 8 8 8 8 15 15 15 15 15 16 16 16 17 17 17 18 18 18 18 18 19 20 22 22 22 22 23 23 23 26 28 I Summary The following bullets correspond to the categories in the AQUAMONEY case study characterisation matrix. They summarise the key characteristics of the Morsa case study for purposes of case study comparability. • • • • • • • • • • • • • • • II Objective: Problem: Good/bad valued: Valuation method: Survey method: Survey timing: Part of CVD: Scale: Use-nonuse / users-nonusers: Standard (effluent) values: Sensitivity to scope testing: Substitution effects: Aggregation: Benefit transfer: Use of GIS: disproportionate cost analysis eutrophication and toxic algal blooms valuation of different attribute levels of lake visitation (goods and bads) choice experiment in-person survey of users; web-based survey of users and non-users September-December 2007 will participate in a common water quality design for choice experiments regional scale ; target water body and substitute lakes Yes, both No, but values for selected water quality attributes (sight depth) Yes, implicit in choice experiment of multi-level water quality attribute Yes, planned multi-site choice sets and actual site selection Yes, distance decay evaluated using a regionally representative hh sample Not within Norway. Temporal stability tested against 1995 CVM study Yes, but subject to CVD guidance on common explanatory variables 1. INTRODUCTION - GENERAL CASE STUDY CHARACTERISTICS 1.1 area Location of the case study The Morsa catchment is an approximately 700 km2 area in south-eastern Norway, including outskirts of Oslo in the north, a number of smaller lakes draining to the Hobøl river which runs into Storefjorden and Vannemfjorden in the south, which the drains to the Oslofjord through the city of Moss (¡Error! No se encuentra el origen de la referencia.) . Figure 1. The Morsa catchment draining to the Vansjø Lakes and the Oslofjord Source: NVE Atlas 1.2 Geographical characteristics Except for land use the geographical characteristics1 of the Morsa catchment have not been included in this case study report as they can be found in the river basin characterisation report (Lyche_Solheim, Borgvang et al. 2003). They are not deemed directly relevant for valuation study design, but can be added later if this is shown to be required data for e.g. the value mapping. Figure 2. Land uses and nutrient loading pressures. Source: NIVA and (Lyche_Solheim, Vagstad et al. 2001) Note land use: Mainly forest (green areas) and agriculture (light brown areas) with the main urban area being Moss city (dark brown areas) in the southern end of the catchment. Vannemfjorden is a highly eutrophic lake with frequent cyanobacteria blooms in MayJune. Total P loading in 2000 approximately 17 000 kg TotP. Main sources of nurient loading are agriculture(57%), septic tanks from individual households (11%), municipal wastewater (6%) and natural background run-off (26%) . Nitrogen loading relevant to marine areas in Oslofjord in the context of complying with the North Sea Treaty. Little industry of significance. Other water quality issues are marginal compared to nutrient loading issue. Relative P-loading contribution by sector by sub-catchment (¡Error! No se encuentra el origen de la referencia.). Source apportionment has identified near-shore irrigated vegetable agriculture as probable main contributor to surplus P. 1.3. Water system characteristics Most of watershed currently at risk of not meeting ”good status” under WFD (Figure 3, Table 1, Table 2). Storefjorden provides drinking water supply for 60 000 people through the MOVAR water supply facility. Due to algal blooms and heavy turbidity in spring floods MOVAR recently invested approximately 10 million Euro in upgraded water treatment (flushing, ozone 1 - Climate (include rainfall, T, ET, and runoff average values, and spatial and temporal patterns) - Lithology - River length, basin area, altitude, etc. - Biotic framework (describe main ecosystems, including components & functions) 4 treatment).Storefjorden and Vannemfjorden serve as the aquatic recreational area for at least 33 000 people living locally. North Sea Treaty obligations in Oslofjord. Table 1. Temporary estimation of ecological quality ratio (EQR) in waterbodies of the Morsa catchment (see Annex E i Lyche-Solheim et al. 2003 b). Lake no. NVE 5572 294 293 292 295 2 291 291 291 Water bodies - lakes EQR SFT class >0,6? 0,7 0,6 0,3 0,1 <0,3? 0,25 0,15 0,1 I-II? II II IV IV-V V? IV IV-V IV-V Water bodies – water courses EQR SFT class Rivers upstream of Langen Tangenelva (from Våg til Mjær) Hobølelva from Mjær til Tomter Hobølelva from Tomter til Kråkstadelva Kråkstadelva Hobølelva from Kråkstadelva to Høyfoss (Kure) Hobølelva from Høyfoss (Kure) to Vansjø Mørkelva Veidalselva Svinna upstream of Sæbyvannet Svinna downstream of Sæbyvannet Mosseelva Source: (Lyche_Solheim, Vagstad et al. 2001) >0,6? 0,4 0,25 0,3 0,2 0,2 0,2 0,2 0,2 0,25 0,3 0,3 I-II? IV IV IV V V V IV-V V IV-V IV-V IV Bindingsvann Langen Våg Mjær Sæbyvannet Bjørnerødvann Vansjø, Storefjorden Vansjø, Vanemfjorden Vansjø, Grepperødfjorden Subcatchm ent no. (REGINE) 003.E 003.D 003.D 003.CZ 003.C0 003.C0 003.B3Z 003.B5A 003.B1C 003.B1A 003.A3 The EQR is based on the “one-out all out” principle where the quality element with the lowest EQR value determines the EQR of the water body. Values <0,6 indicate moderate or poor sattus. SFT-class refers to the Norwegian Pollution Control Authority’s waterbody status classification. “?” indicates determination of status based on somewhat lacking data. 2 No number in NVEs Lake database 5 Table 2. Integrated evaluation criteria for evaluating risk of not achieving ”good ecological status” (good ecological potential for HMWB). Source: (Lyche_Solheim, Vagstad et al. 2001) Risk of not attaining Biological environome ntal status objective criteria Pressure criteria Pysical chemical status criteria Lakes Bindingsvann Langen Våg Mjær Sæbyvannet Bjørnerødvann Vansjø-Storefjorden Vansjø-Vanemfjorden Vansjø-Grepperødfjorden ? + + + + + + + + ? + + ? + + + ? ? ? ? + ? + + + uncertain low low high very high uncertain very high very high very high Rivers Tangenelva Hobølelva ovenfor Tomter Hobølelva ovenfor Kråkstadelva Hobølelva ovenfor Vansjø Høbølelva ovenfor Høyfoss Kråkstadelva* Svinna oppstrøms Sæbyvannet Svinna nedstrøms Sæbyvannet Mørkelva Veidalselva Mosseelva + + + + + + + + + + + + + + + + + + + + + + ? + ? + + + + ? ? + ? high very high high very high very high very high very high high high very high high Water body Figure 3. Morsa catchment waterbodies Risk of not attaining good ecological status (GES) Note: Based on the WFD principle of "one-out - allout" the table shows a “+” where at least one of the pressure criteria has been evaluated as somewhat significant or significant, and where the EQR < 0,6 (see above). Question marks indicate lacking data. * heavily modified water body (HMWB). Note: “lav risiko”=low risk. “høy risiko”=high risk of not attaining GES in 2015 1.3 Characterisation of water use The Morsa catchment includes 9 different municipalities in two counties (Østfold and Akershus). The municipalities constitute the socalled “Morsa Project” which coordinates financing at a catchment level of nutrient mitigation measures (http://www.morsa.org/hvaermors.html). ¡Error! No se encuentra el origen de la referencia. illustrates the county boundaries around the Morsa catchment. They include large urban areas which are highly unlikely to use the Vansjø Lakes because of distance and available substitutes. In conducting an internet-based survey using a panel at county level this becomes a relevant methodological issue which is discussed further below. Figure 4. Morsa catchment municipalities covers 9 different municipalities in two counties (Østfold and Akershus) Source: NIVA From a recreational water use perspective what is immediately evident is the large number of lakes in close vicinity to Vansjø, as well as the Oslofjord. There are in other words a large number of substitute sites for water recreation although Vansjø is by far the largest. Population density of Akershus and Østfold Counties (Source: SSB) 6 Figure 6. also shows that population density is high near Vansjø (Moss town), as well as in Oslo to the north and Fredrikstad to the south. Populations in these areas use Vansjø to a very limited degree based on anecdotal evidence, suggesting high distance decay of any WTP for nutrient abatament measures and better water quality. See appendix 2 for a list of the municipalities in and around the catchment. Figure 5. Administrative boundaries of Akershus and Østfold Counties (Source: SSB) Figure 6. Population density of Akershus and Østfold Counties (Source: SSB) 7 A mitigating factor for distance decay (at least in Østfold county) is that a large number of the water bodies in the county are heavily eutrophied according to Norwegian State Pollution Control Authority criteria (¡Error! No se encuentra el origen de la referencia. ). No work has been done on recreational water use patterns in the region and there is very little basis for establishing a “policy relevant” population over which to aggregate recreation benefits for a particular water body such as Vansjø. 1.4 Cost recovery of water and sewage fees in Morsa Figure 7. Water quality status in substitute lakes Source: Miljøstatus Norge Note: water quality legend (“meget god”=”very good”; “meget dårlig”= “very poor”). Given that water and sewage fees are a possible payment vehicle the water and sewage utility cost recovery analysis is perhaps the most relevant part of the Economic Analysis of Water Users under the WFD (Annex III). (Lyche_Solheim, Vagstad et al. 2001) (in Norwegian) has a detailed analysis of water and sewage rates and transfers between municipalities in the catchment. The data in this report can be used to calculate the annual cost recovery rate for water and sewage fees in the area, which in turn can be used as the status quo level of the payment attribute in the choice experiment. 2. PRESSURE, IMPACT, AND RISK ANALYSIS WITH REGARDS TO THE WFD ENVIRONMENTAL OBJECTIVES 2.1 Significant pressures impacting on water status Figure 8 shows a water user conflict matrix based on the pressure-impact approach for the Morsa catchment (Lyche_Solheim, Borgvang et al. 2003). The matrix covers both pollution, water abstraction and morphological pressures, but it is immediately evident that the principle conflict relate to nutrient pressures as stated previously. 2.2. Impacts on surface and groundwater bodies As stated previously, due to algal blooms and heavy turbidity in spring floods the water utility MOVAR recently invested approximately 10 million Euro in upgraded water treatment (flushing, ozone treatment). Storefjorden and Vannemfjorden serve as the aquatic recreational area for at least 33 000 people living locally. Impacts in terms of numbers of water users affected by municipality has not been evaluated and will be a contribution of the stated choice survey. 8 2.3. Water bodies at risk of not achieving a good status See Figure 3. 9 Pressure (cause) Households: Drinking water Impact (effect) Households: Drinking water Households: Sewage emissions Agriculture: irrigation Agriculture: Runoff Agriculture: Morphological changes Bathing Households: Sewage emissions ÷ ÷/0 Agriculture: irrigation Agriculture: Run-off Agriculture: Morphological changes Bathing Fishing Hydropower Industry: Water supply Industry: emissions Recreation: scenic ÷/0 ÷ ÷/0 ÷/0 ÷/0 ÷/0 0 ÷ 0 ÷/0 0 0 0 0 ÷/0 0 0 0 0 0 0 ÷/0 ÷/0 0 0 0 ÷/0 ÷/0 ÷ 0 ÷/0 ÷/0 0 ÷/0 ÷/0 ÷/0 0 ÷/0 0 ÷/0 ÷/0 ÷/0 ÷/0 0 0 0 ÷/0 0 ÷ ÷/0 ÷/0 0 ÷ 0 0 0 ÷ 0 ÷ 0 0 0 ÷/0 0 0 0 ÷ ÷/0 0 0 0 0 0 ÷ ÷/0 ÷/0 ÷/0 ÷ ÷/0 ÷/0 ÷/0 ÷/0 ÷/0 0 ÷/0 ÷/0 ÷ 0 ÷ ÷/0 Fishing ÷/0 ÷ ÷/0 ÷ ÷ 0 Hydropower ÷/0 ÷/0 ÷/0 ÷/0 0 0 0 0 ÷ ÷/0 ÷/0 0 0 0 0 ÷/0 ÷/0 ÷/0 ÷/0 0 ÷/0 ÷/0 0 ÷/0 0 ÷ ÷/0 ÷ ÷ 0 0 ÷/0 0 ÷/0 0 ÷/0 ÷/0 ÷/0 ÷/0 0 0 0 0 0 0 0 ÷ ÷/0 ÷ ÷ ÷/0 ÷/0 ÷ ÷/0 ÷ ÷/0 Industry: Water supply Industry: emissions Recreation: scenic Boating Nature reserves Boating Nature reserves ÷/0 ÷/0 Figure 8. Matrix of water use conflicts Morsa catchment Source: (Hovik, Selvik et al. 2003). Water resource use conflicts in Morsa catchment: ÷ = conflict, 0 = little or no impact. Red: Main use conflicts, Yellow: Secondary use conflicts 10 2.4. Diagnosis of water quality and ecological issues (aquatic and related terrestrial ecosystems) See Table 1 and Table 2. 2.5. General trends and future pressures No separate trends analysis has been performed for the Morsa catchment apart from the evaluation of risk of not attaining GES in 2015. 3. POLICY ISSUES 3.1 Water management framework and major issues The principle focus of the case study is water quality issues, specifically related to excessive nutrient loading of the Vansjø Lakes. 3.2 Water policy and research relevance in the basin Nutrient abatement as a priority is illustrated in the pressure-impact matrix ( ). (Barton, Saloranta et al. 2007) used a Bayesian belief network to show how uncertain nutrient mitigation costs could be compared to uncertain benefits of water quality improvements. The study was based on a more than 10 year old contingent valuation study (Magnussen, Bergland et al. 1995) from the Vansjø Lakes. Whereas the CV study looked at willingness to pay for increasing water quality throughout the lakes to suitable levels for drinking water and bathing, they were not able to show any scope effects of different levels of improvement. The WTP estimates are therefore much coarser than the predictions of suitability on several different water quality parameters derived from the Bayesian belief network. Furthermore, the study did not evaluate health risks due to toxic algal blooms, which have been a recurring problem since 2000. Also, disproportionate cost analysis ideally requires that benefits can be calculated for several different levels of ambition in the programme of measures. Valuing alternative levels of water quality is easier in choice experiments (CE) than contingent valution, given the same budget for sampling, as more information on preferences is obtained per respondent. The following focuses specifically on the policy relevance of the planned choice experiment, Reearch relevance of the choice experiments NIVA has carried out water quality monitoring of algal toxins since 2004 (particularly in Østfold and Akershus Counties). In 2006 a total of 37 lakes were analysed; in 25 of these we found the algal toxin microcystin - the situation was worse than previously assumed. Because of this several lakes had bathing advisories and water treatment plants increased their preparedness. The Norwegian Health Institute has been contacted frequently regarding health effects of contact with blue green algae. NIVA has taken the initiative for a national monitoring programme and system for risk evaluation of algal toxins in Norway. Risk analysis has generally been the purvue of experts, but there is a growing international awareness that health advisories to the public should be based on better information of how water users experience water quality and health risk subjectively (WHO 2001). Health advisories (bathing, dietary) play a large role in determining the use value of water resources and as such the evaluation of whether costs of measures are disproportionate to the benefits of avoiding advisories. An understanding of subjective water use suitability criteria (Smith, Cragg et al. 1991) will also make it easier for local environmental authorities to give more relevant risk information and portray monitoring data in a more meaningful way to the public. There is also a need to understand how health risk and suitability is percieved across different water user groups. Survey-based methods – particularly choice experiments – can be used to evaluate these preferences across relevant populations around the water resource in question (Bateman, Carson et al. 2002). 15 AquaMoney The newest choice experiment methods such as latent choice models are capable of studying user preferences for different water quality attributes for different user segments of the population (classes such as bathers, boaters, property owners, hikers) (Morey and Breffle 2006). Choice experiments also have the capability to look at more flexible forms of the utility function - the mixed logit approach allows for different distributional forms of choice attributes, including positive and negative values for different segments of the population (Train 2003). As far as we know there are no previous choice experiments of water quality in Norway, and only a few internationally (Hanley, Adamowicz et al. 2002; Hensher, Shore et al. 2004; Adamowicz, Dupont et al. 2005). As far as we know there have been no choice experiments on health risks related to algal toxins. In that sense, the AQUAMONEY project also fills an important research gap with its case studies. 3.3 Information sources and stakeholder involvement Principle secondary information sources for the river basin are as follows: • River basin characterisation: (Lyche_Solheim, Borgvang et al. 2003) • Cost-effectiveness analysis of programme of measures (pre-WFD): (Lyche_Solheim, Vagstad et al. 2001) • Prior non-market valuation studies of Lake Vansjø (CVM): (Magnussen, Bergland et al. 1995) • Uncertainty analysis of programme of measures (Bayesian belief networks): (Barton, Saloranta et al. 2005; Barton, Saloranta et al. 2007) The following stakeholders were interviewed for the AQUAMONEY decision-makers survey: • Norwegian Pollution Control Authority (SFT) • Norwegian Directorate for Water Resources and Energy (NVE) • The Morsa Project 4. ERC ANALYSIS AND METHODOLOGICAL ISSUES 4.1 List of main water-related goods and services provided in the basin The following list of water –related goods and services is ranked in rough order of importance from the water use conflicts matrix ( ). The conflict matrix evaluation was based on expert judgment of the severity and number of users affected. The indirect use values of sustainable land use in the catchment are derived from the main pressure-impact linkages leading to conflict between water users. Direct Use values of the Vansjø Lakes (Morsa catchment) Bathing / recreation Fishing / recreation Drinking water Irrigation water (vegetables) USE VALUES Indirect Use values relating to land use management in the catchment and effect on water quality in Vansjø Lakes Nutrient retention, including sewage treatment Flood control Option and Option value Quasi- Unknown given that there are many substitute water bodies for practicing bathing, fishing and also for drinking water transfer. NON-USE VALUES Existence value Unkown, but no wetland nature reserves. No charismatic or publicly known aquatic red-list species Benefits and costs from water services are self-explanatory. Benefits accrue to direct uses of the Vansjø Lakes. Drinking, irrigation water supply and sewage treatment have direct costs and are in principle “cost recovered” (by regulation). Nutrient retention is the single most important indirect use value related to land use management, involving costs of ploughing, fertilisation reduction and buffer zone measures. 16 4.2 Objectives: type of ERC analysis to performe Keywords for the ERC analysis are environmental costs and benefit-cost analysis (disproportionate cost analysis). I. The primary objectives of the Norwegian valuation study in AQUAMONEY: 1. 2. 3. to evaluate the marginal willingness to pay for different aspects of water quality for recreation in the Vestre Vansjø Lake and Storefjorden Lake (Eastern Vansjø). (and substitute lakes in Østfold and Akershus Counties, South Eastern Norway). to conduct benefit transfer (BT) tests across different water user populations using the Vansjø Lakes. o BT type 1(Figure 9): to evaluate benefit transfer across different user populations using Vestre Vansjø Lake o BT type 4: to evaluate distance decay of response rates and willingness to pay within the counties where the water bodies are located. Evaluate “relevant population” for disproportionate cost analysis. to evaluate the temporal “stability” and convergent validity of valuation estimates comparing contingent valuation for water quality (Magnussen, Bergland et al. 1995) with valuation based on choice experiment results II. Secondary objectives (analysis based on data from previous studies, applied in the AQUAMONEY context): 1. linking marginal attribute values of specific water quality indicators to cost-effectiveness estimates for those indicators modelled using Bayesian networks (Barton, Saloranta et al. 2006) a. visibility depth b. probability of bathing advisories 2. conduct disproportionate cost evaluation combining uncertainty in non-market valuation estimates (transferred and primary) with uncertainty in costs of measures. 3. evaluate costs of attaining good ecological status using cost-based valuation only. Evaluate transferability issues using Bayesian networks. 4.3 Proposed methods and tools for the valuation of ERC 4.3.1 Choice experiment Re Objectives: I.1 A choice experiment is planned in two phases: 1. Pilot study on identifying significant water user suitability attributes by water user type This study will be conducted during the spring and early summer 2007 using a web-based survey of a small panel drawn from stakeholder organisations representing water users around Lake Vansjø (environmental NGO, boat owners association, land owners association). The survey will look at how different water users trade-off water quality and user attributes. A share-ware internett-software will be tested and the panel will be constructed by NIVA (with the help of an M.Sc. student from UMB). 2. Main survey of marginal willingness to pay for water user suitability attributes This survey is also internett-based, and will use only the significant water quality and user attributes uncovered in the pilot study. The sample will be much larger and cover two whole counties within which the Lake Vansjø waterbody 17 AquaMoney and catchment is located. The internet survey tool and panel for these two counties will be sub-contracted from a professional survey company, Norstat3. 4.3.2 Benefit transfers Re Objectives: I.2-3 Figure 9 Benefit transfer tests Morrison and Bergland (2006) review different approaches to benefit transfer testing of choice experiment models (Figure 9). The benefit transfer tests conducted with the data sets in the Morsa case study will be Type 1. Type 4 test will be possible by comparing choices of populations living nearshore to the county/region at large. Between European case study sites Type 2 tests may be conducted (provided similar choice experiment survey instruments are employed). 4.3.3 Mitigation cost Re Objectives II.1-3 From the Morsa catchment costs of nutrient mitigation measures in agriculture and sewage treatment have been Source: Morrison and Bergland (2006) quantified (Barton, Saloranta et al. 2006). This has been evaluated against the effects of these measures in Bayesian belief networks which account for uncertainty of cost and effect estimates. The Bayesian networks can be used “in reverse” (inductively) to estimate implementation costs of given changes in lake water quality. This constitutes an alternative and conservative approach to valuing attainment of “good ecological status” (assuming that WTP is unknown, but higher than total mitigation costs). 4.4 Methodological issues 4.4.1 Methodological steps preparing CE studies The following methodological steps are common to the preparation of choice experiments(Kanninen 2006). Some of these steps are discussed under the common AQUAMONEY headings for methodological issues. 1. 2. 3. 4. 5. 6. Identify attributes, levels; Number of alternatives in choice set Treatment of attributes(continuous, categorical); number of parameters and degrees of freedom, required number of choice sets Maximum number of choice occasions/questions feasible; decision on whether to use blocks Determine minimum sample size Factorial design a. OMED (1993, Sloane, 2004, or Warren Kuhfeld’s online catalog: http://support.sas.com/techsup/technote/ts723_Designs.txt) 7. 8. 9. 4.4.2 b. Computer generated (software choice?) Decide whether to include interactive terms Evaluate dominated alternatives Evaluate possibility to adjust attributes levels during field work in order to balance probabilities Target group(s) The choice experiment will be conducted on a panel of respondents from Østfold and Akershus Counties Figure 5. Problem 1: For the general population in these counties we have no way of selecting water recreational users only. The sample is likely to include a large number of non-users. 3 http://www.norstat.no/en/content.asp?uid=201 18 Solution 1: option values will be an important element of the survey. Questions identifying current and intended use patterns will be included in the survey. This will be important in order to estimate a latent class model (heterogenous preferences across user groups). Problem 2: Nor is it possible to select specific users of Lake Vansjø, as there are many substitute marine and freshwater recreation sites in the two counties. Distance decay for Lake Vansjø is expected to be high if available subsitute lake recreation options are pointed out to the respondents. Solution 2: Questions will have to be introduced to separate distance decay effects from substitute effects on marginal utility of water quality attributes in Vansjø Lakes. Problem 3: representative sampling within the two counties is possible with the Norstat panel, but not so for a selection of municipalities within the counties (e.g. within the catchment or around the lakes). The sample will probably be adequate for evaluating distance decay and substitution effects with other water recreation sites, but will have relatively few users of the Vansjø lakes themselves with a specific knowledge of local water quality required to evaluate user thresholds in that particular lake. Solution 3: water quality descriptions must be more generic (not specific for eutrophication conditions in Vansjø). Users of other lakes in the counties should be asked to evaluate thresholds in the lakes where they live. Some map user interface is necessary in the survey so that respondents can select the lake they are most familiar with when answering choice questions. 4.4.3 Sample size requirements Question 1: What is the minimum sample size of pilot survey in order to identify significant water quality attributes? Questions 2: What is the minimum sample size of the main survey in order to identify significant explanatory background variables of choice? In question 1 we are concerned with estimating the marginal value of attribute levels. In this case it may be an OK approximation to use the rule of thumb proposed by Orme (Kanninen 2006; Orme 2006), who suggests the following formula: Equation 1 N= 500 (NLEV)/ (NALT x NREP) NLEV= largest number of levels in any atribute, including interactions NALT= number of alternatives per choice set NREP=number of choice questions per respondent The final sample size estimation will be based on the number of attributes and choice occasions which is selected. In question 2 we are concerned with hypothesis testing of explanatory variables. Personal communication with an econometrician4 suggested that at least double sample size of that estimated using Equation 1 would be necessary to test for a few very significant relationships (e.g. with socio-economic background variables). We currently have no priors on choice proportions. The pilot choice experiment will be used to narrow down the number of choice attributes so that observation of any signficant relationships with background variables becomes easier. Orme (2006) states that for investigative work and establishing hypotheses about a market samples sizes as low as 3060 respondents may be sufficient5. For robust quantitative work without strata Orme suggests a samples size of 300 (presumably dependent on use of Equation 1). Further rules of thumb when budgetary restrictions take precendece over thoeretical sample size considerations (Hensher, Rose et al. 2005). With no priors they suggest a “quota strategy” aimed at obtaining a minimum of 50 responses for a given choice (they further assume that this is based on 16 choice sets, completely generic / non-labeled alternatives, and no context or covariate effects to be modelled). 4 5 O.Bergland, UMB It is not clear whether this assumes the adaptive conjoint analysis of Sawtooth software for which Orme is a proponent. 19 AquaMoney Morey and Breffle (2006) provide an example of sample size which produced significant results in a latent class study appllication fo choice experiments. The authors had a sample of 640 valid responses from which the could identify 4 significantly distinct latent classes. Sample stratification Norstat recommends conducting an additional mail based survey for respondents over 60 as they are not well represented in the panel. This will also be sub-contracted to Norstat. In addition it will be desirable to tratify the sample by municipality or postcode if possible in order to have enough respondents at different distances from the Vansjø Lakes. TO BE CONFIRMED WITH NORSTAT. Further practical advice is that individual strata should contain at least 200 respondents (Orme 2006) 4.4.4 Valuation scenario(s) design in relation to ERCB & WFD Section 4 made a case for the use of choice experiments in the context of benefit-cost analysis of disproportionte costs under implementation of the WFD. Using a choice experiment also makes it possible to evaluate “good ecological status” as a policy priority, versus “good water use suitability”, which has to date been the focus of Norwegian water management. Furthermore, we want to test whether respondents consider suitability in the same way the WFD defines “ecological status” with its “all out one out” rule. Perhaps recreational water users are willing to trade some quality attributes off against others. Water quality attributes can be grouped in some broad classes: • “esthetic attributes” (continuous) • “health risk attributes”(continuous) • “advisory attributes” (binary or categorical) The choice experiment will test : H1) which types of attributes are significant for choosing whether to use the water water body for recreation? Do significant attributes vary with the type of recreational activity? H2) whether water users (bathers, boaters, shoreline users) show any suitability thresholds for these attrbutes H3) if so whether these thresholds correspond to limit values for “good ecological status”. These “hypotheses” are discussed below. H1) (Selected) Water quality attributes are significant in site choice An initial list of attributes that are candidates for evaluation in focus groups and pilot tests is given in Table 4. This list of attributes was narrowed down further for the first focus group (Figure 10). Proposed attributes to be discussed in focus groups for importance for their recreational experience before selection. Once selected we will do further work on getting appropriate photos. Ideally we will have a set of attributes that are consistent from a water quality perspective, i.e. that represent the same concentrations of nutrients, algal biomass. This may be difficult in practice, but at NIVA we will try to find photo illustrations to that effect. Figure 10 Attributes and levels to be evaluated in focus groups 20 Table 3. Proposal for recreational attribute descriptions to be tested in choice experiments Factor Proposed attributes* Visibility depth swimming Relationship WTP=f(attribute) Hypothesis negative Suggested levels Visibility depth viewing negative Shoreline esthetics - foam Water colour uncertain negative Algal /macrophyte growth on shoreline surfaces Bathing advisory negative negative Binary 1=yes 0=no Bathing advisory risk levels Risk of accute symptoms from algal cyanotoxins (gastroenteric, allergenic, head aches, fever) Travel time to substitute bathing sites of at least similar water quality Increase in water and sewage utility fee negative negative Risk levels negative minutes negative kroner/year See appendix 1 examples 0.2 m (foam on surface) 0.5 m 1m 2m 4m See appendix 2 for examples 0.2 m (foam on surface) 0.5 m 1m 2m 4m See appendix for example 1=Milky green (bloom) 0=Other [Brown (natural humus, windy) Grey-blue transparent (clear water)} See examples of levels from Magnussen, Navrud et al. 1995 Visualisation of probability based on percentage of population predisposed to allergenic reactions H2) water users (bathers, boaters, shoreline users) show suitability thresholds for selected water quality attributes The Norwegian Pollution Control Authority (SFT) water suitability levels for bathing are given in Table 4. Table 4. SFT water suitability levels for bathing Bathing and recreation Suitability classes Effects of: Parametre Very suitable Suitable Less suitable Not suitable Nutrients TotP (ug P/l) <7 7-11 11-20 >20 ChlA (ug/l) <2 2-4 4-8 >8 Secchi depth(m) >4 2-4 1-2 <1 Organic material Colour number <25 >25 Source: translated from SFT (1997). Note the colour number refers to the intensity of brown colour We are especially interested in evaluating whether there is any threshold for recreational bathing at the limit values for “suitable”bathing water given by the SFT (11 ug Chla /l, 2m sightdepth). Our hypothesis is that after several years of water quality problems, users have become more used to poor conditions, but continue to use the lake. The local population m ay have adapted to algal blooms and the fact that the lake might be humous, and so have a greater tollerance for poor sight depth and opaque water colour. We want to test whether respondents have a higher tollerance for poor water quality than the recognized suitability limit values. This would imply that benefits of improvement are lower than in the previous CV survey conducted in 1995 (Magnussen, Bergland et al. 1995). 21 AquaMoney H3) Suitability thresholds correspond to limit values for “good ecological status” The classification (lake type) for Vestre Vansjø is still uncertain. However classified, good ecological status would comply with bathing recreational suitability criteria established by the SFT. Table 5. Suitability versus ecological status Limit value “Not Good ecological status suitable” (Chla A biomass) Economic use: (Chla A biomass) (draft recommendations of Intercalibration (SFT, 1995) projects, pers. com. Anne Lyche Solheim, NIVA) Raw drinking water Irrigation water 8 ug/l Recreational fishing 20 ug/l Bathing water 8 ug/l 20 ug/l 5 ug/l (large lime poor nonhumous lakes) 10.5 ug/l (large lime rich humous lakes) If classified as “lime poor” good ecological status would require algal biomass concentrations that are half of what is regulated as “suitable” for bathing. From an economist’s point of view good status would require a programme of measures that was excessively costly, assuming bathing water quality is the primary economic use affected by excessive nutrient levels (if characterised as humus rich “suitability and ecological status” thresholds are compatible). If the choice experiment uncovers less sensitivity to water quality, this conclusion would be even more true. The implications would be that “good ecological status” limit values are strict in an economic sense and biased towards accepting a derrogation from “good ecological status” on dispropotionate cost grounds. 4.4.5 Spatial implementation scale The in-person interviews of lake users will be focused on the main water body in the Morsa catchment, Lake Vansjø (Vestre Vansjø and Storefjorden). The web-based survey will cover the counties of Østfold and Akershus and is “regional”; wider than the river basin. 4.4.6 Temporal issues The initialpayment attribute proposed was an annual water and sewage fee. Historically, there have been a number of sewage fee price increases to pay for measures in the catchment. Initial focus groups have shown that a county-wide tax shows less protest reactions. 4.4.7 Methodological tests (e.g. sensitivity to scope, distance-decay etc) The choice experiment is planned at county level (Østfold and Akershus) which exceeds the limits of the Lake Vansjø catchment. While this is necessary to test distance decay, the county level panel is not very efficient as it will probably include a large proportion of water users not using the Vansjø Lakes themselves. Sensitivity to scope will be tested implictely by using more than 2 attributes levels for several of the water quality attributes in the choice experiment. 4.4.8 Value transfer tests6 Several different tests of benefit transfers are discussed as alternative approaches to evaluating the reliability of BT between the case study sites : 1. convergent validity of implicit prices and WTP (unit value transfer) 2. convergent validity of individuals choices conditional on socio-economic and attitude parameters 3. similarity of value functions (similarity of coefficients) 6 The following section was prepared in connection with the EU project Thresholds (unpublished memo). 22 4. 5. convergent validity of rankings and resulting welfare loss function damage function transfer (conditional on pollution loading) Approach 1 and 3 area “traditional” tests conducted on transfer of CV results. Approach 2 and 4 are specific to choice experiments, although both these approaches have elements of benefit function transfer (using site characteristics with transferred model coefficients) also seen in the CV literature. Approach 5 is (as far as we know) a new approach in the BT literature7. We therefore propose running test 1, 3 and 5 (if detailed water quality data is available at other comparable sites to Lake Vansjø). Introducing some notation for the following discussion; subscript (p) will refer to the policy site to which estimates are transferred. Subscript (s) will refer to the study site from which estimates are transferred/ where the primary valuation study was carried out. There are a number of possible benefit transfer tests that could be conducted in comparing this study to others in AQUAMONEY. These are discussed further in appendix. 4.4.9 Aggregation and use of GIS (feasibility of a GIS based value map) ¡Error! No se encuentra el origen de la referencia. shows the water quality of major water bodies in the whole of the Østfold county. If respondents within the county were asked to indicate which lakes they visit, how often and to what extent water quality attributes affected their choices between lakes that were otherwise similar, it may be feasible to identify boundaries for relevant user populations around the different water bodies in the county. This may be the basis for a county-wise value map. If this county-wise approach is taken the sample size will not be large enough to estimate marginal utilities for individual water bodies. Values applied will be averages across the county. 4.4.10 Planning of activities and their timing Survey implementation is planned for August and December 2007. 4.4.11 Other issues Information-optimal experimental design? • SPSS • JUMP • GAUSS (Kanninen et al. 2006)… • catalogue based orthogonal main effects designs (OMED) ? Web-based/computer-based surveys with illustration capabilities? • Questback • SPSS Dimensions(?) • Sawtooth(?) Estimation software (incl. mixed logit, latent dependent variable) • NLOGIT/LIMDEP(reliable?) • STATA(too limited?) • GAUSS(programming required) • BIOGEME (freeware) 7 Currently being evaluated in the EU project Thresholds. This requires detailed water quality data and damage functions from the case study sites. 23 AquaMoney References Adamowicz, V., D. Dupont, et al. (2005). "The Value of good quality drinking water to Canadians and the role of risk perceptions: a preliminary analysis." Journal of Toxicology and Environmental Health Part A Volume 67, (Number 20-22 / October–November 2004): 1825 - 1844. Barton, D. N., T. Saloranta, et al. (2005). "Using Bayesian network models to incorporate uncertainty in the economic analysis of pollution abatement measures under the water framework directive." Water Science and Techology: Water Supply 5(6): 95–104. Barton, D. N., T. Saloranta, et al. (2006). "Pros and cons of using Bayesian networks to evaluate nutrient abatement decisions under uncertainty in a Norwegian river basin." Ecological Economics (manuscript submitted November 2006). Barton, D. N., T. Saloranta, et al. (2007). "Pros and cons of using Bayesian networks to evaluate nutrient abatement decisions under uncertainty in a Norwegian river basin." Ecological Economics (forthcoming). Barton, D. N., T. Saloranta, et al. (2006). Using belief networks in pollution abatement planning. Example from Morsa catchment, South Eastern Norway. NIVA Report SNo.5213-2006, Norwegian Institute for Water Research (NIVA). Bateman, I., R. T. Carson, et al. (2002). Economic Valuation with Stated Preferences Techniques. A Manual, Edward Elgar. Hanley, N., W. Adamowicz, et al. (2002). Price vector effects in choice experiments: an empirical test. World Congress for Environmental and Resource Economists, Monterrey, California, June 2002. Hanley, N., R. E. Wright, et al. (2006). "Estimating the economic value of improvement in river ecology using choice experiments: an application to the water framework directive." Journal of Environmental Management(78): 183-193. Hensher, D., N. Shore, et al. (2004). "Households' willingness to pay for water service attributes." Environmental and Resource Economics Volume 32 (Number 4/ December, 2005): 509-531. Hensher, D. A., J. M. Rose, et al. (2005). Applied Choice Analysis. A Primer. Cambridge, New York, Cambridge University Press. Hovik, Selvik, et al. (2003). Demonstrasjonsprosjekt for Implementering av EUs Vanndirektiv i Vansjø-Hobølvassdraget: Fase I, NIVA. Jiang, Y., S. K. Swallow, et al. (2006). "Context-Sensitive Benefit Transfer Using Stated Choice Models: Specification and Convergent Validity for Policy Analysis." Environmental and Resource Economics(31): 477-499. Kanninen, B., Ed. (2006). Valuing environmental amenities using stated choice studies. A Common sense approach to theory and practice. The Economics of non-market goods and resources. Dordrecht, Springer. Kristofersson, D. and S. Navrud (2005). "Validity Tests of Benefit Transfer - Are We Performing the Wrong Tests?" Environmental and Resource Economics(30): 279-286. Lyche_Solheim, A., S. A. Borgvang, et al. (2003). Demonstrasjonsprosjekt for implementering av EUs Vanndirektiv i Vannsjø-Hobøl. Fase 2: Skisse til veildere for karakteriseringsoppgavene i 2004, samt forslag til overvåkningsprogram, NIVA. Lyche_Solheim, A., N. Vagstad, et al. (2001). Tiltaksanalyse for Morsa. Vansjø-Hobøl vassdraget. Sluttrapport, NIVA. Magnussen, K., O. Bergland, et al. (1995). Overføring av nytte-estmater: status for Norge og utprøving knyttet til vannkvalitet. Del II. Utprøving knyttet til vannkvalitet. NIVA Report 1995-3258. Morey, E. and J. T. W. Breffle (2006). "Using angler characteristics and attitudinal data to identify environmental preference classes: a latent-class model." Evironmental & Resource Economics(34): 91-115. 24 Orme, B. (2006). Sample Size Issues for Conjoint Analysis (Chapter 7). Getting Started with Conjoint Analysis: Strategies for Product Design and Pricing Research. Reprinted from Orme, B. (2006). Madison, Wis., Research Publishers LLC. Poe, G. L., K. L. Giraud, et al. (2005). "Computational methods for measuring the difference of empirical distributions." American Journal of Agricultural Economics 82(2): 353-365. Smith, D. G., A. M. Cragg, et al. (1991). "Water clarity criteria for bathing waters based on user perception." Journal of Environmental Management(33): 285-299. Train, K. E. (2003). Discrete choice methods with simulation. New York, Cambridge University Press. WHO (2001). World Health Organization (WHO). Water Quality: Guidelines, Standards and Health., Published by IWA Publishing, London, UK. 25 AquaMoney Appendix 1 Further details on possible benefit transfer approaches 1. Convergent validity of implicit prices and WTP (unit value transfers) 1.1 Convergent validity of implicit price of water quality attributes Implicit price: IP = MU v β v = (8) MU c α c v= choice attribute c= cost attribute Mixed logit gives standard errors for parameter coefficients through simulation. However, the parameters are not independent(?). In order to simulate confidence interval for IP correctly you need to simultaneously estimate the parameters and calculate IP through bootstrapping the model (Krinsky and Robb (1986)). If simulated IP for the study site and policy site are approximately normal the two-onesided t-test (TOST) (Kristofersson and Navrud 2005) can be used to evaluate the hypothesis that the implicit prices are equivalent. An alternative approach that allows for other distributional assumptions (??) is to calculate p-values for differences between bootstrapped non-normal distributions (Poe, Giraud et al. 2005). Poe et al. point out that inspection of overlapping confidence intervals tend to accept too many transfers when confidence intervals are wide (due to small sample size, poor survey design and implementation etc.). 1.2 Convergent validity of WTP for policies (bundles of attributes) Willingness to pay can also be calculated as : WTPq = − 1 αc (Vi − Vn ) (9) where WTPq= willingness to pay for programme choice with change in attribute level q αc= parameter on cost attribute Vi-Vn=difference in indirect utility of choice set i versus the no programme choice8 Following (Jiang, Swallow et al. 2006) WTP can then be estimated across all attribute bundles (choice permutations) at each site and then the resulting distributions compared across sites. The authors check whether the WTP distribution is normal for all combinations of programmes using the Kolmogorov-Smirnov (KS) test (Lapin 1993) of normality. Upon confirming normality they then use a “Paired sample p-test” for the differences between distributions which sounds much the same as the TOST proposed by (Kristofersson and Navrud 2005). 2. convergent validity of individuals choices conditional on socio-economic and attitude parameters This approach compares the % of correct predictions of choices using the study site (transferred) model coefficients on policy site respondent characteristics, with the actual choices made at the policy site(Jiang, Swallow et al. 2006). 3. convergence of utility functions across sites (equality of parameter estimates) A straight-forward approach is to conduct a likelihood ratio test of equivalence of coefficient parameters and scale parameters between site specific and pooled models (Hanley, Wright et al. 2006; Jiang, Swallow et al. 2006). Jiang et al.(2006) use two tests to avoid confounding equality of coefficient and scale parameters (that needed to be e programmed in Gauss). Test 1: 8 Φ site = Φ pooled , λ site = λ pooled Does the apporach used in Jiang et al. require that the “no programme” choice be defined explicitely in terms of attribute levels? 26 H1: Φ site ≠ Φ pooled , λ site ≠ λ pooled λ site ≠ λ pooled ≠ Φ pooled , λ site ≠ λ pooled Test 2: Φ site = Φ pooled , H1: Φ site 4. convergent validity of rankings and resulting welfare loss function Jiang et al. (2006) use Spearman’s and Kendal’s correlation coefficients to compare rankings of attribute bundles between study and policy sites. They also derive a loss function based on the difference between the cumulative WTP for the highest ranked choices T, out of a total N choices, chosen at the study site, with the model coefficients and respondent characteristics of the policy site. These are compared to the cumulative WTP for the highest ranked choices at the policy site, with the policy site model coefficients and policy site respondent characteristics. The difference between WTP estimates is due to the different source of ranking results (study site versus policy site). WTP is calculated as shown in equation (9) above. The Loss function summarises the transfer error in terms of reduction in WTP relative to the optimal ranking at the policy site: Loss(N)=100[WP|P(N)-WP|S(N)]/WP|P(N) (10) where WP|P(N) is the sum of non-negative WTP estimates using only policy site rankings, coefficients and respondent characteristics WP|S(N) is the sum of non-negative WTP estimates using study site rankings, policy site coefficients and respondent characteristics 5. damage function transfer (conditional on pollution loading) Several different tests of transfer reliability (convergent validity) can be carried out on the damage function given availability of data at the policy site. Each additional function or linkage transferred introduces a potential error. Table 6 Damage function transfer possibilities (conditional on site characteristics) Policy site data availability Nutrient concentration (N) only or Algal biomass (B) and duration(D) and Congestion (Z) Policy site transferred WTP given study site estimates (p|s), given difference (δ)in site attributes (p-s) Study WTP site WTPp|s,1= ws(gs(fs(δN p-s)+ef)+eg) +ew WTPs|s WTPp|s,2= ws(gs(δΒ p-s, δD p-s) +eg) +ew WTPp|s,3= ws(δ Z p-s , δΒ p-s, δD p-s) +ew Task 2.5 calls for evaluating whether GIS can be used to improve benefit transfers based on state variables. This will be relevant if the study site teams obtain GIS maps showing water quality monitoring data at their study site and perhaps neighbouring beaches, or other beaches in the same country. We could then use the GIS maps to generate WTP at each site with water quality data using the function in Table 6. 27 AquaMoney Appendix 2 Municipalities in and around the Morsa Catchment. Østfold County 0101 Halden 0104 Moss 0105 Sarpsborg 0106 Fredrikstad 0111 Hvaler 0118 Aremark 0119 Marker 0121 Rømskog 0122 Trøgstad 0123 Spydeberg 0124 Askim 0125 Eidsberg 0127 Skiptvedt 0128 Rakkestad 0135 Råde 0136 Rygge 0137 Våler 0138 Hobøl 28 Akershus County 0211 Vestby 0213 Ski 0214 Ås 0215 Frogn 0216 Nesodden 0217 Oppegård 0219 Bærum 0220 Asker 0221 Aurskog-Høland 0226 Sørum 0227 Fet 0228 Rælingen 0229 Enebakk 0233 Nittedal 0235 Ullensaker 0238 Nannestad 0239 Hurdal 0230 Lørenskog 0231 Skedsmo 0234 Gjerdrum 0236 Nes 0237 Eidsvoll Coding: Adjacent to target lake In lake catchment Other municipalities in county