NERI Technical Report No. 543 Valuation of groundwater protection versus water treatment in Denmark by Choice Experiments and Contingent Valuation. Hasler, B., Lundhede, T., Martinsen, L., Neye, S. & Schou, J.S. 2005. 176 p.

 

Summary and conclusions

Objectives of the studyThe benefits of groundwater protection are estimated in order to measure whether there are welfare gains associated with increased protection of the groundwater resource, as compared to the current level of protection and to purification of groundwater for drinking water purposes. The term "groundwater" refers to the groundwater resource in Denmark and local groundwater pollution problems are not considered. The study assesses only the benefits, and not the costs, of achieving these benefits.

 

Danish drinking water policy is based on the assumption that the public prefers clean groundwater to water that has been treated. These preferences have never actually been explored by Danish valuation studies.

 

The primary hypotheses in this study are that:

• Consumers prefer naturally clean groundwater, which is not in need of purification or other treatment, to water that has been polluted and treated to clean, thereafter. This is a premise underlying Danish drinking water policy. By testing this hypothesis the benefits of groundwater protection versus purification are measured.
• The value associated with clean drinking water exceeds the value associated with good surface water quality. The rationale here is that clean drinking water influences human health and hence private goods more directly than the quality of surface waters does.
• The Willingness to Pay (WTP) in urban areas exceeds the WTP in rural areas. This hypothesis is motivated by the results of former analyses of the demand for organic foods in Denmark and Great Britain (Wier, 2004). These results show that urban residents consume organic foods to a higher degree than residents living in rural areas. Human health and environmental concern are the most commonly stated reasons for preferring organic to conventional food, and we expect that these reasons are also the drivers for the hypothesised preferences for clean groundwater.
• The WTP in households with children exceeds the WTP in households without children and the WTP of females exceeds that for males. This hypothesis is motivated by results from the above-mentioned study, which also concludes that households with children under 15 years of age have a higher demand for organic foods than other households (Wier, 2004). The presence of children, in itself, does not increase the demand, but the presence of children under 15 years of age does. As mentioned above, human health and environmental concern are the most commonly stated reasons for preferring organic to conventional food, and we expect that these reasons are also the drivers for the hypothesised preferences for clean groundwater.

 

Besides elicitation of WTP for groundwater protection and purified water, an additional objective of the study is to compare the results obtained with the two methods, choice experiments and contingent valuation, and to analyse and assess the apparent differences. The indicators and scenarios in the two surveys

 

The effects being valued comprise both changes in drinking water quality and surface water quality, represented by the living conditions for flora and fauna in lakes and watercourses in Denmark. The indicators for the quality of lakes, watercourses and drinking water are expressed in general terms, and not specifically for a certain area, as valuation is based on a general description of Danish drinking water quality and the quality of surface waters, i.e. watercourses and lakes. As a consequence the results can be used at a general level, but not to value changes in specific areas.

 

The use of qualitative indicators as opposed to quantitative indicators, such as limit values, has been selected because qualitative indicators are found to be more suitable when the aim is to assess the value of general protection of surface waters as opposed to more specific cases, e.g. valuation of quality changes of a specific lake or watercourse. Danish surface waters, e.g. lakes, differ widely from each other because of variations in the prevailing natural conditions (depth, nutrient richness, size), making it impossible to characterise them by using the same indicators. Furthermore, it was found, in testing the questionnaires, to be least demanding cognitively to use qualitative indicators. The indicators comprise choices between naturally clean drinking water of good quality resulting from protection, versus uncertain quality of drinking water. The uncertainty relates to fulfilment of the limit values of nitrate and pesticides in the future, although it is assumed that the present protection level is maintained in the future. Protection is also valued in relation to water that is purified and treated to remove pesticides and nitrates. The information supplied to the respondents explains that, under current conditions, a range of measures is carried out with regard to protection of groundwater against pollution from pesticides and nitrogen. They are informed that when a groundwater borehole is found to be polluted, it is closed and a new one is established. Furthermore, it is explained that it is uncertain whether clean drinking water can be provided in sufficient amounts at this protection level in the future. There is, therefore, a risk that tap water will exceed current limits for pesticides and nitrogen content in the future.

 

The respondents are also informed that by carrying out measures, primarily in agriculture, naturally clean drinking water can be secured both now and in the future. At the same time, good conditions can be secured for animal and plant-life in watercourses and lakes. This means that animal and plant-life will be more natural, varied and balanced, and affected by human activity to only a slight to average degree.

 

The respondents are, furthermore, informed that the general conditions for animal and plant-life in watercourses and lakes are not good at the present and that, under the current level of protection, animal and plant-life is in a state of imbalance many places, and differs markedly from how it would appear under natural conditions. The primary reason for changes in the condition of the aquatic environment is human activity.

 

In the Contingent Valuation (CV) survey, the respondents are provided with this information directly, and they are asked to choose how much they would pay for groundwater protection from a payment card listing 11 levels, ranging from 0 to 2400 DKK/year per household, representing additions to their water bill. In the Choice Experiment (CE) survey the respondents are asked to choose between alternatives where the levels of drinking water quality, surface water quality and price are varied systematically.

 

In the CE survey, the indicator levels are designed so as to approach the descriptions in the CV survey. The quality levels "good drinking water quality now and in the future", "uncertain quality now and in the future" and "purified water" describe drinking water. Surface waters are described by "very good conditions for flora and fauna in waterways and lakes", by "slight imbalance, markedly different than would be so under natural conditions" and "bad conditions". The price consists of six levels, ranging from 0 to 2,400 DKK/year per household again representing additional payments to the water bill. In both of the surveys the respondents are informed that it is assumed that the Danish consumer should cover the costs of protecting the groundwater, as well as those for purification. This would take place in the form of a fixed annual sum per household claimed once a year via the water bill. In other words, a payment additional to the annual water bill is used as the payment vehicle in both surveys. On average, Danish households pay 4,000 DKK/year in water service and supply bills.

 

Full report  in pdf format (1,387 kB).