09/10/2012

Towards an improved methodology for

the valuation of ecosystem servicesThe substitution question

Jeremy De ValckPhD Student, KU LeuvenResearcher, VITO (Flemish Research Center)

09/10/2012 2© 2012, VITO NV

Content

• PhD research context

• Conceptual framework

• The substitution effect

• The case

• Further investigations

• Discussion

09/10/2012 3© 2012, VITO NV

Research context

» Drivers:

• ↗ pressure on ecosystems � ↗ demand for nature valuation from policy-

makers

• What contributes to the value of nature?

• Improve current (SP) valuation techniques: CVM, CE

» PhD research: “Valuation & mapping of ecosystem services”

• Past experience (collaboration with Roy Brouwer’s unit, IVM – VU*) showed

the need to investigate spatially-related questions: substitutes, distance-

decay, upscaling issues, etc.

• Need to account for different sources of preference heterogeneity to

improve transferability of value functions

• Final goal: Improving/generalising a valuation tool developed by VITO for

policy-makers:

http://rma.vito.be/natuurwaardeverkenner/doc/Brochure_ESD.pdf

*Cf. Liekens et al. (2013): “Developing a value function for nature development and land use policy in Flanders, Belgium”.

09/10/2012 4© 2012, VITO NV

ON-SITE

characteristics

ON-SITE

characteristics

INDIVIDUAL

characteristics

INDIVIDUAL

characteristics

OFF-SITE SPATIAL

characteristics

OFF-SITE SPATIAL

characteristicsWTPWTP

1. Recreation preferences

2. Socio-demographics

3. Others (e.g. spatial

cognitive capacities, ex

ante knowledge)

1. Ecosystem-related

2. Infrastructure-related

•Spatial context (e.g. distance to

site, number/distance to eligible

substitutes)

Conceptual framework

8 km

Option №1“Primary site”

Option №2

Option №3

The substitution effect

09/10/2012 6© 2012, VITO NV

Study area: The Drongengoed

» Context: “peri-urban” forest (456 ihb/km²)

» 860 ha one-piece nature area, made of:

• 250 ha conifers

• 310 ha broadleaves

• 25 ha heathland

• 275 ha others (pasture, arable land, peat, poplar)

» Decision on nature conversion scenarios currently at

the core of the political debate

� Traditional forestry practices Vs nature/recreation focus

09/10/2012 7© 2012, VITO NV

The survey

» 284 respondents, 252 kept for final analysis

» 11.3% “protest bidders” removed through filtering process

Variable Survey Flanders* census (Belgian Federal

Government, 2012)

Gender Male 55.8% 49.4%

Female 44.2% 50.6%

Age (years) 18 – 29 13.3% 21.5%

30 – 49 34.9% 34.3%

50+ 51.8% 44.2%

Household size (persons) 1 17.6% 12.0%

2+ 82.4% 88.0%

Level of education High school degree or lower 51.6% 72.9%

Bachelor degree or higher 48.4% 27.1%

Household net income ≤€2,500 58.9% 72.0%

>€2,500 41.1% 28.0%

Job status Employed 54.4% 66.2%

Not employed 45.6% 33.8%

Descriptive statistics of the respondents. [Source: Belgian Federal Government, 2012 (URL: http:// economie.fgov.be)]

09/10/2012 8© 2012, VITO NV

09/10/2012 9© 2012, VITO NV

The choice experiment» Choice cards:

» 24 cards selected (out of 144) = 4*6 cards � 6 cards per respondent

» 2 alternatives + status quo

» Attributes:

1. Habitat

• Broadleaf, heathland

2. Reduction in coniferous forest

• 50ha, 100ha, 200ha

3. Biodiversity

• More common species

• More common & rare species

4. Accessibility

• Good

• Poor

5. Price (€)

• 10, 25, 50, 75, 125, 200

• Payment vehicle: annual mandatory tax exclusively used to restore/conserve the Drongengoed

09/10/2012 10© 2012, VITO NV

Results : Model I (CL) Vs Model II (MXL)

Attributes

Step 1

Model I (CL)

Step 2

Model II (MXL)Mean Std. Dev.

ASC 1.024*** 2.879***(0.167) (0.291)

Rare species 0.369*** 0.0818 3.546***(0.0950) (0.285) (0.383)

No Access -0.427*** -1.187*** 2.523***(0.0929) (0.251) (0.264)

Broadleaf -0.388*** -0.996*** 2.468***(0.143) (0.303) (0.350)

Size100 -0.663*** -0.769*** 0.551(0.107) (0.219) (0.435)

Size200 -0.391*** -1.025*** 1.951***(0.136) (0.301) (0.372)

Size100*Broadleaf 1.086*** 1.474*** 1.446***(0.204) (0.409) (0.542)

Size200*Broadleaf 0.175 0.231 1.652**(0.187) (0.468) (0.716)

Price -0.0132*** -0.0314***(0.00118) (0.00252)

Summary statisticsLog-likelihood -1464.3 -1208.3AIC (Akaike Information Criterion) 2946.6 2448.7BIC (Bayesian Information Criterion) 3004.4 2551.4Observations 4,536 4,536Sample size 252 252

Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

�Preferenceheterogeneity formost attributes

�Better fit of Model II

� Confirms the needto prefer MXL

09/10/2012 11© 2012, VITO NV

Results : Interacting attributes with additional

variablesIndividual-related variables Description

Age Respondent’s age (in years)

Gender Dummy. 1 if male

Family size Total household size in persons (adults and children)

High education Dummy. 1 if Bachelor or higher degree, 0 if High school degree or lower

Employed Dummy. 1 if currently employed

High income Dummy. 1 if income >€3,500

knowDrong Dummy. 1 if ex ante knowledge of the study site

Actual user Dummy. 1 if respondent has already visited the site

Homenat Dummy. 1 if nature proximity was crucial for choosing home location

Ecofriendly Dummy. 1 if member of an “eco-friendly” NGO (e.g. WWF)

Off-site spatial variables

Distkm Road distance (in km) between respondent’s home and the site

Natprox5km Dummy. 1 if individual feels sufficiently surrounded by nature in his 5 km vicinity

09/10/2012 12© 2012, VITO NV

Results : Ecofriendliness

COEFFICIENTS

VARIABLES Ecofriendly-interacted

ASC 0.747***

(0.185)

Rare species 0.386***

(0.106)

No Access -0.440***

(0.111)

Broadleaf -0.382**

(0.173)

Size100 -0.580***

(0.129)

Size200 -0.215

(0.163)

Size100*Broadleaf 1.042***

(0.246)

Size200*Broadleaf -0.0933

(0.222)

Price -0.0137***

(0.00123)

Ecofriendly*ASC 1.178***

(0.410)

Observations 4,500

Robust standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

�Confirms that attitude

towards nature is a crucial

parameter

�Need to better understand

people’s individual

characteristics

09/10/2012 13© 2012, VITO NV

Results : Nature proximity (5km)

VARIABLES

COEFFICIENTS

Natprox5km-

interacted

ASC 1.800***

(0.293)

Rare species 0.290*

(0.151)

No Access -0.701***

(0.160)

Broadleaf -0.186

(0.309)

Size100 -0.791***

(0.219)

Size200 -0.590***

(0.215)

Size100*Broadleaf 0.862**

(0.437)

Size200*Broadleaf 0.363

(0.340)

Price -0.0132***

(0.00120)

Natprox5km*ASC -1.046***

(0.344)

Natprox5km*No Access 0.385*

(0.197)

Observations 4,536

Robust standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

�Confirms the detrimental

effect of substitutes on

people’s WTP

�Lower WTP for nature

restoration scenarios

�Less affected by a lack of

site accesibility

09/10/2012 14© 2012, VITO NV

Results : Willingness to pay estimates

Willingness to pay estimates (€) with Krinsky-Robb 95% intervals Model I (CL) Model I – Interacted

Attributes WTP Lower limit Upper limit WTP Lower limit Upper limit

ASC 77.8 52.0 103.1 101.1 61.1 141.1

Rare species 28.0 14.9 41.6 28.9 15.1 42.6

No Access -32.4 -49.1 -18.0 -45.8 -69.9 -21.7

Broadleaf -29.4 -50.0 -8.3 -25.9 -47.0 -4.7

Size100 -50.4 -70.9 -32.8 -47.1 -65.7 -28.6

Size200 -29.7 -52.5 -9.0 -27.0 -47.7 -6.2

Size100*Broadleaf 82.5 54.0 113.9 76.3 45.0 107.7

Size200*Broadleaf 13.3 -16.0 41.5 11.0 -16.1 38.2

Additional variables interacted

Ecofriendly*ASC 91.5 46.6 136.3

Natprox5km*ASC -64.2 -106.5 -21.9

Natprox5km*No Access 23.7 -3.9 51.4

09/10/2012 15© 2012, VITO NV

Drongengoed case conclusions

» We confirm that 3 sources of preference heterogeneity impact people’s WTP for nature restoration:

1. on-site characteristics2. Individual characteristics3. off-site spatial characteristics

» People positive towards transformation of coniferous forest. (Model I: 78€/yr*HH towards heathland, 48.4€/yr*HH towards broadleaf)

» People prefer a change to more biodiversity (+28€/yr*HH), less conifers and good accessibility (-32.4€/yr*HH).

» Attitude to nature (“ecofriendliness”) is crucial. It almost doubled people’s WTP �from 101.1€ to 192.6€/yr*HH (Model II).

» Perceived substitution effect: people feeling surrounded by nature had ~60% lower WTP for nature restoration and were less affected by a lack of accessibility.����Confirms the need for further investigation of the spatial heterogeneity

question.

09/10/2012 16© 2012, VITO NV

Investigating the substitution question

» Goal

Further investigate the substitution question and create a new variable that

controls for that effect.

» Idea

Building a “Substitution effect index” (SEI) based on GIS and survey data

» Hypothesis

SEI = f(similarity, density, distance),

Where:

» similarity = capacity to supply similar level of utility to respondents

» density = abundance indicator, to be compared with the target

» distance = to account for distance-decay effect

09/10/2012 17© 2012, VITO NV

Stating the problem

» Choice decision rule based on utility maximisation: the respondent can

ascribe a level of utility to each possible destination and go for the one

maximising utility.

» Sounds like building a composite indicator by means of multi-criteria

analysis but with some tricky constraints:

» 1. Respondent-centric model � modelling preferences for one

nature site over a bunch of alternative sites (respondent-specific)

within a certain range (also respondent-specific!)

» 2. Not a pure question of recreational destinations. This is also an

amenity-related question. Both are linked.

09/10/2012 18© 2012, VITO NV

General approach

GIS-based tasks:

1. Defining the “primary site” (reference) according to a set of chosen

characteristics

2. Calculate all possible substitutes based on the same characteristics

3. Compute a “similarity index” for each substitute to indicate how

good/bad substitute it is.

Survey-based tasks:

4. Explore respondent’s answers about socio-demographic and recreational

habits.

5. Develop a weighing factor based on respondent’s preferences (e.g.

hobbies)

6. Combine the “similarity index” with the respondent-specific weighing

factor to obtain his substitutes and their related power.

09/10/2012 19© 2012, VITO NV

Primarysite

Primarysite

Individual

preferences

Individual

preferences

SusbtitutesSusbtitutes

SEI components (1)

Substitutioneffect Index

SEI Components (2)

1. Primary site (or “reference”)

Ecosystemcharacteristics

•Size

•Habitat type(s)

•Bio-physical indicators

Infrastructurecharacteristics

• Accessibility level

• Facilities

Attractiveness

• Crowdedness• NB: likely to be an individual-

dependent quadratic function (e.g. more people increase social enjoyment, but too many people decrease peacefulness)

• Points of interest

NB: Fisher et al (2009): ESS production area Vs ESS benefit area � in situ, directional or omni-directional

SEI Components (3)

2. Substitutes

Relativeproximity

• Travel cost attribute

• Ratio travel time/recreation time (individual-dependentbecause depends onrecreation preferences!)

• (Means of transport)

Direct substitutes

• Similarity level

• Number/density within a certain “range” (individual-dependent)

Othersubstitutes

• “Man-made” substitutes

• (e.g. cinema, park, theatre, amusement park, bar, museum, sport facilities)

• NB: also individual-dependent

SEI Components (4)

3. Individual-related characteristics

Recreationpreferences

• FREQUENCY

• RANGE:

• ���� Trip duration: 1h trip, day-trip, weekend?

• ���� Trip enjoyment: Some people mayenjoy the travel itself! Jones et al. (2010)

• � Depends on people’s spatialcognitive capacitites

Socio-demographics

• Source of proxies (age, gender, income, level of education, etc.)

Otheraspects

• Spatial cognitive capacities

• Ex ante knowledge

• Values

• Experience of nature

• Sentimental attachment to a type of landscape � culturalvalue

• Others

09/10/2012 23© 2012, VITO NV

Practical example

09/10/2012 24© 2012, VITO NV

Discussion (1)

Current issues:

» Hard in practice!

» GIS data availability, quality and relevance to calculate “similar”

substitutes

» Approach computationally demanding � GIS software limitations

(ArcGIS) & computing power

» Correct econometric approach? Number of observations?

Questionnaire?

09/10/2012 25© 2012, VITO NV

Discussion (2)

Current questioning:

» No distance-decay found. Conflicting with high non-use value?

» Substitutes: good approach?

» Sufficiently innovative?

» What about other spatially-

related questions (scale, δ-decay,

use><non-use)?

» Individual-related heterogeneity

(values, ex ante knowledge, beliefs,

“sense of place”, etc.)?

» Any “No way!” thus far?

09/10/2012 Thanks for you

attention!

Any questions?

http://www.panoramio.com/photo/42409409http://www.natuurenbos.be/nl-BE/Domeinen/Oost-Vlaanderen/Drongengoedbos.aspx#leesmeer