Methods, Section 8
Benefit Transfer Method
Estimates economic values by
transferring existing benefit estimates from studies already completed
for another location or issue.
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Overview
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Why Use the
Benefit Transfer Method?
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Application
of the Benefit Transfer Method
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Summary
of the Benefit Transfer Method
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Applying
the Benefit Transfer Method
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Advantages
of the Benefit Transfer Method
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Issues
and Limitations of the Benefit Transfer Method
Overview
The benefit transfer method is used to
estimate economic values for ecosystem services by transferring available
information from studies already completed in another location and/or context.
For example, values for recreational fishing in a particular state may
be estimated by applying measures of recreational fishing values from a
study conducted in another state.
Thus, the basic goal of benefit transfer
is to estimate benefits for one context by adapting an estimate of benefits
from some other context. Benefit transfer is often used when it is
too expensive and/or there is too little time available to conduct an original
valuation study, yet some measure of benefits is needed. It is important
to note that benefit transfers can only be as accurate as the initial study.
This section continues with some example
applications of the benefit transfer method, followed by a more complete
technical description of the method and its advantages and limitations.
Hypothetical Situation
A park is being upgraded to provide additional
recreational opportunities. One proposal is to add a swimming beach
to the lake. Agency staff want to know the benefits of the new beach,
but do not want to spend a great deal of money on a valuation study.
Why Use the Benefit Transfer Method?
The benefit transfer method was selected
in this case for two main reasons. First, the agency does not have
a large budget for site-specific benefits studies. Second, values
for recreational uses are relatively easy to transfer.
Application of the Benefit Transfer
Method
Step 1:
The first step is to identify existing
studies or values that can be used for the transfer. In this case,
the researcher would look for studies that value beach use, specifically
for lake beaches if possible. For the purposes of this example, assume
that the researcher has found two travel cost studies that estimated values
for swimming at lake beaches.
Step 2:
The second step is to decide whether the
existing values are transferable. The existing values or studies
would be evaluated based on several criteria, including:
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Is the service being valued comparable to
the service valued in the existing studie(s)? Some factors that determine
comparability are similar types of sites (e.g., lake beaches in a park),
similar quality of sites (e.g., water quality and facilities), and similar
availability of substitutes (e.g., the number of other lake beaches nearby).
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Are characteristics of the relevant population
comparable? For example, are demographics similar between the area
where the existing study was conducted and the area being valued?
If not, are data available to make adjustments?
In the example, the first study is for a similar
lake beach. The beach is also in a park, has comparable water quality
and facilities, and a similar number of substitute sites in the area.
However, it is located in an urban area, while the beach being valued is
in a rural area. Thus, the characteristics of visitors can be expected
to be different for the two sites. The second study is in a rural
area with similar types of visitors, but the lake has many more available
substitutes.
Step 3:
The next step is to evaluate the quality
of studies to be transferred. The better the quality of the initial
study, the more accurate and useful the transferred value will be.
This requires the professional judgment of the researcher. In this
example, the researcher has decided that both studies are acceptable in
terms of quality.
Step 4:
The final step is to adjust the existing
values to better reflect the values for the site under consideration, using
whatever information is available and relevant. The researcher may
need to collect some supplemental data in order to do this well.
For example, in this case, the sites valued in each of the existing studies
differ from the site of interest. The researcher might adjust the
values from the first study by applying demographic data to adjust for
the differences in users. If the second study has a benefit function
that includes the number of substitute sites, the function could be adjusted
to reflect the different number of substitutes available at the site of
interest.
In addition, because the beach will be
new, the researcher will need to estimate how many people will use the
beach. This might be accomplished by a survey of park visitors, asking
whether they would use a beach on the lake, and how many times they would
use it. The researcher would then multiply these visitation estimates
by the value per day for beach use (adjusted for differences in population
and site characteristics), to get an estimate of the economic benefits
for the new beach.
Case Study Examples of the Benefit Transfer
Method:
Case # 1? Wetlands
Restoration in Saginaw Bay, Michigan
The Situation
The State of Michigan is considering plans
to protect and restore coastal wetlands along the southern shore of Saginaw
Bay.
The Challenge
The State must estimate the potential
benefits from protecting and restoring the wetlands. A survey asked
people about their support for restoring wetlands, but did not include
a valuation question. Therefore, the researchers used benefit transfer
methods to estimate the value of protecting and restoring wetlands around
the Bay.
The Application
A valuation study for proposed wetlands
protection and restoration of Ohio?s Lake Erie coastal wetlands was used
for the benefit transfer. Researchers assumed that the values estimated
for Ohio were similar enough to be transferable to Michigan. The
study valued similar programs and quantities of wetlands to those proposed
in Michigan. However, coastal residents were not surveyed.
Thus, the transfer of values from the Ohio study to coastal residents in
Michigan requires the assumption that coastal residents have values similar
to those of residents of other areas of the drainage basin.
Results
Estimates of wetland values for Michigan,
based on the Ohio study, ranged from $500 per acre to $9,000 per acre for
residents of the drainage basin, and from $7,200 per acre to $61,000 per
acre for residents of the State of Michigan. These values can be
used to evaluate decisions concerning purchase and restoration of wetlands
around the Saginaw Bay.
Case # 2?Benefits
of Water Pollution Controls on Pulp and Paper Mills
The Situation
The Clean Water Act provides standards
for water quality that affect the pulp and paper industry, which must implement
technological improvements to bring water quality up to standards.
The Challenge
Researchers attempted to assess the benefits
of water quality improvements in a particular set of stream segments where
pulp and paper mills discharge effluent. Clean Water Act policies
mandate specific controls for effluent. This determines downstream
water quality, which in turn affects benefits to recreational users of
the streams, as well as non-use benefits from improved water quality.
The Application
Researchers used benefit transfer to estimate
the economic benefits of improved water quality. They selected streams
affected by 68 mills for the study. The researchers began by collecting
data on existing water quality and pollution control costs for the streams,
and assigning feasible uses for each stream, based on existing water quality.
The benefits transfer was based on three
studies of other rivers, the Charles River in Boston, and the Monongahela
River in western Pennsylvania that valued changes in water quality.
Two were contingent valuation studies, and one was a travel cost study.
Both recreational and non-use benefits were considered.
Results
The researchers found that, even using
the upper bound estimate of benefits?$66 million? total benefits for the
68 mills were only two-thirds of the costs to these mills?$95.5 million.
The total costs to the entire pulp and paper industry were estimated at
$310 million. If the 68 mills selected are assumed to be representative
of the total of 306 mills, the upper bound estimate of the economic benefits
of pollution control would be about 50% of the costs.
Summary of the Benefit Transfer Method
The benefit transfer method is used to
estimate economic values for ecosystem services by transferring available
information from studies already completed in another location and/or context.
For example, values for recreational fishing in a particular state may
be estimated by applying measures of recreational fishing values from a
study conducted in another state.
Thus, the basic goal of benefit transfer
is to estimate benefits for one context by adapting an estimate of benefits
from some other context. Benefit transfer is often used when it is
too expensive and/or there is too little time available to conduct an original
valuation study, yet some measure of benefits is needed. It is important
to note that benefit transfers can only be as accurate as the initial study.
The simplest type of benefit transfer is
the unit day approach, where existing values for activity days are used
to value the same activity at other sites. These estimates are based on
expert judgment in combining and averaging benefit estimates from a number
of existing studies. These ?unit day values? may be adjusted for
characteristics of the study site when they are applied.
A more rigorous approach involves transferring
a benefit function from another study. The benefit function statistically
relates peoples? willingness to pay to characteristics of the ecosystem
and the people whose values were elicited. When a benefit function
is transferred, adjustments can be made for differences in these characteristics,
thus allowing for more precision in transferring benefit estimates between
contexts.
Different standards for benefit transfer
may be applied in different contexts. For example, a higher standard
of accuracy may be required when the costs of making a poor decision are
higher. A lower standard of accuracy may be acceptable when costs
are lower, such as when the information from the benefit transfer is only
one of a number of sources of information, or when it is used as a screening
tool for the early stages of a policy analysis.
The benefit transfer method is most reliable
when the original site and the study site are very similar in terms of
factors such as quality, location, and population characteristics; when
the environmental change is very similar for the two sites; and when the
original valuation study was carefully conducted and used sound valuation
techniques.
Applying the Benefit Transfer Method
Application of the benefit transfer method
involves several steps. First, identify existing studies or values
that can be used for the transfer. There are a number of valuation
databases that can be useful (see the Links section for more information).
Second, evaluate the existing values to
determine whether they are appropriately transferable. Consider whether:
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the service being valued is comparable to
the service valued in the existing studie(s). This includes determining
whether the features and qualities of sites or ecosystems are similar,
including the availability of substitutes.
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the characteristics of the relevant population
are comparable. This includes determining whether the demographics,
and peoples? preferences, are similar between the area where the existing
study was conducted and the area being valued.
Third, evaluate the quality of studies
to be transferred. The better the quality of the initial study, the
more accurate and useful the transferred value will be. This step
requires professional judgment of the researcher. Fourth, adjust
the existing values to better reflect the values for the site under consideration,
using whatever information is available and relevant. The researcher
may need to collect supplemental data in order to do this well. For
example, the researcher might survey key informants, talk to the investigators
of the original studies, get the original data sets, or collect some primary
data at the study site to use to make adjustments. Finally, estimate
the total value by multiplying the transferred values by the number of
affected people.
Advantages of the Damage Cost Avoided
and Replacement Cost Methods
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Benefit transfer is typically less costly
than conducting an original valuation study.
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Economic benefits can be estimated more quickly
than when undertaking an original valuation study.
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The method can be used as a screening technique
to determine if a more detailed, original valuation study should be conducted.
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The method can easily and quickly be applied
for making gross estimates of recreational values. The more similar
the sites and the recreational experiences, the fewer biases will result.
Issues and Limitations
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Benefit transfer may not be accurate, except
for making gross estimates of recreational values, unless the sites share
all of the site, location, and user specific characteristics.
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Good studies for the policy or issue in question
may not be available.
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It may be difficult to track down appropriate
studies, since many are not published.
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Reporting of existing studies may be inadequate
to make the needed adjustments.
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Adequacy of existing studies may be difficult
to assess.
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Extrapolation beyond the range of characteristics
of the initial study is not recommended.
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· Benefit transfers can only be as
accurate as the initial value estimate.
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Unit value estimates can quickly become dated.
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Dollar-Based
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