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Valuing Ground Water: Economic Concepts and Approaches
For the economic component of the assessment framework, we need reliable and valid estimates of the benefits to society of ground water protection. This requires correct application of economic valuation techniques. This section reviews selected studies of ground water valuation, with emphasis on two categories of studies: those based on CVM and those that use averting behavior approaches. At the outset, we should note that past ground water valuation studies have focused primarily on a small part of the known ground water functions and services identified in Chapter 3. Thus our current empirical knowledge of the values of ground water is quite limited.
Results of Indirect Approaches
Relatively few empirical studies of ground water values have been conducted employing indirect methods. Of the studies that focus on services related to ground water quality, the averting behavior approach has been most commonly used.
Ground Water Studies Using the Averting Behavior Method
At least five studies have used the averting behavior approach to measure household-level costs associated with ground water contamination. As noted earlier, depending upon whether key assumptions are met, the results of such studies may not accurately represent lower bound estimates of WTP for ground water services. Also, values obtained from averting behavior methods must be combined with estimates of other ground water services to get an estimate of the total value of ground water. Despite these limits, results from carefully done averting behavior studies can provide important information needed for policymaking. For example, as a lower bound estimate of benefits of ground water protection, they can be used as an initial screening step in comparing benefits and costs of protection alternatives and in helping to decide if more in-depth valuation efforts are needed (Abdalla, 1994). The results of five averting behavior studies are highlighted below. Additional information on the studies can be found in Table 4.2.
Smith and Desvouges (1986) found in a sample taken in the Boston area that bottled water and water filters were purchased for the sole purpose of avoiding hazardous waste by 30 and 7 percent of households, respectively. Losses due to water quality degradation were not estimated, however, since they lacked detailed data on household averting behaviors and their costs.
Abdalla (1990) and Abdalla, Roach, and Epp (1992) documented averting expenditures of households served by public water systems in two Pennsylvania communities that had organic chemicals in their water supplies. At a central Pennsylvania site, 96 percent of the households were aware of water contamination and 76 percent of those with such knowledge undertook averting behaviors.