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Valuing Ground Water: Economic Concepts and Approaches
methods may be useful in improving the robustness of CVM estimates and may expand the potential for transferring existing CVM estimates to other empirical settings.
If data are available and critical assumptions are met, indirect valuation methods (e.g., travel cost method (TCM), hedonic price method (HPM), averting behavior) can produce reliable estimates of the use value of ground water.
The EPA, and other federal agencies as appropriate, should develop and test other valuation methods for addressing the use and nonuse values of ground water, especially the ecological services provided by ground water.
Technical, economic, and institutional uncertainties should be considered and their potential influence delineated in ground water valuation studies. Research is needed to articulate such uncertainties and their potential influence on valuation study results.
Ground water values obtained from both indirect and direct methods are dependent on the specific ground water management context. Attempts to generalize about or transfer values from one context to another should be pursued with caution.
If data are available and critical assumptions are accurate, traditional valuation methods such as cost of illness, demand analysis, and production cost can be used for many ground water management decisions that involve use values. Such methods offer defensible estimates of what are likely to be the major benefits of ground water services.
The pervasiveness and magnitude of nonuse values for ground water is uncertain. Few and limited studies have been conducted, and little reliable evidence exists from which to draw conclusions about the importance of nonuse values for ground water. Additional research is needed to document the occurrence and size of nonuse values for ground water systems.
What is most relevant for decision-making regarding ground water policies or management is knowledge of how the TEV of ground water will be affected by a decision. Pending documentation of large and pervasive nonuse values for ground water, it is likely that in many, but not all, circumstances, measurement of use values or extractive values alone will provide a substantial portion of the change in TEV relevant for decision-making.
In some circumstances the TEV is likely to be largely composed of nonuse values. At the current time, pending documentation of large and pervasive nonuse values for ground water systems, this appears to be most likely when ground water has a strong connection to surface water and a decision will substantially alter these service flows. In these situations, focusing on use values alone could seriously mismeasure changes in TEV and will ill serve decision-making. Decision-makers should approach valuation with a careful regard for measurement of TEV using direct techniques that can incorporate nonuse values.