Non-market Costs Research Articles

The effect of growth, deforestation, forest fires, and volcanoes on Indonesian regional air quality

As a rapidly developing country, Indonesia faces a challenge in improving air quality that is made more difficult by frequent forest fires linked to deforestation and volcanic eruptions. This paper analyses the link between development and air pollution in 30 Indonesian cities from 2002 to 2019. Air quality is measured using two novel regional air quality indicators (AQIs) for PM2.5 and PM10 estimated from weather observations and NASA satellite data on Aerosol Optical Depth (AOD). Results from an Environmental Kuznets Curve (EKC) analysis, based on a dynamic panel data model, show that forest fires and volcanic activity have significantly worsened regional air quality in Indonesia. The model also shows that the EKC hypothesis is rejected for Indonesia as cities have followed a monotonically increasing trend in air pollution with respect to economic growth. An additional 1% of economic growth increased long run pollution as measured by AQI PM2.5 and PM10 by 0.35% and 0.46%, and forest fire events by 0.11% and 0.06%. A partial Benefit-Cost Analysis (BCA) of forest fires shows that particulate matter pollution is excessive. Decreasing the frequency of forest fires by 1% would generate a net benefit of between US$17 million to 145 million. The lower estimate of the health benefits exceeds the agricultural benefits of forest fire without accounting for other non-market costs due to forest fires. Our results imply that, as Indonesia grows economically, air quality is likely to continue deteriorating. Further, regions affected by regular volcanic activity and wildfires should apply tighter emission standards to controllable point source emissions from industry and non-point source emissions such as agricultural forest fires.

New concentration-response functions for seven morbidity endpoints associated with short-term PM2.5 exposure and their implications for health impact assessment

BackgroundMorbidity burdens from ambient air pollution are associated with market and non-market costs and are therefore important for policymaking. The estimation of morbidity burdens is based on concentration–response functions (CRFs). Most existing CRFs for short-term exposures to PM2.5 assume a fixed risk estimate as a log-linear function over an extrapolated exposure range, based on evidence primarily from Europe and North America. ObjectivesWe revisit these CRFs by performing a systematic review for seven morbidity endpoints previously assessed by the World Health Organization, including data from all available regions. These endpoints include all cardiovascular hospital admission, all respiratory hospital admission, asthma hospital admission and emergency room visit, along with the outcomes that stem from morbidity, such as lost work days, respiratory restricted activity days, and child bronchitis symptom days. MethodsWe estimate CRFs for each endpoint, using both a log-linear model and a nonlinear model that includes additional parameters to better fit evidence from high-exposure regions. We quantify uncertainties associated with these CRFs through randomization and Monte Carlo simulations. ResultsThe CRFs in this study show reduced model uncertainty compared with previous CRFs in all endpoints. The nonlinear CRFs produce more than doubled global estimates on average, depending on the endpoint. Overall, we assess that our CRFs can be used to provide policy analysis of air pollution impacts at the global scale. It is however important to note that improvement of CRFs requires observations over a wide range of conditions, and current available literature is still limited. DiscussionThe higher estimates produced by the nonlinear CRFs indicates the possibility of a large underestimation in current assessments of the morbidity impacts attributable to air pollution. Further studies should be pursued to better constrain the CRFs studied here, and to better characterize the causal relationship between exposures to PM2.5 and morbidity outcomes.

The Financial and Environmental Consequences of Renewable Energy Exclusion Zones

As countries decarbonise, the competition for land between energy generation, nature conservation and food production will likely increase. To counter this, modelling, and sometimes energy policies, use exclusion zones to restrict energy deployment from land deemed as important to society. This paper applies the spatially-explicit ADVENT-NEV model to Great Britain to determine the cost imposed on the energy system when either environmental or food production exclusion zones are applied. Results show that exclusion zones impose a cost of up to £0.63 billion (B), £19.17 B and £1.33 B for the solar, wind, and bioenergy pathways. These costs give an indication of the value being placed on protecting these areas of land. When multiple exclusions are imposed on bioenergy, the high pathway is infeasible indicating a more flexible approach may be needed to meet net zero ambitions. The model also shows how the value of ecosystem services changes when exclusion zones are applied, highlighting how some exclusions increase non-market costs whereas others decrease them. In several cases exclusion zones are shown to increase social costs, the opposite of their intended use. For these exclusions to be justifiable, the unobserved values missing from the model must be as large as these increases.

A typology of climate adaptation costs for a smallholder maize farming system

Understanding adaptation costs among smallholder farmers is essential in developing more targeted policy frameworks. This study was carried out to develop a typology of adaptation costs for a smallholder maize farming system. An exploratory sequential mixed methods research design was adopted. Semi-structured interviews with smallholder maize farmers were conducted to gather qualitative data on adaptation costs. Qualitative data on adaptation costs was transformed into quantitative binary data and subjected to Agglomerative Hierarchical Clustering using the Squared Euclidean Distance and Between-Groups Linkage methods. This led to the development of a typology of adaptation costs with twenty-one homogenous clusters and six distinct categories out of the 119 climate adaptation costs established. The typology developed encompasses the intangible, indirect, non-economic and non-market costs. It simplifies the complexity associated with adaptation costs in general, can be useful as a management tool and could be essential in facilitating adaptation cost inventories. It is recommended that national governments should develop capacity building programmes aimed at raising awareness of adaptation costs among smallholder farmers. Training and mentorship programs aimed at enhancing proper implementation of adaptation measures among smallholder farmers are also pertinent to reduce mis-implementation and maladaptive practices that increase the cost of adaptation among smallholder farmers.

Role of Food Processing, Cooking Fuel, and Time Use for Meal Preparation in Diet Costs and Affordability Across 177 Countries, 2011 and 2017

ObjectivesPrevious studies focused on the high cost of nutrient-dense foods and low cost of convenient ultra-processed foods. This study considers fuel and time costs of meal preparation, using nutritional criteria to distinguish healthy and unhealthy processing. We identify differences in retail prices by type of food processing, revealing how processing that preserves nutritional value can help reduce the total cost of healthy diets when accounting for time and fuel burdens. MethodsWe use food prices from the International Comparison Program (ICP) for 177 countries in 2011 and 2017. We class items by processing type and food group. We use OLS regression to compute price premiums by processing type, food group, region, national income and year. For diet costs, we select least-cost items in each food group by country, year, and processing type (unprocessed; processing to maintain/enhance nutritional quality; processing to diminish nutritional quality) and add non-market costs of preparing foods using fuel prices from ICP, cooking fuel data from WHO, and recipes from the Food and Nutrient Database for Dietary Studies, Global Food Matters Database and RecipeDB. ResultsCanned, frozen, dried and cured animal foods are $1.42–4.42 on average less costly per recommended daily intake than fresh meats and fish (P < 0.001), while smoked and added-salt animal foods are $4.77–4.87 more expensive (P < 0.001). Canned plant protein foods are $2.27 more expensive on average than dry legumes/nuts/seeds (P < 0.001). Dried fruits/vegetables are $2.11–2.33 less costly than fresh (P < 0.001), while added-salt vegetables are $1.51 more expensive (P < 0.001). A healthy diet is $0.59 more costly on average if made of foods processed to diminish nutritional quality vs unprocessed foods (P < 0.001), but $0.51 less if made of foods processed to preserve nutritional quality (P < 0.001). Considering only the least expensive quintile of foods in each food group/country, average diet costs are similar across processing types. ConclusionsProcessing can reduce the burden of food preparation, yet processed foods are often more expensive and some are less nutritious. Distinguishing healthy and unhealthy forms of processing can help guide policies and programs that make healthy diets available and affordable for all, accounting for the time and fuel required for meal preparation. Funding SourcesBMGF, UKAid.

What is a lion worth to local people – Quantifying of the costs of living alongside a top predator

The presence of large predators entails a range of costs and some benefits for the communities that live alongside them. The cost in terms of the value of livestock lost to predation is well known, but this represents only a part of the costs that people experience, as it does not account for non-market costs such as fear, avoidance behaviours and threat to human life. We quantify the total cost of lion presence for agro-pastoral communities in Zimbabwe using economic valuation techniques. The total perceived value of one additional lion was estimated to be negative US$180 per person per year, which is several hundred times larger than the market value of the average loss of livestock per household. If making simplifying economic assumptions, this discrepancy reveals the magnitude of the non-market costs associated with the presence of large predators. The disvalue of lion presence was linked to fear, ecocentric values, wealth and trust in compensation institutions. We also demonstrate the importance of considering heterogeneity in preferences within communities; segments of the population did not have net negative value attached to lions, and some disliked monetary compensation. We also estimate the willingness-to-accept for two human-wildlife conflict mitigation programs in terms of acceptable increases in lion numbers, as opposed to monetary units which is the conventional approach in economic valuation studies. We argue that estimating value in terms of biodiversity outcomes should be used more widely. We also demonstrate the distorting effect of distrust towards compensation in choice experiments and argue that economic valuation methods employing choice experiments should control for this distrust when estimating willingness-to-pay. These discoveries have relevance for a wide range of situations where potentially dangerous wildlife species co-exist with people.

Challenges and innovations in the economic evaluation of the risks of climate change

A large discrepancy exists between the dire impacts that most natural scientists project we could face from climate change and the modest estimates of damages calculated by mainstream economists. Economic assessments of climate change risks are intended to be comprehensive, covering the full range of physical impacts and their associated market and non-market costs, considering the greater vulnerability of poor people and the challenges of adaptation. Available estimates still fall significantly short of this goal, but alternative approaches that have been proposed attempt to address these gaps. This review seeks to provide a common basis for natural scientists, social scientists, and modellers to understand the research challenges involved in evaluating the economic risks of climate change. Focusing on the estimation processes embedded in economic integrated assessment models and the concerns raised in the literature, we summarise the frontiers of research relevant to improving quantitative damage estimates, representing the full complexity of the associated systems, and evaluating the impact of the various economic assumptions used to manage this complexity.

Evaluating non-market costs of ICT involving data transmission in smart cities

ABSTRACT Smart cities are spurred by rapid development of Information and Communication Technologies (ICTs). Cost justification has been a challenging but essential decision-making aspect for smart city projects. Whilst market costs are measurable, non-market costs are often obscure and even intangible. The adverse effects on individuals arising from ICT services are usually underestimated due to the exclusion of intangible elements. This study is devoted to the non-market costs of ICT to users (i.e. Privacy leak, Cyber-attack, Non-availability, and Impediment) and non-users (due to Digital divide) in smart cities. Contingent Valuation is conducted on representative ICT services in Hong Kong which is an emerging smart city. Ordinal regression is adopted to calculate Willingness-to-Pay (WTP) for avoiding detriments as the proxy of non-market cost. The results indicate that the WTPs increase with data input needs. Information overload is remarkable in smart cities. Age is identified as a significant determinant through a discussion of influential factors of WTP. The impacts of Age on digital divide are studied with further insights through supplementary interviews. The estimated non-market costs should be incorporated into the Cost–Benefit Analysis of smart city projects for decision-making. Accordingly, policy recommendations on ICT use and security are provided for smart city managers.

Coastal armoring and sinking property values: the case of seawalls in California

Rising sea levels necessitate careful consideration of different forms of coastal protection but cost-benefit analysis is limited when important non-market social costs have not been measured. Seawalls protect individual properties but can potentially impose negative externalities on neighboring properties via accelerated beach loss. We conduct a hedonic valuation of seawalls in two coastal California counties: San Diego and Santa Cruz. We find no strong evidence to suggest that the presence of a seawall is positively correlated with the value of the home protected. However, we find that seawalls are strongly negatively correlated with the value of neighboring properties in Santa Cruz but not in San Diego county, suggesting that the effect of seawalls depend on certain geographical attributes. Our results are robust to accounting for the public-good nature of locational attributes and the potential spatial dependence of housing prices. Simulation reveals that doubling the extent of seawalls in San Diego and Santa Cruz could reduce property tax revenues by $7 million and $54 million, respectively.

Impacts of marine plastic on ecosystem services and economy: State of South African research

In addition to its direct impacts on marine ecology and biota, marine plastic debris can affect the delivery of ecosystem services, with resulting impacts on human well-being, society and the economy. It is important to quantify these impacts in economic terms, so as to be able to provide evidence-based support for an appropriate policy response. We review the South African literature on the impacts of marine plastic debris on ecosystem services and on the economy, in order to identify relevant knowledge gaps. The gaps are found to be significant. Some research has been conducted in terms of impacts relating to recreation, aesthetics and tourism and the costs of beach and harbour clean-ups. However, there is a significant lack of research regarding impacts on ecosystem services relating to fisheries and aquaculture, heritage, habitat provision, biodiversity, and nutrient cycles. There is also a significant lack of research regarding direct economic impacts on the transport/shipping and fisheries industries, indirect economic impacts (such as costs associated with health-related impacts), and non-market costs (e.g. impacts on scenic, cultural and spiritual values). More research is needed in South Africa to address these gaps, in order to inform policy aimed at addressing plastic waste and marine plastic debris.&#x0D; Significance:&#x0D; &#x0D; This review highlights the knowledge gaps in terms of the impacts of marine plastics on ecosystem services and on the economy in South Africa, which are important to understand in order to be able to direct funding for future research in this domain. Without better knowledge of the economic impacts of marine plastic debris, it is difficult to assess the costs of inaction, and therefore to inform an appropriate policy response for tackling the problem of marine plastic debris.&#x0D;

Can better technologies avoid all air pollution damages to the global economy?

This paper assesses the potential role of the implementation of the best available technologies to reduce the economic consequences of outdoor air pollution in the coming decades. The paper focuses on market impacts related with additional health expenditures, changes in labour productivity and crop yield losses and also presents results on non-market costs, i.e. welfare losses from avoided premature deaths. The results show that technological improvements can potentially reduce concentrations of air pollutants to levels compatible with the WHO guidelines in most countries. However, technology measures can only reduce part of the economic costs relative with the market impacts. While those are efficient in reducing the direct costs of air pollution, there are still large indirect costs associated with current and remaining pollution levels. Policies that aim directly at avoiding economic impacts need to be implemented to further reduce air pollution damages, especially in the regions where technologies are not sufficient to reduce concentrations or where economic consequences persist despite reduced concentration levels.

Estimating the economic costs of algal blooms in the Canadian Lake Erie Basin

Over the past two decades there has been a re-emergence of regular harmful algal blooms in Lake Erie due to increasing phosphorus loading, mainly from non-point agricultural sources. The Canadian and United States governments have jointly agreed to reduce phosphorus loadings to the lake in order to control the extent and severity of the blooms. Citizens on both sides of the border face a number of economic costs, both market and non-market, as a result of the blooms. This study values these costs for the Canadian portion of the Lake Erie basin economy using standard economic approaches that are widely applied within the world of cost-benefit analysis. The results suggest that algal blooms will impose equivalent annual costs equal to $272 million in 2015 prices over a 30-year period if left unchecked. The largest market costs will be imposed on the tourism industry ($110 million in equivalent annual costs) and the largest non-market costs will be borne by recreational users and those who place inherent value on the lake’s quality ($115 million in equivalent annual costs). Management action to reduce phosphorus loadings is found to be justified on economic grounds if the 30-year net present value of the reduction program is less than $1294 million (2015 Canadian dollars).

How Does Welfare from Load Shifting Electricity Policy Vary with Market Prices? Evidence from Bulk Storage and Electricity Generation

We model the electricity market to demonstrate that changes in the price of natural gas can cause the market and non-market impacts of bulk electricity storage to move in opposite directions. We provide evidence consistent with the model using a series of reduced form tests on data from 2005-2010. We then simulate installing bulk electricity storage on the US electric grid. We find that lower natural gas prices generally reduce the market gains and non-market costs of storage. However, direct non-market costs are still positive which means that there is no argument for subsidizing storage to mitigate pollution given the current mix of generating technologies; arguments in favor of bulk storage R&amp;D subsidies ride on public good aspects of technology and dynamic investment incentives for intermittent renewables.

Industrial pollution and the management of river water quality: a model of Kelani River, Sri Lanka.

Water quality of the Kelani River has become a critical issue in Sri Lanka due to the high cost of maintaining drinking water standards and the market and non-market costs of deteriorating river ecosystem services. By integrating a catchment model with a river model of water quality, we developed a method to estimate the effect of pollution sources on ambient water quality. Using integrated model simulations, we estimate (1) the relative contribution from point (industrial and domestic) and non-point sources (river catchment) to river water quality and (2) pollutant transfer coefficients for zones along the lower section of the river. Transfer coefficients provide the basis for policy analyses in relation to the location of new industries and the setting of priorities for industrial pollution control. They also offer valuable information to design socially optimal economic policy to manage industrialized river catchments.

Quantifying Market and Non-market Benefits and Costs of Hydraulic Fracturing in the United States: A Summary of the Literature

We quantify the monetary market and non-market environmental benefits and costs of hydraulic fracturing in the 14 U.S. states whose oil and gas production is dominated by hydraulic fracturing. By far the largest market benefit is $75 billion ($46–$95 billion) in consumer surplus from lower natural gas prices to residential, commercial, and industrial consumers. There are also environmental benefits resulting from the switch by some electric utilities from coal to natural gas ($13.25 billion, range $3.9–$21.9 billion). However, there are also substantial environmental costs associated with hydraulic fracturing. These are dominated by $27.2 billion ($12.5–$41.95 billion) health damages from air pollution. Costs also include $3.8 billion ($1.15–$5.89 billion) in greenhouse gas emissions, $4 billion ($3.5–$4.45 billion) in wildlife habitat fragmentation, and $1 billion ($0.5–$1.6 billion) in pollution of private drinking water wells. Opportunity costs of water usage and property value losses are less than one-quarter of a billion dollars. The market and non-market benefits of hydraulic fracking are widespread geographically but many of the non-market costs are concentrated in the areas of drilling, creating a distributional disconnect that we believe drives much of the controversy over hydraulic fracturing.

Is river rehabilitation economically viable in water-scarce basins?

Decisions on river rehabilitation actions are often based on cost-benefit analyses taking into account the costs and benefits of the considered management actions, but ecosystem services are often not included as benefits, despite recent evidences on the effects of river rehabilitations on ecosystem services. A cost-benefit analysis integrating market and non-market costs and benefits was undertaken in this study to assess the economic feasibility of a river rehabilitation project in a water scarce region, the Yarqon River Rehabilitation project (Israel). In this case, the costs included both the capital costs of implementing rehabilitation measures (including maintenance costs) and the opportunity costs of water allocation (foregone benefits to farmers from water provisioning for agriculture). The benefits of rehabilitation included the net marginal benefits of the cultural ecosystem services at local scale (estimated with a hedonic pricing method), and at regional scale (estimated with a value function transfer), in addition to the habitat service gene-pool protection (estimated with a replacement cost method). Bearing in mind the uncertainties surrounding water resource management decisions, especially in water scarce areas, a sensitivity and risk analysis was conducted using an analysis that included both Monte Carlo simulations and the standardized regression coefficients method. The rehabilitation of the Yarqon River provided positive net present values (approximately $139 million in 30-year period). This was thanks to the provision of cultural ecosystem services and despite the high rehabilitation costs, and that the massive water reallocation involved high foregone benefits to farmers. Therefore, these results highlight that river rehabilitation in water scarce regions can be economically viable due to the social amenity demand for urban rivers.

Integrated assessment model of society-biosphere-climate-economy-energy system

The feedback based integrated assessment model ANEMI_2 represents the society-biosphere-climate-economy-energy system of the earth and biosphere. The ANEMI_2 model is based on the system dynamics simulation approach that (a) allows for the understanding and modeling of complex global change and (b) assists in the investigation of possible policy options for mitigating, and/or adapting to changing global conditions within an integrated assessment modeling framework. This paper outlines the ANEMI_2 model and its nine system components: climate, carbon cycle, land-use, population, food production, hydrologic cycle, water demand, water quality, and energy-economy. To evaluate market and nonmarket costs and benefits of climate change, the ANEMI_2 model integrates an economic optimization approach, with a focus on the international energy stock and fuel price, climate interrelations and temperature change. The model takes into account all major greenhouse gases (GHG) influencing global temperature and sea-level variation. Results from several scenarios (a) compare well with other information available in the scientific literature, (b) present comprehensive response of the society-biosphere-climate-economy-energy system to the selected scenarios, and (c) confirm the support role of the ANEMI_2 model in the policy development and analyses.

Economists Owe Ecology an Apology

This apology is neither a wholesale rejection of economic thought and perspective nor an admission of error in our understanding of ecological values or human impacts on the environment. Life is complex. It's an apology for the unintended damage that's resulted from misapplying economic ideas: GDP fails to include non-market costs and benefits; transaction-based models mischaracterize dynamic relationships; aggregate social efficiency overlooks distribution impacts; technological advances can have substantial, unmeasured environmental impacts.

Methods to Assess Costs of Drought Damages and Policies for Drought Mitigation and Adaptation: Review and Recommendations

This article examines available methods for assessing all types of drought costs, including both damage costs and costs arising from adopting policy measures to encourage mitigation of, and adaptation to, droughts. It first discusses damage costs, distinguishing between direct, indirect and non-market costs. Then it examines the suitability of existing methods for estimating drought costs in different economic sectors, their underlying theoretical assumptions, complementarity between different methods, and conditions relevant for their application. The latter include precision, ability to deal with future climate change risks, data needs and availability, and required financial and human resources. The article further considers potential policies for drought mitigation and adaptation and different cost types associated with them. It ends with providing recommendations for good practices regarding the use of methods as well as drought mitigation and adaptation policies.

Incorporating Non-market Benefits of Reclaimed Water into Cost-Benefit Analysis: A Case Study of Irrigated Mandarin Crops in southern Spain

Maintaining a river system’s minimum water flow is a pre-condition for achieving the “good ecological status” prescribed by the European Water Framework Directive (WFD). In areas of water scarcity the reuse of treated water for agricultural irrigation is seen as a promising option to reduce the quantitative pressure on the resource. As part of assessing the viability of reclaimed water use in agriculture, and in accordance with the economic principles underpinning the WFD, a comprehensive economic analysis of this irrigation option is needed. This paper contributes to fill this knowledge gap by producing a cost-benefit analysis (CBA) of the use of reclaimed water in agriculture. The costs and benefits of reclaimed water use on an experimental mandarin farm in the south-east of Spain are compared with those of using surface water and a mixture of water sources. The novelty of this study is that non-market benefits are incorporated in the CBA. We thereby account for the increase in welfare that the environmental services of this supply option provide to society at large. These kind of “intangible” benefits are often ignored, but only the combination of market and non-market costs and benefits can produce a balanced assessment of water management options and lead to an efficient and sustainable allocation of the resource. Our results suggest that at the private and social level, when environmental benefits are included, the use of a mixture of water sources, including reclaimed water, seems the best option. However, at low mandarin prices (lower than 0.23 €/kg) the exclusive use of reclaimed water seems the most beneficial option.