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Water Quality and Climate Change: What are Consumers Willing to Pay to Reduce Health Risks?

Water Quality and Climate Change: What are Consumers Willing to Pay to Reduce Health Risks?. Vic Adamowicz, University of Alberta Diane Dupont, Brock University Alan Krupnick, Resources for the Future Lorie Srivastava, University of Alberta

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Water Quality and Climate Change: What are Consumers Willing to Pay to Reduce Health Risks?

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  1. Water Quality andClimate Change: What are Consumers Willing to Pay to Reduce Health Risks? Vic Adamowicz, University of Alberta Diane Dupont, Brock University Alan Krupnick, Resources for the Future Lorie Srivastava, University of Alberta With Assistance from Spencer Bahnzaf and Michael Batz, RFF, Paul De Civita and Andrew Macdonald, Health Canada Acknowledgements: Financial support from CWN and Health Canada

  2. Research Questions • Are Canadian worried about health risks of tap water? • Are they willing to pay in order to see these risks reduced? • Role of climate change with respect to changes in health risks? • Operational and policy implications? • Choice of water disinfection techniques • Inform pricing • Inform investment decisions

  3. Case Study • Drinking water is treated with chlorine to remove microbes • Chlorine used to treat water has been implicated in the production of trihalomethanes (THMs) linked to bladder cancer • Trade-offs: cancer vs. microbes vs. costs (plus morbidity risk vs. mortality risk) • Question - How much are people willing to pay as premium on water bill to obtain reduced health risks?

  4. Methodological Issues • Focus on characteristics of tap water – health risks of different diseases • Non-market good so need preference elicitation method • A. Contingent Valuation Method (CVM) • Respondents are presented with scenario and a price for the good ($X) • Respond yes – willing to pay at least $X for good • Construct WTP from pattern of responses

  5. Methodological Issues • B. Choice experiment Method (CE) • Respondents presented with status quo (SQ) and alternative programs • Differ in levels of attributes (microbe risk, cancer risk, cost to household) • Respondent chooses alternative that provides highest level of utility

  6. Data/Models • Developed after extensive focus group testing and pilot survey in December 2002 • Internet site and panel maintained by Ipsos-Reid • Respondents from over 100,000 person balanced representation of Internet-enabled Canadians • 829 observations

  7. Preliminary Results • CVM Results • WTP for reduction of 50 bladder cancer cases and a reduction of 10 deaths from bladder cancer (over 35 years) in a population of 100,000 • Median WTP - $155.24 to $298.12 • WTP for reduction of 15,500 microbial cases and a reduction of 10 deaths from microbial illness (over 35 years) in a population of 100,000 • Median WTP - $219.08 to $448.47

  8. Preliminary Results • CE Results • SQ + 2 alternatives with variable mortality/morbidity • Implied WTP: • $18.35 per reduction in 1 cancer death • $13.00 per reduction in 1 microbial death • $2.54 per reduction in 1 cancer case • $0.02 per reduction in 1 microbial case

  9. Preliminary Results • Comparison of CVM and CE • WTP for cancer risk reductions of 10 deaths and 50 cases • CVM - $152-$298 • CE - $88-$142 • WTP for microbial risk reductions of 10 deaths and 15,500 cases • CVM - $140-$448 • CE - $143-$217

  10. Preliminary Results • CE Results (continued) • Ratios of WTP: • Cancer Deaths / Microbial Deaths = 1.41 • Implies about 40 % cancer premium • Hammitt and Liu (2004) find 30 % • Cancer Deaths / Cancer Cases = 7.22; • Abt (2000) uses ratio of 10 to 1 for rules on arsenic in drinking water in US • Microbial illness numbers need work • Microbial Deaths / Microbial Cases = 650 • Respondents may have trouble with large number of illnesses presented (15,500 or 7,500)

  11. Late-Breaking Preliminary Results • Models to allow for heterogeneity in preferences • More variability in preferences when respondents are offered SQ+2 (than when offered SQ+1) • Age appears to be important in choices

  12. Policy Implications/Future Directions • Cancer premium – implications for climate change valuation work • Protection against microbial cases might swamp protection against cancer cases for most plausible scenarios • Sort out role of altruism in WTP • Have data on averting expenditures and expressed choices

  13. TOP TITLE: Microcosm dedicated to the London Water Companies. Brought forth all monstrous, all prodigious things, hydras and corgans, and chimeras dire. BOTTOM TITLE: Monster Soup commonly called Thames Water, being a correct representation of that precious stuff doled out to us!!! – William Heath – Monster Soup 1828

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