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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
An Application of ‘Willingness to Pay’ Method as a Quantifier for Environmental Impact Assessment
Author(s)
Odysseas Kopsidas
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DOI:10.17265/2162-5298/2017.09.005
Affiliation(s)
Dep. Industrial Management and Technology, Univ. Piraeus, Piraeus 18534, Greece
ABSTRACT
The
preservation/restoration of natural environment is frequently entailing
excessive cost (paid by people through taxation) while it is a source of
additional income for both, the State and the people, due to tourism. Since the
evaluation of this good cannot be in market terms, it is applied here in a
modified version of the CVM (Contingent Valuation Method), which is used in experimental
economics
in order to investigate the significance that people put on this good and how
much they might be WTP (Willing to Pay) for supporting activities concerning the
preservation/restoration of Lake Kastoria. The WTP dependence on (i) external
diseconomies;
(ii) the expectations for property values’ rise as a result of the restoration;
(iii) the proximity of interviewees’ residence to the lake;
(iv) the opinion of the interviewee on the time and money spent to visit the
lake;
(v) the time and money the interviewees spent to visit the lake, as well as
other dependencies (all taken as independent variables) are estimated by means
of logit,
probit,
logistic
and linear
regression
models.
The optimal concentration Copt of a pollutant in the environment can
be determined as an equilibrium point in the tradeoff between (i) environmental
cost, due to impact on man/ecosystem/economy; and (ii) economic cost for environmental
protection, as it can be expressed by Pigouvian tax. These two conflict
variables are internalized within the same techno-economic objective function
of total cost, which is minimized. In this work, the first conflict variable is
represented by a WTP index. A methodology is developed for the estimation of
this index by using fuzzy sets to count for uncertainty. Implementation of this
methodology is presented, concerning odor pollution of air round an olive pomace
oil mill.
KEYWORDS
CVM (Contingent Valuation Method), environmental impact, WTP (Willingness to Pay), logit model, parametric approach, non-parametric approach, probit model.
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