Willingness to pay for improvements in surface water quality in Northern Europe

The Water Framework Directive (WFD) (European Commission, 2000) requires that measures ensuring that all water bodies in the member states reach ‘Good Ecological Status ‘(GES) should have been in place by 2015, but with opportunities for extension to 2027. Leakage of nutrients, particularly Nitrogen and Phosphorous, from agriculture and wastewater treatment plants other is the main source of pollution causing eutrophication of the aquatic environment. Nutrient load reductions are thus necessary to achieve GES of water ecosystems.

While achieving GES in all water bodies will be costly for the member states, it will also entail important benefits for society, including both use and non-use values, many of which are non-marketed. Use values include e.g. improved conditions for recreational activities and improved drinking water quality, while non-use values include existence values related to biodiversity and ecosystem health. An important performance measure for decision-makers considering new projects or policies aiming to improve water quality is the assessment of whether the societal benefits are actually higher than the societal costs. This requires economic valuation of the non-marketed benefits associated with improvements in water quality.

However, conducting primary economic valuation studies is generally very costly, not only in terms of money, but also in terms of time. A cheaper and faster alternative is to use benefit transfer methods, which rely on transferring value estimates from a study site, where a primary valuation study has already been conducted to assess the value of a water quality improvement, to the policy site, where a new project or policy to improve water quality is being considered. Rather than simply transferring a value estimate from a single study site to the policy site of interest, it may be possible to construct value functions based on meta-regression analysis on values from a range of available study sites. Basing the benefit transfer on the transfer of such as meta-regression function is generally considered more reliable than the simple benefit transfer.