CHAPTER 2 LITERATUR E REVIEW
2.4 Summary
1. The most common forms of evaluation methodologies for transport Project member states are CBA.
2. In many countries, including Taiwan, the CBA is supplemented by a quantitative and/or qualitative appraisal to include other impacts which are not monetized for technical reasons.
3. BIT can be narrowed down to a practical scale, which can help planner watching all interest groups. It will explore CBA from macro to micro vision.
4. CBA will provide more information about the cost and gain allocations between the different stockholders to the government going redistributing.
5. CV method can elicit both use and non-use values, and indeed it is the only possible technique for the evaluation of non-use value.
6. Integrate CV result into traditional CBA is a good way to improve the defect of CBA, that traditional CBA can not calculate environmental impacts with the other effect.
7. As the most stated preference methods, the variability and reliability of CV results are argued. The resent CV studies provide some solutions to this issue.
(1)WTP format is preferred.
(2) Face-to-face interviewing is the most reliable results.
(3) Pro-testing is essential element in CV study.
(4) Accurate information on the valuation situation must be presented to respondents; particular care is required over the use of photographs.
(5) Accurate information provided can avoid hypothetical bias.
(6) DB-DC estimation method can avoid strategic bias.
(7) Test-retest method can test the CV reliability, particularly at information bias and starting point bias.
8. Estimating WTP is not the end, CV studies in advance realize respondent characteristics and behaviors that may influence their preferences for the good being valued.
9. A valuation function is estimated using these indicators that are predicted by economic theory to explain respondent preferences for the good. The better the ability of the data to explain the observed preference information, the greater the confidence in the results of the survey.
CHAPTER 3 DESIGN OF THE SURVEY
In this chapter the design of the survey for this research will be explored. We will first elaborate on the research framework of the study and it will be followed by addressing the subject of survey conducting. The background information of the Pinglin case is then discussed in the final section of this chapter.
3.1 Research Framework of this Study
Figure 3.1 shows the research framework for the study. The central theme of this study is to develop a process which integrates the CBA with CVM to evaluate the overall effects. It is worth bearing in mind that the current methodologies of assessing projects have limitations and have led to biased outcome. Such biases are even prevalent in the environment sensitive project. Therefore it is exceedingly important to examine and modify the current methods. In doing so we could establish the redistribution mechanism of economic benefits and it may raise the credibility of project in the future.
The modification of CBA Elicitation method of CVM
The appropriate adjustment of CVM
Identifying the scope of environmental goods
Double-bounded dichotomous choice (DB–DC) approach
Reducing information bias
Classifying the interest groups of a
transportation project Correcting
starting point bias
Integrating CBA with CVM
Estimating monetary value of environmental goods by applying CVM approach
Comparing the outcomes of CBA by including environmental goods.
Assessing the distribution of benefits and costs among various interest groups
Establishing the redistribution mechanism of economic benefits accruing from transportation projects
Constructing proper economic mechanism of environmental protection
Employing CVM to appraise the value of environmental goods
Ascertaining socio-economic factors that affecting evaluation of environmental goods
Fig. 3.1 Research framework of dissertation
3.1.1 The modification of CBA：Identify sources of pollution and pertinent interest groups
As mentioned in previous chapters given the complicated nature of pollution it is hard to indicate the sources of pollution in an environment sensitive transportation project. Consequentially the impacts of affected interest groups may be ignored which may lead to inaccurate evaluation results.
Fig. 3.2 Identify sources of pollution and pertinent interest groups
For the purpose of this study given the characteristics of the Pinglin case we focus on three pollutants: air pollution, water pollution and noise pollution. The people are affected by these pollutants can be categorizes into two groups. The first group is mainly affected by air and noise, we can consider air pollution and noise as a kind of local environmental pollution. In this regard Pinglin residents and passengers are affected group.
The classification of pollution and interest group is listed in table3.1.
Table 3.1 The sources of pollution and affected interest group Groups
Pollutants Pinglin residents Passengers Taipei metropolitan residents
Noise 9 9
Air 9 9
Water 9 9 9
3.1.2 The elicitation method of CVM：Double-bounded dichotomous choice (DB–DC) approach
Given the above framework we may further develop the model to incorporate the environmental effects. In the model we use a double-bounded dichotomous choice (DB–DC) approach to estimate the monetary values of the environmental effects. The DB–DC approach is the most widely used elicitation technique for the CVM. The DB–DC approach elicits data via the questionnaire.
In the questionnaire survey, the respondents are asked if they are willing to pay (WTP) a specific amount (‘yes–no’) to support an environmental good. If the answer is “yes”, then a follow-up question with a higher amount will be raised. On the contrary, if the respondents refuse the initial bid, then in the second round they will be tested with a smaller amount. The underlying idea is to reflect the respondents’
evaluation of their environmental utility. If the respondents think that their WTP for the described scenario exceeds the stated bid, and then they will agree to pay, otherwise they will reject the bid. The observed respondents’ decisions regarding the two bid amounts are offered in sequence as a proxy variable for the unobserved values.
For each respondent, five possible response outcomes are produced: “yes–yes”,
“no–no”, “yes–no” and “no–yes”. The complete elicitation procedure is shown in Fig.3.2.
Fig. 3.3 Elicitation questions for the survey: double dichotomous choice
The model’s coefficients are estimated by using the maximum likelihood technique. The log-likelihood function for the DC–DB model is defined as follows:
Initial bid
YES NO
YES NO
Increase bid Decrease bid
NO YES
yes, yes yes, no no, yes no, no
)]
Here, I is an indicator function which takes the value of one when responses are in a relevant category (y=‘yes’, n=‘no’, 0=true zero); otherwise, its value is zero. For example, refers to a response where the first bid was not accepted, but the second bid was accepted. In addition, refers to the initial bid, to the increase bid, and
to the decrease bid. F is the chosen cumulative density function, and
is the chosen cumulative density function between and . In this study, the CV estimation is identified as:
Iny
Where E[w] is the expected CV; µ is a location parameter; σ is a scale parameter;
φ is a standard normal probability density function (p.d.f.); and is a standard normal cumulative density function (c.d.f.) all parameters are calculated using the software package SPSS according to the samples.
Φ
3.1.3 The appropriate adjustment of CVM
1. Reducing information biasThe “information” plays a vital role in a CV method. The validity of the CV results depends crucially on the level and the nature of the information that respondents received during the survey. Information bias may arise whenever respondents are forced to value attributes with which they have little or no experience. In such cases, the amount and type of information presented to respondents may affect their answers.
As in our case Pinglin interchange could facilitate transportation convenience but generate environmental pollution. The public usually are only aware of the direct environmental impacts (e.g. the air is not fresh or the water is contaminated), but the indirect environmental impacts (e.g. drinking polluted water is not good for health) are often overlooked. As a result, as we conduct the CV assessment, it is imperative to
provide respondents adequate information and to reduce the bias.
In the survey we will try to examine the influence of information on the CV survey. As we know the public generally ignore the indirect environmental impacts; it is essential to make sure adequate information of water pollution is provided in the survey. In principle the respondents are offered 3 different levels of information in the test. (See Table 3.2)
Information level 1 was given only a very brief description of the Taipei-Ilan Freeway, Information level 2 was given more information to illustrate that more trips may pollute water resources, and the Information level 3 was given a very detailed description that the Taipei-Ilan Freeway may contaminate Feitsui Reservoir catchments area and may cause some diseases.
Table 3.2 The Outline of Information Levels Information
levels Explanations
1 The Taipei-Ilan Freeway crosses the Feitsui Reservoir catchments area and builds an interchange in Pinglin.
2 The Taipei-Ilan Freeway crossing the Feitsui Reservoir catchments area and builds an interchange in Pinglin that might pollute water resources.
3
The Taipei-Ilan Freeway crossing the Feitsui Reservoir catchments area and builds an interchange in Pinglin that might pollute water resources.
Polluted water may hurt human health.
2. Correcting starting point bias
Starting point bias take places in the iterative bidding framework when the initial bid influences the final bids of respondents. It is well known that the bidding game has become the most common used method of asking the valuation question in CV studies. A bidding process typically begins with an interviewer offering and initial bid (starting bid) to a respondent. If the respondent is willing to accept the initial bid, the interviewer adjusts the bid downward until a negative reply is acquired. On the other hand if a negative response is found in the initial bid, the interviewer will revise the bid downward until a satisfactory amount is accepted.
There are several reasons for starting point bias. It may come from the item
being valued is inadequately defined or not clearly perceived by the respondent.
Starting point bias could arise if the initial bid is significantly different from a respondent real willingness to pay; the respondent may become impatient with the bidding and abbreviate the process before the actual willingness to pay is revealed.
To resolve the starting point bias this study will follow the approach of Thayer (1981).Thayer has developed a consumer choice model to explain the occurrence of starting point bias in the bidding process. The general method to avoid starting point bias is to offer the respondents with different starting bids and run the statistical test to examine whether differences in the starting point would affect the estimated WTP values. As in this survey we will follow the same approach to test the extent of starting point bias.
Fig. 3.4 The appropriate adjustment of CVM
3.1.4 Establishing the redistribution mechanism of economic benefits accruing from transportation projects
After distinguishing pollutants and pertinent interest groups clearly, we are able to assess the distribution of benefits and costs among various interest groups.
Environmental protection is now perceived by many as the major concerns in transportation projects. By including environmental goods this framework has developed methods and procedures that can be used by transportation planners to evaluate the distributional impacts of projects.
Moreover from the survey we could further explore the characteristics of respondents that can influence their willingness to pay. This should enable us to find
out socio-economic factors that affecting evaluation of environmental goods. As a result it can lessen the pressure from the affected interest groups and to expedite the project implementation.
Fig. 3.5 The redistribution mechanism
Explanatory factors for WTP model depends context. Various variable types can be added such as choice characteristics, site characteristics or environmental conscience variables. In the Chapter 5, WTP models contain social and economic variables. WTP model on the other hand, are more or less interpreted in a fashion analogous to simple regression results. It has been modeled as shown in Equation 3-3:
i ik k
WTP i = β0 + β χ + µ
log (3-3)
with all indexes interpreted as previously. Policy makers would like to respond to the variables that appear to affect negatively the WTP, e.g. by improving education or by providing more information to certain groups of people.
3.2 Background Information of the Pinglin Case
The empirical base of the study draws on the case of the Pinglin Interchange in Taiwan. Pinglin, as a small rural town in northern Taiwan, lies between Taipei and Yilan. The major connection of Pinglin is Route 9 which is known for its zigzag feature. It will regularly take 2 hours for driving from Taipei to Yilan.
Pinglin is famous for its green tea and rapidly-growing tourism business. The area around it has some nice tea-related stores and a tea museum that attract a fair number of tourists from the cities. On the other hand only few people are aware that the Pinglin area is environmentally sensitive because it is located in the middle of the water catchments of the Feitsui Reservoir. Feitsui Reservoir is the largest reservoir in
Taiwan which supplies drinking water to about 5 million Taipei metropolitan residents.
In order to save the driving time and accelerate the economic development the Taiwanese government has decided to construct No. 5 Expressway which could reduce driving time between Taipei to Yilan to about 40 minutes. The debate was originated from the Pinglin interchange. Pinglin residents have been chased for a full function interchange at their town. The principal motivation for them was economic consideration. They claimed that if there is no full function interchange in Pinglin, most of the travelers will drive through Pinglin and Pinglin may lose its tourists to Yilan. As a result it will seriously damage Pinglin’s economy. The Pinglin residents even held a referendum at one point to demand their "rights."
On the other hand since the Pinglin interchange lies within the catchments area of the Feitsui Reservoir (Figure3.6), the Taipei city government and environmental groups are concerned that increased traffic in the area will increase emissions and contaminate water in the area. To protect the drinking water of the 5 million residents of greater Taipei, the city government and the environmental groups have opposed the full function interchange, they claimed that the Pinglin interchange at most could only be designed as an emergency exit and the central authority has to inspect water quality frequently to preserve the environment.
Fig. 3.6 The Location of Pinglin Interchange
Pinglin Inetrchang Feitsui
Reservoir
In order to settle the dispute, the central government reevaluated the effects of full function Pinglin interchange. According to “Before and After Analysis of the Taipei-Ilan Freeway Construction Project Report” (TNEEB, 2004), the full function Pinglin interchange would pass the environmental assessment test. Table 3.3shows the official CBA results in 2010 (target year), which has evaluated three effects on the road use, local economy and public service costs due to Pinglin interchange opening.
According to the official CBA result, the Pinglin Interchange was expected to generate NT$550 million annual benefits. The benefits mainly are from road use and local economy. The effects on the road use taking the form of time saving, vehicle operating cost saving, and accident reduction. The local economy would benefit from the flocking-in of tourists to Pinglin. On the other hand, the construction of the Pinglin Interchange would incur public service costs, including waste disposal costs and facility and maintenance costs.
Table 3.3 The official CBA results for the Pinglin Interchange opening
Unit: NT$ 1,000 per year
Effects Value
Time saving 95,749
Vehicle operating cost saving 158,006 Road use
Accident reduction 20,430
Local economy Income increase 331,152
Waste disposal -1,239
Public service cost
Facility and maintenance cost -54,000
Net effect value 550,098
Source: TNEEB, 2004
The residents of Taipei metropolitan who are affected by water pollution can be regarded as second group. Water pollution can be characterized as regional environmental pollution; since opening of Pinglin interchange may contaminate Feitsui Reservoir which supplies the drinking water to Taipei metropolitan residents.
CHAPTER 4 RESULTS AND DISCUSSIONS
In this chapter we will first text the robustness of the study by conducting the preliminary study. In the preliminary study the information bias and starting point bias of the survey will be examined. This will be followed by the presentation of survey results and the further discussions of the results.
4.1 Testing the information bias
The “information” plays a vital role in a CV method. The validity of the CV results depends crucially on the level and the nature of the information that respondents received during the survey. For example, it is well known that Pinglin interchange could facilitate transportation convenience but generate environmental pollution. The public usually are only aware of the direct environmental impacts (e.g.
the air is not fresh or the water is contaminated), but the indirect environmental impacts (e.g. drinking polluted water is not good for health) are often overlooked.
Table 3.5 shows the increase of environment index value of the Pinglin interchange use. Those science volumes are interest for the experts, but the public without professional training has no idea about Table 3.5. We have to translate the environment index value to visible situations, such as the quality of drinking water being worse and worse. Too many “TP” in the body will increase the possible of disorder and dementia.
As a result, as we conduct the CV assessment, it is imperative to provide respondents adequate information and to reduce the bias. This section first tries to examine the influence of information on the CV survey. As we know the public generally ignore the indirect environmental impacts; it is essential to make sure adequate information of water pollution is provided in the survey. In principle the respondents are offered 3 different levels of information in the test. (See Table 4.1)
Information level 1 was given only a very brief description of the Taipei-Ilan Freeway, Information level 2 was given more information to illustrate that more trips may pollute water resources, and the Information level 3 was given a very detailed description that the Taipei-Ilan Freeway may contaminate Feitsui Reservoir catchments area and may cause some diseases. The original questionnaires are shown in Appendix 1.
Table 4.1 The Information Levels Information
levels
Explanations
1 The Taipei-Ilan Freeway crosses the Feitsui Reservoir catchments area and builds an interchange in Pinglin.
2 The Taipei-Ilan Freeway crossing the Feitsui Reservoir catchments area and builds an interchange in Pinglin that might pollute water resources.
3 The Taipei-Ilan Freeway crossing the Feitsui Reservoir catchments area and builds an interchange in Pinglin that might pollute water resources. Polluted water may hurt human health.
The survey was conducted over the period extending in March, 2004. The sample size was 220, who are a part of our target sample were from the Taipei metropolitan area and were randomly selected in our survey. Those who responded were first asked if they have lived in the Taipei metropolitan area for at least 5 years.
Those who meet the residence requirement were then given a brief description of the study and were asked if they are willing to play a part in answering the questions. The telephone survey began with the following preface:
We are now going to ask you a hypothetical question. Bear in mind that if you pay to completely avoid being ill this time, you have to give up some other use for this money. For example, you may reduce your expenditure for entertainment or education.
Suppose you were told that the Taipei government plans to levy a fee by adding a
Suppose you were told that the Taipei government plans to levy a fee by adding a