Water

Environmental and Service Quality Valuation

Economic values of many goods and services are well approximated by their market prices. However, in the case of environmental services and utility services where networks limit important attributes--such as service reliability and quality--there are typically no existing markets and hence no prices available. The values of improvements or declines in these services or attributes are, nonetheless, often critical to project or policy decisions. Policy makers require these values to know whether the benefits of a policy change outweigh its costs, while water companies require these values to evaluate alternative schemes (e.g., resource development, leakage reduction, and demand management). Other utility companies have similar needs.

Economists have developed a range of techniques to estimate the values of improvements or declines to non-marketed services. These techniques involve either direct elicitation of preferences (e.g., contingent valuation and stated preference methods) or indirect derivation of values from revealed behavior in other markets (e.g., travel cost and hedonic price approaches). In some cases, specific values for a project or policy proposal also may be derived via the "benefits transfer" technique, which uses valuation results from elsewhere to lower the study costs, though often these will not be sufficiently robust.

NERA's experts have applied the full range of non-market economic value estimation techniques, including stated preference, revealed preference, and benefits transfer methodologies, to gain a deep understanding of the theory and practical application of cost benefit analysis within policy and regulatory contexts. Drawing on our strong econometric capabilities and on our extensive experience advising policy makers, industry bodies, regulators, utility companies, and NGOs, we provide the following services to clients:

• Advice on leading-edge theoretical findings and the associated techniques for non-market valuation, including the relative robustness and merits of alternative techniques in practical applications.
• Design of methodologies for conducting high quality stated and revealed preference studies, and undertaking such studies to derive robust estimates of environmental and service quality values.
• Advice on interpreting and deploying results from non-market valuation studies in a wide range of decision-making contexts.
• Evaluation and critique of third party methodologies, estimates and interpretations of non-market values.