Economic Benefits Of Improved Water Quality

Public Perceptions Of Option And Preservation Values

Douglas Greenley

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9780429725043
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political Economy
• Index: Politics & International Relations

Until recently, there has been general agreement that improvement and preservation of water quality, though costly, provided economic and social benefits that outweighed the expense. Now, however, some observers are beginning to question whether the costs of the 1972 Water Pollution Control Act may actually exceed those benefits. This book provides answers to some of the questions that have been raised. The authors give measures of several important nonmarket benefits of improved water quality in Colorado's South Platte River Basin and empirically test and confirm the Weisbrod and Krutilla proposals that the general public may be willing to pay for preservation of environmental amenities and that option value and other preservation values must be added to recreation-use values to give an accurate picture of the social benefits of environmental preservation and restoration. Their findings include the fact that even those who do not expect to use the river basin for recreation are willing to pay for the maintenance of a natural ecosystem and to bequest clean water to future generations. The authors also arrive at average amounts households are willing to pay for improved water quality to enhance enjoyment of water-based recreation activities. They suggest that, without such information, it is highly unlikely that sufficient resources will be allocated for the preservation of unique environments and for the improvement of those being degraded.

1
Introduction and Summary

Background and Scope of Study

The Water Pollution Control Act amendments of 1972 (P.L. 92-500) provided the necessary legal framework for an ambitious effort aimed at extensive improvement of water quality in lakes and streams throughout the United States. As specified in the Act, the national goal was no less than "water quality which provides for the protection and propagation of fish, shellfish, and wildlife and provides for recreation in and on the water . . ." with the eventual elimination of all effluent discharge. The law called for all industrial dischargers to have installed the best practical treatment methods by 1977 and the best available treatment technology by 1983. Municipal treatment systems were to have installed secondary treatment by 1977 and the best practicable waste water treatment technology by 1983. Non-point sources of pollution such as erosion and runoff from agricultural and urban areas were required to develop and implement area-wide waste treatment management plans.

The Clean Water Act of 1977 (P.L. 95-217) reaffirmed the national goal of fishable and swimmable water quality by 1983 and established a new goal of eliminating the discharge of pollutants into navigable waters by 1985. Amendments passed in 1977 modified the best available treatment requirements and extended the 1983 deadline for various industries. This is not surprising, since these goals are expensive and perhaps impossible to attain. Competing national goals of expanded mineral and energy production and inflation reduction may conflict with the attempt to achieve water quality. Moreover, the benefits to be achieved by the Federal goals may not be sufficient to justify the necessary public and private expenditures. The Environmental Protection Agency has come under increasing pressure to assess its water quality improvement programs in terms of their benefits and costs.

There was widespread agreement that the problem of water pollution in the United States had reached unacceptable levels when the 1972 water quality legislation was passed. The Environmental Protection Agency (EPA) estimated that 29 percent of all U.S. river and shoreline miles were polluted in 1971. Table 1.1shows the amount of polluted water reported in the nine major river basins of the

Table 1.1. Estimated Stream and Shoreline Pollution in Major River Basins, United States, 1971.

Major River Basin	Total Stream and Shoreline (Miles)	Polluted Stream and Shoreline (Miles)	Proportion Polluted (Percent)
Ohio	28,992	24,031	83
Southeast	11,726	4,490	38
Great Lakes	21,374	8,771	41
Northeast	32,431	5,823	18
Middle Atlantic	31,914	5,627	18
California	28,277	8,429	30
Gulf	64,719	11,604	18
Missouri	10,448	1,839	18
Columbia	30,443	5,685	19
United States	260,324	76,299	29

Source: Environmental Protection Agency, The Cost of Clean Water, (Washington, D.C., 1972).

U.S. Nearly all of the waterways in the Ohio River Basin were polluted, and waterways in the Great Lakes and Southeast drainage areas exceeded the national average pollution level by one-third, California waterways were nearly identical in quality to the national average with 30 percent polluted.

Measuring the level of water quality is a very complex question. Pollution is always a matter of degree, rather than yes or no, and defining pollution is closely related to the use to which water may be put. The estimates were based on Federal-State water quality standards which vary from place to place, depending on the local use of water for drinking, swimming, fishing, industrial waste discharge, and other uses. The estimates were corrected for natural pollution levels. In the EPA study, the calculation of percentage of water polluted was supplemented using a prevalance-duration-intensity index showing the degree of pollution and how long during the year the waterway was in violation of the standards.

A specialized measure of water quality for Colorado showed substantial pollution levels. The Colorado Division of Wildlife reported that 8,700 miles or 70 percent of the 12,500 miles of river, in the state were capable of sustaining a trout population in 1970.¹ An estimated 2,640 miles or 21 percent of the rivers in the state were polluted; 917 miles of river or 7 percent were dewatered by irrigation and power users; and 253 miles or 2 percent were inundated by reservoir construction.

In the past, most Western communities and state governments welcomed and encouraged the clean water program as a source of new income and general economic growth. Recently, some observers have begun to question whether the social benefits of water pollution control exceed social costs. The people involved are interested in what can be learned from current experience to help formulate sound water quality policies for the future. The purpose of this study is to begin to provide answers to some of the questions which have been raised. Procedures are developed to measure several important non-market benefits from improved water quality in the South Platte River Basin, Colorado.

A complete economic analysis of a proposed policy to improve water quality would measure: (1) the benefits of pollution control, (2) the costs of reducing or removing waste discharge, (3) the costs of monitoring and enforcing regulations, and (4) where chronic unemployment exists, the indirect or secondary benefits and costs.² A recommended program on grounds of economic efficiency would be one for which the incremental benefits exceed the incremental costs. Bradford³ proposed the use of aggregate benefit or bid functions as shown in Figure 1.1which are derived from the vertical summation of benefits of the affected population. When total costs are known, an optimum level of water quality can be determined where the difference between total benefits and total costs is maximized or at the point where the slopes of the two curves are equal. Alternatively, the first derivatives of total benefit and cost curves yields the marginal benefit and cost curves shown in Figure 1.1. An efficient allocation of resources occurs at the point where the marginal benefit and cost curves intersect.

The total costs of pollution control programs have been estimated by the National Commission on Water Quality⁴ and others. However, there are very few investigations of the aggregate social benefits of improved water quality. Early studies focused on the recreation-associated benefits of water quality improvement and ignored any economic assessment of the preservation value to the general population.

This book provides an empirical test and confirmation of the Weisbrod⁵ and Krutilla⁶ proposals that: the general public may be willing to pay for the preservation of environmental amenities; option value and other preservation values represent important social benefits; and should be added to recreation use values to determine the total benefit of environmental amenities to society. In the absence of information on preservation benefits to all of the people, insufficient resources would be allocated by society to the preservation of unique environments such as pristine mountain streams where mineral and energy development may irreversibly degrade water quality.

Measuring the economic value of the preservation benefits of environmental quality has proven to be a difficult aspect of an already complex problem. In addition to the usual difficulties encountered in measuring the value to society of recreation use where market transactions are absent, the benefits from pollution abatement also include significant option, existence, and bequest values. The primary contribution of this analysis is to empirically test the importance of these latter values relative to the conventional recreation benefits. Measurement of these nonmarket and rather abstract values such as option, existence, and bequest demand requires careful development of a methodology which allows the assessment of the value of water pollution abatement to members of the appropriate population.

Figure 1.1. Aggregate Benefit and Cost Functions for Water Quality.

Krutilla noted several possible instances of willingness to pay for attributes of environmental quality which are distinct from the direct or immediate benefits to users of a natural resource. These previously unrecognized benefits of environmental quality were termed preservation benefits by Krutilla. Since this book develops and implements a procedure for...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• List of Tables
• List of Figures
• Foreword
• Acknowledgments
• 1 INTRODUCTION AND SUMMARY
• 2 PREVIOUS RESEARCH ON RECREATION AND PRESERVATION BENEFITS OF WATER QUALITY
• 3 THE SOUTH PLATTE RIVER BASIN, COLORADO
• 4 DATA COLLECTION PROCEDURES
• 5 OPTION, PRESERVATION, AND RECREATION BENEFIT ANALYSIS
• 6 SOCIOECONOMIC RELATIONSHIPS
• 7 SUMMARY AND CONCLUSIONS
• BIBLIOGRAPHY
• APPENDIX A: CONCEPT OF OPTION DEMAND
• APPENDIX B: QUESTIONNAIRE
• APPENDIX C: REGRESSION ANALYSIS
• INDEX