Contingent valuation of improved water quality in the lower Waimakariri River

Abstract

The Agribusiness and Economics Research Unit (AERU), in association with the Agricultural Engineering Institute (AEI) and the Centre for Resource Management (CRM), all at Lincoln University, carried out, on behalf of the Canterbury Regional Council, an analysis of the costs and benefits associated with improving the water quality in the Lower Waimakariri River. The costs of achieving a specified water standard were assessed by the AEI through consultation with various dischargers to the river and design and estimation of the processes and associated costs needed to reach the discharge standard set. The present value of these costs was estimated as between $10.1 million and $17.2 million (10 year period) depending upon the final interpretation of the water quality standard requirements. The benefits associated with a water quality improvement were assessed through a Contingent Valuation Method using a Willingness to Pay process. A sample of 2,628 Canterbury residents were sent a mail questionnaire which sought information on their present use of the Lower Waimakariri River, use of alternatives and Willingness to Pay (via rates) for a specified improvement of the water quality. A response rate of 44.2 per cent (1161 responses) was achieved. In addition a sample of 512 respondents from a predefined "User" group was sent questionnaires from which a response rate of 63.7 per cent (326 respondents) was achieved. A non respondent telephone survey of 400 from the original sample was also undertaken. Responses were received from 320 people, a response rate of 80 per cent. The results indicate that a high proportion of Canterbury residents (nearly 40 per cent) had visited the Lower Waimakariri River over the preceding two years. Of those who hadn't visited, most were not inclined to visit for a variety of reasons, while approximately 10 per cent cited pollution as their reason for not visiting. The major activities undertaken were walking, picnicking and fishing. Respondents cited "Increased Health Risk", "Murkiness" and "Smell" as the main effects of pollution and up to 30 per cent of respondents indicted that these factors influenced their decision with respect to visiting the Lower Waimakariri River. Depending on the activity, up to 40 per cent of respondents indicated they would increase their level of use if the water quality was improved. Respondents were asked to indicate their Willingness to Pay (WTP) for an improvement in Lower Waimakariri River water quality to the point where the water was safe for swimming. The results indicate a mean WTP of about $102 per respondent household with a range of $72 to $153 representing the 95 per cent confidence interval. Given the number of households in the survey area, this represents a potential present value of benefits of $94.4 million (eight per cent discount rate over 10 years). This clearly exceeds the present value of water quality improvement costs of up to $17.2 million. Analysis of the "User" survey results and the "Non Respondent" survey results confirm the robustness of the general population survey results with any adjustments to the mean Willingness to Pay being within the standard error of the original estimate. It is concluded that the research indicates that the benefits associated with an improvement in Lower Waimakariri River water quality exceed the cost of achieving such an improvement and therefore the improvement should be sought by policy makers and resource managers. No assessment of an equitable method of distribution of the cost of achieving the improvement has been attempted.