Valuation Study

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Value of Improvements in Air Quality from the Adoption of Cleaner Public Transportation


Medium: Air

Country: Philippines

Analytical Framework(s): Contingent Valuation

Unit(s): Mean WTP

Study Date: 2010

Publication Date: 2011

Major Result(s)

Resource/Environmental Good PHP, per household per month
PHP, per household per month
USD, per household per month
Improved air quality3 173.10 201.75 4.51

About the Inflation Adjustment: Prices in Philippines (PHP) changed by 16.55% from 2010 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.17 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2020) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.

Study Note: This study shows how the chosen method of eliciting responses to the WTP question influences WTP estimation. Results show that respondents who are asked directly for their vote in the referendum through a conventional face-to-face interview are more likely to respond positively to the WTP question than those who are asked to cast their votes using a secret ballot. Estimated WTP obtained from the group using the conventional face-to-face method was significantly higher than the WTP estimate from the group that used the secret ballot method. Literature recommends the use of secret ballots particularly when either controversial or "high social prestige" issues are in question. This study shows how research on a topic which is neither particularly controversial nor one that puts social prestige at stake can nonetheless benefit from the use of secret ballots in eliciting responses to the WTP question as it provides a more conservative estimate of willingness to pay by reducing social desirability bias and yea-saying behavior.

Study Details

Reference: Francisco, Jamil Paolo. 2011. Are Metro Manila Households Willing to Pay for Cleaner Public Transport? EEPSEA Research Report, No. 2011-RR1.

Summary: To address the problem of air pollution in Metro Manila, the study proposes a jeepney buy-back program through which the current fleet of diesel jeepneys would be replaced with zero-emission electric vehicles. Households are made to pay for the program through a surcharge on top of their monthly electricity bill. A single-bound dichotomous choice contingent valuation approach using the referendum format is employed to estimate willingness to pay (WTP). The study arrives at WTP estimates for the program aimed at providing cleaner public transportation ranging from PHP 173.10 (USD 3.85) to PHP 259.75 (USD 5.77) per month. However, a simple cost-benefit comparison shows that the program remains economically unfeasible without government support, particularly due to the high cost associated with replacing the diesel fleet. Nonetheless, substantial aggregated benefits show that Metro Manila households are indeed willing to pay for improved air quality from cleaner public transport. Income, education and bid level are found to be significant determinants of WTP. The study also investigates the impact of using secret ballots for eliciting WTP responses to reduce yea-saying bias. Results show that the method of WTP elicitation influences WTP responses. WTP estimates from data gathered using the secret ballot technique were significantly lower than estimates from data gathered using the conventional face-to-face method.

Site Characteristics: The main household survey was conducted in Metro Manila, the national capital region of the Philippines, with a population of 11.5 million in 2007. Covering an area of 636 km2, Metro Manila is the smallest of the country's 17 regions but is the most densely populated (18,166 people per km2) and the most urban. It is also the region with the highest densities of road traffic. The urban agglomeration consists of 17 cities. In 2005, the World Health Organization and the United Nations Environment Program ranked Metro Manila as the fourth-most-polluted urban region in the world. A large proportion of the population is exposed to particulate matter, sulfur dioxide, total oxidants, carbon monoxide, and lead at levels above WHO guidelines. Based on a 2003 emissions inventory, the DENR reports that mobile sources contributed to 70% to 90% of air pollution in the metropolis. The most important mobile sources include diesel-fueled vehicles and two-stroke gasoline engines.

Comments: WTP values estimated in the study range from PHP 173.10 to PHP 259.75 per household per month, depending on whether certainty-calibration was applied or whether estimates were derived from the group that used the conventional face-to-face method for eliciting WTP or the group that used secret ballots. The mean WTP value quoted above (PHP 173.10) is derived from WTP responses of the group that used secret ballots, after calibrating responses based on self-rated certainty. Hypothetical biases were minimized through the adoption of cheap scripts and by calibrating responses according to self-rated certainty. Yea-saying and social desirability bias were also minimized through the use of the secret ballot technique in eliciting WTP.