Valuation Study

Water Quality Improvement for Recreation

Attributes

Medium: Water

Country: China

Analytical Framework(s): Contingent Valuation, Travel Cost

Unit(s): Total Benefit, Consumer Surplus

Study Date: 1996

Publication Date: 1998

Major Result(s)

Functional Transfer: In the travel cost method, visitation rate was used as a dependent variable and travel cost as an independent variable in a semi-logarithmic functional form: ln(VISITS) = 8.974627 – 0.047344(COST), having a coefficient of correlation r² = 0.9422, with the intercept and coefficient standard errors being 0.0654 and 0.0006, respectively. Visitation rate in terms of numbers per thousand population and travel cost data in the target policy site must be obtained and plugged into ln(VISITS) = a + b (COST) in order to utilize such a transfer exercise.

Study Note: The author stressed that adequate care must be taken in interpreting and using the results from this study. Since demand was dependent on real improvements in water quality, a difference between hypothetical and real situations may arise. Moreover, additional effort may be required to proportionate time and cost to the price for demand analysis, because many visitors from farther sites normally come to Wuhan not only for recreation in the lake, but for other purposes as well. Finally, the value estimated in this study was that of improved water quality for recreation only, while water quality may have other benefits such as health benefits and productive use of the water.

Study Details

Reference: Du Yaping. 1998. The value of improved water quality for recreation in East Lake, Wuhan, China: Application of Contingent Valuation and Travel Cost Methods. EEPSEA Research Report Series, No. 1, 1-24.

Summary: It is believed that improving lake water quality increases the economic value of recreational resorts. However, few empirical estimates have been made in China to determine the value of the economic benefits that are brought about by such improvements. In this study, two non-market valuation methods, travel cost (TC) and contingent valuation (CV), were used to gather empirical evidence on the economic value of improved recreational water quality. The values obtained from TC and CV methods were similar. Lake users were willing to pay for the use of the lake together with its facilities, thus offsetting some of the cost of maintaining water quality for recreation. Payment for the improvement and maintenance of water quality could be in the form of fees for entry, angling or swimming.

Site Characteristics: East Lake is a highly appreciated recreational site known for its wide water surface area, natural peacefulness, and beauty within the metropolitan boundary of Wuhan. Major recreational uses of the lake include sightseeing, jogging by the lake, boating on the lake, swimming in the summer season, angling throughout the year, and water sports. The most frequent users of the lake are people living around it, and occasional visitors come from areas farther away from the city. Water pollution occurred as more and more domestic sewage and industrial wastewater was discharged into the lake (441 tons of nitrogen and 40 tons of phosphorus in net annual terms, 1993), after being cut off from the Yangtze River in 1957, thus affecting recreation in and around the area.

Comments: Though the CVM and TCM studies reinforce each other, further analysis is required as to the large degrees of variation in transport cost, as well as to the implications of other travel purposes with time cost. These two case-specific features are unique to this study as they are different from many other existing TCM studies conducted in developed countries. Regarding policy implications, water pollution treatment measures should be taken to clean the lake, but it may not be worthwhile to pursue attainment of the highest drinkable quality level. Moreover, policies should take into account free riders, and could be administered with lesser cost by charging fees for entry, angling, or swimming.

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