Valuation of oil spill risk reductions in the Arctic

ABSTRACT

In this study, data from a contingent valuation (CV) study in Lofoten, Norway, are used to assess the value of ecosystem services at risk from oil spills in the Arctic. It is investigated to which extent subjective opinion about the probability of a potential oil spill steers respondents’ willingness to pay (WTP) for reducing risk. The respondents’ preferences are analysed for ecosystem services. Finally, differences in WTP for two hypothetical spill scenarios are considered: one where measures are taken to reduce the probability of a spill and one where measures are taken to reduce the probability and impacts in the event of an accident. The findings indicate that measures should focus on alleviating the impacts of oil spills on ecosystem services generally, rather than on any specific ecosystem service. Furthermore, respondents’ perception of risk is higher than the estimated objective risk. The findings also suggest that respondents are more concerned about preventing the occurrence of oil spill accidents (usually considered to be more frequent than they actually are) compared to preventing the impacts of a spill. One policy implication is to focus more on policies that decrease the probability of spills than on policies that decrease the subsequent ecological impact.

KEYWORDS:

• Ecosystem services
• risk
• Arctic
• non-market valuation
• oil spill

Acknowledgements

This work was gratefully supported by the research programme MISTRA Arctic Futures in a Global Context and ACCESS (Arctic Climate Change, Economy and Society) supported within the Ocean of Tomorrow call of the European Commission Seventh Framework Programme.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. See e.g. Klinke and Renn (2002) for a short discussion on ‘constructivist’ vs ‘realist’ views on risk.

2. See e.g. Ministry of Foreign Affairs (2011, 2). See also the subsequent establishment of the Task Force on Arctic Marine Oil Pollution Preparedness and Response by the Arctic Council.

3. When people are risk avert, a crucial distinction can be made between ex post and ex ante valuation since the option price is higher in the ex-ante valuation than in the ex post valuation, see e.g. Freeman (2003, 214–218). If preferences towards risk are to be taken into account this implies that an ex post valuation underestimates the value of avoiding risk.

4. The full questionnaire is available from the authors upon request.

5. The respondents stated their household income using fixed alternatives based on 100,000 intervals.