Willingness to pay for the outcomes of improved stormwater management

ABSTRACT

Sydney Water owns approximately 450 kilometres of stormwater and waterway infrastructure spread across more than 70 catchments in Sydney, Australia. Improving waterway health and enhancing urban environments is an important part of Sydney Water’s strategy to enhance the liveability of Sydney. This strategy can have a range of costs and benefits to the community. The costs of stormwater management can generally be estimated using market data. The benefits are not marketed directly, so estimation requires the use of nonmarket valuation methods. This paper reports the results of a choice modelling study that examined the willingness to pay of households in the catchments of Georges, Cooks and Parramatta rivers for improved stormwater management. The study found positive household values for improvements in waterway health, additional native vegetation plantings, including wetlands, additional recreation facilities in local open spaces used for stormwater management, and removal of rubbish and litter from the waterways.

KEYWORDS:

• Stormwater management
• Sydney
• choice modelling
• willingness to pay

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. To achieve standards higher than those mandated by Parliament and/or government.

2. Green roofs, façade greening, tree drains, swales and ponds,

3. Pre-requisites for benefit transfer include: that the study site and policy sites are almost identical; the same human population is involved; the extent of the change being considered is the same in both source and target cases; the ‘frame’ of the source study matches the ‘frame’ of the target study; and the initial valuation study has been performed rigorously and accurately (Rolfe and Bennett 2006).

4. The estimation of the length of waterway in good condition by Sydney Water was underpinned by numerous other metrics relating to the physical and chemical attributes of the waterway.

5. Other actions and activities in the catchments also contribute to waterway health e.g. sewerage discharge and overflow, erosion etc. However, this study is only focused on stormwater management.

6. The payment horizon can be expressed as a lump sum payment (Gillespie and Bennett, 2012) or a continuing annual payment for a period of time (Morrison et al. 2016). Where a continuing annual payment is used, it is generally truncated to 5 or 10 years (Morrison et al. 2016) as people tend to disregard payments that may occur to far in the future. A shorter time frame period makes the payment more consequential for respondents.

7. An anonymous referee pointed out that it would have been beneficial to ask respondents if they understood that the benefits of stormwater improvements were identified for 30 years’ time, while the annual payments to be made by respondents would occur for 10 years.

8. The Pseudo R-squared in ML models is not the same as the R-squared in ordinary least squares (OLS) regression. This is because ML functions are nonlinear (Hensher, Rose, and Greene 2005). The values of Pseudo R-squared in ML models tend to be considerably lower than those of OLS R-squared. Pseudo R-squared values of 0.2 to 0.4 represent an excellent fit (McFadden 1979).

9. The socio-demographic characteristics of the sample differed from those of the catchment population with respect to one of the explanatory socio-demographic variables – income. The average annual household income for the sample was higher than for the catchment population. The income variable is positive in the preferred ML model suggesting that higher income respondents are more likely to choose ‘new stormwater management actions’ than lower income respondents. However, even though Sample 1 and Sample 2 have different socio-demographic characteristics, including mean income, that did not translate into statistically significant differences in WTP for attributes across the samples.

Additional information

Funding

This work was supported by Sydney Water Corporation.