Choice experiment survey to estimate the economic value of visibility improvement for Canadians
Executive Summary
Prepared
for Environment and Climate Change Canada
Supplier name: Kantar
Contract number: K1A12-191149/001/CY
Contract value: $122,887.15
Award date: 2019-05-10
Delivery date: 2020-11-30
Registration number: POR # 007-19
Ce rapport est aussi disponible en français
For more information
on this report, please contact ECCC at: ec.enviroinfo.ec@canada.ca
Choice experiment
survey to estimate the economic value of visibility improvement for Canadians Final
Report
Prepared for Environment
and Climate Change Canada
Supplier name: Kantar
November 2020
Environment
and Climate Change Canada (ECCC) commissioned Kantar to design and conduct a
choice experiment survey in order to assess the economic value that Canadians’
associate with a noticeable visibility improvement, expressed in monetary
willingness-to-pay per household for a 1-unit deciview (DV) change. The
findings of this study are meant to refine the accuracy and representativeness
of the economic values associated with visibility in the Air Quality Valuation
Model (AQVM2), whose estimates are used in cost-benefit analyses of air
pollution regulations.
Cette publication est aussi disponible en français sous le titre: Enquête
par la méthode de choix multi-attributs pour estimer la valeur économique d’une
amélioration de la visibilité auprès des Canadiens
Permission to
Reproduce
This publication may be
reproduced for non-commercial purposes only. Prior written permission must be
obtained from ECCC. For more information on this report, please contact ECCC at
ec.enviroinfo.ec@canada.ca or at:
DEPARTMENT
OF THE ENVIRONMENT
200
Sacre-Coeur Blvd.
Gatineau,
Quebec
K1A0H3
Catalogue Number: En4-424/1-2021E-PDF
International
Standard Book Number (ISBN): 978-0-660-37651-6
Related publications
(registration number: POR #007-19):
Catalogue Number: En4-424/2-2021F-PDF (Final Report, French)
ISBN:
978-0-660-37653-0
© Her Majesty the Queen in Right of Canada, as represented by Environment
and Climate Change Canada, 2021
Air pollution can lead to haze that can reduce
or obscure visibility and economic literature has established that reduced
visibility can be associated with reduced citizen well-being along with lost
revenues in the areas of outdoor recreation and/or tourism. To improve visibility, it is necessary to
reduce pollution levels, which can come at a cost to Canadian consumers.
Generally, these costs are indirect and come in the form of additional expenses
incurred by businesses for installing pollution control devices on vehicles and
manufacturing equipment. The additional costs to businesses are eventually
passed on to Canadians through higher prices on everyday items such as food,
electricity, and transportation. Reducing pollution and thus improving
visibility means that Canadians will experience unavoidable increases to
general cost of living.
To estimate the value of changes in pollution
levels, Environment and Climate Change Canada (ECCC) currently uses the Air
Quality Valuation Model (AQVM2). This
model measures the impacts of pollution on visibility, crop productivity, and
cleaning costs for households.
The current inputs into the visibility module
within AQVM2 use data that was last collected in 2002 in the lower mainland of
British Columbia only and were applied throughout Canada. Furthermore, the existing empirical
literature pertaining to the valuation of visibility improvement is very
limited, especially in Canada. The
collection of current and more methodologically robust data will allow ECCC to
provide more accurate information to decision-makers, which is consistent with
ECCC’s responsibilities, Treasury Board Secretariat’s guidelines on
cost-benefit analysis under the Cabinet Directive on Regulation and the
Government of Canada’s commitment to evidence-based decision-making.
The overall objective of this research was to
obtain current and robust data regarding Canadians’ willingness to pay (WTP)
for improved visibility that can better characterize the differences that may
exist across the Canadian population.
The findings of this study will be used to refine the accuracy and
representativeness of the economic values associated with visibility in AQVM2,
whose estimates are used in cost-benefit analyses of air pollution regulations.
A discrete choice experiment was undertaken
with the goal of understanding how attributes of visibility, health risk and
annual cost to household affect WTP per household for a 1-unit DV change. The
levels chosen for investigation for this study are outlined in Table 1.2.a.
below.
|
Visibility (Deciview/Visual Range) |
Health Risk |
Annual Household Cost |
|
9 DV (155-160 km) 13 DV (105-110 km) 17 DV (70-75 km) 21 DV (45-50 km) 25 DV (30-35 km) 29 DV (20-25 km) 33 DV (10-15 km) |
Low Moderate |
$30 ($2.50 per month) $60 ($5.00 per month) $90 ($7.50 per month) $180 ($15.00 per month) $360 ($30.00 per month) None |
Visual stimuli (pictures) were used to depict
various levels of visibility to the respondents. As there is no “typical” visibility for
Canada, a wide visual range was chosen for testing (5-35 DV) to allow for
evaluation of the most likely air quality scenarios in Canada.
The Air Quality Health Index (AQHI) was used to represent
health risk to respondents and two levels of health risk were included in the
final design: low and moderate. No
constraints were imposed on which health risk levels could be combined with
which visibility levels.
A complete enumeration approach was used while
designing the choice sets. The complete enumeration approach was chosen as it
better addresses the objective of the research: to estimate a robust
nationally-averaged WTP value (annual $ per Canadian household) for a 1-unit
deciview (DV) change and to identify statistically significant variables in
explaining the willingness to pay.
A design with balanced alternative effects
(complete enumeration) does a better job of estimating the specific visibility
levels in the context of the price, whereas a design with imbalanced
alternative effects (full factorial) would be better for estimating the
gaps.
In general, the goal of the experimental design is
two-fold:
1.
Level balance – each level to appear the same number
of times as each other level within an attribute.
2.
Orthogonality – levels across attributes to be
independent of each other in how they appear across choices.
In this study’s design, the following constraints were
implemented with the goal of a more realistic comparison for respondents:
·
For each task, the baseline scenario was on the left
with the test scenario on the right
·
The test scenario always had better visibility than
the baseline scenario.
·
The baseline scenario always had $0 cost
·
The test scenario always had cost of at least $30 per
year.
·
The baseline scenario always had visibility no better
than 17 DV.
·
The test scenario always had visibility no worse than
25 dv.
The discrete choice exercise was estimated
using a Hierarchical Bayes Multinomial Logit model and was estimated using Sawtooth
Software’s CBC Hierarchical Bayes Module v5.5.6. The model used an iterative Monte Carlo
Markov Chain approach to estimate the model for 200,000 iterations with the
first 100,000 iterations used as a burn-in to calibrate the process and the
last 100,000 iterations used to provide a robust estimate of the model. The final model estimated linear effects for visibility
and annual household cost and categorical effects for the two levels of health
risk. This model generated a robust estimate of the WTP per household for each
one-unit decrease in the DV scale for the entire sample and for various
subgroups of interest.
Two WTP values were calculated per
respondent. The first WTP was when the heath
risks are both moderate since we assume the baseline state has a moderate
health risk. In this calculation, the overall utility of the health risk was
zero since both the baseline and improved health risk level were the same. The second WTP value was the WTP for a one
unit decrease in DV that results in a low health risk. This calculation included the change in
utility in moving from a moderate risk to a low risk.
When health risk is zero, on average, Canadians
are willing to pay $107.04 annually or $8.92 per month for an improvement of
one DV to visibility. The median is
$1.10 per month and the standard deviation is $21.27 per month indicating a
wide variability in the amount that Canadians are willing to pay for 1 DV
improvement in visibility.
There are noticeable differences among
different demographic groups, more specifically, younger Canadians (18-34),
households with children or with individuals with health conditions impacted by
air quality and/or those who currently live in areas with high visibility are
all willing to pay more than their respective counterparts.
Not unexpectedly, Canadians are willing to pay
more when there is an associated improvement to health. On
average, Canadians are willing to pay $581.76 annually or $48.48 per month for an improvement of one DV to visibility that includes a
perceived associated decrease in health risk from moderate to low. There are noticeable
differences among different demographic groups when it comes to WTP with an
associated improvement to health. Specifically,
younger Canadians (18-34), women, households with children or with individuals
with health conditions impacted by air quality and/or those living outside of
Atlantic Canada are all willing to pay than their respective counterparts.
In order to provide more clarity around the WTP
differences with improved health risks, the analysis reviewed the ratio of WTP
on its own, compared to WTP with an associated improvement to health risk. Absolute WTP values identify how much
Canadians care about visibility and how much they care about health. The ratio analysis allows one to understand
how much Canadians care about visibility compared with health. Not unexpectedly, virtually all Canadians
care more about health than visibility however, the ratio analysis helps to
identify Canadians that “care” more about visibility and these include middle
aged Canadians (35-54), Atlantic Canadians, rural Canadians, and Canadians with
children in the home and/or living in areas with good visibility (9 DV or less).
The findings of this study are based on online
surveys conducted from September 8 to
29th, 2020. The survey was conducted among Canadians aged
18 years and older. Respondents were randomly selected from an online panel and
invited via email and/or personal online panelist dashboard to participate in
the survey. The results of panel
surveys are considered a non-random sample, meaning they are not a random
selection from the general population of Canada, rather they are a subset of
people who are, in this case, people who have signed up to participate in
online surveys. As such, margin of error does not apply.
The data have been weighted to reflect the
demographic composition of the Canadian population for age, gender, region, education,
and population of residence. Surveying was conducted in the respondent’s
official language of choice and took an average of 15 minutes to complete.
The total contract value for the project was $122,887.15
including applicable taxes.
I hereby certify as a representative of Kantar
that the deliverables fully comply with the Government of Canada political
neutrality requirements outlined in the Communications Policy of the Government
of Canada and Procedures for Planning and Contracting Public Opinion Research.
Specifically, the deliverables do not include information on electoral voting
intentions, political party preferences, standings with the electorate or
ratings of the performance of a political party or its leaders.
Tanya Whitehead
Kantar
Senior Director, Public Practice Leader