Monday, May 9, 2011

Choice Experiments in Environmental Impact Assessment: The Case of the Toro 3 Hydroelectric Project and the Recreo Verde Tourist Center in Costa Rica

Abstract: Choice experiments, a stated preference valuation method, are proposed as a tool to assign monetary values to environmental externalities during the ex-ante stages of environmental impact assessment. This case study looks at the impacts of the Costa Rican Institute of Electricity’s Toro 3 hydroelectric project and its affects on the Recreo Verde tourism center in San Carlos, Costa Rica. Compared to other valuation methods (e.g., travel cost and contingent valuation), choice experiments can create hypothetical but realistic scenarios for consumers and generate restoration alternatives for the affected good. Although they have limitations that must be taken into account in environmental impact assessments, incorporating economic parameters—especially resource constraints and tradeoffs—can substantially enrich the assessment process.
Mean Willingness-To-Pay (MWTP) for huts with improved aesthetics and electricity was US$ 0.81. (The exchange rate at the time of the study was CRC 470 colones = US$ 1). Respondents were also willing to pay an additional $2.20 if the access road to Recreo Verde was paved. The reduction in water flow implied a reduction in welfare equal to $3.17. However, improvements to the pools (more ornamental plants, for example), were valued at $2.81. Improvements to the road, pools, and huts thus constituted a likely compensation for the reduction in water flow.

The willingness to pay estimates can be compared in magnitude and can be added together. For example, the loss of $3.17 due to decreased river flow can be approximately compensated by improving the road and huts ($2.20 + $0.81, respectively), or by improving the pools ($2.81). Making all three improvements would overcompensate the owners for the impact of Toro 3 on the tourist center. In summary, the choice experiment revealed the compensation measure or combination of measures that would return Recreo Verde visitors to a welfare state similar to the one before the change in the river level.
by Dora Carías Vega and Francisco Alpízar
Resources For the Future (RFF)
RFF Discussion Paper EfD 11-04; May, 2011
Keywords: Land Use, Ecosystem Management

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