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How Sure Can You Be? A Framework for Considering Delivery Uncertainty in Benefit Assessments Based on Stated Preference Methods
Author(s) -
Glenk Klaus,
Colombo Sergio
Publication year - 2011
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.2010.00278.x
Subject(s) - preference , ex ante , valuation (finance) , economics , cost–benefit analysis , estimation , actuarial science , willingness to pay , climate change , risk analysis (engineering) , environmental economics , public economics , business , microeconomics , ecology , management , finance , biology , macroeconomics
Abstract The economic valuation of benefits resulting from environmental policies and interventions often assumes that environmental outcomes are certain. In fact, these outcomes are typically uncertain. This article proposes a methodological approach to incorporate delivery uncertainty into benefit estimation based on stated preference methods. In the study design of a choice experiment survey on land‐based climate change mitigation, we explicitly include delivery uncertainty as the risk that a proposed mitigation project fails to deliver emission savings. We find that respondents’ preferences do not change significantly after being confronted with choices that included risk of failure. However, failure risk itself does have an important impact on the preferences for delivering emission reductions. We show that delivery uncertainty can have a large impact on stated preference estimation of benefits of public programmes. This result should condition conclusions drawn from ex‐ante environmental cost‐benefit analyses that make use of such benefit estimates.