Work

Measuring the social benefits of water quality improvements to support regulatory objectives: Progress and future directions

Year: 2023

Type: article

Abstract: The U.S. Environmental Protection Agency (EPA) has undertaken dozens of regulatory impact analyses (RIAs) and benefit-cost studies related to the objectives of the Clean Water Act (CWA).Originating with President Reagan's Executive Order 12291 in 1981, and supported through subsequent Executive Orders, the EPA is required to undertake these analyses for all major rules, with the objective of maximizing net benefits and avoiding regulations where the costs to the society do not justify the benefits.* Because the environmental research field of nonmarket valuation was nascent when the early Executive Orders were initiated, leadership at the EPA committed funds and expertise to support original research by economists, usually in collaboration with scientists from other disciplines.One goal of these efforts was to provide estimates of monetary value for water quality improvements to inform regulatory analysis.Estimating economic benefits in this setting requires the use of nonmarket valuation techniques, as most water quality and related aquatic ecosystem services are not commodities that are bought and sold directly in markets.Sources of benefits tied to the direct use of water bodies, such as fishing in a river or living near a lake, can be inferred from the expenditures people make to use the resource.But, benefits can accrue that are unrelated to use.For example, people may value water quality because it is beneficial to other species, to preserve the resource for future generations, or out of a sense of stewardship for the environment.As these nonuse values cannot be inferred from observed behavior in markets or related settings, economists have devised survey methods to measure the public's willingness to pay (WTP) for improved environmental quality.These stated preference methods conceptually capture both use and nonuse values.Directed by the Executive Orders to quantify all sources of value possible, the EPA has played an important role in supporting research that measures the benefits of water quality improvements.Notable early studies provided foundational methods and empirical estimates to support federal regulatory design for water resources at EPA and other federal agencies (e.g., refs.1-3).Despite the methodologies and findings generated by these studies and a related body of economics research, the funding and knowledge base for water quality valuation has not kept up with new and evolving needs of the Agency (4-6).This has resulted in EPA economic analyses with categories of water quality benefits that are either left unquantified (e.g., nonuse values) or estimated using arguably obsolete methods and data (7, 8).To fill these critical knowledge gaps, the EPA issued a request for applications (RFA) in 2015 to provide financial support for interdisciplinary nonmarket valuation studies.† The basis of this RFA was to improve estimates of benefits across multiple types of water resources including, "…the Nation's inland fresh water small streams, lakes and rivers, estuaries, coastal waters, and the Great Lakes."The Agency identified three research areas that could prove fruitful for future benefit estimates.The first of these is to understand how individuals perceive and value changes in water quality.For instance, how do individuals value the attainment of a water quality standard versus a comparable change in water quality that does not cross a defined threshold?The second pertains to the spatial scale and scope of water quality benefits and sought interdisciplinary research that could strengthen the link between hydrological and ecological models and end points that affect human welfare.Third, this RFA provided support for methodological advancements, such as new ways to communicate changes in environmental quality within stated-preference questionnaires, to improve the estimation of both use and nonuse sources of value.In response to the RFA, EPA awarded $4.8 million in funding to six multi-institutional teams.‡ To increase the quality and collective impact of the studies and enhance their ability to inform local and national decisions on water quality, the EPA encouraged sharing of methodological advances across the teams and promoted joint efforts to address research challenges.This resulted in a tightly integrated body of valuation research.The set of studies, together, will support the next generation of water quality valuation methods at EPA.The articles in this PNAS symposium provide key results from studies funded under the RFA by academic researchers and closely related original research by EPA analysts and scientists.

Source: Proceedings of the National Academy of Sciences

DOI: 10.1073/pnas.2120247120