3.2.2 Secondary (Data) Approach5
In a CBA, environmental costs and benefits cannot be valued simply.
Even though the environment has value, it cannot be priced as there is no market
for it. Therefore it is necessary to assess consumer preferences.
The two special valuation approaches used to determine consumer
preferences: the stated preferences and revealed preferences approaches both
require large amounts of primary data to obtain accurate results.
When there are time and budget constraints, environment values may be
estimated from existing studies or secondary data. This method is known as
‘benefit transfer’. Estimated environmental costs or benefits from relevant
studies are used to estimate the costs and benefits of a similar environment in a
specific area. The area that has been studied and which will be the source of
information is called ‘the study site’. The area to which the information from the
study site will be ‘transferred’ is called ‘the policy site or project site’.
The benefit transfer method requires the necessary assumption that the
overall population of the study site is similar to that of the project site. The
transferred value must be used for the same kind of environment and the same
terms of value must also be used. For instance, if a tourism benefit of the
environment was estimated in terms of WTP in the study site, it has to be
transferred to the project site as a tourism value in terms of WTP as well. The
value cannot be used for other benefit estimations or as WTA.
The benefit transfer method can be categorized in two ways. One is a ‘unit
value transfer’ in which an average environmental value per person or per
household from the study site is transferred to estimate the environmental value
of the project site. The transferred value may require some adjustment for socioeconomic
factors such as level of income.
The other is a ‘function transfer’. This method involves the transfer of the
WTP or WTA function of the study site to assess similar function/s in the project
site. The strength of this method is that it is more accurate than the unit value
transfer in that the whole set of data used for the WTP/WTA functions is
transferred. However, if the WTP/WTA function of the study site was estimated
by the TCM or CVM, the low coefficients used will cause inaccuracy. An
estimation from such a WTP function can lead to uncertainty (Du Y., 1999). In
such a case, the unit value transfer method would be more appropriate.
The benefit transfer method may provide a less accurate value than
primary data techniques such as the TCM or CVM. For instance, some
economists are not in favour of using the benefit transfer method because its
validity and reliability are subject to existing studies and these are only very few.
In addition, the reliability of the benefit transfer method also depends on the
nature of the values estimated. For example, the transferred value of recreation
benefits would be more reliable than that of the ecosystem or non-use value
because of its less complex nature and also because there are many studies on
recreational benefits presently available.
Furthermore, the benefit transfer method is not appropriate for pollution
tax rate determination because this requires the precise value of environmental
impacts; this method only estimates rough values. It could, in this context, be
useful for a cost-benefit analysis that does not require very accurate measures.
The method is also suitable for urgent studies or low-budget projects when
analysts have to make decisions under time pressure or other constraints. It can
give policymakers a quick overview of the magnitude of environmental
problems.