ANALYSIS
Applying contingent valuation in China to measure the total economic value of restoring ecosystem services in Ejina region

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Abstract

This paper reports an attempt to apply the Contingent Valuation Method (CVM) in rural China. The CVM was used to obtain estimates of willingness to pay for restoring Ejina ecosystem services. In our survey, we used a payment card format and a 12-page survey booklet with maps depicting the reasons why Ejina ecosystem deteriorated, the means by which ecosystem services could be restored from their current level. We used an in-person interview along with the survey booklet. We employed a parametric model to estimate the benefits of restoring Ejina ecosystem. Results from 700 in-person interviews indicate that households would pay an average of 19.37 (RMB) per year with 20.78 per household for the main river area, and 16.41 per household for the rest of Hei basin. The aggregate benefit to residents of the Hei basin is 8.84 million annually for 20 years. Taking into account an environmental discount rate calculated by using respondent's equivalent utility between periodical payments and lump sum payments, the present value of aggregate benefit of restoring Ejina ecosystem is 55.33 million. These results suggest that the general public in Hei Valley would be willing to pay to restore the Ejina ecosystem, although this amount is substantially less than the estimated costs of restoration.

Introduction

Ecosystem services such as natural purification of water, erosion control and habitat for wildlife are public goods that have value to society but no relevant market where these values are expressed. When ecosystem degradation arises society has to decide whether to incur a cost to restore them. Thus, it would be helpful in making rational social decisions if we could assess the economic value of these ecosystem services to compare to the opportunity cost of preventing degradation or the restoration costs.

Valuation of ecosystem services has received much attention. Early examples include energy-based approaches of Costanza (1981) and Odum (1983), and Ecological Economics’ special issue on this topic in 1995. After Costanza et al. (1997) estimated the value of the world's ecosystem services, attention to this field increased.

The Contingent Valuation Method (CVM) is considered one of the most commonly used methods to estimate an economic value for environmental goods (Mitchell and Carson, 1989, Bishop and Romano, 1998). Literally hundreds of contingent valuation studies have been completed in the USA and Western Europe (Bishop and Romano, 1998). Owing to institutional and cultural differences with western countries, Chinese research using CVM is in its infancy. Economic evaluation as a guide to public decisions has never been in fashion in China. Some environmental economics appraisal methods are introduced in university courses but they are hardly used as tools for actual government decisions. The reason for this situation is to be found in the deeply rooted suspicion toward economics by politicians and administrators: China is an exceedingly centralized government and correspondingly, centralized decision making as far as public expenditure is concerned. In the current stage of economic transformation from a centrally planned economy to a market economy, the Chinese people are used to administered prices, not market determined prices. Thus, officials in China are hesitant to accept what people say they would pay.

In this paper, we are following the approach of Loomis et al. (2000) to analyze the total economic value of restoring Ejina ecosystem services by adopting the CVM. One objective of this paper is to learn if CVM can be applied in a country and culture transitioning from a centrally planned economy to a market oriented economy. The paper is organized as following: the first part gives a general description of the Ejina oasis and ecological environment, the second and third sections illustrate the survey design and operational aspects of the study. In the fourth section the results of the analyses are presented and finally we finish with a brief conclusion.

Section snippets

Ejina oasis and its ecological environment

The Hei river basin located in the middle of Hexi Corridor of the Gansu Province, is one of the two largest inland river basins in China. Its watershed covers an area of 130×103 km2, and its upper, middle and lower reaches stretch from the middle area of Heixi corridor in Gansu to Qinghai and western Inner Mongolia. Ejina lies in the lower reaches of Hei River (between 97°10′23″–103°7′15″ E and 39°52′20″–42°47′20″ N), is situated south of Monogolia and western Inner Mongolia (Fig. 1). The Ejina

Survey design

Obtaining accurate benefit estimates using CVM requires detailed descriptions of the resource being valued (Loomis et al., 2000, Loomis and Walsh, 1997). During October 2000, we organized a 12-person investigation group consisting of 7 ecologists and 5 economists. Twenty days were spent in the region, visiting and learning about the Ejina ecosystem. After returning to our institute, it took the group 6 months to define what ecosystem services were being provided by the Ejina and how these could

Response rate and reasons why some respondents would not pay

The sampling frame were households living within Hei valley. We performed a random sample of these households. Sufficient funds were available to allow for us to use in-person interviews of 700 households. During July 2001, our group took 1 month to finish our in-person investigation. The 700 households to be sampled were split into 24 smaller groups of 20–35 people each. To identify households for sampling, random digit dialing was used in cities and towns that have the telecommunication

Results

In the PC format, respondents are confronted with an ordered sequence of bids where they choose the maximum amount they are willing to pay. In the PC format maximum WTP is elicited directly. Following Welsh and Poe (1998) and Bonato et al. (2001), we expanded the PC format beyond the traditional PC format by letting respondents consider each monetary amount and allowing them to express uncertainty. Therefore, additional thresholds and likelihood of voting yes are included and WTP responses are

Conclusions

The total value of restoring ecosystem services represents important information about the consequences of changes in the condition or quality of an ecosystem. The valuation process reduces multidimensional information to a single number. This can make understanding of the result obtained much easier for the decision maker.

Three conclusions can be made from this study. First, owing to institutional and cultural differences with western developed countries, some are suspicious of whether the CVM

Acknowledgements

The research is financed by National Natural Science Key Foundation (No. 40235053), the Innovation Project of Chinese Academy of Science (No. KZCX1-10-03, KZCX1-09-04), and National Natural Science Key Foundation (No. 40201019). Without implicating, I would like to thank Lu Anxin, Ma Minguo, Lin Qing and Zhang Haitao for their providing valuable materials and much valuable discussion on the natural setting of Ejina oasis. Simultaneously, thanks to all colleagues at the collaborative survey last

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