Misuses of Contingent Valuation

Although contingent valuation can be an important component in calculating the benefit-cost ratio of environmental policies, it is not universally applicable. For example, extrapolating the public’s willingness to pay for preservation of specific ecosystems and biomes led Robert Costanza et al. to conclude in an article that appeared in Nature (1997) that the economic value of the world’s ecosystems exceeds the total global gross national product. Contingent valuation loses validity when used to transfer benefits calculated from specific situations or locations to a much larger or different paradigm.


Contingent valuation is not a valid tool when the real cost involved in preventing or mitigating damage far exceeds the economic capacity of society to address the problem or when the problem cannot be corrected. The problem of removing all of the plastic debris from the oceans is an example. Although we can institute policies that will reduce the amount of plastics going into the oceans and remove a portion of the existing debris, it is impossible to make the oceans “plastic free” at any cost. Another example is using contingent valuation to determine the willingness to pay to preserve an endangered species that is beyond recovery. Applying contingent valuation to these types of problems does not produce useful results.

The usefulness of contingent valuation largely depends on the questions asked and the scope of the problem. Individual countries cannot solve global problems by themselves, thus attempting to quantify the amount Americans are willing to pay to solve their portion does not solve the problem. In fact, the efforts of environmentally conscientious countries can result in other countries acting as free-riders. Attempting to extrapolate the results of limited studies to other locations or larger areas can result in erroneous conclusions. Applying contingent evaluation to unsolvable problems or economically infeasible solutions is inappropriate.

Appropriate Uses of Contingent Valuation

Contingent valuation is most effective in cases where the respondents are asked to state their preferences using closed-ended questions that address real situations instead of open-ended questions that address hypothetical situations. (“Would you be willing to pay $X to accomplish Y?” vs. “How much would you be willing to pay to accomplish Y?”) It is also more useful in situations that affect the respondents directly.


An example of a local environmental problem to for which contingent valuation would be useful is the damage caused by off-road vehicles. Off-road vehicles damage large areas of Arizona desert each year leading to habitat loss and severe erosion. Current enforcement is inadequate to curb off-roading in undesignated areas. Additional enforcement would require additional funding. Contingent valuation could assess the public’s willingness to pay for this funding and the sources of funding they would support.

Alternative energy sources such as wind and solar power are currently more expensive than traditional power sources such as coal, natural gas, and nuclear power. However, wind and solar power are non-polluting and essentially inexhaustible, and once developed, potentially far less expensive than current power sources. Contingent evaluation would assess the public’s support for wind and solar alternatives quite effectively by determining their willingness to pay more in energy costs temporarily in exchange for the environmental and future economic benefits. In addition, issues such as the “visual pollution” associated with wind and solar installations could be evaluated using contingent valuation. For example, installations near population centers may be less expensive to build and involve shorter transmission distances. However, installations in more remote locations are less visible, thus present less intrusion on the public’s scenic view. Conversely, a more remote location as opposed to rooftop installations might reduce the scenic value of a favorite place for some. The public could decide which alternative made the most sense to them based on their preferences and the relative costs involved.

Improving air quality is another issue that lends itself to contingent valuation, especially on a local level. In the Phoenix metropolitan area, air quality is an on-going problem exacerbated by a desert environment, urban sprawl, and a car-dependent population. Attempts to limit urban sprawl and decrease the number of cars on the roadways have met with limited success because of public resistance to the measures proposed by policy-makers. Contingent valuation studies could provide more insight into which measures the public would support and at what cost. This approach would also serve to inform the public of the economic, environmental, and social costs and benefits of various proposals.

Engaging the Public in Environmental Issues

The environment, and consequently the responsibility for its protection, belongs to everyone. Therefore, the public should be included in environmental policy discussions, even when their knowledge is limited. However, that responsibility comes with the responsibility to make informed choices rather than basing opinions on the emotional appeal of a creature or a situation. (Yes, it is a cute critter, but over-population and starvation is a hard way to die.) Those who choose to participate in such discussions have an obligation to inform themselves about the science behind the issue. Public managers and environmental planners have an obligation to provide as much information as the public requires, written in layman's terms instead of scientific jargon, to make informed, educated decisions. In addition, the public should have access to all information used to evaluate the issues and have the opportunity to talk with researchers. In cases where it is possible, the public should be invited to view the environmental problem or situation first-hand. The public also needs to be well-informed concerning the economic costs and any associated environmental or social consequences of proposed environmental policies.


Public participation can provide valuable insight to decision-makers while increasing public acceptance of environmental policies. Nonetheless, the weight given to public participation and public opinion in environmental policy-making must be tempered by informed logic on the part of planners and managers. Even an informed public may not fully grasp the implications of some policy decisions because their logic is clouded by emotional responses.

Assignment #2 My Op-ed Article

The realities of forty-two years of US environmental policy

Analyzing an administration’s environmental policy in the US may appear to be as simple as examining each administration’s record and declaring them “green” or “not green”. In reality, politicians are subject to public sentiment, economic realities, political agendas of the other politicians, and the views of the courts. In this look back at the past 42 years of US environmental policy, I have tried to consider these factors.

Spurred by Rachel Carson’s Silent Spring (1962) and the first Earth Day in 1970, Americans demanded “more vigorous and comprehensive federal action to prevent environmental degradation” (Kraft & Vig, p. 11). The political appeal these concerns motivated policymakers to enact new environmental regulations and laws without regard for agencies’ ability to carry them out or their overall effects on the environment and the economy. President Nixon signed the National Environmental Policy Act (NEPA) and proclaimed the 1970s the “environmental decade”, furthering this flurry of new policymaking. Throughout the 1970s, the primary focus remained on pollution, pesticides, endangered species, and habitat protection.

Spending to fund the Vietnam War and Linden Johnson’s “war on poverty” and a reluctance to raise taxes increased inflation by 1970. The OPEC oil embargo (1973 – 1974) created shortages and increased energy prices (US Department of State, 2010). By the end of the “environmental decade”, the US economy was in a deep recession. Energy prices, climbing unemployment, and stagflation overshadowed environmental concerns (US Department of State, 2010). Nonetheless, the Carter administration was successful passing amendments to the Clean Air and the Clean Water Acts, the Surface Mining Control and Reclamation Act, the Public Utility Regulatory Policies Act, the Alaska National Interest Lands Conservation Act, and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

In 1980, recession weary voters elected Ronald Reagan on promises of smaller government and reduced taxes. Reagan’s Economic Recovery Act, “reduced income taxes by nearly 25 percent and deeply cut spending for environmental and social programs” (Vig, p. 79) and “ not only reduced tax rates, but established a powerful set of incentives to promote investment in income-producing ‘capital assets’”; by 1983 the economy had recovered (Duke University, 2009). The Reagan administration’s focus on reducing the influence and size of the federal government created conflicts with Congress. Faced with a Congress dominated by members who had enacted much of the environmental policies from the previous decade, President Reagan resorted to an “administrative presidency” (Vig, p. 79).

Reagan, like all other Presidents, appointed people who shared his views. He reduced funding for environmental programs and increased White House oversight of EPA and other regulations by creating the Office of Information and Regulatory Affairs (OIRA). The Council on Environmental Quality (CEQ) and the EPA suffered substantial budget and staffing cuts. This raised Congressional criticism, which led to an investigation of OIRA, eventually forcing James Watt and Anne Burford to resign as head of the Interior Department and the EPA, respectively.

By 1984, environmental issues were popular again. Congress “approved major amendments to the 1976 Resource Conservation and Recovery Act … and set tight new deadlines for EPA rulemaking on control of hazardous chemical wastes (Vig, p. 107) and passed the Food Security Act, reauthorization of the Clean Water Act, the Superfund Amendments and Reauthorization Act, the Clean Water Act Amendments, and the Ocean Dumping Act (Vig, Appendix 1). The Reagan administration formally recognized climate change as an environmental issue with the passage of the Global Climate Protection Act.

A nation’s energy policies affect the environment and the economy (which in turn affects public sentiment and government policy on the environment). Reagan pursued US energy independence through deregulation of oil and natural gas production, increasing the Strategic Petroleum Reserve, and support of nuclear power and clean-coal technology. Congress enacted the first comprehensive nuclear waste legislation, the Nuclear Waste Policy Act of 1982 and in 1987, approved Yucca Mountain, Nevada for consideration as a high-level nuclear waste storage site (Vig, Appendix 1).

George H.W. Bush inherited a strong economy and an electorate keen on environmental issues. He worked with environmental leaders and Democratic Congress to strengthen environmental protections such as the Clean Air Act Amendments to reduce sulfur dioxide emission from coal-fired power plants and lower toxic airborne chemical emissions. He promoted a cap-and-trade scheme to reach the sulfur dioxide emission goals instead of command-and-control regulation. Although he promised to be an “environmental president”, he disappointed many with his refusal to agree to binding carbon dioxide reduction targets at the 1992 Earth Summit and his refusal to sign the Convention on Biological Diversity.

The Clinton administration offered many environmental policy promises, but ignored the relationship between environmental policy and the economy. President Clinton appointments were largely pro-environment, most notably Bruce Babbitt, Secretary of the Interior. Babbitt attempted to raise grazing fees on public lands eliciting outrage from ranchers and their Congressional representatives. Vice President Gore proposed a tax on the energy content of fuels (the BTU tax), which provoked a similar reaction in Congress. The administration dropped both proposals. Two other policies favored by Clinton, the biodiversity convention and stabilization of carbon dioxide emissions by 2000, also failed. Faced with Republican control of both the House and the Senate, Clinton employed Reagan’s tactic of an “administrative presidency”, a move that allowed the administration to strengthen the EPA, adding some fifty new programs. Clinton, through executive orders, protected over 60 million acres of public land, more than did any president besides Theodore Roosevelt. One issue Clinton failed to address because of opposition from Congress was climate change (Vig, pp. 82 – 84).

President George W. Bush attempted to circumvent environmental policy in favor of an antiregulatory, pro-business agenda (Kraft, p. 111). Bush required numerous formal regulatory review procedures, which slowed or reversed regulations. Policy implementation was further hindered because the “vice president and White House operatives often intervened directly in the details of agency decision making” (Vig, p. 87). Faced with Democratic majorities in both the House and the Senate, the Bush administration resorted to executive rulemaking that bypassed Congress. This tactic opened the door to legal challenges. Many people criticize Bush’s opposition to stricter regulation of carbon dioxide emissions and instead promoting further research on global warming. However, he promoted increased domestic oil production, alternative fuels, and increased fuel efficiency standards to reduce dependence on foreign oil.

Barack Obama came to office with a long list of environmental promises from combating global warming to changing nearly all of Bush’s policies. Capitalizing on the popularity of the global warming hypothesis, Obama adopted the opportunistic strategy of Nixon and the elder Bush. In the early days of the Obama administration, he could count on the support of a Democratic majority in Congress and voters still flush with promises of “hope and change”. However, his early successes turned to disappointment and disillusionment. As in the Carter era, economic concerns, in this case fueled by a faltering economic recovery, dominated the voters’ concern. As federal spending increased the national debt, policy decisions drove up the price of gasoline and other goods and services, and the promised “green” jobs failed to materialize, the country began to question the fiscal soundness of the new environmental policies. The Democratic majority Obama needed evaporated with the mid-term elections, and with it, support for cap-and-trade of carbon dioxide. Like Clinton, he found himself with a hostile Congress. With strong support from the corn growers and genetically modified seed producer lobbies, corn-based ethanol production increased two-fold. Scientists estimate that at least half of all corn intended for human consumption is contaminated through cross-pollination with genetically modified strains. The Gulf of Mexico dead zone continues to expand as more farmers convert acreage to industrial corn crops. The nuclear industry lobby won support for additional loan guarantees for construction of five new nuclear plants, but disagreements continue concerning where and how to store the waste. At last count, environmental, business, and community groups have filed over one hundred suits related to environmental and energy policies enacted under the Obama administration. The view from today, October 19, 2012, does not look promising for Obama’s re-election or the continuation of many of his administration’s environmental policies under a new administration.

Internet Links Cited

Duke University. (2009, February 6). To Stimulate Economy, Obama Should Revive Reagan-Era Initiative, Law Professor Says. Retrieved February 14, 2010, from Office of News and Communications; Duke University: http://www.dukenews.duke.edu/2009/02/brown_tip.html

US Department of State. (2010). Stagflation in the 1970s. Retrieved from About.com: Economics: http://economics.about.com/od/useconomichistory/a/stagflation.htm

US Department of State. (2010). Years of Change: The 1960s and 1970s. Retrieved February 14, 2010, from About.com: Economics: http://economics.about.com/od/useconomichistory/a/change.htm

Assignment #2

Commentary on Obama's energy policy:

more corn ethanol, 'clean' coal

Reported in http://www.thesunnews.com/611/story/1296600.html  on February 3, 2010

The Obama administration apparently prefers a sampler plate approach to energy production. President Obama has piled his plate high with alternatives to fossil fuels – most notably corn-based ethanol and nuclear power, while retaining fossil fuels as the main course. To entice Congress to support this agenda, President Obama is serving a large helping of reduced dependence on foreign oil and job creation. However, he fails to address the net cost of these new “green” jobs in terms of higher energy prices, lower wages, and displacement of existing jobs (US Senate Subcommittee on Green Jobs and the New Economy). The Energy Department and Department of Agriculture are offering incentives while the EPA is adding regulations. The Energy Department is supplying “$4 billion in carbon capture and storage, and it expects industry to contribute an additional $7 billion” for research and development of “clean-coal” demonstration sites. The Agriculture Department “proposed a new plan to provide financing for the conversion of biomass, or material made from plants or animals, to energy”. The EPA unveiled a requirement for the use of “36 billion gallons of renewable fuels by 2022, including 21 billion gallons from ‘advanced biofuels’.” No other administration has taken such an eclectic approach to these issues.

The Obama administration’s buffet of energy options are little more than the re-seasoned leftovers of previous administrations. Obama’s plan includes offshore drilling for oil and gas, a policy also supported by Nixon, Reagan, and both the elder and younger Bush. Nuclear power plants and “clean” coal are perennial favorites. Unfortunately, the US has no permanent storage site for nuclear waste and dim prospects for developing any in the near future since the Obama administration removed the Yucca Mountain Nevada site from consideration. “Clean” coal projects are not a new idea. In 1987, the Department of Energy described thirty-seven projects “underway or planned for clean coal demonstration facilities” ( Department of Energy - Timeline '71 - '80); part of George W. Bush’s energy plan drafted by a task force appointed by Vice President Cheney called for “major increases in future energy supplies including…”clean coal” development” (Vig, p 88). However, even if we bury the carbon dioxide emissions from burning coal, coal mining presents serious problems including grave damage to the environment and to human health (Smithsonian.com). Obama rounds out his list of alternative fuels with biofuels, another well-worn option promoted by Carter in the Biomass and Alcohol Fuels Act of 1980 ( Department of Energy - Timeline '71 - '80). Corn-based ethanol, like the other energy proposals Obama favors, has its own set of problems. Although EPA Administrator Lisa P. Jackson contends that, “new scientific studies concluded corn ethanol, when produced with energy-efficient means, could (emphasis added) have 20 percent lower greenhouse gas emissions than gasoline”. Other studies “found corn ethanol resulted in large amounts of greenhouse gases throughout its production and use, especially when land use changes - such as cutting forests, which store carbon dioxide, to make room for corn - were taken into account”. Ms. Jackson did not mention other possible unintended consequences including higher food prices and environmental damage from fertilizers (Oregonlive.com).

Obama’s plan includes new requirements for the energy industry and new spending programs to promote his agenda. His plan also rolled out EPA standards established in 2007 under George W. Bush which require the US “to have 36 billion gallons of renewable fuels by 2022, including 21 billion gallons from ‘advanced biofuels’. Presumably, some funding for this would come from the Department of Agriculture’s plan “to provide financing for the conversion of biomass, or material made from plants or animals, to energy.” The Energy Department plans to spend more than $4 billion on carbon capture and storage research and development; they expect industry to spend an additional $7 billion. This combination of standards, funding, and the expectation of industry investment in research and development of new technologies borrows strategies from every President from Nixon to George W. Bush. A significant part of the Obama administration’s plan continues policies established during the Bush administration through the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 (Vig, Appendix 1).

Although the intent of President Obama’s plan is admirable – energy independence, less pollution, and more jobs, it lacks cohesiveness and a logical basis. Climate change is a widely accepted fact. Over the course of Earth’s history, the climate has changed. Many experts support the global warming hypothesis, but a conveniently overlooked body of research at the Woods Hole Oceanographic Research Institution suggests quite strongly that global warming is self-correcting. Global warming devotees might be surprised to learn that according to research finding published by Woods Hole researchers in January 2009, “One of the ‘pumps’ that helps drive the ocean’s global circulation suddenly switched on again last winter for the first time this decade. The finding surprised scientists who had been wondering if global warming was inhibiting the pump and did not foresee any indications that it would turn back on”. This does not mean we should ignore the problems associated with fossil fuels, but it does suggest that the current administration is using the global warming hysteria as a convenient crisis to further a poorly thought out and ultimately unsound agenda. Oil from any source, domestic or foreign, represents a short-term solution. Pushing for more nuclear power plants without first addressing radioactive waste storage is illogical. It is unwise to displace other crops and cultivate virgin land to expand corn acreage, inflict more damage on aquatic ecosystems through increased fertilizer application, and use already strained water resources to produce more corn and process it into ethanol, especially when there are better alternatives such as switch grass (Scientific American, 2008). “Clean coal” is an oxymoron. The time has long passed for political games for political gains. The overall long-term effect of energy production must be addresses beginning with the raw materials and ending with the waste products. President Obama’s plan clearly lacks such a comprehensive approach.

Websites Referenced


http://bond.senate.gov/public/_files/BondGreenJobsReport.pdf

http://www.smithsonianmag.com/specialsections/ecocenter/Mining-the-Mountain.html

http://www.oregonlive.com/environment/index.ssf/2009/09/growing_corn_for_ethanol_boost.html

http://www.whoi.edu/page.do?pid=12455&tid=282&cid=10046

http://www.whoi.edu/page.do?pid=12455&tid=282&cid=54347

http://www.scientificamerican.com/article.cfm?id=grass-makes-better-ethanol-than-corn