Paying for clean air

23 Feb 2017. NUS ecologists used a survey-based method to study the economic impacts of trans-boundary haze.

The economic impacts of trans-boundary haze from fires in Southeast Asia include health effects and disruption to transport and tourism. Prof Ryan CHISHOLM, his Honours student, LIN Yuan, and his Ph.D. student Lahiru Wijedasa, from the Department of Biological Sciences, NUS applied contingent valuation to estimate the impacts of haze on Singapore. Contingent valuation is a method for assessing non-market economic values and is commonly applied to environmental and other public goods. The method uses surveys that ask individuals their willingness to pay (WTP) for a public good, in this case clean air. The survey results are scaled up from the sample individuals to the population of interest — in this case from 390 randomly selected individuals to Singapore as a whole. The sample size of 390 was sufficient for the researchers to estimate Singapore’s willingness to pay for clean air to within 20%, with 95% confidence. The specific methods used in the researchers’ study were a double-bounded dichotomous-choice survey design, income stratification, and the Kaplan-Meier-Turnbull method, which together tend to produce conservative estimates of WTP.

The researchers’ main result was that mean individual WTP was 0.97% of annual income, with the total WTP estimate at S$881.6 million per year, with a 95% confidence interval of [S$722.9 million, S$1,048.1 million]. There was substantial variation in WTP among individuals, with an estimated 3 in 10 Singaporeans being unwilling to pay even the minimum bid amount in the surveys (0.05% of annual income). The estimated probability of an individual Singaporean saying “yes” to different bids is shown in the figure below (solid lines, with dashed lines showing 95% confidence intervals).

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Estimating the costs of haze is a major challenge. Previous studies have used a variety of approaches to assess the economic impacts of haze and forest fires. However, these studies do not take into account the non-market impacts of haze on individuals. The study by Prof Chisholm used contingent valuation, a survey-based economic technique to capture such effects. This is important because while market-based methods can capture impacts such as tourism disruption and hospitalisable health conditions, they underestimate impacts to the day-to-day life for Singaporeans. This includes non-hospitalisable health impacts and disruption to recreational activities.

The haze is to a large degree a problem that requires coordination from many different parties. The government, industry and academia have to come together with a common understanding of the causes of fires that result in haze, possible mitigation strategies and estimates of the costs and benefits. The fires benefit landholders, agricultural companies and eventually, consumers through cheaper production of agricultural goods. However, the costs involved are more diffuse and difficult to estimate. By estimating these costs, this study helps to fill this gap and provides a context within which appropriate decisions can hopefully be found.

In future, the researchers intend to collaborate with other research groups to provide a more comprehensive measure of haze impacts. They also intend to repeat their surveys in different years to assess the robustness of the results.

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Figure shows views of NUS campus on 14 September 2015 (left panel) and 14 September 2016 (right panel). The year 2015 witnessed one of Singapore’s most severe recorded haze events.

 

Reference

Lin Y, Wijedasa LS, Chisholm RA “Singapore’s willingness to pay for mitigation of transboundary forest-fire haze from Indonesia”, Environmental Research Letters Volume 12, Number 2 Published: 2017