Microsoft Word - 0717.doc UNIVERSITY OF WAIKATO Hamilton New Zealand Non Market Valuation in New Zealand: 1974 through 2005 Richard Yao and Pamela Kaval Department of Economics Working Paper in Economics 07/17 September 2007 Richard Yao and Pamela Kaval Economics Department University of Waikato Private Bag 3105 Hamilton, New Zealand Tel: +64 (7) 838 4045 Fax: +64 (7) 838 4331 Yao e-mail: ry32@waikato.ac.nz; rickyyao@gmail.com Kaval e-mail: pkaval@mngt.waikato.ac.nz; pam98k@yahoo.com 2 Abstract Non-market valuation (NMV) is recognized as an essential tool in policy decision making worldwide. In this paper, we investigate the history of NMV, specifically in relation to New Zealand (NZ), by compiling and analyzing all available published studies. Results show a significant increase in the number of studies, specifically those requested by government agencies, following the passage of the NZ Resource Management Act of 1991. Studies were found to be concentrated in three major areas: outdoor recreation, environmental conservation/management, and travel time savings. These three areas covered eight environmental commodities, the value of which totaled NZ$72 billion, or 50% of NZ GDP, with the highest valued commodity being biodiversity services. While our analysis yielded many positive results, we did discover, however, a severe lack of studies in many areas including pest control, water resources and outdoor recreation. Keywords Non-market valuation New Zealand Consumer surplus Resource Management Act JEL Classification B4, Q2, Q26 Acknowledgements We thank Frank Scrimgeour, Terry Parminter and Thomas Wilding for their support in this research project entitled ‘Improved Policy Interventions for Encouraging the Voluntary Use by Landowners of Practices Protecting and Enhancing Biodiversity. We also thank the Foundation for Research, Science and Technology (FRST) for funding this project. 3 Introduction Non-market valuation (NMV) is the process of placing a monetary value on goods and services that do not have out-of-pocket costs (Bateman, et al. 2002). The estimated monetary values from NMV studies are used in cost-benefit analyses to calculate the value of changes in environmental quality (Boardman, et al. 2006; Bockstael and Freeman 2005). Over the years, NMV has been used in both developed and less developed countries to calculate more realistic estimates of the values of environmental goods and services (Kahn 2005; Navrud and Pruckner 1997; Smith 1993) Over the last five decades, NMV methods have been useful for environmental policy decision making, particularly for project evaluation, environmental impact assessments, regulatory review and environmental accounting (Adamowicz 2004; Navrud and Pruckner 1997; Freeman 2003; Kahn 2005; Carson, et al. 1994; Smith 1984; Harris and Meister, 1981). The most widely used NMV methods, to date, are the contingent valuation method (CVM), travel cost method (TCM), choice modeling method (CM), benefit transfer method (BT), and hedonic pricing method (HPM) (Rolfe and Bennett 2006; Carson and Hanemann 2005; Adamowicz 2004; Champ, et al. 2003; Hanley, et al. 2003). While most NMV studies focus on using one methodology, some attempt to value environmental commodities using a combination of NMV methods in the same study, i.e., CVM and TCM (e.g., Adamowicz, et al. 1998; Kling 1997; Grandstaff and Dixon 1986). Some of these studies have also compared resulting estimates between different NMV techniques (e.g. Scarpa and Willis 2006; Mogas, et al. 2006; Boxall, et al. 1996). The concept of NMV originated in the United States in the mid 1800s when non- market values of environmental goods (i.e. wilderness) were discussed by non-economists such as Henry David Thoreau (1854; 1864) and John Muir (1912; 1901). In 1915, an economist named Clark argued that these values relating to the environment and environmental quality should be taken into account, even though they are not captured in market transactions. He suggested that if these values were estimated, they could be used in economic analysis to capture a more “true” value estimate of a good or service (Clark 1915a; Clark 1915b; Carson and Hanemann 2005). In 1947, two NMV theories were independently proposed in the US. Firstly, Ciriacy- Wantrup (1947) raised the issue that there are other benefits and costs from the establishment of soil conservation measures that are yet to be valued. He called these “extra-market” values and believed that data for these values could be calculated. This served as the foundation of the NMV technique known today as CVM. The second theory, proposed by Harold Hotelling, began with his two-paged letter to the US National Park Service in 1947. In this letter, he proposed a method for measuring the benefits provided at outdoor recreation sites 4 by calculating what people spent to travel there. This NMV technique is known today as the TCM (Hotelling 1947). By the late 1950s, Wood and Trice (1958) and Clawson (1959) published their applications of Hotelling’s theory to value the benefits of water-based recreation. These studies are regarded as the first applications of TCM. In 1961, Robert Davis, who was not aware of the theory behind CVM, applied his own variation of CVM to his PhD thesis at Harvard. This study valued the benefits from recreational deer hunting in Maine and became known as the first CVM application (Davis 1963). Even though studies were being conducted, NMV studies were not commonly applied until many significant environmental tragedies occurred, which, in turn, led to new environmental laws. In the US, environmental laws such as the Clean Air Act of 1970, the Clean Water Act of 1972, and the Oil Pollution Act of 1990, facilitated an increase in NMV research (Kahn 2005). The Clean Air Act spurred the application of the HPM, because these studies allow for the decomposition of prices of market goods; prices which facilitate the estimation of embedded values for particular environmental attributes (Kahn 2005). Using relevant data on property values, HPM enables an analyst to elicit willingness-to-pay values of individuals to avoid the negative effects on health and aesthetic aspects from air pollution. The Clean Water Act, in turn, resulted in an increase in TCM studies. This is because they are used mainly for measuring the demand for recreational activities, many of which were based on water resources (Kahn 2005). The significant increase in CVM research in the US in the early 1990s can be attributed mainly to three factors: the passage of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980, the Exxon-Valdez oil spill in Alaska in 1989, and the passage of the Oil Pollution Act (OPA) of 1990 (see Portney 1994: 6- 7). During that time, CVM was regarded as the only technique that measured both use and passive use values (Kahn 2005).1 Use and passive use values were ordered to be given equal treatment in natural resource damage assessments, by a US federal court of appeals (Portney 1994). Passive use values, which can be larger than use values, are recognized as a major component in the natural resource damage assessment (NRDA) for the determination of compensable values (Carson, et al. 2003; Loomis 2006).2 The Exxon Valdez oil spill was the first legal case where CVM surveys were used in a quantitative assessment of damages. 1 Passive use value refers to the belief that an environmental commodity is valuable even if they never make active use of it (e.g., existence of the Amazon River). In contrast, use value refers to the direct consumption or direct use of a particular environmental commodity (e.g., visit to a beach). While CVM can estimate passive use values, HPM and TCM cannot 2 Under the provisions of CERCLA, government agencies who were trustees to natural resources (e.g., bay, forest) can sue firms or individuals who damage these resources as a consequence of the 5 Here, damages to the Alaskan coastline, which were mostly passive use value losses, were calculated (Carson and Hanemann 2005; Carson, et al. 2003; Carson, et al. 1998). To explain in more detail about the reason for the recommendations from NOAA, we must go back in time. In the early 1990’s, the reliability of estimates from CVM studies for damage assessments had been questioned. It was recommended that CVM be excluded from NRDA (Diamond and Hausman 1994; Niewijk 1992). In response to these criticisms, the NOAA panel, chaired by Nobel laureates Kenneth Arrow and Robert Solow, was organized to review the validity of estimates of CVM studies. The results of the review suggested that CVM estimates would be useful, in fact, for NRDA, given that the administration of related CVM studies adhere to the panel’s recommendations (Arrow, et al. 1993). These recommendations shaped the NOAA regulations, which, once published, resulted in wide debates in the academic arena regarding the use of CVM (Carson, et al. 2003). The academic and policy debates, spurred by the NOAA regulations, led to a large demand for CVM research, resulting in over one thousand journal articles (Adamowicz 2004). Most likely, because of the extensive exposure it has received over the years, CVM has become the most commonly applied NMV methodology (Bateman 2002; Carson 2000). Not only has NMV been applied in the North America’s, but as early as the 1970s, NMV began being applied in Australasia. We believe that the first NMV study in Australasia was a project in New Zealand (NZ) by Gluck. In 1972, Gluck (1974) applied both CVM and TCM to assess the recreational benefits of the Rakaia fisheries on the South Island. The second NMV work was conducted by Woodfield and Cowie (1977), again in NZ, who estimated the recreational benefits of the Milford Walking Track using TCM. In Australia, the first CVM study took place in 1979. In this project, Bennett used the responses from a sample of adult residents in Canberra Australia to estimate the existence value of the Nadgee Nature Reserve (Bennett 1981; Bennett 1984). Since several environmental laws facilitated the increase in NMV research in the US, our first hypotheses for this paper is that this would also be the case in NZ. Most notably, we propose that the passage of NZ’s comprehensive environmental law, the Resource Management Act (RMA) of 1991, might have facilitated an increase in NMV studies. This is because the need for the use of NMV methods has been mentioned in two sections of the RMA: Section 32 and Section 88 (Kerr 2002). Section 32 states that: “…an evaluation [of an environmental resource] must take into account the ‘benefits and costs’ of policies, rules, or other methods;” where “‘benefits and costs’ includes benefits and costs of any kind, whether monetary or non-monetary”. Section 88, on the other hand, mentions that: “…an assessment of environmental effects in such detail as corresponds with the scale and release of hazardous substances (Portney 1994; Kahn 2005). The estimated monetary amount from damages represents the compensable value. 6 significance of the effects that the activity may have on the environment.” With the inclusion of the phrases “benefits and costs”, “whether monetary or non-monetary”, and “environmental effects in such detail”, we could see the need for NMV in the enforcement of this policy. To examine this conjecture, we compile a detailed database of all NMV studies available in NZ. From this compilation, in addition to studying whether the RMA had an effect on the number of NMV studies, we also present an overview of the NMV studies. In addition, we use the results from these studies, specifically the average consumer surplus non-market values of different environmental commodities, to estimate the value of non- market benefits in NZ. Data An extensive search of published NZ NMV studies, in printed and electronic form, was conducted in NZ between December 2006 and June 2007. Firstly, several libraries were visited, including the Hamilton City Libraries, University of Waikato’s Central Library and other Hamilton government libraries. Next, on-line NZ university libraries and web sites of relevant journal publishers were searched. Finally, an on-line NZ NMV database created at Lincoln University3 was referred to. From this search exercise, we were able to compile 92 NMV studies whose results were published between 1974 and 2005 (Appendix A). While we took every effort to follow every lead we received, with the aim of obtaining every NMV study ever conducted in NZ, many of our leads lead us to dead ends. Overall, however, we believe that the 92 studies we compiled, account for over 90 percent of the NMV studies ever conducted in NZ4. The 92 NMV studies were published as project reports (57%), postgraduate theses (24%), and refereed journal articles (18%). Publications in report form were classified into six types: conference papers, commissioned reports, discussion papers, policy papers, bulletins and technical papers. Postgraduate theses included several Master’s thesis and one PhD Thesis. Refereed articles were published in a variety of journals including: Australian Journal of Agricultural and Resource Economics, Land Economics, New Zealand Economic Papers, New Zealand Geographer and New Zealand Hydrology. Twenty-three percent of the NMV studies were published in two or more formats presenting virtually the same results. Therefore, in our count of 92 studies, if a thesis and a journal article presented the same results, we count this as one study, not two. Results Overall, three decades of NMV studies from NZ has resulted in a compilation of data from 92 studies. After recording our findings into an extensive database, our first task was to test our first hypothesis. To see if there was an increase in NMV studies occurring after the passage 3 Accessed at http://oldlearn.lincoln.ac.nz/markval/. 4 To date. 7 of the 1991 RMA, studies were categorized as to whether they were conducted before 1991 or after.5 Out of the 92 NMV studies, 86 of them clearly reported their valuation year or the year of data collection implementation, which can sometimes be different than a year a study is published. Sixty-seven percent of these studies were conducted during or after 1991. In addition, we find that before 1991, only 7% of the NMV studies were submitted as commissioned reports to government agencies (Table 1). Most of these pre-1991 studies were conducted for academic purposes, mainly in the form of technical academic reports. From 1991 onwards, the proportion of government commissioned NMV studies increased to 35%. Using a statistical test of difference between the two proportions, we found that the proportion of commissioned reports post RMA to be significantly higher at the 95% confidence level. Our results present a scenario wherein the NMV application transformed from mainly an academic exercise, prior to 1991, into a government decision support tool for policy decision making, afterwards. Therefore, we conclude that the RMA did have an effect, not only on the number of studies conducted, but also on who was interested in the studies. Table 1. NMV methods used in New Zealand (1974-2005) Item Before 1991 1991 onwards All Total Number of NMV studies by output year 31 (34%) 61 (66%) 92 (100%) Number of studies commissioned by the Government 6 (7%) 32 (35%) 38 (42%) Next, we categorized the 92 NMV studies by their methodologies. Here, we discovered that the most popular NMV method employed was CVM (66%). CVM was typically used as a standalone valuation tool (58%), but in a few instances, it was used in conjunction with other NMV methods (Table 2). Overall, nine studies used a combination of methodologies: six used CVM and TCM, one used CVM and CM, one used CVM and HP, and one used CM and BT. The next most popular methods were TCM and CM, respectively accounting for 17% and 10% of the studies. All studies that applied TCM valued outdoor recreational goods, such as hunting, tramping/ walking on the Milford Track, and forest park recreation. Studies which used CM, however, concentrated on valuing the benefits from transportation safety and travel time savings. Six studies used the BT method: five of them used BT as a standalone valuation tool, while one used BT in conjunction with CM. BT is recognized as the cheapest NMV method, since it uses data from previous NMV studies and transfers the data to a new study location. 5 We believe this was appropriate, as studies were conducted for approximately the same number of years before and after 1991. 8 However, BT requires that previous studies be conducted to obtain the data from. This is not always available, probably resulting in the low number of NZ BT studies. The first BT study in NZ was conducted in 1995 by Ball et al (1997a; 1997b) and focused on estimating the recreation values of Auckland regional parks by using CS estimates from previous NMV studies. This was followed in 1999 by two related reports valuing the non-market benefits of land-based biodiversity for all of NZ and ecosystems services specific to the Waikato region (Patterson and Cole 1999a; Patterson and Cole 1999b). Two separate BT studies followed which valued the recreational benefits of two areas in the North Island: Te Kouma Park and the Maungatautari Ecological Island (Kaval et al. 2004; Kaval 2004). The most recent BT study was conducted by Sharp and Kerr (2005) and valued recreational fishing at the Waitaki catchment. Here, BT was applied with the CM technique which resulted to numerous estimates of CS values. Table 2. NMV methods used in New Zealand (1974-2005) NMV Method/s Number of Studies Percent Contingent Valuation Method 53 58% Travel Cost Method 10 11% Choice Modelling/Conjoint Analysis 7 8% Hedonic Pricing Method 6 7% Contingent Valuation and Travel Cost 6 7% Benefit Transfer 5 5% Contingent Valuation and Choice Modelling 1 1% Contingent Valuation and Hedonic Pricing 1 1% Choice Modelling and Benefit Transfer 1 1% Game Theory 1 1% Expert Opinion 1 1% TOTAL 92 100% Moyle’s (1995) NMV study was the only one in NZ to apply game theory. Here, a game theory framework was setup to understand the endangered species problem from the point of view of a species manager. Another NMV method applied only once in NZ was conducted by the Works Consultancy Services (1995) that used expert opinion to estimate the value of the benefits that could be derived from the construction of a seven-kilometer highway, called the Stoke bypass, in Nelson. This South Island project would ultimately cost over 25 million dollars to construct (Transit New Zealand 2000). 9 While most of the 92 studies valued only one environmental good, a few used CVM to either value two different environmental goods or two different types of values of an environmental good. Fahy and Kerr (1991) valued research efforts for the conservation of the Royal Albatross and willingness-to-pay to increase the number of life-saving patrols on Christchurch beaches. The study by Kirkland (1988), estimated both preservation values and recreational benefits of Whangamarino wetlands. Kerr and Manfredo (1988), estimated the recreation values for the use of National Park Visitor Centres and did a separate set of estimates for the recreation benefits from enjoying Tararua Forest Park road end camping. When distributing NMV studies by the environmental commodities they valued, we find ten commodity categorizations. Overall, these studies appear to be concentrated in three major areas: outdoor recreation (38%), environmental conservation/management (23%) and travel time savings (17%) (Figure 1). Environmental management studies were primarily water quality improvement studies (80%). Other NMV studies dealt with valuing risk reduction (5%), public/academic/health services (4%), pest control (i.e., possum, weeds) (3%), land quality (2%), food quality/labeling (2%), biodiversity and ecosystem services (2%), human life (2%), and aesthetics (2%). Recreation 38% Environmental Management 23% Risk Reduction 5% Others 17% Transport/Travel Time 17% Figure 1. Distribution of NZ NMV studies by type of environmental commodity valued The primary output variable from a majority of the NMV studies was to estimate consumer surplus (CS) values. The CS value is an amount that a consumer is prepared to pay for a commodity, over and above its market price. To calculate CS, we determine the difference between the price that consumers would be willing-to-pay (WTP) for an environmental commodity and the commodity’s actual price in the market For example, if a consumer would be WTP $25 for a tour at a wildlife sanctuary, but the cost of the tour was only $10, they would have a positive CS value. The difference between the two prices, $15, represents this CS value. 10 Many studies reported more than one CS value (for example, one study may report WTP for picnic areas and WTP for camping on Stewart Island). In all, 167 CS values were obtained from the studies. For ease of comparison, these CS values were converted to 2007 NZ$/person/day. We found the lowest CS value to be $0.02/person/day; this represented the benefit of pest control. The highest CS of $622.41/person/day represented the value of a tramping day on the Milford Track (Table 3). CS was estimated for eight commodities: biodiversity services, travel time saving, water resource improvement, recreation, health/life risk reduction, transport safety and efficiency, land quality improvement and pest control. For six of the eight commodities: biodiversity services, water resource improvement, transportation safety and efficiency, health/life risk reduction, land quality and pest control, we calculated CS by using the following formula: we multiplied the average CS/person/day by 365 (days) and the NZ population (4,233,149 as of 21 August 2007). This is accurate because we believe that all people in NZ benefit from these commodities. However, we do realize that these numbers are most likely an underestimate, as there are many non-residents that come to NZ every year and also benefit from these commodities. Table 3. Mean and Total CS Value of Environmental Commodities (2007 NZ$) Commodity No. of observations (% of observations) Mean CS Value ($) Std Dev ($) Min CS Value ($) Max CS Value ($) Coeff. of Variation Total CS Value ($) Biodiversity Services6 1 (1%) 35.21 -- 35.21 35.21 -- 54,410,016,972 Travel Time Saving 7 (4%) 95.85 39.40 43.62 171.18 0.41 6,920,665,538 Water Resource Improvement 41 (25%) 2.96 10.46 0.04 54.08 3.53 4,579,961,966 Recreation 88 (53%) 56.63 98.22 0.38 622.41 1.73 4,077,323,280 Health/Life Risk Reduction 6 (4%) 0.58 1.28 0.03 3.19 2.20 897,960,929 Transport Safety and Efficiency 3 (2%) 0.41 0.23 0.15 0.59 0.56 637,490,083 Land Quality Improvement 3 (2%) 0.21 0.06 0.16 0.27 0.28 317,277,506 Pest Control 18 (11%) 0.37 0.50 0.02 1.62 1.34 577,867,044 TOTAL 167 34.87 74.03 0.02 622.41 2.40 72,418,563,318 Overall, we found that biodiversity services provide the highest value ($54 billion annually). Biodiversity is an extremely important commodity, not only for humans, but for all organisms in NZ and the world. Therefore, it is not surprising that biodiversity services had such a high value. However, caution should be observed when referring to this specific amount, since this CS estimate came only from one study. This study was, however, a benefit transfer study that used valuation information from a variety of sources. Even so, we 6 Biodiversity services are also known as ecosystem services. 11 believe more work should be accomplished in this area to measure the accuracy of the original estimates. In addition, the authors of this study warned about the possibility of overestimation of the CS value due to the use of a partial equilibrium approach (Patterson and Cole 1999a: 69). Of the 167 observed CS estimates, 25% valued the importance of water resource improvement. These studies concentrated on valuing the improvement of water quality of rivers and/ or lakes, as well as, an improvement in the quality of groundwater and drinking water resources. About two-thirds of these water resource studies were conducted after 1991, when the RMA was legislated. This might indicate that the RMA facilitated an increase in NMV research for water resources improvement. The average CS value for water resources improvement was about $3/person/day with a coefficient of variation (COV) of 3.53. This commodity has the highest COV among the eight commodities, indicating that it exhibits the widest variation in its estimates.7 This variation can be attributed to the fact that the average CS value came from 41 observed CS values. For the 41 observed CS values, namely direct, option and preservation, values were $0.85, $7.65, and $3.01, respectively. This shows that, on average, the non-use value of water resources is about three times higher than the use value (i.e., direct use value). This scenario is consistent with the previous empirical results in the US showing that non-use values of water resources are higher than their counterpart use values (e.g., Sutherland and Walsh 1985; Loomis 2006). In NZ, just like anywhere else, water resources improvement would most likely affect or ‘benefit’ the everyday life of all its residents. Taking the average CS value of $3/person/day, the total CS for this commodity is estimated to be around $4.6 billion annually (Table 3). This is the third most valuable among the eight commodities. Lock (1992a) and Kerr and Cullen (1995) have suggested that people that benefit most from the control of pests (e.g., possums, invasive plants) are mainly farmers and rural people. We disagree with this assumption, since we can argue that all people in NZ consume farm products such as meat, vegetables and fruits, and therefore all residents in NZ benefit from pest control 365 days annually. Not only this, but pest control is related to native NZ biodiversity, which we have already established as the most important NMV commodity. Taking this into account, the benefits from pest control for NZ residents would total NZ$578 million annually. 7 It is interesting to note that the coefficient of variation for water resource management, with 41 observations, is higher than the recreation commodity, which has 88 observations. The smaller variation of the CS value estimates for recreation can be attributed to the fact that all recreation values fall under only one type of value, use values. The commodity water resources improvement, on the other hand, consisted of three types of values, namely: use, preservation and option. 12 Other commodities believed to have an everyday impact on a typical NZ resident are risk reduction, transport safety and land quality improvement. It seems that people found these commodities to be less important than biodiversity services or water resource management and therefore, they have relatively lower CS estimates. These three commodities exhibit a combined benefit value of $1.5 billion annually. Two environmental commodities would not likely benefit or affect all people in NZ year round, namely: recreation and travel time saving. Not all people participate in recreation, and of those, few engaged in outdoor recreation activities 365 days a year. Tourism New Zealand (2007a; 2007b) reported that 72.1 million recreation days annually were spent on the country’s outdoor recreational amenities. Taking this into account and multiplying it by the average 2007 dollar value of a recreational day of $56.63, we get a total CS value of about $4.1 billion (Table 3). Outdoor recreation ranked fourth among the eight commodities. Observed recreational CS values ranged between $0.38 and $622.41/ person/ recreation day. This illustrates a wide variation in the value of recreational amenities. Of the 88 observed recreation CS values, 50% of them occurred on the South Island, 40% on the North Island, and only 10% on both islands. At the 95% confidence level, the average CS value on the South Island ($131) is significantly higher than the average CS value on the North Island ($28). This might imply that outdoor recreation on the South Island has a higher value, but this may also be due to a location bias. It seems that popular amenities like the Milford Walking Track and mountain climbing at Mt. Cook were amenities valued on the South Island, while on the North Island; only causal activities like picnicking were valued, therefore producing a location bias (Kaval and Yao 2007). Estimation of the total CS value of travel time saving for all New Zealanders is difficult to calculate. Murphy and Satherley (2000) calculate that a typical employee in NZ takes 44 minutes/day to travel to and from work. As of June 2007, there were approximately 2,158,000 workers in NZ, accounting for about 51% of the population (Statistics New Zealand 2007). During weekends or non-working days, people also travel: perhaps less for work, but more for activities like visiting relatives, relaxation and shopping. Therefore, we make the assumption that people travel 44 minutes/day on non-working days. Since these studies represent a savings in travel time, we also assume that whatever method a person uses to travel: car, bicycle, walking, etc, will take the same amount of time. Multiplying 44 minutes/day by the number of NZ employees and then by 365 days and by the CS value of $95.85/day (or approximately $0.20/minute), we get a total CS value for travel time savings of $6.9 billion annually. We believe this calculation may represent an underestimation of the value of travel time since non-workers do travel on working days; however, we did not have figures for the non-workers and therefore needed to make an assumption. 13 CS values were calculated from the studies for eight environmental commodities. If it is true that the eight environmental commodities in Table 3 are mutually exclusive, their total consumer surplus value is approximately $72 billion annually. This amount is a significant component of the national economy, representing approximately 50% of the 2006 NZ GDP. Therefore, including NMV results in GDP would most likely result in a significant increase in the country’s total GDP. Discussion and Conclusions In this paper, we present a brief history of NMV, focusing on applications in NZ. In all, 92 NMV studies were conducted in NZ between 1974 and 2005. It was discovered that NMV became more popular and more commonly used in NZ policy decision making after the passage of the RMA in 1991. Of the NMV methods used in NZ, CVM was the most popular. It was also revealed that biodiversity is the most highly valued NMV commodity in NZ. This may be because it is not only important to people but also to all ecosystem functions. Based on the above discoveries, it appears that NMV studies in NZ followed similar patterns to that in the US. Firstly, both countries legislated policies that created avenues to conduct NMV studies for environmental policy decision making. This, we believe, is important, because NMV calculations combined with the market values results in more holistic estimates of benefits and costs. In addition, both the US and NZ used the CVM technique more than any of the others (Adamowicz 2004; Kerr 2007; Kaval 2007). The wide application of CVM in both countries can be attributed to its flexibility to elicit WTP values for almost any environmental commodity of interest (Portney 1994; Mitchell and Carson 1989; Carson et al., 2003). In addition, CVM facilitates the estimation of both use and non-use values while methods like TCM and HP cannot (Bateman, et al. 2002). Furthermore, numerous research undertakings have been conducted to examine or improve the reliability of estimates from CVM studies (e.g., Carson, et al. 1997; Dupont 2004). The rate of increase in the number of NMV studies in the US, however, was several folds higher than in NZ (Adamowicz 2004; Kerr 2007). One reason for this might be related to the extreme environmental destruction caused by the Exxon Valdez oil spill disaster in 1989. Whereas in NZ, there have been no similar environmental disasters. NMV studies have played an important role in NZ, to a limited extent. However, given the proven usefulness of NMV studies for policy decision making in the US and in Australia, study numbers and study areas in NZ seem to be deficient (Bennett 2002; Carson, et al. 2001; Kerr 2002). Areas that are lacking include pest protection and studies on the newest and fastest growing outdoor recreational activities (e.g., black water rafting, extreme mountain biking, surfing). These study areas represent only a few of the many areas where we believe NMV studies could aid in future environmental policy decisions. 14 References (Note: Database references preceded by ‘* ‘) Adamowicz, W. 2004. What’s it Worth?: An Examination of Historical Trends and Future Directions in Environmental Valuation. Australian Journal of Agricultural and Resource Economics, 48(3):419-443. Adamowicz, W., Boxall, P., Williams, M. and Louviere, J. 1998. 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Report to Transit New Zealand. 25 Appendix A List of Studies in the New Zealand NMV Database (Note: CVM=Contingent Valuation Method, TCM=Travel Cost Method, BT=Benefit Transfer, HP=Hedonic Pricing, CM=Choice Modelling, GT=Game Theory, and EO=Expert Opinion) Study No. Author/s Item Valued Publication Year Valuation Year Valuation Method 1 Gluck Recreational Fishing in Rakaia River 1974 1973 TCM, CVM 2 Woodfield and Cowie Milford Walking Track 1977 1975 TCM 3 Harris and Meister Recreational Value of Lake Tutira 1981 1981 TCM 4 Harris Benefits from Water Pollution Control in the Waikato Basin 1983 1982 CVM 5 Everitt Forest Recreation in Coromandel Peninsula 1983 1982 TCM 6 Sandrey and Simmons Kaimanawa and Kaweka Forest Parks 1984 1982 TCM 7 Cairns Lobster Diving – WTP 1985 1985 CVM 8 Cribbett House Prices in Christchurch 1985 1985 HP 9 Kerr Aesthetic Features of the Kawarau Gorge 1985 1985 CVM 10 Kerr, Sharp and Gough Visit to Mt Cook National Park 1986 1984 TC 11 Sandrey Canoeing at Wanganui River and Visit to Hanmer Forest Park 1986 1985 TC, CVM 12 Kerr Tramping in Greenstone & Caples Valleys 1987 1986 CVM 13 Kirkland Preservation of Whangamarino Wetland 1988 1987 CVM 14 Kerr and Manfredo Recreation at Arthur's Pass National Park and Tararua Forest Park 1988 1988 CVM 15 Kask and Maani Value of Safer Shelters 1989 1983, 1984, 1986 HP 16 Clough and Meister Recreation at Tongariro National Park 1989 1985 TCM 17 Kerr Value of Mountain Climbing at Mount Cook National Park 1989 1984 TCM 18 Kirkland Environmental Design 1989 not reported CVM 19 Kerr Reduction in Flood Risk from the Waimakariri River 1989 1988 CVM 20 Greer and Sheppard Research on the Biological Control of Clematis vitalba for Native Bush Conservation 1990 1989 CVM 21 Nugent and Henderson Oxford Recreational Hunting Area in Canterbury 1990 1987 TCM 22 Riley and Scrimgeour Kauaeranga Valley 1990 1990 CVM 23 Walker Kaitoke Regional Park recreation 1990 1985 TCM 24 Fahy and Kerr Royal Albatross chick fatality research and Life Saving Beach Patrols 1991 1990 CVM 25 Kane Hollyford Valley Track 1991 1990 CVM 26 Welsh Christchurch Domestic Water 1991 1991 CVM 27 Guria and Miller Value of a Statistical Life 1991 1989/90 CVM 28 Lambert, Saunders and Williams Upgrading Dunedin City's Sewage Treatment and Disposal System 1992 1992 CVM 29 Lock Possum Control Programme - For Wildlife Protection and Conservation of Species 1992 1991 CVM 30 Beanland Preservation of Aorangi Awarua Forest 1992 1991 CVM 31 Lynch and Weber Ashburton River Water Instream Values 1992 1991 CVM 32 Walker Recreation at Bottle Lake Forest 1992 1989 TCM, CVM 33 Killerby Recreational Resources at Western King Country 1992 1991 CVM 34 Mortimer, Sharp and Craig Conservation Benefits of Little Barrier Island 1993 1991 CVM 35 Heylen Research Centre Value of Travel Time Savings 1993 1993 CM 36 Mayer Methven Recreational Lake Project 1994 1993 CVM 37 Cocklin, Fraser and Harte Recreational benefits of the in-stream flows of the Upper Wanganui and Whakapapa Rivers 1994 1988 TCM 38 Gan and Zwart Waterfowl Hunting Lease 1994 Not reported HP 39 Vadnjal and O'Connor Existence Value of the Rangitoto Island 1994 Not reported CVM 40 Kerr and Cullen Possum Protection of the Forest at the Paparoa National Park 1995 1992 CVM 41 Omwenga Improved Water Quality of the Manawatu River 1995 1994 CVM 42 Moyle Conservation of Endangered Species 1995 1995 GT 26 Study No. Author/s Item Valued Publication Year Valuation Year Valuation Method 43 Works Consultancy Services Stoke Bypass Property Price Changes 1995 1995 EO 44 Kerr Entrance Fees in Wellington Parks 1996 1994 CVM 45 McDermott Fairgay Group and Valuation Technologies Te Puke Highway Bypass 1996 1996 CVM 46 McDermott Miller Transport System Improvements 1996 1996 CM 47 Williamson Water Quality Improvement of the Orakei Basin 1997 1997 CVM 48 McBeth Tongariro River Recreational Fishing 1997 1997 TCM, CVM 49 McDermott Fairgay Group Ltd. Attendance at the Wellington Street Race 1997 1996 CVM 50 Beca Carter Hollings and Ferner Ltd and Malcolm Hunt Associates Road Noise Reduction 1997 1993 CVM, HP 51 Ball, Cullen and Saunders Recreation at Auckland Regional Council Parks 1997 1995/96 BT 52 Symonds Travers Morgan (NZ) Ltd and McDermott Miller Ltd Sealing Unsealed Roads 1997 1994 CVM, CM 53 McDermott Miller Ltd Value of Travel Time Savings 1997 1997 CM 54 Awatere and Scrimgeour Improved Water Quality at the Manukau Harbour 1998 1996 CVM 55 Nelson Pukekohe Groundwater Improvement 1998 1997 CVM 56 Bateman, Brouwer, Langford and Saunders Skin Protection from Sunscreen 1998 1997 CVM 57 Guria, Jones-Lee and Loomes Value of Human Life 1998 1997/98 CVM 58 Farrelly, Koorey, Mitchell, Nicholson and Wong-Toi Highway Passing Lanes 1998 1998 CVM 59 Saunders Premium for Organic Produce 1999 1998 CVM 60 Patterson and Cole NZ Land-based Biodiversity 1999 1994 BT 61 Montgomery Watson Recreational Lake 1999 1999 CVM 62 Cole and Patterson Waikato Ecosystem Services 1999 1997 BT 63 McKinney Light Rail Transportation 1999 1998 CVM 64 Moore Community Sewage Schemes 1999 1998 CVM 65 Beca Carter Hollings and Ferner Ltd Upgrading of State Highway 3 1999 Not reported CVM 66 McDermott Miller Transmission Gully Motorway 1999 1999 CVM 67 Radovich and Foster Value Travel Time Savings in Tauranga 2000 1999 CM 68 Kerr Water Quality Improvement in the Lower Waimakariri River 2000 1992 CVM 69 Booz-Allen & Hamilton Value of Travel Time Savings 2000 1999 CM 70 Kerr University Facilities 2000 1999 CVM 71 Kerr and Greer Salmon Angling at the Rangitata River 2000 2000 CVM 72 Bond and Hopkins Presence of Transmission Lines on Residential Properties 2000 1983- 1993 HP 73 White, Sharp, and Kerr Maintenance of the Waimea Groundwater System 2001 1999 CVM 74 Lee Preservation of Recreational Areas in the Whangaroa Harbour 2001 2000 CVM 75 Wheeler and Damania NZ Recreation Fishing 2001 1999 CVM 76 Kerr, Sharp and White Domestic Water Supply in Christchurch 2001 2000 CVM 77 Kerr and Welsh Water Pollution Reduction 2001 2001 CVM 78 Quazi Flood Protection in the Lower Waikato 2002 2001 CVM 79 McDermott Miller Highway bypass 2002 2002 CVM 80 Beca Carter Hollings & Ferner Mike Copeland Forsyte Research Steer Davies Gleave Ian Melsom Transportation Convenience and Safety 2002 2001 CM 81 Craig Preservation of Trees in 15 NZ Cities 2003 2003 CVM 82 Kerr and Sharp Water Quality 2003 2002 CM, BT 27 Study No. Author/s Item Valued Publication Year Valuation Year Valuation Method 83 Kerr, Sharp and White Maintenance of Christchurch River Flows 2003 2000 CVM 84 Kerr, Hughey and Cullen Marine Recreational Fishing License 2003 2002 CVM 85 Cullen, Kerr and Hughey Government Budget on Health, Education, Environment, Income Support 2003 2002 CM 86 Bicknell, Lamb and Kaye-Blake Labeling of Genetically Modified Food 2003 2002 CVM 87 Kaval, Hughes and Scrimgeour Te Kouma Farm Park 2004 2004 BT 88 Kerr, Sharp, and Leathers Preservation Value of Rakaia River 2004 1983 TCM, CVM 89 Kaval Recreational Value of the Maungatautari Ecological Island 2004 2004 BT 90 Kerr and Greer Rangitata River Salmon Angling 2004 2000 TCM, CVM 91 Sharp and Kerr Angling at the Waitaki Catchment 2005 2004 BT 92 J. Kerr Residential Land Values in New Zealand 2005 1991- 2005 HP