Households' willingness to pay for water for the environment in an urban setting

Abstract

Continued population growth, and climate change are placing stress on many of the world's water sources and this often manifests in environmental damage to rivers and wetlands. Most of the published literature around allocating more water to the environment considers trade-offs with agriculture. In contrast this study focusses on scenarios for different potable water supplies in cities and thus adds a novel perspective on the value of riverine restoration. This study sheds light on urban households' willingness to pay for more water to be allocated to the environment where it directly competes with their own water demands. The study uses two stated preference techniques (choice modelling and best-worst scaling) to establish the value of environmental water and the motivations for households paying for an increase in environmental water reserves. The study is set in Australia's fastest growing city, Melbourne, although the approach and method have implications for other developed-world settings. The paper also offers practical advice on the management of water allocated for different uses. Overall, the results indicate a positive and significant willingness to pay by households for additional water entitlements. Importantly, this provides a benchmark for contemplating the costs and benefits of activating alternative water supplies, such as desalination, to free up rainwater for environmental purposes.

Keywords: Environmental water; Environmental water entitlements; Mixed logit; Water management; Water policy; Willingness to pay.