Table of Contents

Choice Experiments Informing Environmental Policy

Choice Experiments Informing Environmental Policy

A European Perspective

New Horizons in Environmental Economics series

Edited by Ekin Birol and Phoebe Koundouri

This innovative book is a compilation of state-of-the-art choice experiment studies undertaken in several European Union (EU) countries, including Finland, France, Greece, Ireland, Italy, Poland, Spain and the United Kingdom. The case studies presented concern a variety of environmental, agricultural and natural resource issues – such as the management of water resources, forests and agricultural landscapes; conservation of biodiversity and cultural heritage; noise pollution reduction and food labeling. The book highlights how the choice experiment method can be employed to inform efficient and effective design and implementation of various EU level agricultural and environmental policies and directives, including the Common Agricultural Policy, Water Framework Directive, Forestry Strategy, Habitats Directive and food labeling systems.

Chapter 1: Introduction

Ekin Birol and Phoebe Koundouri

Subjects: economics and finance, behavioural and experimental economics, environmental economics, valuation, environment, environmental economics, valuation


Ekin Birol and Phoebe Koundouri BACKGROUND The Choice Experiment Method (CEM) is a Stated Preference Method (SPM) of environmental valuation, adopted from marketing and transport economics literature (see for example, Louviere and Hensher, 1982; Louviere and Woodworth, 1983; Louviere 1988; Louviere 1992). Similarly to the other SPM, the Contingent Valuation Method (CVM), CEM can elicit the total economic value (that is, both use and non-use values) of nonmarket environmental goods, which can in turn be used to inform the design of efficient and effective policies for their sustainable management and conservation. The CEM has a theoretical grounding in Lancaster’s characteristics theory of value (Lancaster, 1966), and an econometric basis in models of random utility (Thurstone 1927; Manski, 1977). Consequently, this method is based on the notion that any environmental good can be described in terms of its characteristics, or attributes, and the levels that these attributes take (with or without a policy change). Once attributes and their levels are identified, experimental design theory is used to generate different profiles of the environmental good in terms of its attributes and the levels these attributes take. These profiles are then assembled in choice sets which are presented to the respondents, who are asked to state their preferences on multiple occasions. Hanley et al. (1998) define the CEM as a highly ‘structured method of data generation’. One of the attributes which is typically included in a choice experiment study is a monetary cost or benefit...