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_'Applied Environmental Economics'. The complex real-world interactions between the economy and the environment form both the focus of and the main barrier to applied research within the field of environmental economics. However, geographical information systems (GIS) allow economists to tackle such complexity head on by directly incorporating diverse datasets into applied research rather than resorting to simplifying and often unrealistic assumptions. This innovative book applies GIS techniques to spatial cost-benefit analysis of a complex and topical land use change problem – the conversion of agricultural land to multipurpose woodland – looking in detail at issues such as opportunity costs, timber yield, recreation, carbon storage, etc., and embracing cross-cutting themes such as the evaluation of environmental preferences and the spatial transfer of benefit functions. Ian J. Bateman is Professor of Environmental Economics at the School of Environmental Sciences, University of East Anglia, and Senior Research Fellow at both the Centre for Social and Economic Research on the Global Environment (CSERGE) and the Centre for the Economic and Behavioural Analysis of Risk and Decision (CEBARD), University of East Anglia. His previous publications include Economic Valuation with Stated Preference Techniques (2002, with Richard Carson et al.), Valuing Environmental Preferences (1999, edited with Ken Willis), and Environmental Economics (1993, with R. Kerry Turner and David Pearce). He is Executive Editor of the journal Environmental and Resource Economics. Andrew A. Lovett is Senior Lecturer at the School of Environmental Sciences, University of East Anglia. His research focuses on the application of geographical information systems, and he has previously published articles in Risk Analysis, Social Science & Medicine, the Journal of Environmental Management, and the International Journal of GIS. He is currently chair of the Geography of Health Research Group of the Royal Geographical Society–Institute of British Geographers. Julii S. Brainard is Senior Research Associate at CSERGE, University of East Anglia. Her research background includes GIS, benefit transfer, outdoor recreation and environmental equity. Applied Environmental Economics: A GIS Approach to Cost-Benefit Analysis Ian J. Bateman Andrew A. Lovett Julii S. Brainard Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge United Kingdom Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org 978-0-521-80956-6 © Ian J. Bateman, Andrew A. Lovett and Julii S. Brainard 2003 This book is in copyright. Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published in print format 2003 For Fiona, Ben, Freya and Natasha: my world. With love, Ian. For Mum and Dad. With love and many thanks, Andrew. For Isabel, Dan and John. Con cariño, Julii. Contents List of plates List of figures List of tables Foreword by David W. Pearce Preface Acknowledgements 1 Introduction 2 Recreation: valuation methods 3 Recreation: predicting values 4 Recreation: predicting visits 5 Timber valuation 6 Modelling and mapping timber yield and its value 7 Modelling and valuing carbon sequestration in trees, timber products and forest soils 8 Modelling opportunity cost: agricultural output values 9 Cost-benefit analysis using GIS 10 Conclusions and future directions References Index Page ix xii xv xix xxi 1 15 43 91 111 158 184 219 250 285 293 332 Plates Between pages 266 and 267 1 Predicted timber yield class (YC): (a) Sitka spruce; (b) beech 2 (a) Predicted farm-gate income for sheep farms; (b) Predicted shadow value for sheep farms; (c) Predicted farm-gate income for milk farms; (d) Predicted shadow value for milk farms 3a The farm-gate net benefit of retaining sheep farming as opposed to conversion to conifer woodland (defined as timber plus grants only, i.e. present situation): 6% discount rate 3b The social net benefit of retaining sheep farming as opposed to conversion to conifer woodland (defined as timber, carbon storage and recreation, the latter measured using contingent valuation): 6% discount rate 3c The farm-gate net benefit of retaining milk farming as opposed to conversion to conifer woodland (defined as timber plus grants only, i.e. present situation): 6% discount rate 3d The social net benefit of retaining milk farming as opposed to conversion to conifer woodland (defined as timber, carbon storage and recreation, the latter measured using contingent valuation): 6% discount rate 3e The farm-gate net benefit value of retaining sheep farming as opposed to conversion to broadleaf woodland (defined as timber, carbon storage and recreation, the latter valued using the ITC measure): 6% discount rate 3f The social net benefit of retaining sheep farming as opposed to conversion to broadleaf woodland (defined as timber, carbon storage and recreation, the latter valued using the ITC measure): 6% discount rate 3g The farm-gate net benefit of retaining sheep farming as opposed to conversion to conifer woodland (defined as timber plus grants only, i.e. present situation): 3% discount rate Figures 1.1 The total economic value of woodland 1.2 Representing real-world phenomena as raster or vector data layers 1.3 Costs and benefits of woodland 2.1 Methods for the monetary assessment of non-market and environmental goods 2.2 The value formation process 3.1 Graph of the ratio of stated to GIS-calculated distance against calculated distance 3.2 Comparison of 1 km grid reference with county centroid trip origins 4.1 Travel time zones for the Thetford Forest study 4.2 Digital road network for Wales and the English Midlands 4.3 Population density surface for Wales and the English Midlands 4.4 5 km grid points used to generate the predicted woodland visitors surface 4.5 Woodland recreation demand in Wales: predicted annual total party visits per site 4.6 Woodland recreation demand in north-western Wales: predicted annual total party visits per site 4.7 Predicted value of total annual woodland recreation demand per site using two valuation estimates: (a) lower-bound values based on cross-study analysis of CV values; (b) upper-bound values based on ITC study Page 2 6 8 16 21 79 86 93 98 99 101 103 104 114 131 133 135 149 150 List of figures xi 5.1 Social value for Sitka spruce (annualised equivalent of a perpetual series of optimal rotations). Various yield classes and discount rates 156 5.8 Social value for beech (annualised equivalent of a perpetual series of optimal rotations). Various yield classes and discount rates 156 6.1 Aspect effects for Sitka spruce and beech in differing locations 173 6.2 Predicted timber social NPV sums for perpetually replanted Sitka spruce: 3% discount rate 180 7.1 Total carbon storage curves for unthinned and thinned Sitka spruce: 5% discount rate 190 7.2 Longevity of Sitka spruce timber when put to different uses 192 7.3 Thinning factor for beech 205 7.4 Annual carbon liberation distributions for products and waste expressed as a proportion of total carbon sequestration in wood from one rotation of Sitka spruce 206 7.5 Annual carbon liberation distributions for products and waste expressed as a proportion of total carbon sequestration in wood from one rotation of beech 207 7.6 NPV of net carbon storage in live wood, products and waste from an optimal first rotation of Sitka spruce: 3% discount rate 213 7.7 NPV of net carbon flux (live wood, products, waste and soils), Sitka spruce: 3% discount rate 214 7.8 NPV of net carbon flow (live wood, products, waste and soils) from an optimal first rotation of beech: 3% discount rate 217 Model of a typical CAP price support system 221 Sheep stocking intensity in Wales, 1972 to 1997 227 Location of Forestry Commission sub-compartments of Sitka spruce in Wales (superimposed upon elevation) 283 Tables 1.1 Typical questions that a GIS can be used to answer 2.1 Welfare change measures obtained from expressed preference measures 2.2 WTP for preservation of the Norfolk Broads using various elicitation methods 2.3 Payment vehicle analysis results 2.4 ZTC ITC consumer surplus estimates for six UK forests 3.1 Forest users’ per person per visit recreation values from ZTC studies 3.2 Forest users’ per person per visit recreation values from CV studies 3.3 Woodland recreation values from a cross-study analysis of CV estimates 3.4 Summary WTP responses for the Thetford 1 CV study 3.5 Thetford 1 TC study: consumer surplus estimates for three functional forms 3.6 Summary WTP results: per annum (WTPpa) and per visit (WTPfee) formats 3.7 Stepwise regression of lnWTPpa on significant predictors 3.8 Ключевые слова: references, english midlands, sitka spruce, computing facility, good, standard deviation, price, press, factor, agricultural, uks entry, source, norfolk broads, lovett, site, time, regular grid, pricing technique, applied, random variable, wtp, spruce, natural logarithm, cost, ttwcsss, presented, pricesize curve, wa, analytical power, strategic overbidding, theoretical expectation, environmental economics, bene?t, environment, university, main crop, special scientic, ha, utwcsbe, economic cooperation, road network, macsharry reforms, government, applied environmental, freq, sample, tree, impact, problem, upwardly biased, cv, non-use motif, discount, applied environmental economics, decided, warm-glow bidding, approach, fc ha, allenheld totowa, economic, roger oakes, timber, report, carbon xing, natural log, model, entrance fee, agri-environmental policy, forest, change, sheep, highly correlated, geographically referenced, measure, marginal utility, strictly speaking, english border, biophysical characteristic, bene?ts, individuals preference, fiap running, european communities, predicted, census, van kooten, chris quine, period, ecu billion, beech, pearce, individual, farm surplusha, london, environmental science, modication variable, british trust, signi?cant, journal, purchasing power, cent, policy, entire surface, rate, utwcsi, agriculture, social, study, ttwcsbe, table, smith, biophysical variable, enumeration districts, data, closely resembles, national trust, ith farm, discount rate, number, environmental, variable, year, payment, milk, cell, carbon pool, land, statistically signicant, point, edinburgh, travel expenditure, carbon dioxide, commission, estimate, planting, chapter, lynford stag, function, substantial improvement, area, bateman, income, millennium, result, method, market, net, annum, farmer, annual, work, level, economics, wales, man-made capital, carbon sequestration, european association, carbon, modelling, response, bartholomew database, institutional rule, willis, forestry, issue, road segment, gis, respondent, forestry commission, payment vehicle, national park, lost opportunity, uk ha, welsh border, milk quota, explanatory variable, survey, case, global warming, travel, uk, total, sitka, storage, explanatory power, uk wa, special environmental, fc wa, national assembly, everyday decision-making, conversion, valuation, question, tenants capital, oe dc, gravity-induced drainage, bsu ror, spatial dimension, yc, farm, yield, technical economic, subsidy, resultant shortfall, recreation, east anglia, publisher, woodland, tax relief, soil, map, analysis, visit