Review of non-market values of water sensitive systems and practices: An update Asha Gunawardena, Fan Zhang, James Fogarty and Sayed Iftekhar 2 | Review of non-market values of water sensitive systems and practices: An update Review of non-market values of water sensitive systems and practices: An update Comprehensive economic evaluation framework (IRP2) IRP2-3-2017 Authors Asha Gunawardena1,2, Fan Zhang2, James Fogarty1,2 and Sayed Iftekhar1,2 1 CRC for Water Sensitive Cities 2 Agricultural and Resource Economics, UWA School of Agriculture and Environment © 2017 Cooperative Research Centre for Water Sensitive Cities Ltd. This work is copyright. Apart from any use permitted under the Copyright Act 1968, no part of it may be reproduced by any process without written permission from the publisher. Requests and inquiries concerning reproduction rights should be directed to the publisher. Publisher Cooperative Research Centre for Water Sensitive Cities Level 1, 8 Scenic Blvd, Clayton Campus Monash University Clayton, VIC 3800 p. +61 3 9902 4985 e. [email protected] w. www.watersensitivecities.org.au Date of publication: December 2017 An appropriate citation for this document is: Gunawardena, A., Zhang, F., Fogarty, J., Iftekhar, M. S., (2017). Review of non-market values of water sensitive systems and practices: An update. Melbourne, Australia: Cooperative Research Centre for Water Sensitive Cities Disclaimer The CRC for Water Sensitive Cities has endeavoured to ensure that all information in this publication is correct. It makes no warranty with regard to the accuracy of the information provided and will not be liable if the information is inaccurate, incomplete or out of date nor be liable for any direct or indirect damages arising from its use. The contents of this publication should not be used as a substitute for seeking independent professional advice. CRC for Water Sensitive Cities | 3 Contents Executive summary ................................................................................................................................................. 5 Glossary of selected terms ..................................................................................................................................... 7 Green infrastructure .............................................................................................................................................. 10 Amenity values ............................................................................................................................................ 10 Recreational values ..................................................................................................................................... 13 Health benefits due to reduced air pollution ................................................................................................ 13 Improvements in physical and mental health .............................................................................................. 14 Energy saved .............................................................................................................................................. 15 Ecological and environmental value of water ..................................................................................................... 26 Water quality value ...................................................................................................................................... 26 Habitat conservation value .......................................................................................................................... 28 Aesthetic value ............................................................................................................................................ 28 Economic value of local stormwater management ..................................................................................... 29 Climate change mitigation .................................................................................................................................... 31 Urban heat island effect mitigation .............................................................................................................. 31 Carbon sequestration .................................................................................................................................. 32 Reduced carbon emissions ......................................................................................................................... 32 Non-point source pollution ................................................................................................................................... 39 Value of pollution removal based on abatement cost ................................................................................. 39 Flood hazard reduction ......................................................................................................................................... 42 Evaluate flood damage ............................................................................................................................... 42 Evaluate flood risks and protection measures ............................................................................................ 44 Recharge and improved groundwater quality ..................................................................................................... 46 Direct use values of groundwater................................................................................................................ 46 Non-use values of groundwater .................................................................................................................. 48 Water supply and pricing ...................................................................................................................................... 52 Averting behavior studies ............................................................................................................................ 52 Contingent valuation studies ....................................................................................................................... 53 4 | Review of non-market values of water sensitive systems and practices: An update Choice experiments examples .................................................................................................................... 56 Hedonic price studies .................................................................................................................................. 56 Other studies ............................................................................................................................................... 56 Wastewater management ...................................................................................................................................... 62 Contingent valuation studies ....................................................................................................................... 62 Choice experiment studies .......................................................................................................................... 63 Shadow price evaluation method ................................................................................................................ 63 Cost-benefit studies .................................................................................................................................... 64 Conclusions ............................................................................................................................................................ 67 Appendix A: Non-market valuation methods ...................................................................................................... 68 Averting behavior approach ........................................................................................................................ 69 Stated preference techniques ..................................................................................................................... 69 Revealed preference techniques ................................................................................................................ 70 Other methods ............................................................................................................................................. 71 References .............................................................................................................................................................. 72 CRC for Water Sensitive Cities | 5 Executive summary Water sensitive systems and practices provide multiple indirect benefits such as environmental and ecological services. However, due to a lack of information on the monetized value of these services many of these services are not considered during investment decision making. The compilation and synthesis of existing non-market valuation estimates of the monetary value of water sensitive systems and practices, by making reference values readily available, can encourage the incorporation of indirect benefit value information in the investment decision process. Reference information on the monetary value of indirect benefits can also be used when conducting comprehensive post-hoc analysis of investments in water management projects. This review presents the findings from an extensive survey of the literature on the key benefits and services delivered through the use of water sensitive systems