Food and Resource Economic Institute Report No. 179 ECONOMIC VALUATION OF THE VISUAL EXTERNALITIES OF OFF-SHORE WIND FARMS Jacob Ladenburg Alex bubgaard Louise Martensen Jasper Tranberg Copenhagen 2005 Table of contents: Preface.......................................................................................................................... 11 Executive Summary.................................................................................................... 13 Extended Abstract of Results........................................................................................ 16 Willingness to Pay for Reduced Visual Externalities............................................19 1. Introduction............................................................................................................23 Aim and Approach.................................................................................................24 2. Economic Valuation and Cost Benefit Analysis................................................... 26 2.1. Cost-Benefit Analysis.................................................................................. 26 2.2. Economic Valuation.....................................................................................27 2.3. Market-Based Methods................................................................................ 28 2.3.1. Travel Cost Method........................................................................ 28 2.3.2. Hedonic House Price Method........................................................ 29 2.4. Survey-Based Methods............................................................................... 29 2.4.1. Contingent Valuation Method (CVM)............................................30 2.4.2. Choice Modelling Methods............................................................ 30 2.4.3. Choice Experiments (CE)............................................................... 31 2.4.4. Contingent Ranking (CR)............................................................... 32 2.4.5. Contingent Rating (CRT)............................................................... 32 2.5. Choice of Method in the Study .................................................................... 33 3. The Survey .............................................................................................................35 3.1. Definition of the Questionnaire................................................................... 35 3.1.1. The Valuation Scenario.................................................................. 35 3.1.2. Focus Groups.................................................................................. 37 3.1.3. Cover Letter................................................................................... 38 3.1.4. The Attributes Defining the Alternatives ........................................39 3.1.5. Alternative Attributes ..................................................................... 40 3.2. Definition of Attributes and Variables ........................................................42 3.2.1. Hypothesis and Interaction Effects.................................................43 3.3. Properties of the Statistical Design.............................................................. 48 3.3.1. Full Factorial Design...................................................................... 49 3.3.2. Fractional Factorial Design............................................................. 49 Economic valuation of the visual externalities of off-shore wind farms FOI 3 3.3.3. Design Efficiency........................................................................... 50 3.3.4. Construction of Fractional Factorial Designs.................................52 3.4. Sample Populations and Sample Sizes........................................................ 54 4. Analysis of Data and Model Design....................................................................57 4.1. Choice Experience Models...........................................................................57 4.1.1. Discrete Choices............................................................................. 57 4.1.2. The Random Utility Model............................................................. 59 4.1.3. The Functional Form of the Utility Function..................................61 4.1.4. The Binary Logit Model................................................................. 62 4.1.5. Limitations of the Logit Model....................................................... 63 4.1.6. Random Effect Model.................................................................... 64 4.1.7. Estimations of the Marginal Rates of Substitution and WTP.......65 4.2. Construction of Models.............................................................................. 67 4.2.1. Background of Models................................................................... 67 4.2.2. Methods Used for Construction of Models.....................................69 5. Analysis of Samples and Respondents.................................................................73 5.1. Response Rate and Distribution between Samples.................................... 73 5.2. Socio Economic Analysis of Samples........................................................74 5.2.1. Gender .............................................................................................75 5.2.2. Education....................................................................................... 75 5.2.3. Income........................................................................................... 76 5.2.4. Age..................................................................................................77 5.2.5. Summery........................................................................................ 78 5.3. Socio-economic Analysis Between Models...............................................79 5.3.1. Gender .............................................................................................80 5.3.2. Education....................................................................................... 80 5.3.3. Income........................................................................................... 82 5.3.4. Age ................................................................................................ 85 5.3.5. Summary........................................................................................ 87 5.4. Distribution of Blocks between Samples and Models............................... 87 5.4.1. Distribution of Choice Set in all Samples....................................... 87 5.4.2. Distribution of Choice set in NA Sample....................................... 88 5.4.3. Distribution in the Horns Rev Sample............................................ 89 5.4.4. Distribution in the Nysted Sample..................................................90 5.4.5. Test of Uniform Distribution.......................................................... 91 4 FOI Economic valuation of the visual externalities of off-shore wind farms 6. Attitudes towards Development in Wind Power Generation.............................. 93 6.1. Attitudes towards Energy Policy in General...............................................93 6.1.1. Choice of Energy Source................................................................ 93 6.1.2. CO2 Reduction................................................................................ 94 6.2. Attitudes towards Land-based Wind Turbines ............................................95 6.2.1. Attitudes towards Existing Land-based Wind Turbines................ 95 6.2.2. Attitude towards New Land-based Wind Turbines ........................96 6.2.3. Visual Impact of Land-based Wind Turbines .................................97 6.3. Attitudes towards Off-shore Wind Farms.................................................... 98 6.3.1. Attitudes towards Existing Off-shore Wind Farms........................98 6.3.2. Attitudes towards New Off-shore Wind Farms..............................99 6.3.3. Visual Impacts of Off-shore Wind Farms..................................... 100 6.3.4. Impact on Birdlife and Life in the Sea.......................................... 103 6.4. Concluding Remarks..................................................................................104 7. Result of Estimation of WTP.............................................................................107 7.1. National Sample.........................................................................................107 7.1.1. Basic Model...................................................................................107 7.1.2. Certain Choice Model....................................................................109 7.1.3. Rational Choice Model..................................................................111 7.1.4. Comparisons of WTP Estimates across Models...........................113 7.2. Nysted Sample............................................................................................114 7.2.1. Basic Model...................................................................................115 7.2.2. Certain Choice Model....................................................................117 7.2.3. Rational Choice Model................................................................ 118 7.2.4. Comparison of WTP Estimates across Models.............................120 7.3. Horns Rev Sample...................................................................................
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