Cities as water supply catchments – Economic valuation (Project A1.1)

Overview

This project’s main objectives are to identify the willingness to pay for stormwater harvesting; to quantify the contribution of urban water amenities to property values; and to to determine the optimal portfolio of urban water supply sources.

These objectives will be delivered through three individual but related sub-projects. The first project (Project 1) combines methodologies to gain the best possible understanding of willingness to pay for stormwater management. The second (Project 2) applies techniques of the hedonic pricing model to the work on willingness to pay and the third (Project 3) applies dynamic techniques to the issues of stormwater management.  Hedonic pricing is a model identifying price factors according to the premise that price is determined both by internal characteristics of the good being sold and external factors affecting it.

Key outcomes

The project provides a monetary evaluation of non-market benefits of stormwater management in metropolitan areas in Australia.

In particular, the project has:

• identified preliminary monetary values and preferences for stormwater harvesting and determine the willingness to pay for stormwater harvesting in a range of different ‘markets’ and contexts such as if the community has recently experienced flooding;
• explore how individuals’ risk aversion influences their willingness to pay for different environmental services;
• explain the variation of the willingness to pay for the benefits of stormwater management between different Australian states and cities; and
• support the development of business cases for water sensitive city projects and programs by allocating nonmonetary values to a range of benefits for use in cost-benefit analyses.

This project has contributed research toward an industry note  Valuing stormwater management: who is willing to pay?