Exploring Health and Environmental Costs of Food Workshop Summary (2012) / Chapter Skim
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5 Attaching Value to Costs and Benefits
5 Attaching Value to Costs and Benefits
Pages 53-66
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From page 53... ...
, James Hammitt discussed challenges to quantifying and monetizing external costs and benefits and issues to consider when conducting a similar study on the cost of food. Anna Alberini, associate professor of economics in the Department of Agricultural and Resource Economics at the University of Maryland, College Park, discussed how economists attach value to external costs and benefits using estimates of WTP and "value of a statistical life" (VSL)
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From page 54... ...
Hammitt discussed major challenges to completing the statement of task for that report; described key results; and highlighted questions to consider for a study on the cost of food. Statement of Task Key components of the statement of the task were to (italics added by Hammitt for emphasis)
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From page 55... ...
29. Identifying Internalized Externalities One key component of the statement of task was to evaluate key externalities "that are not or may not be fully incorporated into the market price .
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From page 56... ...
Use of Graphics Graphics used in the energy report included flow charts showing which elements of the system were examined; pie charts and bar graphs showing consumption by source and use by sectors; and tables showing which components of the system were examined using quantitative versus qualitative methodologies (see Figure 5-1a-d)
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From page 57... ...
Total consumption = 101.5 quadrillion Btu FIGURE 5-1 Examples of graphics used in The Hidden Costs of Energy: (a) the flow of major energy sources and uses; (b)
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From page 58... ...
. Btu = British thermal unit, MA = quantitative modeling analysis conducted by the committee, QE = qualitative evaluation, QL = quantitative information from the literature.
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From page 59... ...
First, the committee's analysis of electricity, which was based partly on a detailed modeling of air pollution mortality, revealed that the dominant outcome is particulate matter mortality associated with coal and natural gas plants, but with a great deal of heterogeneity among plants. Average damage among the 406 coal-fired electric plants across the United States is $160 million per plant, but with plants in the top decile causing an average $666 million per plant (in 2007)
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From page 60... ...
Second, the committee's analysis of on-road transportation, which involved using life cycle analysis to examine a wide range of fuels and engine technologies, revealed that total damages were remarkably similar across different fuel/engine technologies. For example, health damages caused by light-duty automobiles were nearly 1.5 cents per vehicle mile traveled for almost all fuel/engine technologies, with liquid hydrogen being the only outlier.
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From page 61... ...
Alberini discussed how economists attach value using WTP assessments; how economists quantify WTP for a marginal change in mortality risk (i.e., VSL) ; and factors to consider before using VSL and other WTP estimates typically measured in nonfood contexts in a study on the costs of food.
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From page 62... ...
"So we are talking about relatively large numbers," she said, "even for relatively simple episodes." At the other extreme are mortality risks. When estimating WTP to reduce a mortality risk, economists typically use either the VSL or the value of a statistical life year (VOLY)
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From page 63... ...
. VSL estimates derived from housing price hedonics are typically comparable to those estimated using compensating wage values.
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From page 64... ...
and indicate how much they are willing to pay for them." Stated Preferences The stated preferences method involves asking people how much they would be willing to pay for a reduced risk of dying by asking them to choose between two alternative interventions for reducing risk. For example, in one of her studies, Alberini and colleagues asked respondents which of two interventions they preferred: (1)
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From page 65... ...
Economists favor what is known as the damage function approach, which involves quantifying the physical effects and then attaching a value to those effects. In addition to the methods discussed above, the monetary value of the effects can also be estimated using the travel cost method (a method that infers the value people place on visiting some site, generally for recreational purposes)
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From page 66... ...
2007. Valuing environmental amenities using stated choice studies.
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