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Water Quality Index Aggregation and Cost Benefit Analysis

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  • Patrick J. Walsh
  • William Wheeler

Abstract

The water quality index (WQI) has emerged as a central way to convey water quality information to policy makers and the general public and is regularly used in US EPA regulatory impact analysis. It is a compound indicator that aggregates information from several water quality parameters. Several recent studies have criticized the aggregation function of the EPA WQI, arguing that it suffers from “eclipsing” and other problems. Although past papers have compared various aggregation functions in the WQI (usually looking at correlation), this is the first paper to examine these functions in the context of benefit-cost analysis. Using data from the 2003 EPA CAFO rule, the present paper examines four aggregation functions and their impact on estimated benefits. Results indicate that the aggregation method can have a profound effect on benefits, with total benefit estimates varying from $82 million to $504 million dollars. Furthermore, a sensitivity analysis does not find convincing evidence to substitute the current aggregation function, although several changes to the underlying WQI methodology may be warranted.

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File URL: http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2012-05/$File/2012-05.PDF
File Function: First version, 2012
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Bibliographic Info

Paper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 201205.

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Length: 26 pages
Date of creation: Jul 2012
Date of revision: Jul 2012
Handle: RePEc:nev:wpaper:wp201205

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Keywords: water quality; valuation; cost-benefit analysis;

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  1. Robert J. Johnston & Elena Y. Besedin & Richard Iovanna & Christopher J. Miller & Ryan F. Wardwell & Matthew H. Ranson, 2005. "Systematic Variation in Willingness to Pay for Aquatic Resource Improvements and Implications for Benefit Transfer: A Meta-Analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(2-3), pages 221-248, 06.
  2. Van Houtven, George & Powers, John & Pattanayak, Subhrendu K., 2007. "Valuing water quality improvements in the United States using meta-analysis: Is the glass half-full or half-empty for national policy analysis?," Resource and Energy Economics, Elsevier, vol. 29(3), pages 206-228, September.
  3. Ron Johnston, 2005. "On journals," Environment and Planning A, Pion Ltd, London, vol. 37(1), pages 2-8, January.
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