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Water quality indices and benefit-cost analysis

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  • Walsh, Patrick J.
  • Wheeler, William J.

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. The net benefits of the rule vary from negative to positive over this range of estimates. 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.

Suggested Citation

  • Walsh, Patrick J. & Wheeler, William J., 2013. "Water quality indices and benefit-cost analysis," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 4(1), pages 81-105, March.
    • Handle: RePEc:cup:jbcoan:v:4:y:2013:i:01:p:81-105_00
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    Cited by:

    1. Choi, Dong Soon & Ready, Richard, 2021. "Measuring benefits from spatially-explicit surface water quality improvements: The roles of distance, scope, scale, and size," Resource and Energy Economics, Elsevier, vol. 63(C).
    2. Robert J. Johnston & Elena Y. Besedin & Benedict M. Holland, 2019. "Modeling Distance Decay Within Valuation Meta-Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 657-690, March.
    3. Stephen Newbold & R. David Simpson & D. Matthew Massey & Matthew T. Heberling & William Wheeler & Joel Corona & Julie Hewitt, 2018. "Benefit Transfer Challenges: Perspectives from U.S. Practitioners," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(3), pages 467-481, March.
    4. Robert J. Johnston & Kevin J. Boyle & Maria L. Loureiro & Ståle Navrud & John Rolfe, 2021. "Guidance to Enhance the Validity and Credibility of Environmental Benefit Transfers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(3), pages 575-624, July.
    5. Moeltner, Klaus & Puri, Roshan & Johnston, Robert J. & Besedin, Elena & Balukas, Jessica A. & Le, Alyssa, 2023. "Locally-weighted meta-regression and benefit transfer," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    6. Rolfe, John & Windle, Jill & McCosker, Kevin & Northey, Adam, 2018. "Assessing cost-effectiveness when environmental benefits are bundled: agricultural water management in Great Barrier Reef catchments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(3), July.
    7. Wainger, L. & Loomis, J. & Johnston, R. & Hansen, L. & Carlisle, D. & Lawrence, D. & Gollehon, N. & Duriancik, L. & Schwartz, G. & Ribaudo, M. & Gala, C., "undated". "Ecosystem Service Benefits Generated by Improved Water Quality from Conservation Practices," C-FARE Reports 260679, Council on Food, Agricultural, and Resource Economics (C-FARE).
    8. John Rolfe & Jill Windle & Kevin McCosker & Adam Northey, 2018. "Assessing cost‐effectiveness when environmental benefits are bundled: agricultural water management in Great Barrier Reef catchments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(3), pages 373-393, July.
    9. Zach Raff & Andrew Meyer, 2022. "CAFOs and Surface Water Quality: Evidence from Wisconsin," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 161-189, January.
    10. John Sorrentino & Mahbubur Meenar & Donald Wargo, 2019. "Residential Land Use Change in the Wissahickon Creek Watershed: Profitability and Sustainability?," Sustainability, MDPI, vol. 11(21), pages 1-31, October.
    11. Margaret W. Gitau & Jingqiu Chen & Zhao Ma, 2016. "Water Quality Indices as Tools for Decision Making and Management," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 30(8), pages 2591-2610, June.
    12. Patrick J. Walsh & J. Walter Milon, 2016. "Nutrient Standards, Water Quality Indicators, and Economic Benefits from Water Quality Regulations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 643-661, August.
    13. Ainsworth, Penelope & Bell, Kendon & Barker, Adam, 2024. "An agent-based approach to QUICKly valuing the benefits of agricultural research and extension," Agricultural Systems, Elsevier, vol. 216(C).
    14. Søren B. Olsen & Cathrine U. Jensen & Toke E. Panduro, 2020. "Modelling Strategies for Discontinuous Distance Decay in Willingness to Pay for Ecosystem Services," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(2), pages 351-386, February.
    15. Newbold, Stephen C. & Johnston, Robert J., 2020. "Valuing non-market valuation studies using meta-analysis: A demonstration using estimates of willingness-to-pay for water quality improvements," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).

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