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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.

Suggested Citation

  • Patrick J. Walsh & William Wheeler, 2012. "Water Quality Index Aggregation and Cost Benefit Analysis," NCEE Working Paper Series 201205, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jul 2012.
    • Handle: RePEc:nev:wpaper:wp201205
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    File URL: https://www.epa.gov/environmental-economics/working-paper-water-quality-index-aggregation-and-cost-benefit-analysis
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    References listed on IDEAS

    as
    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, June.
    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.
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    Cited by:

    1. Daissy Milena Díaz-Casallas & Mario Fernando Castro-Fernández & Elvira Bocos & Carlos Enrique Montenegro-Marin & Rubén González Crespo, 2019. "2008–2017 Bogota River Water Quality Assessment Based on the Water Quality Index," Sustainability, MDPI, vol. 11(6), pages 1-17, March.
    2. Minjuan Zhao & Robert Johnston & Eric Schultz, 2013. "What to Value and How? Ecological Indicator Choices in Stated Preference Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 3-25, September.
    3. Ivana I. Mladenović-Ranisavljević & Lj. Takić & Đ. Nikolić, 2018. "Water Quality Assessment Based on Combined Multi-Criteria Decision-Making Method with Index Method," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 32(7), pages 2261-2276, May.
    4. 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.

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    More about this item

    Keywords

    water quality; valuation; cost-benefit analysis;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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