Defining environmental attributes as external costs in choice experiments: A discussion

After doing a CE literature review to examine the dominant trends around the definition of environmental attributes in terms of their identification as external benefits or costs, their description through qualitative or quantitative attribute level labels, their number of levels and their assumed relationship with utility (i.e. linear vs non-linear), three main conclusions have been drawn. First, definition of environmental attributes as external costs has been uncommon. Second, only one single parameter has been estimated for most of them, in which cases the number of quantitative and qualitative attributes has been similar. Third, nonlinear effects have been mainly depicted through use of qualitative attributes. In this context, this paper examines the policy relevance of defining the environmental attributes as external costs when the assessment of welfare losses induced by potential impacts from polluting activities is the issue. It shows how a cost-based attribute definition allows identifying the environmental attributes through impact pathway analyses not only enabling links between welfare estimates and actual impact magnitudes but also promoting the description of attribute levels in quantitative terms.