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have noted in many cases that subsidizing conservation, like water conserving technology, can stimulate decision-makers to increase usage—the “Rebound Effect.”
However, Nexus projects are often analyzed under a strong assumption that the current economic and technical characteristics will be unchanged. However, this may
not hold as increasing refrigerator efficiency and thus lowering the cost of say
refrigerating food may cause people to buy more refrigerators resulting in less to no
savings in energy.
As a specific example, several western US states subsidized water conserving
irrigation technologies, and assumed that only the equipment would change.
However, Pfeiffer and Lin (2014) analyzed such a case in Kansas and found this
lowered water costs to farmers and stimulated a higher production of irrigated crops,
including expansions onto previously unirrigated lands. The end result was increased
overall water use.
Thus, one needs to consider possible rebound effects when Nexus projects are
implemented to lower water or energy usage and costs.
5.2.3 Non-market Valuation
Nexus projects often alter abundance or characteristics of items that do not trade in
marketplaces such as ecosystem functions, air and water quality, recreational access,
climate, and other phenomena. Economic appraisals of the effects on these items
involve what economists called nonmarket valuation.
Valuing non-market items involves determining how much society would need to
be paid to live with the adverse effect (diminished air or water quality, lost recreation, or climate change), or conversely, how much they would be willing to pay for
the more desirable outcome.
Placing a value on such items may make a project more or less desirable. For
example, replacing a coal-fired generating plant with a solar farm may not be costefficient in some locations. However, the impact of the solar farm on reducing air
pollution and emissions of greenhouse gases may make the project more desirable.
Many techniques of non-market have been introduced. Techniques are usually
divided into two approaches: stated and revealed preference methods. Stated preference method measures individuals’ value for environment quality directly, by
asking them to state their preference for the environment. Revealed preference
method seeks to recover estimates of individuals’ will to pay for environment quality by observing their behavior in related markets (see the detailed discussion in the
estimated “cost of carbon” or, various revealed or, stated preference approaches).
As reviewed in Chap. 9 (Ecosystem), economic valuation reveals the trade-offs
within the Nexus and the impacts of various agricultural systems on the ecosystem
services. Estimating the valuation of an ecosystem involves estimating the way that
the ecosystem is involved with increasing production of market goods then estimating the marginal effect of a change in ecosystem services (i.e., altered water quantity
or quality as discussed in Hanley et al. 2002). These ecosystem services can involve
many diverse items such as changes in spawning habitat for commercial fish species
B. A. McCarl and Y. Yang
have noted in many cases that subsidizing conservation, like water conserving technology, can stimulate decision-makers to increase usage—the “Rebound Effect.”
However, Nexus projects are often analyzed under a strong assumption that the current economic and technical characteristics will be unchanged. However, this may
not hold as increasing refrigerator efficiency and thus lowering the cost of say
refrigerating food may cause people to buy more refrigerators resulting in less to no
savings in energy.
As a specific example, several western US states subsidized water conserving
irrigation technologies, and assumed that only the equipment would change.
However, Pfeiffer and Lin (2014) analyzed such a case in Kansas and found this
lowered water costs to farmers and stimulated a higher production of irrigated crops,
including expansions onto previously unirrigated lands. The end result was increased
overall water use.
Thus, one needs to consider possible rebound effects when Nexus projects are
implemented to lower water or energy usage and costs.
5.2.3 Non-market Valuation
Nexus projects often alter abundance or characteristics of items that do not trade in
marketplaces such as ecosystem functions, air and water quality, recreational access,
climate, and other phenomena. Economic appraisals of the effects on these items
involve what economists called nonmarket valuation.
Valuing non-market items involves determining how much society would need to
be paid to live with the adverse effect (diminished air or water quality, lost recreation, or climate change), or conversely, how much they would be willing to pay for
the more desirable outcome.
Placing a value on such items may make a project more or less desirable. For
example, replacing a coal-fired generating plant with a solar farm may not be costefficient in some locations. However, the impact of the solar farm on reducing air
pollution and emissions of greenhouse gases may make the project more desirable.
Many techniques of non-market have been introduced. Techniques are usually
divided into two approaches: stated and revealed preference methods. Stated preference method measures individuals’ value for environment quality directly, by
asking them to state their preference for the environment. Revealed preference
method seeks to recover estimates of individuals’ will to pay for environment quality by observing their behavior in related markets (see the detailed discussion in the
estimated “cost of carbon” or, various revealed or, stated preference approaches).
As reviewed in Chap. 9 (Ecosystem), economic valuation reveals the trade-offs
within the Nexus and the impacts of various agricultural systems on the ecosystem
services. Estimating the valuation of an ecosystem involves estimating the way that
the ecosystem is involved with increasing production of market goods then estimating the marginal effect of a change in ecosystem services (i.e., altered water quantity
or quality as discussed in Hanley et al. 2002). These ecosystem services can involve
many diverse items such as changes in spawning habitat for commercial fish species
B. A. McCarl and Y. Yang