Climate change: evidence review in Agriculture, Forestry, Land Use, Waste

Appendix A3. Review of the monetary values of the wider impacts

Monetary values can be derived from a number of sources including impacts on market prices, changes to costs or willingness to pay for changes to take place (e.g. improvements in environmental quality). Consequently there are differences in what these different approaches actually measure, with non-market approaches that estimate willingness to pay (e.g. contingent valuation, discrete choice experiments) able to capture total economic welfare and hence consumers' surplus. These approaches are also able to include a wider range of co-benefits in valuation scenarios (simultaneous valuation of multiple benefits may be preferred to summation of individual estimates). However, there may be concerns over the robustness of such estimates due to the often hypothetical nature of the changes being valued and the lack of a real transaction. Consequently, market price and cost based values, although arguably less complete, may be considered more defensible.

A further complication is that the direction of change being valued may be important. Implied property rights (for a given existing level of environmental quality) and loss aversion suggest that the value of lost benefits associated with a decline in environmental quality will be higher than the value of benefits gained from an improvement in quality of equal magnitude. We might also expect diminishing margin utility to be observed. For example in the context of water quality, values for changes improvements from poor to moderate or good quality may have higher values that when the change is from good to high quality, even where biological or chemical change is of similar magnitude. There may also be threshold effects, for example where a change from bad to poor status is not considered acceptable or given a lower value than a change from poor to moderate. These potential marginal values are illustrated in Figure 2.

The monetary values are presented in Table 59 with some explanation on their relevance. Further notes can be found in Sections 1.1-A3.13.

Table 59 Monetary values of the wider impacts

	Wider impact	Monetary value	Notes	Reference
WI1	Air quality: NH 3	Low central: £1,843 t -1 Central: £2,363 t -1 High central: £2,685 t -1	Cost of morbidity and mortality based on willingness to pay. Recommended use for UK national evaluation; Relates to pollution from all sources and locations; 2015 prices	Defra 2015
WI2	Air quality: NO x	Low central: £2,020 t -1 Central: £5,050 t -1 High central: £8,080 t -1 Values if PM is also valued: Low central: £1,683 t -1 Central: £4,209 t -1 High central: £6,734 t -1	Cost of morbidity and mortality based on willingness to pay. Recommended use for UK national evaluation; Relates to pollution from agricultural sources; 2015 prices	Defra 2015
WI3	Air quality: PM	Low central: £9,103 t -1 Central: £11,625 t -1 High central: £13,211 t -1	Cost of morbidity and mortality based on willingness to pay, also includes value of building soiling. Recommended use for UK national evaluation; Relates to pollution from agricultural sources; 2015 prices	Defra 2015
WI4	Air quality: other	Values for sulphur oxides : Low central: £1,581 t -1 Central: £1,956 t -1 High central: £2,224 t -1	Cost of morbidity and mortality based on willingness to pay, sulphur oxides values also include materials damage. Recommended use for UK national evaluation; Relates to pollution from all sources and locations; 2015 prices	Defra 2015
WI5	Water quality: Nitrogen leaching	Lowest value: £4,278 nitrate-nitrogen t -1 Highest value: £17,148 nitrate-nitrogen t -1	Nr damage to ecosystems (not including human health) Based on WTP for a 'healthy Baltic Sea' study (achieving 50% reduction in nitrogen load) 2008 prices Water quality monetary values highly depend on the location and the baseline pollution load - values are worked back from proposed change in eutrophication status to required change in nitrogen emissions rather than reflecting a damage cost per unit of nitrogen.	Brink et al. 2011
WI6	Water quality: Phosphorous		No values specific to phosphorous could be identified. Linking impacts to changes in water quality status suggested
WI7	Water quality: other	£911.67 t -1 (all pesticides)	Value based on costs to water companies of pesticide removal (to meeting drinking water standards) in England between 2004-5 and 2008-9 (£92m) divided by average application of all pesticides in England	Own calculation based on NAO 2010 and FERA 2016
	Water quality: general status change	Rivers: £1.81 hh -1 % -1 Lochs: £1.20 hh -1 % -1	Public WTP per household per 1% increase in the proportion of rivers or lochs in good status in Scotland River Basin District	Glenk et al. 2011
WI8	Soil quality		Increased productivity due to higher yields and/or lower costs. Values will depend on chosen soil quality parameter, its initial starting conditions, crop types and cropping systems
WI9	Flood management, water use	Average annual damage cost per flooded property (residential and non-residential) based on main (10 highest) areas of risk across 14 Local Plan Districts: Minimum: £462 Maximum: £13,684 Mean: £2,581 Median: £2,136	Value of flood management and water use will be context specific, e.g. the number and types of property protected from flood damage for different severity and probability. Estimated flood damage values are available in the SEPA Flood Risk Management Strategies	SEPA 2015
WI10	Land cover and land use		Value of land cover/use changes will depend on what is being changed. Move to less intensive production may see reduction in gross margins, but increase in co-benefits covered by other WI categories. Similarly a land use change from agriculture to forestry will change both provisioning services and other ecosystem services co-benefits.
WI11	Biodiversity	Value of BAP habitat improvements (charismatic species): Arable margins: £1.76 - £2.58 ha -1 Blanket bog: £25.24 - £36.56 ha -1 Hedgerows: £26.01 - £37.68 ha -1 Limestone pavement: £42.31 - £57.69 ha -1 Lowland heath: £44.73 - £64.77 ha -1 Low Hay meadow: £21.90 - £31.43 ha -1 Purple moor. grass: £27.96 - £40.55 ha -1 Upland calcareous grassland: £15.93 - £23.45 ha -1 Upland hay meadow: £11.11 ha -1 Upland heath: £29.18 - £42.25 ha -1 Coastal floodplain: £38.36 - £55.53 ha -1 Fens: £5.52 - £8.29 ha -1 Lowland raised bog: £6.36 - £9.54 ha -1 Wet reed beds: £15.96 - £23.40 ha -1 Native woodland: £33.90 - £49.09 ha -1 Arable fields: £0.52 - £0.76 ha -1 Improved grassland: £3.07 - £4.44 ha -1	Values are based on a choice experiment that elicited general public WTP for a range of ecosystem services, these values were then allocated to Biodiversity Action Plan ( BAP) habitats based on expert assessment of the supply of each ecosystem services. The range of values (where identified) reflects two scenarios: 1) the current 'maintenance' area of habitats achieve BAP targets, 2) 'maintenance' area plus restoration and expansion targets are achieved (as per 2006 UK BAP Habitat Targets, http://jncc.defra.gov.uk/Docs/UKBAP_SpeciesTargets-2006.xls). Single values indicate no difference between scenarios, zero values are omitted. The values listed are total UK values for charismatic (animals, amphibians, birds, and butterflies) and non-charismatic (trees, plants, insects and 'other bugs') species divided by habitat extent to determine per ha values.	Christie et al. 2011
WI11	Biodiversity (cont.)	Value of BAP habitat improvements (non-charismatic species): Arable margins: £1.63 - £3.12 ha -1 Blanket bog: £6.57 - £13.10 ha -1 Hedgerows: £3.88 - £7.74 ha -1 Limestone pavement: £7.69 - £19.23 ha -1 Lowland calcareous grass: £3.69 - £7.14 ha -1 Low dry acid grass: £1.79 - £3.57 ha -1 Lowland heath: £9.28 - £18.67 ha -1 Low Hay meadow: £6.67 - £13.33 ha -1 Purple moor. grass: £6.05 - £12.09 ha -1 Upland calcareous grassland: £7.08 - £14.16 ha -1 Upland hay meadow: £0.00 - £11.11 ha -1 Upland heath: £6.30 - £12.55 ha -1 Coastal floodplain: £8.01 - £15.96 ha -1 Fens: £1.66 - £2.76 ha -1 Lowland raised bog: £3.53 - £7.42 ha -1 Wet reed beds: £3.19 - £5.32 ha -1 Native woodland: £8.06 - £16.09 ha -1 Arable fields: £0.34 - £0.67 ha -1 Improved grassland: £0.84 - £1.67 ha -1
WI12	Animal health and welfare		Impacts on livestock growth (time to target liveweight, liveweight achieved) and vetenary costs. Animal welfare values (beyond production and health impacts) have typically been elicited with reference to production system (e.g. caged versus non-caged eggs, stocking density, environmental enrichment) rather than actual welfare outcomes.
WI16	Employment	Type I direct and indirect output multiplier, income effect, employment effect, GVA effect Agriculture ( SIC 01) Output multiplier: 1.39 Income effect: 0.20 Employment effect: 16.84 GVA effect: 0.55 Forestry planting ( SIC 02.1, 02.4) Output multiplier: 1.44 Income effect: 0.34 Employment effect: 18.86 GVA effect: 0.67 Repair and installation of machinery and equipment ( SIC 33) Output multiplier: 1.25 Income effect: 0.43 Employment effect: 9.70 GVA effect: 0.73	Use of Scottish Input-Output tables and multipliers to determine impacts on employment and incomes. Type I multipliers/effects reflect direct and indirect impacts on industry sector and its supply chain; Type II multipliers also include induced effects throughout the economy. Multipliers and effects stated based on impact of £1m additional final demand in sectors relevant to GHG measures ( SIC 33 represents on-farm renewables and AD plant installations). For example, if an additional £5m demand for AD plant installations is identified then direct and indirect impact on employment will be 5 x 9.7 = 49 FTE jobs within the SIC 33 sector and its supply chain; direct, indirect and induced employment throughout the economy will be 5 x 12 = 60 FTEs, indicating an additional 11 FTEs throughout the economy. In terms of employment income, direct and indirect effects will be 5 x 0.43 = £2.15m with a further £0.3m in induced employment income. Care is needed where increases in final demand are not permanent as these employment and income effects will be short-term, there is no proscribed way (i.e. in the Green Book) to account for this.	Scottish Government 2016
WI16	Employment (cont.)	Type II direct, indirect and induced output multiplier, income effect, employment effect, GVA effect: Agriculture ( SIC 01) Output multiplier: 1.51 Income effect: 0.23 Employment effect: 17.93 GVA effect: 0.62 Forestry planting ( SIC 02.1, 02.4) Output multiplier: 1.65 Income effect: 0.39 Employment effect: 20.68 GVA effect: 0.79 Repair and installation of machinery and equipment ( SIC 33) Output multiplier: 1.52 Income effect: 0.49 Employment effect: 12.00 GVA effect: 0.88
WI16	Employment (cont.)	Type I multipliers for forestry: Planting and related services Income effect: 2.1 Employment effect: 1.4 GVA effect: 1.8 Harvesting and related services Income effect: 2.4 Employment effect: 1.8 GVA effect: 2.1 Type II multipliers for forestry: Planting and related services Income effect: 2.5 Employment effect: 1.5 GVA effect: 2.1 Harvesting and related services Income effect: 2.8 Employment effect: 1.9 GVA effect: 2.5		CJC Consulting 2013
WI17	Recycling	Nutrient costs: Nitrogen: £0.67 kg -1 nitrogen (£230 t -1 ammonium nitrate) Energy costs: Red diesel: £0.50 l -1 DERV: £1.17 l -1 Electricity: £0.11 kWh -1	Reduction in energy and material (e.g. purchased nutrients) costs.	SAC 2015
WI18	Human health	QALY: £60,000	Impact on both life years and quality of life based on willingness to pay.	Glover and Henderson 2010
WI20	Cultural impacts	Value of improvements to BAP habitats: Arable margins: £0.41 - £0.54 ha -1 Blanket bog: £17.00 - £21.66 ha -1 Hedgerows: £20.01 - £25.50 ha -1 Limestone pavement: £15.38 - £23.08 ha -1 Lowland calcareous grass: £12.07 - £15.52 ha -1 Lowland heath: £23.52 - £30.06 ha -1 Low Hay meadow: £15.24 - £20.00 ha -1 Upland calcareous grassland: £16.81 - £21.68 ha -1 Upland hay meadow: £11.11 ha -1 Upland heath: £27.32 - £34.81 ha -1 Coastal floodplain: £22.63 - £28.83 ha -1 Lowland raised bog: £8.13 - £10.25 ha -1 Wet reed beds: £3.19 ha -1 Native woodland: £23.63 - £30.13 ha -1 Improved grassland: £3.30 - £4.20 ha -1 Urban community woodland: £2,850 ha -1 year -1 Peri-urban, high facilities: £4,000 ha -1 year -1 Peri-urban, low facilities: £400 ha -1 year -1 Rural, high facilities: £2,400 ha -1 year -1 Rural, low facilities: £180 ha -1 year -1	Values are based on a choice experiment that elicited general public WTP for a range of ecosystem services, these values were then allocated to Biodiversity Action Plan ( BAP) habitats based on expert assessment of the supply of each ecosystem services. The range of values (where identified) reflects two scenarios: 1) the current 'maintenance' area of habitats achieve BAP targets, 2) 'maintenance' area plus restoration and expansion targets are achieved (as per 2006 UK BAP Habitat Targets, http://jncc.defra.gov.uk/Docs/UKBAP_SpeciesTargets-2006.xls). Single values indicate no difference between scenarios, zero values are omitted. The values listed are total UK values for 'sense of place' divided by habitat extent to determine per ha values.	Christie et al. 2011 Bateman et al. 2011

1.1 A3.1 Air quality ( WI1- WI4)

The available value estimates for air pollutants are well established and conform to the UK guidance for policy appraisal. The values for each of the emissions include health impacts in terms of morbidity and mortality, in addition those for PM and sulphur oxides include building soiling and impact on materials respectively. The potential for eutrophication and acidification damage to ecosystems are not included. These values are to be used according to the guidance document provided by Defra (Defra 2011b).

A3.2 Water quality ( WI5- WI7)

Valuation studies with respect to water quality typically elicit the public's WTP for changes in water quality status: as an indicator this is commonly derived from a combination of underlying biological and chemical parameters. In turn water quality status is combined with further indicators (status of beds and banks, flow, and wildlife) to determine ecological status as required by the Water Framework Directive.

There are advantages to this approach: it reflects an outcome that can be more readily understood by those whose values are being elicited without the need for specialist knowledge; it is less sensitive to the context of individual water bodies (e.g. specific pressures) so values are more widely applicable (in terms of value transfer and evaluating a range of management interventions).

In order to estimate the value of changes in specific water quality pressures, such as diffuse pollution from nitrates or phosphorus, it is necessary to link current water quality status to emissions and determine what change in emissions would be required to achieve the desired status change. From such calculations it is then possible to estimate the values per unit change in emissions.

An alternative approach to valuation is to determine the costs that are imposed by pollutants. For example between 2004-5 and 2008-9 water companies in England spent £189m removing nitrates and £92m removing pesticides from water supplies ( NAO, 2010). However there remains a difficulty in relating these figures back to actual emissions of these pollutants such that a unit (per tonne) value can be estimated. Using data on pesticide applications in England ( FERA, 2016) to estimate average pesticide applications over the same period as the cost data indicates that the cost to water companies of removing pesticides was £0.91 per kg of product applied (across all pesticide types). This is a crude figure as it does not account for the actual quantity of pesticides reaching water bodies, or specific types of pesticide that may more likely to reach water (due to crop type, targeted pest or solubility), the timing of applications (relative to water flow and dilution) or their environmental persistence.

Applying a similar approach to the cost of removing nitrates from water supply (using the same area that pesticides were applied to combined with typical nitrogen application rates (kg/ha) for tillage crops) gives a value of £4.58 per tonne of nitrogen applied. This clearly is significantly different from the even the lowest nitrogen leaching value (£4,278/t) but reflects the fact that completely different impacts are being valued. The lower value considers only the cost of removing nitrates from public water supplies rather than the broader range of eutrophication impacts, and is based on costs incurred in meeting a standard rather than WTP. It does not account for the actual degree of nitrate leaching as it is applied to total nitrogen applications, i.e. there is a much larger denominator.

Figure 2 Marginal values for changes in water quality status categories

A3.3 Soil quality ( WI8)

Values will depend on chosen soil quality parameter, its initial starting conditions; the nature of management change, and how this impacts quality parameters; crop types and cropping systems. The types of impact observed may include changes in productivity due to higher or lower yields and/or changes in production costs. Improved soil quality may increase soil fertility and structure leading to improvements in growth and yield and reduced nutrient inputs, enhanced workability may also reduce cultivation costs (see values for WI14 material and energy recycling).

There may also be a number of ecosystem service co-benefits that arise from improved soil quality such as better water retention ( WI9) and higher biodiversity ( WI11).

A3.4 Flood management, water use ( WI9)

Value of flood management and water use will be context specific, e.g. the number and types of property protected from flood damage for different severity and probability. Estimated flood damage values are available in the SEPA Flood Risk Management Strategies.

A3.5 Land cover and land use ( WI10)

Value of land cover/use changes will depend on what is being changed. Move to less intensive production may see reduction in gross margins, but increase in co-benefits covered by other WI categories. Similarly a land use change from agriculture to forestry will change both provisioning services and other ecosystem services co-benefits.

A3.6 Biodiversity ( WI11)

Values are based on a choice experiment that elicited general public WTP for a range of ecosystem services, these values were then allocated to Biodiversity Action Plan ( BAP) habitats based on expert assessment of the supply of each ecosystem service. The range of values (where identified) reflects two scenarios: 1) the current 'maintenance' area of habitats achieves BAP targets, 2) 'maintenance' area plus restoration and expansion targets are achieved (as per 2006 UK BAP Habitat Targets, http://jncc.defra.gov.uk/Docs/UKBAP_SpeciesTargets-2006.xls). Single values indicate no difference between scenarios, zero values are omitted.

The values listed are total UK values for charismatic (animals, amphibians, birds, and butterflies) and non-charismatic (trees, plants, insects and 'other bugs') species divided by habitat extent to determine per ha values.

A3.7 Animal health and welfare ( WI12)

Impacts on livestock growth (time to target liveweight, liveweight achieved) and veterinary costs. Valued via market prices.

Animal welfare values (beyond production and health impacts) have typically been elicited with reference to production system (e.g. caged versus non-caged eggs, stocking density, environmental enrichment) rather than actual welfare outcomes.

A3.8 Crop health ( WI13)

Impacts on crop yield and crop protection costs, specific to crop types. Valued via market prices.

A3.9 Household income ( WI14)

Impacts on aggregate household incomes can be estimated using income effects and multipliers from the Scottish IO tables as per WI16 (employment). Specific regional data (e.g. regional SAM models) would be required to determine spatial distribution using this approach unless the aggregate data can be linked to well defined geographical area (thus limiting leakage).

A3.10 Employment ( WI16)

Scottish Input-Output tables and multipliers can be used to determine impacts on employment and incomes. Type I multipliers/effects reflect direct and indirect impacts on industry sector and its supply chain; Type II multipliers also include induced effects throughout the economy.

Multipliers and effects stated based on impact of £1m additional final demand in sectors relevant to GHG measures ( SIC 33 represents on-farm renewables and AD plant installations).

For example, if an additional £5m demand for AD plant installations is identified then direct and indirect impact on employment will be 5 x 9.7 = 49 FTE jobs within the SIC 33 sector and its supply chain; direct, indirect and induced employment throughout the economy will be 5 x 12 = 60 FTEs, indicating an additional 11 FTEs throughout the economy. In terms of employment income, direct and indirect effects will be 5 x 0.43 = £2.15m with a further £0.3m in induced employment income. Care is needed where increases in final demand are not permanent as these employment and income effects will be short-term, there is no proscribed way (i.e. in the Green Book) to account for this.

Additionally, employment can be valued via WTP, for example rural households were found to be willing to pay £1.08/year for every additional full-time job created by renewable schemes (Bergmann et al. 2006).

A3.11 Human health ( WI18)

Change in number of cases of ill-health. Economic value can be captured through the valuation of quality life years. It may already be captured with respect to other impacts such as air quality where damage costs reflect morbidity and mortality,

Increased potential for physical and recreational activity (e.g. through afforestation). The economic values of new recreational opportunities will be context specific and reflect location (ease of access, remoteness), available substitutes, site facilities and type of activity that are possible. Diminishing marginal utility (as per water quality) is also likely to be observed with respect to site size.

A3.12 Social cohesion, social engagement ( WI19)

Difficult to measure and consequently value.

A3.13 Cultural impacts ( WI20)

Values are based on a choice experiment that elicited general public WTP for a range of ecosystem services, these values were then allocated to Biodiversity Action Plan ( BAP) habitats based on expert assessment of the supply of each ecosystem service. The range of values (where identified) reflects two scenarios: 1) the current 'maintenance' area of habitats achieves BAP targets, 2) 'maintenance' area plus restoration and expansion targets are achieved (as per 2006 UK BAP Habitat Targets, http://jncc.defra.gov.uk/Docs/UKBAP_SpeciesTargets-2006.xls). Single values indicate no difference between scenarios, zero values are omitted.

The values listed are total UK values for 'sense of place' divided by habitat extent to determine per ha values.