Floods and Droughts: Eliciting Customer Willingness-to-Pay

Diane Dupont, a professor in the Department of Economics and of the Environmental Sustainability Research Centre at Brock University presents, “Floods and Droughts: Eliciting Customer Willingness-to-Pay and Adverse Event Likelihood Priors for Public Utility Pricing and Infrastructure Decisions.”\r\n

Key Topics Covered

\r\nDevastating floods in Calgary and Toronto and ongoing droughts in parts of Canada highlight the infrastructure and management challenges facing North American water and wastewater utilities. While increasing variability in climate has been the immediate culprit, the severity of events has been exacerbated by years of underinvestment in infrastructure improvements due to inadequate pricing of services provided. The American Water Resources Association (2015) notes that water utility managers need to identify clearly what communities’ priorities may be with respect to water and wastewater management, both of which provide public or community-level goods and services.\r\n\r\nThis talk describes a method to elicit public preferences for improved water and wastewater management, specifically examining the relative desirability of engineering versus green infrastructure approaches to having more reliable water supplies and to mitigating the likelihood of rainfall-caused flooding events. Results indicate a great deal of heterogeneity about prior beliefs on the likelihood of adverse events and that green infrastructure elicits a higher willingness-to-pay to deal with unreliable water supplies but not to support flooding infrastructure.