Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras

Author: Carlos Castillo

1. COVERING PAGE AND ABSTRACT.

a) Project Title: Economic valuation of multiple environmental mitigation

activities in the Bay Islands.

b) Project Leader: Carlos Roberto Castillo Gutiérrez.

c) Contact Information:

Address: Colonia San Angel, Bloque 41, Casa 4012, Tegucigalpa, Honduras,
Centro America.

Phone: (504) 2228-4028.

E-mail: [email protected]; [email protected]

d) Institution: ECONOAMBIENTE in partnership with BICA UTILA.

e) Date of submission: November 10, 2011

f) Abstract:

This proposal is based on solving the problem of financing for the

implementation of the Environmental Mitigation Programs (EMP's) in the Bay
Islands, Honduras, this problem could be solved with the creation of an
Environmental Investment Fund (EIF) that could be financed by direct users
such as residents, tourists and tourism businesspersons, so we must know
what is their willingness to pay (WTP) to create the EIF to fund EMP's, for this
estimate the Choice Experiment method is used.

2. RESEARCH PROBLEM

The Bay Islands is an archipelago with an area of 229.7 km2 located about 34
Km north of the Caribbean coast of Honduras. It consists of three main islands
such as Roatan (125 km2), Guanaja (55.4 km2) and Utila (49.3 km2) and several
islets. It has valuable natural systems such as: located on the second largest
barrier reef in the world, has jungle, pine forest and mangrove, has endemic
species such as the Utila Lizard (Ctenosauria bakery) and endangered species
such as the Carey Turtle (Eretmochelys imbricata) and others. The islands
belong to the Mesoamerican Barrier Reef System (MBRS), which extends along
the Caribbean coast of Mexico, Belize, Guatemala and Honduras, which has a
length of 1000 km approximately. In Honduras for the conservation and
protection of natural systems mentioned, have been proposed and enacted to
date, five (5) protected area attached to the National Protected Areas System
of Honduras (SINAPH, 2011), these areas are: Natural Monument Cochinos
Keys (Decree 114-03), Guanaja Forest Reserve 2 (Decree 49-61), National
Marine Park of the Bay Islands (Proposed), Turtle Harbour (Proposed) and Port
Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras
Author: Carlos Castillo

Royal (Proposed). Protected areas are currently co-managed by Non

Governmental Organizations (NGOs)

Currently due to the natural attractions of the Islands, has been a growth in
tourism investment that has been quite significant in recent years. There are
some facts about growth in tourism investment in the bay islands:

1. In 2010, 308 cruise came to Roatan bringing a total of 803,102.00 cruisers

(86.8% higher than 2009) (Honduran Institute of Tourism, 2011).

2. 39083.00 visitors arrive on flights to the island in 2009, mostly international

tourists (Honduran Tourism Institute, 2010).

3. Investment in infrastructure led to a net migration rate of 3.2% annually in

2001 (National Statistics Institute, 2001).

Growth in tourism investment and migration has caused environmental impacts

that environment conservation agencies governmental and non-governmental
have not fully controlled, because these organisms do not have enough budget.
It should also be noticed that currently in the island there is no investment fund
for tourism businesspersons could invest in environmental mitigation works. The
most significant impacts on natural systems on the island are:

1. Erosion: When there is a construction of tourism infrastructure, the soil

cutting and soil removal activities cause erosion affecting the coral reef.

2. Deforestation: In the process of building tourist infrastructure, it has to be

cleared in areas of land which causes damage to ecological habitats,
erosion or other effects.

3. Solid Waste Management: There are some old and new settlements that do
not have all the basic services of solid waste management. In addition to
the above problem must add also the waste generated by tourists in the
island. This affects human health and scenic beauty of the island.

4. Liquid Waste Management: There are some old and new settlements that
still lack basic sanitation services and wastewater which causes pollution in
the sea that affected the reef.

As it can be seen economic growth in the island has caused negative impact on
the environment, so there is a need to conserve the precious resources of the
Islands with the implementation of environmental compensation mechanisms
such as making environmental mitigation programs (EMP's) that could be
implemented by government, NGOs and private tourism businesspersons. But
to run EMP's is necessary to have an Environmental Investment Fund (EIF), the
Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras
Author: Carlos Castillo

fund makes sense because some organizations mentioned do not have the
financial means to implement the EMP's. The means for the EIF can be
obtained through voluntary cooperation of the direct users such as residents,
tourists and Businessmen of the tourism.

To help solve the research problem posed above, we will propose to analyze
the direct user preferences for various EMP's using the method of choice
experiments, in which we discuss issues such as: willingness to pay (WTP) of
users Direct to contribute to the EIF, elasticity of substitution between EMP's
due to a change in the price of such programs and income of individuals,
characteristics of the EIF (Who should handle the EIF Government or Private?)
and socioeconomics (income, age , sex, marital status, tourists, local, etc.).

3. RESEARCH OBJECTIVES

General.

The aim of this study is the economic valuation of different Environmental

Mitigation Program (EMP's) in the Bay Islands, Honduras, using choice
experiments technique.

Specific.

Estimating Willingness to Pay (WTP) of the direct users of the Bay Islands by
multiple programs of Environmental Mitigation (EMP's) with the aim of creating
an Environmental Investment Fund (EIF) for the implementation of these
programs.

Estimating the elasticity of substitution due to price changes of EMP’s and

income of individuals.

Estimating the preferences of contributors with respect to the management of

the Environmental Investment Fund (EIF) (who should handle the EIF
government or private?) And socioeconomic characteristics (income, age, sex,
marital status).

4. RESEARCH METHODS.

For the development of this study, we will apply economic valuation technique
called choice experiment in which individuals choose for various goods, the
choice depends on the following: characteristics of goods to be measure,
income of individuals and prices of goods, other factors are included in the
Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras
Author: Carlos Castillo

error term. Below is the utility function with which we start to formalize the
model:

Vik (ai , M k  pi ,  ik )

Where:

Vik : Utility function.

ai : Characteristics of goods.

M k : Individual Income.

pi : Good price.

 ik : Error term.

The hypothesis to be tested in this study is what is the willingness to pay (WTP)?
by the direct users such as: residents, tourists and Businessmen of the tourism
by multiple Environmental Mitigation Programs (EMP's) for the creation of a
Environmental Investment Fund (EIF). Additionally we intend analyze the
elasticity of choice due to marginal change in: price of EMP's and income of
individuals. In addition, we will explore issues such as: socioeconomic
characteristics of the direct users such as: income, age, profession, gender or
other characteristics and their preferences with respect to the Environmental
Investment Fund (EIF) as: who should manage the private or public sector?,
vehicle payment, or other allocation mechanisms.

The methodological steps for the development of this study are: First design a
survey with focus group meetings such as: government agencies, non-
governmental organizations and other community leaders in this process is
taken into account in elections of Environmental Mitigation Programs (EMP's),
four impacts (4) that were mentioned in the research problem, some EMP's may
contain activities such as: soil conservation works, reforestation, waste
management activities, sanitation and sewerage. Second, to estimate the
sample size, we will make a pre-sampling to determine the optimal sample and
make adjustments in the survey. Third will run the final sampling of the research
project. Fourth will be sorted, processed and analyzed the data with statistical
packages such as LIMDEP or STATA. Finally, we will interpret results and write
publication.

The choice experiment method can have the following biases and also we
present some solutions for them:
Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras
Author: Carlos Castillo

1. Non-use value is difficult to estimate: This bias is reduced, interviewing only

the direct users because they give objectively measuring to the quality of
environmental services.

2. Answer by moral satisfaction: To control this bias in this study we will focus
on consult to persons a price range that will adapt to their income level.

3. The interviewee would focus only on few attributes: This bias could be
controlled, focusing on explaining all the attributes and characteristics.

4. Lenght of survey: we will make a survey design according to the time that
respondents have, because after a while, the respondents might be answering
only to finish faster.

5. Survey is shown as an examination: To prevent the respondents feel

uncomfortable to answer, we will treat not to display the survey until the
respondents will agree to answer and we will try that survey to be as interactive
as possible.

6. Order of presentation of the attributes: This bias will be controlled on basis to

try to show attributes and compare at the same time.

It is also important to note that this study is intended to be publishable in a

journal of environment economics, any suggestion towards improving this
section shall be taken into account.

5. EXPECTED RESULTS AND DISSEMINATION.

The study will focus on developing a solution to the problem of lack of financing
for environmental activities on the island through direct users consult to their
willingness to pay (WTP) for various Environmental Mitigation Programs
(EMP's) for creating Environmental Investment Fund (EIF) . As mentioned
above to develop this approach, we will make using the Choice Experiments
technique.

We pretend to make a contribution to the literature empirical because we want

to analyze multiple scenarios of EMP's, this analysis has been underdeveloped
in the empirical literature on the issue. The results of this study will be valuable
to organizations government, non government and private for decisions about
where to direct efforts toward the creation of the EIF so we can fund the EMP's.

We have planned to campaign for the dissemination of results of this research

project, pretending to be submitted to: at least one national research conference,
at least at a regional congress and an international conference when we will
Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras
Author: Carlos Castillo

have final results of the study. Another aspect to be taken into account is that it
intends to publish in a journal of economic specialized on the issue.

6. INSTITUTION AND PERSONNEL.

The technical expertise of the principal investigator of this study is attached to

this project profile.

The role of the principal investigator will be to coordinate the planning,

coordination with the interviewers, tabulation, data processing and drafting the
final document.

Economy and Environment Society (ECONOAMBIENTE) is located in

Tegucigalpa, Honduras, the main activities of this society are environmental
research and environmental projects management. The principal investigator is
the technical coordinator and researcher in this organization.

7. TIMETABLE.

Attached are planning activities of this research project in an Excel

spreadsheet.

8. BUDGET.

Attached are planning activities of this research project in an Excel spreadsheet.

9. REFERENCES.

Alpizar, F., F. Carlsson, P. Martinsson (2001) Using Choice Experiments for

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application of choice experiments. Ecological Economics 47 (2003) 95-103

Jin, J., Z. Wang, S. Ran (2006) Comparison of contingent valuation and choice
experiment in solid waste management Programs in Macao. Ecological
Economics Volume 57, Issue 3, 25 May 2006, Pages 430-441.

Medina, C. (2010) Formation of stable and consistent preferences: Effect of

application of a contingent valuation exercise prior to the valuation of
environmental services on the islands of the Galapagos. MERNYMA Thesis
Program, Chile.
Economic valuation of multiple environmental mitigation activities in the Bay Island, Honduras
Author: Carlos Castillo

Radoslav, B. (2002) Methodological Guidelines for Economic Valuation of

Goods, Services and Environmental Impacts: A contribution to the
management of ecosystems and natural resources in the CBM. Project for the
consolidation of the Mesoamerican Biological Corridor. Technical Series 04.

Thacher, T., D. R. Lee, J. W. Schelhas (1997) Farmer participation in

reforestation incentive Costa Rica. Agroforestry Systems 35: 269-289, 1997.

Vasquez, F., A. Cerda, S. Orrego (2007). Economic Valuation of the

Environment: Economic Fundamentals, econometrics and applications. Editorial
Thonsom Learning.

Zabel, A., B. Roe (2009) Optimal design of pro-conservation incentives

Ecological Economics. Volume 69, Issue 1, 15 November 2009, Pages 126-134.