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Water quality indices and benefit-cost analysis

Published online by Cambridge University Press:  19 January 2015

Patrick J. Walsh  and
William J. Wheeler
Patrick J. Walsh*
Affiliation:
US EPA, National Center for Environmental Economics, 1200 Pennsylvania Avenue, Ariel Rios Bldg, MC1809T DC Washington 20460, USA
William J. Wheeler
Affiliation:
US EPA, National Center for Environmental Economics, 1200 Pennsylvania Avenue, Ariel Rios Bldg, MC1809T DC Washington 20460, USA
*
Patrick J. Walsh, US EPA, National Center for Environmental Economics, 1200 Pennsylvania Avenue, Ariel Rios Bldg, MC1809T DC Washington 20460, USA, walsh.patrick@epa.gov
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Abstract

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The water quality index (WQI) has emerged as a central way to convey water quality information to policy makers and the general public and is regularly used in US EPA regulatory impact analysis. It is a compound indicator that aggregates information from several water quality parameters. Several recent studies have criticized the aggregation function of the EPA WQI, arguing that it suffers from “eclipsing” and other problems. Although past papers have compared various aggregation functions in the WQI (usually looking at correlation), this is the first paper to examine these functions in the context of benefit-cost analysis. Using data from the 2003 EPA CAFO rule, the present paper examines four aggregation functions and their impact on estimated benefits. Results indicate that the aggregation method can have a profound effect on benefits, with total benefit estimates varying from $82 million to $504 million dollars. The net benefits of the rule vary from negative to positive over this range of estimates. Furthermore, a sensitivity analysis does not find convincing evidence to substitute the current aggregation function, although several changes to the underlying WQI methodology may be warranted.

Keywords

cost benefit analysisvaluationwater qualitywater quality index
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 4 , Issue 1 , 28 March 2013 , pp. 81 - 105
Copyright
Copyright © Society for Benefit-Cost Analysis 2013

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