Economic valuation of air quality improvement in transport sector in Klang Valley, Malaysia : comparing the contingent valuation method and choice experiment

Abstract

Malaysia has experienced incredible economic achievement in the last three decades, which had activated urbanization and led to an increase in the per capita income of its population. This leads to rapid growth in transport sector. Due to rapid urbanization and rapid growth in transport sector, air quality is declining in some urban areas especially in Klang Valley Malaysia. As a consequence, Malaysian residents are suffering from many health problems. To address this issue, this study is trying to estimate the preferences of the household respondents towards air quality improvement in Klang Valley, Malaysia. The objectives of this study are to investigate the level of the households’ knowledge, attitude, and behavior towards the environmental pollution and air pollution, to estimate the factors which affects the willingness to pay (WTP) of the respondents for improving the air quality in Klang Valley and to compare the WTP of the respondents obtained from contingent valuation method (CVM) and choice experimental design (CE) for air quality improvement in Klang Valley. CVM and CE are utilized to estimate the WTP. These methods consisted of asking people directly about their WTP extra fuel price to cover the costs of a new alternative air quality management project in Klang Valley, Malaysia. The survey results are analyzed using Binary Logit Model for CVM and Conditional Logit Model for CE. In this study, it is found that the level of knowledge of the respondents is high and the attitude of the respondents is positive, but the behavior of the respondents is low. The mean WTP derived from CVM is about RM 2.13 per respondent and the mean WTP for the new air quality management program derived from CE is about RM1.99 per respondent. So, this study reports that the respondents are willing to pay extra fuel price comparatively higher than current fuel price for air quality improvement in Klang Valley. This study further reports that number of sick days, air pollution index, medical expenditures, age, city, ethnicity, outdoor activities and respiratory symptoms are the significant variables which affects the WTP of the respondents. The results of the study also show that there is no significant difference between the WTP of the respondents for air quality improvement in Klang Valley derived from CVM and CE. The policy implication of this study is highly significant in this sense that if the household respondents are willing to pay extra fuel price, the government can reduce the subsidy on fuel price and they can use that money for the development of transport sector in Malaysia. This study presents the household respondents’ preferences about government policy to improve the air quality improvement in Klang Valley. The results of this study also suggest that both CVM and CE could be successfully implemented for environmental valuation in Malaysia.