Willingness to Pay for the Preservation of Geothermal Areas in Iceland

Abstract

Academic knowledge concerning preferences and willingness to pay for the preservation of geothermal areas is currently very limited. This paper seeks to increase understanding, using the contingent valuation method to estimate willingness to pay for the preservation of two high-temperature geothermal fields likely to be developed in the near future: Eldvörp and Hverahlíð. Both study sites are located in Iceland, a nation that has been the recipient of repeated calls by the OECD to commence accounting for environmental impacts in cost-benefit analyses, particularly those associated with power projects. We applied interval regression using log-transformation to estimate WTP for the preservation of the high-temperature Eldvörp and Hverahlíð fields. The estimated mean WTP was 8,333 and 7,122 ISK for Eldvörp and Hverahlíð respectively. Scaled up to the Icelandic population of national taxpayers, this equates to estimated total economic value of 2.10 and 1.77 billion ISK respectively. These results reinforce arguments in favour of accounting for environmental impacts of Iceland’s future geothermal power projects as a mandatory component of the decision-making process. In Iceland and further afield, more research is necessary to develop understanding of the economic value of impacts to recreational amenity and other ecosystem services resulting from geothermal power projects.