Hedonic Pricing of Climate Change Impacts to Households in Great Britain

Abstract

This study investigates the amenity value of climate to British households. By using the hedonic price approach, the marginal willingness to pay for small changes in climate variables is derived. Various indices of temperature and precipitation are used including means, ranges, extremes and January and July averages.We specify one hedonic regression including information on house prices and wage data for 755 Posttowns and found the model containing January and July averages of temperature and precipitation most appropriate. The estimates suggest that British people would typically prefer higher temperatures in January. Increased precipitation in January is likely to reduce welfare. Changes in temperature and precipitation in July are not significant. Limited global warming, with a more pronounced effect of temperature increases compared to higher precipitation levels during winter months, might thus benefit British households.

Hedonic valuation of flood

“…Englin [4] found both annual and seasonal rainfall patterns in Olympic Peninsula in Washington State, US, affect the overall valuation of rainfall as a climatological resource by conducting econometric analysis for long-term average annual rainfall and the variation in rainfall within the year. Rehdanz [7] discovered that British people would prefer a greater distribution of precipitation across the seasons by investigating the amenity value of climate such as average hours of sunshine, average wind speed, average precipitation and average temperature.…”

Valuing US climate amenities for Americans using an hedonic pricing framework

“…These findings are consistent with results found for European countries, for example, in Great Britain, in Italy, etc. (see Rehdanz 2006).…”

“…Maddison and Bingo (2003) estimated amenity values of Italian climates and suggested that Italians preferred drier climates during the winter and lower temperatures during the summer. Rehdanz (2006) estimated the climate change effect on housing prices and wages in Great Britain by using a single hedonic model. The study suggested that, as in Germany and Italy, British households prefer higher January temperatures and decreased precipitation during January.…”

“…Rehdanz (2006) suggested that including dummies for different regions would correct the problem of regional market segmentation. This study finds that the regional dummies Northeast and West are highly significant compared to the Midwest, suggesting that the housing markets in US are segmented.…”

The Pricing Effects of Open Space Amenities

“…In their study, the implicit value of Gulf of Mexico views is revealed from the hedonic pricing model using the housing transaction data in Pinellas County, Florida (Hindsley et al 2013). In addition, the hedonic housing price model is used to estimate the pricing effects of proximity to Environmental Protection Agency designated hazards areas in Puget Sound of Washington State (Carruthers and Clark 2010) and values of clean air and climate (Chay and Greenstone 2005;Butsic et al 2011;Rehdanz 2006).…”