Hedonic housing prices and the marginal willingness to pay for pollution abatement in Ontario, Canada

Abstract

The aim of this study is to utilize a revealed-preferences approach to estimate the marginal willingness to pay for pollution abatement based on the toxicity levels of pollutants listed under the National Pollutant Release Inventory in Ontario, Canada. The results from the spatial hedonic price model applied to the housing market reveal that the estimated price and income elasticities, and the marginal willingness to pay for pollution abatement accord well with expectation. Overall, the results indicate that in 2006 the cumulative marginal willingness to pay to abate a tonne of pollution in Ontario was $8.4 million for pollutants that are human carcinogen, $1.3 million for pollutants that are probable/possible human carcinogen, $2.1 million for pollutants that are not classifiable as human carcinogen, and $14 thousand for pollutants in none of these groups. While these results alone are not sufficient to determine the optimal levels of pollution abatement, they can be used in tandem with the estimation of firms marginal abatement costs to determine the optimal levels of pollution abatement in Ontario.