Handling preference heterogeneity for river services' adaptation to climate change

Climate projection models for the Southern Mediterranean basin indicate a strong drought trend. This pattern is anticipated to affect a range of services derived from river ecosystems and consecutively deteriorate the sectoral outputs and household welfare. This paper aims to evaluate local residents' adaptation preferences for the Piave River basin in Italy. A Discrete Choice Experiment accounting for adaptation scenarios of the Piave River services was conducted and the collected data were econometrically analyzed using Random Parameters Logit, Latent Class and Covariance Heterogeneity models. In terms of policy-relevant outcomes, the analysis indicates that respondents are willing to pay for adaptation plans. This attitude is reflected on the compensating surplus to sustain the current state of the Piave, which corresponds to a monthly contribution of 80€ per household. From an econometric point of view, the results show that it is not sufficient to take solely into account general heterogeneity, provided that distinct treatment of the heterogeneity produces rather different welfare estimates. This implies that analysts should examine a set of criteria when deciding on how to better approach heterogeneity for each empirical data set. Overall, non-market values of environmental services should be considered when formulating cost-effective adaptation measures for river systems undergoing climate change effects and appropriate heterogeneity approximation could render these values unbiased and accurate.