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Hedonic valuation and adaptation

Good morning,

I am a program evaluator from Canada. My collegue and I just published the results of a costs-benefits analysis of the activities associated to technology transfer organizations (TTO) in Canada. Among other positive externalities, our evaluation showed that TTO’s actions make a difference in terms of climate change adaptation (CCA), especially in enabling actions in the private sector. Our study’s respondents (firms that are the clients of the TTO receiving public funding) have perceived that their collaboration with a TTO generated both internal and external R&D investments while, at the same time, promoting other innovation activities.

Without surprise, our results showed that innovative firms in the area of climate change adaptation are more R&D-active and make large investments in physical capital and specialized human resources. Then, in order to assess the value attributed by the actors doing R&D on CCA innovation, we used the hedonic pricing method. This method aims to give a monetary value to impacts, which can be broken down into price and measurable quantities. This involves deducting intangible individual preferences and behavior on the markets from other goods and services.

We developed a model suggesting that firms invest, on average, $5,358 a year to acquire new technologies related to CCA for each level of impact on CCA observed (10 levels used in our research). This would mean, all things being equals, that each $5,358 of public funding would lead to an additional level of impact on CCA. Unfortunately, our paper in not open access, but the abstract can be viewed at this link.

I will also be happy to provide additional on the study via email.

Now, because costs and benefits of climate change mitigation and adaptation are spread throughout a broad time horizon, even if autonomous private-sector initiatives have been observed, the risks and uncertainties surrounding climate change can curb investments in this area since private firms protect themselves against large potential losses and make sure they obtain a return on their spending. Therefore, states and public administrations should encourage CCA efforts by industry and firms and establish conditions guaranteeing their success. Our work demonstrates how this type of public-private partnership can lead firms to invest in CCA while still developing profitable innovations for the whole society. Such a method could be useful to improve public actions targeting CCA (e.g., tax credit or grants).

1) Hence, I am curious to know if anybody is aware of policies which are specifically targeting intersectoral exchanges between R&D firms committed to climate change adaptation.

2) I am also interested to know, for those who had already used the hedonic pricing method for micro-economic impacts associated to CCA, what lessons were learned in the process.

Best regards

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