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Highlights:
Willingness to pay (WTP) of drinking water users in the Pixquiac sub-basin was established.
This population (92.04 %) has a monthly WTP of 10.23 MXN per household for forest conservation.
Annual WTP of drinking water service users in Xalapa amounts to 17 243 032.08 MXN.
Income, source of income, educational level and age are positively related to WTP.
Introduction
Communities in Mexico have environmental and biological wealth within their ecosystems that can be used to enhance social and economic development (Carrie et al., 2022; Wang et al., 2017), for landscape conservation (Arroyo-Rodríguez et al., 2017; Leija & Mendoza, 2021) and to maintain the cultural value of the surrounding environment (Clarke et al., 2021; Ko & Son, 2018). However, one of the main problems, derived from the uncontrolled demographic increase, is the decrease and deterioration of such wealth disturbing the functionality of forest areas and deteriorating their ecosystem services (Taye et al., 2018), leading to the reduction of water supply (Monroy Hernández, 2020), loss of biodiversity (Dib et al., 2020) and soil degradation (Pereira et al., 2018).
Currently, drinking water scarcity in Mexico is a growing problem (Martínez-Austria et al., 2019); approximately 32 % of the population is estimated to face some degree of scarcity in supply (Instituto Nacional de Estadística y Geografía [INEGI], 2019). Therefore, corrective and proactive measures are required to achieve the conservation and optimal use of ecosystems (Börner et al., 2020).
In the city of Xalapa, Veracruz, water supply depends mainly on the Huitzilapan and Pixquiac sub-basins (Garcia-Cool, 2019), both belonging to the upper basin of La Antigua River. The Pixquiac sub-basin is considered of greater importance because of its proximity to the city and the quality of water it provides. In the region, the conversion of land from forestry to agricultural and residential use reduces both the capacity for groundwater recharge and other ecosystem services, mainly due to the lack of economic incentives for their conservation. This, together with the increase in the quantity demanded, causes an imbalance between consumption and supply, resulting in a shortage of drinking water for the city. In recent years, the supply has gradually decreased, limiting the supply to only a few days a week. In the past, this restriction was only applied during the dry season; however, municipal authorities are now considering permanent rationing to guarantee supply to the entire population.
Increasing and ensuring the supply of drinking water in the city requires strategies and actions for integrated management and protection of forest areas, as well as the strengthening of public policies aimed at water catchment areas. In this sense, it is necessary to generate a payment scheme for ecosystem services, so it is important to know if there is economic potential to contribute to the implementation of these efforts.
Economic valuation, viewed from the environmental economic approach, provides tools assigning monetary values to the ecosystem services provided by the natural environment (Tinch et al., 2019). These assigned values incorporate negative and positive externalities to land management (Bleeker & Vos, 2019) together with the preservation of natural resources (Liu & Kontoleon, 2018).
There are various techniques and methods for valuing ecosystem services (Cristeche & Penna, 2008), from those based on market values to those using stated or revealed preferences (Izko & Burneo, 2003). One of the most widely used because of its versatility is the contingent valuation method (CVM), which aims to estimate people's maximum willingness to pay for the provision or improvement of a good that does not have a market price, or to estimate the minimum willingness to receive compensation for a loss or reduction in the enjoyment of that good (Girma et al., 2021; Navrud & Strand, 2018).
Historically, the valuation of public goods through surveys has an important reference value. During the second half of the 1960s, several studies were conducted that primarily applied the CVM to environmental goods and recreational uses. In the 1970s, Randall et al. (1974) played an important role in increasing reliability and acceptance of the method with rigorous theoretical and applied work. These advances, combined with a maturing process and social needs of environmental economics as a discipline, especially in the United States, have given a clear impetus to CVM. In the second half of the 1980s, Cummings et al. (1986) and Mitchell and Carson (1989) analyzed the development of the probability valuation method and contributed decisively to its popularization in many countries, including the United States. Recently, several studies have addressed the CVM to determine the willingness of users to pay for the conservation of forest ecosystems (Resende et al., 2017), ecological protection of forest areas that provide hydrological ecosystem services (HES; Chu et al., 2020) or restoration of degraded areas in watersheds. The broad use of CVM is based on its versatility, adaptability and relative simplicity to the topic under study, allowing direct analysis of the information collected (Bergstrom & Loomis, 2017).
The objective of this research was to determine the willingness to pay (WTP) of domestic water users in Xalapa, Veracruz, to conserve forest recharge areas and promote a better condition of the current situation or prevent it from worsening. This was achieved through quantitative analysis and generation of an econometric model, including environmental and socioeconomic variables. The hypothesis is that water users are willing to pay a sufficient contribution to conserve the required quality and supply of drinking water, taking into account the past, present and future situation in the city.
Materials and Methods
Study area
The city of Xalapa, capital of the state of Veracruz, Mexico, is located between parallels 19° 29’ and 19° 36’ N and 96° 48’ and 96° 58’ W with an elevation ranging between 700 and 1 600 m (Sistema de Información Estadística y Geográfica del Estado de Veracruz de Ignacio de la Llave [SIEGVER], 2020). The city has an area of 124.38 km2 and is home to a population of 488 531 inhabitants (INEGI, 2020). Annually, the volume supplied with drinking water is 32.3 million m3; the Pixquiac sub-basin contributes 9.69 millon m3 and the Huitzilapan sub-basin contributes 22.61 millon m3 (SIEGVER, 2020). The municipal agency in charge of administering drinking water services and contracting tapping rights for domestic, commercial and industrial use is the CMAS (Comisión Municipal de Agua Potable y Saneamiento). Water tariffs range from 14.59 to 167.07 MXN, depending on the consumption range (m3) and the classification on usage rights (CMAS, 2021).
Basic principles of the model used
The CVM is based on a formulation, developed by Hanemann (1984), which uses a direct function that compares the result of two utility functions. Positive responses focus on WTP, to obtain the good or service under study and achieve a higher utility than that obtained without paying for or accessing that service. The formulation of the economic utility model is centered on the assumption that there is a welfare function (B), given by the equation B = WTP + I + Bi + S; where: I = income, Bi = goods and services, and S = vector of socioeconomic characteristics of the respondent. In this study, Bi = 0; that is, it will be kept constant assuming that the welfare given by the HES does not depend on the goods and services paid by the consumer, therefore the function is represented as B = DAP + I + S.
If WTP is considered as a dichotomous variable where the value 1 represents an amount M for the conservation of forests that provide HES, then the function of B would be given by: 1 + (I-M) + S, which must be greater than B = 0 + 1 + S, where B = 0 for a negative response to WTP. The above indicates that the respondent prefers a decrease in his income on the condition that it improves his welfare, so the probability of a positive WTP depends on WTP = Probability of ∆B > 0; where: ∆B = (1 + (1 - M) + S) - (0 + 1 + S) > 0.
If WTP is considered as a function of income it could be represented as WTP = α 0 + β 1 I + β 2 S + ε j ; where, α 0 = intercept, β 1 = coefficient associated with income; β 2 = set of coefficients associated with the variables encompassing the socioeconomic-environmental characteristics factor and ε j = error. The coefficients associated with β, together with the intercept α, can be estimated using a regression model.
Survey design and development
A structured survey was designed and validated which included social, economic and cultural aspects on WTP for the conservation of forest areas that provide HES. The survey included three scenarios: 1) without scheduled distribution of water (situation that existed 10 years ago), 2) with scheduled distribution of water during the dry season (current situation), and 3) with permanent scheduled distribution of water (near future, under the current trend). Subsequently, for each scenario, a series of related questions were formulated, including WTP ranges for the conservation of forests that capture water in order to promote a better condition or prevent it from getting worse. For example, what would be the maximum WTP to move from the current scenario (scheduled distribution of water during the dry season) to a scenario without scheduled distribution of water? or what would be the maximum WTP to remain in the current situation and avoid moving to a situation with permanent scheduled distribution of water (all year round)?
The surveys were applied personally and directly to the head of household, during the months of June to December 2021, in representative areas of the city of Xalapa. This facilitated the concise explanation of the objective of the survey and clarify doubts related to the questions. The validation was done through several calibrations to the questions during the pilot surveys, so that the biases in the interpretation of questions by the respondents were minimal.
Design and type of sampling
A simple random sampling was applied through statistical analysis, which indicates that each member of the population (household) has the same probability of being included in the sample (Montesinos-López, 2010). The sample size was calculated from the following equation (Zavaleta et al., 2020):
where,
n = sample size
N = population size
Z = confidence level
p = proportion of the population with the desired characteristic
1- p = proportion of the population without the desired characteristic
d = absolute precision level.
The data reported by SIEGVER (2020) indicate that there are 152 609 domestic water supplies in the city of Xalapa. By substituting the values in the above formula and taking into account a confidence level of 95 %, estimated error of 10 % and maximum variance of 0.5, a sample size of 113 households was derived.
Analysis of variables and development of the econometric model
The degree of association between variables was determined by Pearson correlation (P ≤ 0.05). For each variable, an analysis of variance and Tukey's mean comparison of WTP between categories was performed to determine if the associated values are significant (P < 0.0001). Three levels of significance were assigned: a) highly significant values, b) values with medium significance and c) low significance. These values are not mutually exclusive. On the contrary, a variable can be above medium significance but below high significance, which would be represented by two levels in the same variable.
A regression model was developed to determine the probability of WTP considering the socioeconomic and environmental variables as independent variables. Table 1 shows the variables in the model, as well as their categorization. The statistical analysis was performed with R-Studio 4.0.3 software. The proposed regression model is presented in the equation
Table 1 Regression model variables to estimate willingness to pay for hydrological ecosystem services in Xalapa, Veracruz, Mexico.
| Model representation | Variable description | Type |
|---|---|---|
| WTP | Willingness to pay | 1 = yes |
| 0 = no | ||
| AGE | Age | Integer |
| GENDER | Gender | 1 = male |
| 0 = female | ||
| MARITAL.STATUS | Marital status | 1 = married |
| 2 = single | ||
| 3 = widow | ||
| 4 = divorced | ||
| 5 = free union | ||
| EDUC | Level of education | 1 = no schooling |
| 2 = elementary | ||
| 3 = secondary | ||
| 4 = high school | ||
| 5 = university | ||
| 6 = graduate school | ||
| S.INCOME | Main source of income | 1 = public sector employee |
| 2 = private sector employee | ||
| 3 = own business | ||
| 4 = retired-pensioned | ||
| INGR | Income level | 1 = ≤5 000 MXN |
| 2 = between 5 001 and 10 000 MXN | ||
| 3 = between 10 001 and 15 000 MXN | ||
| 4 = between 15 001 and 20 000 MXN | ||
| 5 = between 20 001 and 30 000 MXN | ||
| 6 = between 30 001 and 50 000 MXN | ||
| 7 = >50 000 MXN | ||
| DEPEN | Financial dependents | Integer |
| AVAILABLE.QUANTITY | Perception of the available drinking water quantity over time | 1 = decreased |
| 2 = remained constant | ||
| 3 = increased | ||
| 4 = unknown | ||
| WATER | Main source of drinking water supply in Xalapa | 1 = nearby rivers |
| 2 = from another state | ||
| 3 = from forests | ||
| 4 = unknown | ||
| FEE | Monthly fee charged for water service | Whole number and decimal |
Results and Discussion
Econometric model of willingness to pay (WTP) estimation
A total of 113 people were surveyed. Based on the regression model, the adjusted R2 value (0.3989) indicates that 39.89 % of WTP in the study area can be explained by the combination of the variables included in the model. Although this value could be considered low, it is an acceptable value for contingent valuation analysis (Thapa et al., 2021). In socioeconomic studies, Gupta and Chatterjee (2021) and Irawan (2019) mention that an R2 value between 0.3 and 0.6 indicates that the proposed model has a satisfactory fit. On the other hand, the standard error 6.3162 represents the variability of WTP that is not explained by the regression. In this regard, Diswandi et al. (2021) mention that the better the model fit, the lower the error value. For the analysis performed, the error is considered acceptable because it is low and the adjusted R2 is within the permissible range. The P-value determines the significance of the analysis obtained, as long as the P-value is less than 0.05 (Perni et al., 2021); in this study, the P-value was close to zero (7.057e-10), so the model is considered feasible as a predictor of WTP. Table 2 shows the intercept and coefficient values for each of the variables included in WTP.
Table 2 Regression model results regarding willingness to pay for hydrological ecosystem services in Xalapa, Veracruz, Mexico.
| Variables | Coefficients | Error | t-value | Pr(>|t|) |
|---|---|---|---|---|
| Intercept | 10.2561 | 5.0196 | 2.0431 | 0.0436 |
| Age | 0.0847 | 0.0425 | 1.9905 | 0.0492 |
| Gender | -0.2105 | 1.2854 | -0.1637 | 0.8702 |
| Marital status | -0.6547 | 0.4178 | -1.5669 | 0.1202 |
| Education | 0.9588 | 0.4609 | 2.0799 | 0.0400 |
| Source of income | 1.174 | 0.4774 | 2.4587 | 0.0156 |
| Income | 1.4528 | 0.4039 | 3.5963 | 0.0004 |
| Financial dependents | -1.4908 | 0.6166 | -2.4174 | 0.0174 |
| Amount available* | -1.1420 | 0.5646 | -2.0226 | 0.0457 |
| Water | -1.3766 | 0.5690 | -2.4191 | 0.0173 |
| Fee | -0.0290 | 0.0092 | -3.1544 | 0.0021 |
* Perception of the available drinking water quantity over time. For each of the coefficients, Pr(>|t|) value less than 0.05 is considered significant.
Regarding the coefficients, four of the 10 variables evaluated are positively correlated with WTP, while the remaining six are negatively correlated (Table 2). The Pr(>|t|) value, for each of the coefficients, indicates that those that are less than 0.05 are considered significant within the model (Desta, 2018); this condition is met by almost all variables except for marital status and gender of the respondents.
The largest positive coefficient in the regression model is income, where WTP has a chance of increasing 1.45 MXN as income is higher in the intervals used. The income source variable indicates that WTP increases on average by 1.17 MXN when the respondent works in a private company or owns a business. The coefficient of educational level shows that as the level of education increases, WTP may increase by 0.95 MXN. Finally, WTP could increase by 0.08 MXN for each year of age of the respondent.
Regarding the negative coefficients, the coefficient of the variable water indicates that if the person has no knowledge about the sources of supply, then WTP will decrease on average by 1.37 MXN and vice versa. The perception of water availability over the years is a key factor in WTP because, if people consider that the amount of water has increased over time, then the amount they are willing to contribute decreases by 1.14 MXN. The coefficient of financial dependents indicates that the higher this number is, WTP will decrease by 1.49 MXN.
Model variables evaluation
Based on Figure 1, Pearson's correlation test showed no significant association, either positive or negative between the variables (P ≤ 0.05).
Figure 1 Pearson correlation analysis between independent variables of the regression model to estimate the willingness to pay for hydrological ecosystem services. EDUC: level of education, S.INCOME: source of income, DEPEN: financial dependents, AVAILABLE.QUANTITY: perception of the available quantity of drinking water over time.
When comparing the means of WTP with respect to age, it was observed that the values were significant; when grouping the ages (Table 3), the highest significance was found in the interval from 41 to 60 years, as well as in people older than 60 years. This indicates that people older than 40 are more likely to have a higher WTP, followed by people older than 60 years.
Table 3 Respondents' willingness to pay (WTP) according to age classification in Xalapa, Veracruz.
| Age | Frequency | Percentage (%) | WTP |
|---|---|---|---|
| 20-35 | 37 | 32.74 | 7.75 b |
| 36-40 | 13 | 11.50 | 7.30 b |
| 41-60 | 46 | 40.71 | 12.39 a |
| >60 | 17 | 15.04 | 12.05 ab |
| Total | 113 | 100.00 |
Different letters indicate significant differences in WTP between age groups, according to Tukey's comparison of means (P < 0.01).
According to the level of education (Table 4), the most significant group is the one with postgraduate studies. This is followed, with medium-high significance, by the groups with elementary school, high school and university education. Finally, the least significant groups are those with secondary education and those with no academic training. Therefore, the higher the level of schooling, the greater the probability of payment.
Table 4 Willingness to pay (WTP) of respondents according to level of education in Xalapa, Veracruz.
| Level of education | Frequency | Percentage (%) | WTP |
|---|---|---|---|
| No schooling | 3 | 2.65 | 1.00 b |
| Elementary school | 18 | 15.93 | 7.90 ab |
| Secondary | 20 | 17.70 | 6.57 b |
| High school | 23 | 20.35 | 13.09 ab |
| University | 32 | 28.32 | 10.75 ab |
| Graduate school | 17 | 15.04 | 14.35 a |
| Total | 113 | 100 |
Different letters indicate significant differences in WTP between study categories, according to Tukey's comparison of means (P < 0.01).
With respect to the source of income, Table 5 shows that the group of people who have their own business differs significantly from the groups of private sector workers and retirees or pensioners, who have a medium-high significance. Finally, the group of public sector workers has a medium significance. This indicates that people who generate their own income are more disposed to WTP.
Table 5 Respondents' willingness to pay (WTP) based on source of income in Xalapa, Veracruz.
| Main source of income | Frequency | Percentage (%) | WTP |
|---|---|---|---|
| Public sector worker | 11 | 9.73 | 6.54 b |
| Private sector worker | 79 | 69.91 | 9.70 ab |
| Own business | 19 | 16.81 | 14.73 a |
| Retired–Pensioned | 4 | 3.54 | 9.50 ab |
| Total | 113 | 100.00 |
Different letters indicate significant differences in WTP based on source of income, according to Tukey's comparison of means (P < 0.01).
According to Table 6, people earning between 20 000 and 30 000 MXN differ significantly from those with an income between 15 000 and 20 000 MXN, who have a high mean significance. People whose income is between 30 000 and 50 000 MXN have a medium significance. The group of respondents with an income level between 10 000 and 15 000 MXN has a low medium significance, while income levels of 10 000 MXN or less have a low significance. Finally, people with a medium-high income have higher WTP.
Table 6 Respondents' willingness to pay (WTP) based on income level in Xalapa, Veracruz.
| Level of income (MXN) | Frequency | Percentage (%) | WTP |
|---|---|---|---|
| <5 000 | 18 | 15.93 | 4.83 c |
| 5 001 - 10 000 | 20 | 17.70 | 6.40 c |
| 10 001 - 15 000 | 19 | 16.81 | 8.26 bc |
| 15 001 - 20 000 | 22 | 19.47 | 13.40 ab |
| 20 001 - 30 000 | 18 | 15.93 | 17.22 a |
| 30 001 - 50 000 | 16 | 14.16 | 11.25 b |
| >50 000 | 0 | 0.00 | - |
| Total | 113 | 100.00 |
Different letters indicate significant differences in WTP between income categories, according to Tukey's comparison of means (P < 0.01).
For financial dependents, which ranged from 2 to 5, the analysis showed that all groups had a similar WTP. Likewise, all groups based on the perception of the amount of water available and knowledge of the main source of drinking water supply (nearby rivers, from another state, from the forests in the highlands, unknown) had a similar WTP.
The monthly payment for drinking water service of the respondents is variable, so it was analyzed as a whole, and it was found that, on average, they pay monthly around 172.80 MXN. The lowest value as a water payment was 53.00 MXN and the highest was 278.00 MXN. For this case, the comparison of WTP means showed no significant differences between categories (P > 0.05).
Finally, regarding WTP, 92.04 % (104 respondents) expressed an affirmative response for the contribution of economic resources in favor of forest conservation and the provision of HES.
Willingness to pay for conservation
The potential WTP in the whole municipality amounts to 1 434 919.34 MXN monthly and 17 243 032.08 MXN annually. The monthly amount is achieved by considering 152 609 domestic water supplies in the city of Xalapa (SIEGVER, 2020), the positive response of 92.04 % of the population and a monthly contribution of 10.23 MXN which is the average WTP of the respondents.
If the annual potential of 17 243 032.08 MXN for the Payment for Hydrological Environmental Services (PHES) were combined with concurrent funds from the National Forestry Commission (CONAFOR), whose operability consists of contributing a similar amount, and considering a payment of 2 000.00 MXN∙ha-1∙yr-1, all the forested areas of the Pixquiac sub-basin could be conserved. This amount would exceed the payment of 1 200.00 MXN∙ha-1∙yr-1 allocated by federal entities such as CONAFOR (Secretaría de Gobernación [SEGOB], 2022).
About a third of the respondents (31.86 %) prefer to grant the monetary contribution directly to the owners of the forests; 21.24 % mentioned that through working groups represented by the same inhabitants of the upper parts of the region; 15.04 % believe that it should be carried out through civil associations; 13.27 % determined that the optimal method should be the water bill and, finally, 10.62 % mentioned that it should be through other government institutions.
The preference for making the payment available directly to the owners of forest lands coincides with Talero-Cabrejo and Salcedo-Silva (2020), who consider that the resource would be better used and would arrive in full; in addition, transaction costs would be reduced. In turn, Luna (2018) mentions that society has the perception that the government is not entirely transparent in the management of economic resources so there is distrust to use it as a channel for payment of the WTP, coinciding with that found in this study.
Aguilar et al. (2018) mentioned that gender and marital status are significant characteristics in relation to WTP, in contrast to the results in this study since these variables were not significant. On the other hand, Taye et al. (2018) and Khan et al. (2019) agreed that the variables with the highest significance in the econometric model are income, people's perception regarding the amount of water available over time, and the fee paid monthly for the service. Regarding educational level, the significance in the model is not as high as reported by Aguilar et al. (2018), who mention that the main determinant variables in WTP are age, educational level and income.
Although the population is willing to make an economic contribution to the conservation of forest areas that capture water, it is necessary to generate the HES market. Therefore, it is necessary to establish an institutional framework for the project in which the three levels of government, together with the actors and representatives involved (forest owners, consumers, non-governmental organizations and research institutions), establish the regulatory and operational bases for the HES market through a fund similar to the Mexican Forestry Fund.
When creating the HES market, transparent mechanisms should be defined to channel the resource in an effective and efficient manner; however, operationally, this may not be as profitable since it requires additional economic resources to be allocated for its creation. However, a viable alternative is to adapt governmental mechanisms to achieve efficiency and make management more transparent. There are successful cases such as FIDECOAGUA (Fideicomiso Coatepecano para la Conservación del Bosque y el Agua) in Coatepec, whose administration of contributions is managed by the municipal government (Nava-López et al., 2018), but made transparent through a trust integrated by all stakeholders.
The results have crucial relevance in assigning a value to the conservation of forest areas as providers of HES. In the study area, the level of participation in the WTP for the provision of HES is 92.04 %. This percentage is higher than that reported by Ramos-Alvarez et al. (2021), who mention that in Hidalgo there is a WTP of 68 %. The high percentage of WTP participation may be mainly due to the fact that in the state of Veracruz there are campaigns on the importance of forest care and its relationship with water supply (Córdoba et al., 2021). Also due to the influence of the creation of the first PHES market in the municipality of Coatepec, which is still in force and has shown that, through proper land management and the contribution of economic resources for the conservation of forest ecosystems, the water supply is guaranteed (Von Thaden et al., 2021).
Finally, the research only considered the provision of water for domestic use as the only environmental service provided by forest areas, so that in future research it is suggested to consider the other uses of water and, in addition, the multiple benefits in the provision of environmental services. This would help to include and analyze the benefits of natural resources related to the level of knowledge and awareness of end users but focused on the economic valuation of forests and their WTP for the enjoyment of all these benefits.
Conclusions
There is a potential willingness to pay 1 434 919.34 MXN per month by users of domestic water service in Xalapa, Veracruz. It is important to link the efforts of different local actors, including businesses and industrial, tourist and agricultural users, to improve the quality of the service by proposing actions to improve the catchment areas, such as the hydrological sub-basins. This study lays the foundations and tools for decision-makers to redirect and enrich public policies to improve the capture and application of resources to forest conservation areas in water recharge zones. There are programs for these areas, but the resources are not adequate to cover the forest cover of the region, which represents an area of opportunity for programs that allow contributions and their direct and transparent channeling to forest landowners with a specific focus on the active conservation of ecosystems.
