Post on 13-Jan-2015
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Valuing Spatial Information
A review of methods and findings
Alan Smart - Sydney
Andrew Coote - London 22 November 2011
Slide 2
Topics
● Value added approach
● Economic welfare analysis
● General equilibrium analysis
● Valuing intangibles
Slide 3
Why is it so hard to estimate
● An enabling technology
● Public good dimension
● Impacts occur across a large number of sectors
● Dynamic nature of change
Spatial technologie
s
AgricultureMining and resources
Transport
Planning and
Construction
Utilities
Property and
servicesEmergency manageme
nt
National security
Natural resource
management
Retail
Banking
Government
Slide 4
Value added approach
● Economic contribution of Ordnance Survey in Great Britain – Oxera 1999
● Allens Consulting (2008)
● Value added is the value of output less the cost of inputs
Slide 5
Oxera findings
● Largest contribution to GVA came from users of OS services and products
£79 billion to 135 billion
Around 10% to 21% of GDP of Great Britain at the time
Slide 6
Value added approach in Australia and
New Zealand
● Allen Consulting Group 2010
● Value added in Australia - $12.5 billion
Mainly in government administration, property services, business
services, construction and mining
Around 1.4 % of value added in these industries
● Value added in New Zealand - $ 1.6 billion
Around 1.4 % of value added
Similar industries apart from mining
Slide 7
Welfare analysis
● One measure of benefit is consumer and producer surplus
● Product specific ● Need to know what
consumers are prepared to pay
● And what producers are prepared to receive
Consumer Surplus
Producer Surplus
P
PE
QE Q
D
S
Slide 8
Value of WA Land Information
System (WALIS)
● ACIL Tasman (2004) Willingness to pay survey of 12 user groups and a producer
survey to estimate producer and consumer surplus
Estimate value to WA economy was $14 – 15 million
Plus $1 million from more efficient and effective production of data
Study tested the results against a counterfactual that recognised some provision of data could still occur without WALIS but less efficiently
Slide 9
Cambridge study of Ordnance
Survey Data
● Rufus Pollock et al (Cambridge University, 2008) ● Estimated demand curve to assess the value services
supplied from government trading funds And the impact on consumer surplus of changes in
pricing for data
● Price elasticity of demand = percentage change in demand/ percentage change in price
● Used multipliers to estimate broader economic and dynamic impacts on the economy
Slide 10
Cambridge study
● Studied large scale topographic mapping and transport network products – sales worth £70 million
● Concluded that a move from average to marginal costing would increase economic welfare by £156 million
Pm
Pavc
Psrmc
Qm Qavc Qsrmc
Short run marginal cost
Average cost
Demand curve
Quantity (Q)
$
Slide 11
ANZLIC Study
● PWC study for ANZLIC in 2010 used a similar methodology to address pricing policies
● Change in economic welfare (consumer surplus in this case) by moving from cost recovery to marginal cost pricing is shown in table below
● Report notes that this would come at a loss in revenue to the agencies concerned which has consequences for custodianship of data.
Victorian topographic Landgate topographic Landgate arial photography
Geoscience Australia
topographic
$ million $ million $ million $ million
Change in economic welfare 3.3 1.4 1.0 4.7
Slide 12
Welfare analysis - issues
● Suitable for single product analysis
● Elasticities of demand vary with quantity
● A partial analysis that does not take into account resource transfers in the economy
Eg - Planning and construction sector expands while legal sector contracts
● Multiplier techniques subject to considerable scepticism when resource transfers occur
● Welfare analysis serves as an indication of the implications of different pricing and access models but should not be regarded as conclusive.
Slide 13
Productivity estimates and CGE
modelling
● Economy wide approach Estimate direct impacts and use general equilibrium
model to translate into economy wide impacts Takes into account resource transfers within the
economy as a result of change
● Direct impacts changes in productivity of labour or capital or multifactor changes in resource availability changes in income or trade
Slide 14
Adoption curves over time –
accumulating productivity
Geospatial adoption curves in UK local government
Slide 15
General equilibrium modelling
Slide 16
New Zealand Agriculture 2010
● Example – Precision Agriculture
● Controlled traffic farming, etc. 10-20% productivity ↑
● Adoption ≈ 10%
● = 1.25% sector-wide productivity improvement
Slide 17
Productivity impacts compared
New Zealand 2009 Australia 2007 Tasmania 2010
Agriculture 1.25% -1.9% 0.93% -1.5% Nil
Forestry 5.25% - 5.71% 1.93% 1.93%
Fishing 3.40% 4%-5% 5.14%
Manufacturing 0.25% -0.35% 0.02% 0.02%
Transport 2.1%- 3.15%% 1.4%-1.5% 1.04-1.6%
Communications 0.82% 0.98%-1.32% Nil
Utilities 0.70% 0.7-1.25% 1.0%
Property and business services 0.23%-0.46% 0.47% 0.2%
Construction 0.75% -1.13% 0.25%-0.5% 0.25%
Trade and retail 0.77%-1.15% 0.08 Nil
Recreation 0.23%-0.46% ~ Nil
Mining Low 0.15% - 0.36% 0.01%
Government 0.77% -1.15% 0.0.34%% 0.37%
Slide 18
Studies using CGE modelling
Year Organisation Issue Results
2008 SRCSI and ASIBA (ACIL
Tasman)
Value of spatial information in Australia $6 billion-$12 billion addition to GDP
2007
7% higher economic impact if barriers
removed
0.61 % - 1.2% of GDP
50 % higher adoption if
barriers removed
2009 NZ Ministry of Economic
Development and LINZ (ACIL
Tasman/SKM/Ecological
Consultants)
Value of Spatial information in New Zealand $NZ1.2 billion
$NZ 1.6 million with barriers removed
0.6 per cent of GDP
2010 Consultingwhere /ACIL
Tasman for UK Local
Government Association
Value of geospatial information for local
government in England and Wales
Main sectors with positive impacts –
construction, transport, business services
GDP £320 million higher in 2009 as a
result of geospatial information in local
government
£560 million higher in 2015
Additional £600 million with improved
policies
0.02% of GDP
BC ratio of 1.25
2010 CRCSI (Allen Consulting) Value of enhanced positioning in selected
sectors - mining, agriculture and construction
1.1% to 1.2 % increase in
GDP by 2030
2011 Department of Premier and
Cabinet (ACIL Tasman/ Lester
Fanks/ConsultingWhere)
Value of improved SDI in Tasmania GSP $105 million higher in 2011
$401 million by 2020
Additional $100 million by 202 0with
investment in spatial data
infrastructure
0.47% of GSP
Slide 19
Issues with general equilibrium
modelling approach
● Estimating sector wide productivity impacts
requires assumptions about levels of adoption
● Some users are not willing to share data on
benefits
Slide 20
Components of value
TOTAL ECONOMIC VALUE
Outputs
• petroleum and minerals
• transport• communications• property and
construction• agriculture• Fishing• forestry• tourism • public
administration
Benefits
• flood control• climate• sustainable water
resources• sustainable
natural resource management
• Biosecurity• biodiversity
Benefits
• protection from fires, floods and natural disasters
• improved management of climate change
• Insurance• defence
Benefits
• satisfaction that resource is there
• preservation of environment and conservation values
• national security• Long baseline for
historical analysis
Benefits
• altruistic• preserving
national assets for the next generation
USE VALUES NON-USE VALUES
DIRECT USE VALUE
ECOLOGICAL FUNCTION
VALUE
OPTION VALUE
EXISTENCE VALUE
BEQUEST VALUE
Based on work by Professor Mike Young- University of Adelaide
Slide 21
A wide range of applications -
Tourism to sea bed mapping
Tourist information
systems in New
Zealand
Bathymetric
mapping in Australia
and New Zealand
Slide 22
Natural resource management
● Water resource management Eg CSIRO/Murray Darling
Basin sustainable yields project
Value of water at the margin ~ $100/ML - $500/ML
A 1% reduction in national water consumption saves around $37 million
Slide 23
Summing up
● Understanding economic and social value of spatial information is important for both government and industry
● Welfare analysis useful where single product or service involved and impact on the rest of the economy is not significant in terms of
resource allocation in the rest of the economy
● General equilibrium analysis useful when multiple products are involved and multiple sectors are affected.
● Both approaches confirm that a move from average cost pricing to marginal cost pricing for foundation data increase economic welfare But only as long as governments are prepared to fund the cost of
custodianship
● More work on social and environmental benefits
Slide 24
Thank you
Slide 25
POPSIS Study
● European union sponsored study into pricing of public sector information (2011)
● Assessed different models of supply and charging through 21 case studies (including meteorological and geographical information)
● In case of zero-cost or cost-recovery number of re-users increased by between 1,000% and 10,000%.
● PSI sales revenues can remain stable or even increase after drastic price cuts due to the growing demand.
● Several case study public sector providers have reported that intensified ties with re-users that may lead to improved data quality and process efficiency
Slide 26
Productivity and adoption –
sector wide impacts
Slide 27
Translates into national
economy Precise
positioning used in road
freight
Decreased price road transport sector
Lower production price in sectors using road trasnsport (such as the retail sector). Increased access to
factors .
Productivity improvement
National economic impacts
GDPConsumptionInvestment
Industry outputEmploymentIncreased output and
value added
Increased output per unit of value added
Decreased competitiveness.
Lower value added in coastal shipping due to
resource transfer to road freight
Decreased valueadded
Slide 28
UK Local government productivity
gains
● Channel shift – through deployment of transactional web mapping systems.
● Improved transport efficiency – by wide application of route optimisation and better street works management.
● Better decision making – using geospatially-enabled local information systems.
● Reduced data duplication – using master datasets such as the NLPG.
● Empowering frontline workers – by speeding up analysis and enhancing mobile working.
● Helping identify social deprivation – through data integration and analysis.
Slide 29
Example of results - Local Government (UK)
● Output of local government increased by $221 million in 2009 as a result of the accumulated productivity benefits of using geospatial application
● Gross Domestic Products (GDP) for England and Wales was over $320 million higher in 2009
● Projecting forward to 2015, GDP for England and Wales will be an estimated $600 million higher with right policy framework
● Average annualised cost to benefit ratio of using geospatial information and services in local government is on average 1:2.5 over 5 years.
Slide 30
Australia Infrastructure 2008
● More efficient asset planning, design and management
● Recording location of assets and features
● More efficient maintenance
● Overall productivity impact – 7%-12%
● Adoption ~10%
● Productivity impacts in infrastructure in Australia 0.73% to 1.25%
Slide 31
Productivity impacts on
Tasmanian economy ● 2011
GSP higher by $105 million Real income around $81 million higher Real wages around 0.4 per cent higher
● 2020 – scenario 2 (investment in data infrastructure compared to scenario 1 (no change) GSP higher by $106 million Real income around $96.4 million higher Real wages around 0.2 per cent higher