LAUSR

Abstract Following the success of two trial wind turbines, the national power company of Iceland, Landsvirkjun, proposed a wind farm at Burfellslundur on the edge of the Icelandic highlands. The farm would comprise of 67 turbines with combined production capacity of 200 MW. The Environmental Impact Assessment for the development raised concerns about the visual impacts of the proposals on the surrounding countryside. In this study, the contingent valuation method was applied to evaluate preferences and estimate willingness to pay to preserve Burfellslundur. This study represents only the third contribution in the international academic literature concerning the economic value of the environmental costs of developing wind farms, and the first focused on onshore resources. In addition, this paper fulfills a call by the OECD, who have requested that Iceland commence economic valuation of the environmental impacts of energy projects. A web-based contingent valuation survey was developed and issued by the University of Iceland's Social Science Research Institute, receiving 690 respondents. Of these, 28% were willing to pay for preservation. Interval regression using log-transformation was applied to estimate mean willingness-to-pay, which was 12,549 ISK (approximately US $128). When scaled up to the Icelandic population of taxpayers, the economic value of preserving Burfellslundur was estimated to be 3.17 billion ISK (approximately US $32.3 million). These results are of a scale that could have a significant impact on the social welfare gains or losses associated with Burfellslundur, and inform the international land-use management debate concerning the trade-offs of developing wind farms.