Setting the Context: Ecosystem Service Analysis

Lisa A. Wainger

University of Maryland Center for Environmental Science

STAC workshop on Ecosystem Goods and Services

3/28/17

Total Economic

Value

Use Value

Direct Use

- I’m enjoying nature

Indirect Use

- Nature does thatfor me?!

Option

- I might need it

later

Non Use Value

Existence

- I just like it

Bequest

- I want my grandkids to

enjoy it

Altruistic

- I want to help others who might

need it

Increasing difficulty of valuation ($)

Economic Value = Anything that contributes to human well-being

Non-use values can be substantial (from Wainger, Secor et al., in press)

Ecosystem service Spatial extent of beneficiaries

Monetary valuesfor TMDL

Authors

Property value enhancements due to enhanced water clarity

Waterfront & near-waterfront homes

$400-$700 million (present value)

Klemick et al. (2016)

Property value enhancements due to expanded SAV extent

Waterfront & near-waterfront homes

$300-$400 million Guignet et al. (2016)

Multiple use and non-use benefits [changes in abundance of striped bass, crab and oysters, water clarity in the bay, and algae in lakes]

About 80% of the total benefits accrued to non-users of the Bay

$1.20 to $6.49 billion / year

Moore et al. (2015)

Climate change damage costs avoided (carbon sequestration)*

Watershed $12.6 million/year US EPA (2011, Scenario 8a)

Health and aesthetic benefits due to air quality improvements*

Watershed $2.5 million/year US EPA (2011, Scenario 8a)

Hunting* Watershed $0.2 million/year US EPA (2011, Scenario 8a)*Optimized scenarios - not WIPs

Valuation does not measure overall importance• Builds social preferences from individual preferences

• People get to choose what they like

• What people will pay is determined by supply and demand conditions

• Benefits to society are measured as the aggregate of what everyone prefers

• Does not address • Fairness

• Distribution of benefits and losses among stakeholders

• Biases or information gaps that may prevent people from making optimal choices

Values Are Not Market PricesPrice of Carbon Credit

Based on supply & demandconditions

Based on benefitsto society (avoided damage toproperty, crops,health, etc.)

Values Are Rarely Potential Income

Because values are not market prices -

• Benefits do not represent money you could receive in transactions

• What can be valued might not be what motivates someone to act• Same management practice might improve soil health & sequester carbon

• Relatively easy to value carbon sequestration

• But farmer may be more motivated to adopt by changes in soil health

Values Are for Small Changes, Not the Whole Enchilada• Economists can only value small-moderate size changes in services

• People adapt and substitute when there are large changes

• Costanza approach of valuing the worlds ecosystems has been called “a serious underestimate of infinity”, Why?• A: Value changes as services become scarcer

• Values based on a per-acre value are better thought of as “promotional values”

Ecosystem service values tailored to location promote cost-effective planning

Cost-effectiveness of manure transportation subsidiesRed areas: Combined benefits for subsidizing manure transport are projected to be the highest per dollar spent (white areas = missing data)

Benefit index includes 1) Opportunity to reduce nutrient runoff from manure 2) Likelihood of nutrients reaching a stream3) Potential to improve impaired local water quality or protect areas with high habitat quality or high demand for fishing

Magen and Wainger, 2016

Economic Impacts are a Local Benefit

• Any money spent generates jobs and economic activity

• Jobs created depends on structure of local economy, not the social importance of the investment

Model of economic structure

• Direct effects • Indirect effects • Induced effects

Spend money

JobsEconomic Activity

How do we value ecosystem services to promote sound decisions?

Conceptual Value Diagram

ActionEcological outcome

Benefit-Relevant

Indicators

Who cares?

Social Benefits

How much do they care?

Alternative Benefit Measures with Increasing Economic Content

Ecological Outcome Metrics

Benefit Relevant Indicators

Social Benefits

% change game fish Likely # anglers Willingness to pay

Figures from Mazzotta, Wainger, et al. 2015

Act

ion

Practical & feasible methods for measuring values

One example

Reductions in nutrient and

sediment inputs

Reduced risk of climate change

Benefits to Stakeholders

Ecosystem Service Indicators

Flood and drought mitigation

Improved recreational

opportunities and aesthetics

Waterfowl habitat*

Wastewater treatment plants

Stormwater detention ponds

Septic upgrades

Gray options

Wetland restoration

Reforestation

Riparian buffers

Green options

Water storage*

GHG mitigation*

Hunting, fishing and birding

Freshwater fish habitat*

* Bonus Ecosystem ServicesBioretention

Animal habitat*

Gray vs. Green Options and the Provision of Ecosystem Service Co-Benefits

Weighting ecological changes by potential for benefits

US EPA 2011

Flood protection value highest when BMP is upstream of urban area + downstream of flood control dams

Using economic benefit transfer

Table 3-15. Annual Values* of Pollutant Removal by Urban Stormwater BMPs ($/acre of BMP/year)

US EPA 2011

* Health + other benefits accrue in urban areas with air quality problems

Using Ecosystem Services Values to Compare Implementation Choices

$0

$10

$20

$30

$40

$50

$60

Base CaseLC

RestrictedNPS LC

Base CaseLNC

RestrictedNPS LNC

$M

illio

nAir Quality

Duck Hunting

Non-WaterfowlHunting

Carbon Sequestration& Reduced GHGEmissions

Max BenefitsLeast Cost

US EPA 2011

Using both monetized and non-monetized benefits provides a balanced picture of benefits

0

5

10

15

20

25

30

35

40Ec

on

om

ic B

enef

it In

dex

Non-MonetizedBenefitsMonetizedBenefits

urban

- Property protection- Recreation

rural

- Existence- Bequest

18

Values that support good decisions

• Reflect ecological effectiveness of management practices

• Include location characteristics that determine if service is possible & needed

• Reflect peoples’ degree of concern for the change

• Include use and non-use values to represent a broad portfolio of ecosystem service benefits

References• Klemick, H., C. Griffiths, D. Guignet, and P. Walsh. 2016. Improving Water Quality in an Iconic Estuary: An Internal Meta-

analysis of Property Value Impacts Around the Chesapeake Bay. Environmental and Resource Economics:1–28.

• Guignet, D., C. Griffiths, H. Klemick, and P. J. Walsh. 2016. The Implicit Price of Aquatic Grasses. Marine Resource Economics 32:21–41.

• Mazzotta, M., L. Wainger, S. Sifleet, J. T. Petty, and B. Rashleigh. 2015. Benefit transfer with limited data: An application to recreational fishing losses from surface mining. Ecological Economics 119:384–398.

• Moore, C., D. Guignet, K. B. Maguire, C. Dockins, and N. B. Simon. 2015. A Stated Preference Study of the Chesapeake Bay and Watershed Lakes. National Center for Environmental Economics, US Environmental Protection Agency.

• US EPA. 2011. An Optimization Approach to Evaluate the Role of Ecosystem Services in Chesapeake Bay Restoration Strategies. Office of Research and Development. US EPA/600/R-11/001

• Wainger LA, Secor D, Gurbisz C, Kemp M, Glibert PM, Richkus J, Barber M. (in press). Resilience indicators support valuation of estuarine ecosystem restoration under climate change. Ecosystem Health and Sustainability.

• Wainger, L. A., G. Van Houtven, R. Loomis, J. Messer, R. Beach, and M. Deerhake. 2013. Tradeoffs among Ecosystem Services, Performance Certainty, and Cost-efficiency in Implementation of the Chesapeake Bay Total Maximum Daily Load. Agricultural and Resource Economics Review 42:196–224.

• Wainger, L. A., R. J. Johnston, K. J. Bagstad, C. F. Casey, and T. Vegh. 2014. Social Impact Analysis: Monetary Valuation. In: The Federal Resource Management and Ecosystem Services Guidebook (Olander, L. et al. eds.). National Ecosystem Services Partnership, Nicholas School of the Environment, Duke University. https://nespguidebook.com/assessment-framework/monetary-valuation.