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Economic Benefits Arising from Watershed Restoration
Watershed restoration often requires economic, in addition to scientific justification in order to gain political support (Norgaard et al., 2007; Rubin, 2000). In these cases restoration includes socio-economic arguments in which the economic benefits accruing from restoration are enumerated (Davis, 2004; Cowling, 2007; Holl and Howarth, 2000). However, many of the benefits of properly functioning watersheds are neither fully known nor taken into account in traditional market systems (Holl and Howarth, 2000; Costanza et al., 1997). This paper reviews the existing literature on the non-job creation economic benefits arising from watershed restoration, with a concentration in three areas: 1) return on investment from restoration projects, 2) taxpayer willingness to pay for restored watersheds, and 3) business opportunity created from restored natural amenities. As a note, relatively few studies in these areas directly address restoration activities, thus this article utilizes many tangentially related studies to draw conclusions. Also, all monetary values have been adjusted for inflation to 2008 U.S. Dollars.
Return on Investment from Restoration Projects
Many studies directly examine how ecosystem restoration generates monetary returns, primarily through governments avoiding the costs of providing services currently provided by ecosystems, increasing the productivity of existing industries, and/or expanding the property tax base of communities through increased home values. Large returns on investment from restoration in these areas do exist, but the benefits do not always outweigh the costs.
Researchers have undertaken many studies on this type of economic benefit. Erosion costs the U.S. economy $63 billion per year, and the restoration of cropland and rangeland to prevent this erosion would immediately yield a positive return on investment, with an estimated $7.52 in costs averted for every dollar invested in erosion prevention (Pimentel et al., 1995). Similarly, the loss of wetlands in the farm belt has detrimentally affected a variety of species in addition to causing decreased water quality (Johnston et al., 1990; Schweiger et al., 2004; DeLaune et al., 2005). A restored 999-hectare wetland along the Illinois River could yield a net benefit of $1.99 million to the local economy, after taking into account all costs and benefits (Prato and Donald, 2006). Similarly, restoration of Coho salmon habitat on the west coast of Canada would be worth $700,000 to $3.7 million, largely due to increased productivity within the fishing industry (Knowler et al., 2003). Water quality has also been correlated with housing prices. Home values increased in the Chesapeake Bay 1.5 percent for every 100 fecal coliform counts removed per 100mL of water (Legget and Bockstael, 2000), and in the St. Mary’s watershed in Maryland home values decreased $1,086 for every milligram per liter increase in total suspended solids and $17,642 for every milligram per liter increase in dissolved inorganic nitrogen (Poor et al., 2007).
Not all studies show such strikingly positive results. The full restoration of Chesapeake Bay seagrass would yield annual returns of $7.4 million to hard-shell blue crab fishermen and consumers (Anderson, 1989), but an average of $10.34 million per year so far has been spent on water quality and riparian management, with the full restoration of the seagrass not yet achieved (Hasset et al., 2005). Restoration efforts are also underway to eliminate the tamarisk, a water-intense woody shrub, from the American southwest. The tamarisk costs the U.S. between $305 and $686 per hectare per year, but the cost of eliminating the tamarisk is approximately $9,400 per hectare. Thus 17 years would elapse before these restoration activities would pay for themselves (Zaveleta, 2000). Similarly, ecologists have encouraged the restoration of longleaf pine ecosystems in southern U.S. private timberlands. The benefits as measured by carbon sequestration, endangered species protection, and amenity benefits still come $19 to $40 per hectare short of compensating the landowners for decreased productivity (Alavalapati et al., 2002).
Willingness To Pay for Restoration
Popular support for restoration activities is often measured by willingness to pay (WTP) studies, which use surveys to determine how much households are willing to pay in order to support conservation programs in their locality. These studies, while yielding a hypothetical number, are used frequently by the government to determine whether conservation activities are worth their expense (Farley and Gaddis, 2007).
Willingness to pay for stream restoration is similar across studies, with researchers finding a WTP of $13 to $18 per month for restoration of Deckers Creek in West Virginia (Collins et al., 2005), $3 to $15 per month for the restoration of two creeks in Western Pennsylvania (Farber and Griner, 2000), $28 per month for the restoration of a 45-mile section of the Platte River in Colorado (Loomis et al., 1999), and $8 per month to improve water quality in Grand River Watershed in Ontario (Brox et al., 1996). For those studies that measured it, the costs incurred in restoration were less than the benefits observed in WTP surveys. This echoes other another study in which wetland restoration in North Carolina yielded an average of $11.40 in WTP benefits for every dollar spent on restoration (Holmes et al., 2004).
Social scientists have also undertaken WTP studies on endangered species protection. As the recovery of certain endangered species hinges on increased habitat quality, endangered species protection can be tied to watershed restoration. These studies show that benefits perceived by the public are greater than the costs of restoration activities (Loomis and White, 1996). Average annual WTP for the protection of pacific salmon and steelhead is $87 (Bell et al., 2003; Olson et al., 1991), grizzly bears is $50 (Brookshire et al., 1983), Northern spotted owl is $97 (Hagen et al., 1992; Rubin et al., 1991), and arctic grayling and cutthroat trout is $21 (Duffield and Patterson, 1992).
Municipal Growth and Business Opportunities
Watershed restoration can have economic impacts on cities and counties. Much like infrastructure development, which consistently yields positive returns on investment (Congressional Budget Office, 2008), watershed restoration may create long-term benefits to communities like population growth and business creation because of increased natural amenities (Natural Resource Council, 1992). This section investigates whether these long-term effects of watershed restoration are common.
Population growth rates in the Bitterroot Valley of Montana are highest in high amenity areas, such as those areas nearest to mountains, parks, and national forests (Swanson, 2006). Similarly, new business growth within the Greater Yellowstone area is correlated with natural amenities (Rasker and Hansen, 2000). Public lands used for conservation instead of industrial development purposes are correlated with longer-term and more sustained economic growth (Rasker, 2006), and high-amenity counties have three-times the rate of job growth than low-amenity counties (McGanahan, 1999). Businesses frequently move to these high-amenity areas because of their scenic beauty and environmental quality (Johnson, 1995).
Applying these results to watershed restoration assumes that restoration can have a large incremental benefit to the overall natural amenity value. Also, while these results show how environmental quality is important to town and county growth, more important are certain prerequisites for economic growth (Rasker et al., 2008). Businesses need both an educated workforce to employ and access to large population centers via an airport with regular flights or an Interstate Highway (Rasker et al., 2008; Rasker, 2006; McGanahan, 1999). Therefore, while natural amenities are important, the incremental contribution of watershed restoration to them is unknown, and other factors are required before environmental quality becomes significant in facilitating economic growth.
Watershed restoration can be economically justified in a variety of different ways, with positive returns on investment, public acceptance of the costs, and facilitation of long-term business creation. However, the long time scale required for achieving a positive return on investment in certain restoration projects and the unknown incremental benefit of watershed restoration in increasing the natural amenity qualities of communities are hurdles facing practitioners in justifying restoration on economic grounds.
— Josh is Wildlands CPR’s Restoration Research Associate.
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