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Ecosystems, Ecological Restoration, and Economics: Does Habitat or Resource Equivalency Analysis Mean Other Economic Valuation Methods Are Not Needed?

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Abstract

Coastal and other area resources such as tidal wetlands, seagrasses, coral reefs, wetlands, and other ecosystems are often harmed by environmental damage that might be inflicted by human actions, or could occur from natural hazards such as hurricanes. Society may wish to restore resources to offset the harm, or receive compensation if this is not possible, but faces difficult choices among potential compensation projects. The optimal amount of restoration efforts can be determined by non-market valuation methods, service-to-service, or resource-to-resource approaches such as habitat equivalency analysis (HEA). HEA scales injured resources and lost services on a one-to-one trade-off basis. Here, we present the main differences between the HEA approach and other non-market valuation approaches. Particular focus is on the role of the social discount rate, which appears in the HEA equation and underlies calculations of the present value of future damages. We argue that while HEA involves elements of economic analysis, the assumption of a one-to-one trade-off between lost and restored services sometimes does not hold, and then other non-market economic valuation approaches may help in restoration scaling or in damage determination.

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Notes

  1. The legal framework for compensatory restoration in EU includes: The Environmental Liability Directive, Habitats and Wild Birds Directive, Water Framework Directives, Environmental Impact Assessment and Strategic Environment Assessment Directives (Toolkit 2008).

  2. NOAA: The National Oceanic and Atmospheric Administration in the United States is a lead agency in handling restoration and compensation issues for several types of natural resources.

  3. The CVM presents an individual with a scenario depicted in a survey and then asks what the individual would be willing to pay to bring it about. This sounds simple, but CVM issues are complicated, and the exact methods used today are not at all simplistic.

  4. DDT, or dichlorodiphenyltrichloroethane, is one of the strongest insecticides.

  5. PCB, polychlorinated biphenyl, is one of the persistent organic pollutants.

  6. The scope test more or less examines whether WTP is larger for larger resource impacts and smaller for smaller ones, as should be true in valuation.

  7. The US Army Corps of Engineers (USACE) is a US federal agency responsible for designing, construction, and engineering in the public works and projects, and is indeed part of the United States military branch, the Army. The scope of USACE activities includes among others: construction of dams, flood protection facilities, military facilities, and waterways. Moreover, the USACE is responsible for ecosystem restoration and environmental management (www.usace.army.mil).

  8. Press release, April 2, 2007 by Texas Parks and Wildlife Department.

  9. Actually, the authors use an inverse demand curve, so that the sensitivities are the amount that price (or WTP—willingness to pay) would change in response to changes in resource services.

  10. Compounding means accruing or accumulating. The inclusion of discount rate in the HEA/REA approach causes “past value” of lost acre years to be greater than present value and “future value” of lost acre years to be less than present value. This is reflected in Table 2.

  11. An anonymous reviewer suggested to us that the European Commission currently (2012) uses a 6 % discount rate to evaluate projects, but we were unable to find details and documentation for this.

  12. Her Majesty’s Treasury (2003).

  13. Risk is endogenous when an individual is able to undertake mitigation (self-protection) or self-insurance actions that reduce the risk that he faces.

  14. The EU Birds, Habitats, and Environmental Impact Assessment (EIA) Directives refer to Directives 79/409/EEC, 92/43/EEC, and 85/337/EEC, respectively (Cox 2007).

  15. Benthic organisms live near or on the sea bottom.

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Acknowledgments

Part of this paper was presented at the 5th National Conference on Coastal and Estuarine Habitat Restoration, November, 2010, Galveston, Texas and audience and panel member comments are appreciated. The authors thank Frank Lupi, Mike Kaplowitz and Linwood Pendleton for engaging in discussions about the topic and Urs Kreuter, Mark Southerland, and Brad Wilcox for encouragement on this paper. Michele Zinn gave us excellent editorial assistance in preparing the final version of the manuscript. Shaw acknowledges support from the U.S.D.A. Hatch funding program.

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  1. Department of Agricultural Economics, Texas A&M University, College Station, TX, 77843-2124, USA

    W. Douglass Shaw & Marta Wlodarz

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Shaw, W.D., Wlodarz, M. Ecosystems, Ecological Restoration, and Economics: Does Habitat or Resource Equivalency Analysis Mean Other Economic Valuation Methods Are Not Needed?. AMBIO 42, 628–643 (2013). https://doi.org/10.1007/s13280-012-0351-9

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