Watershed Conference - "The value nature vs the nature of value" - 2006

Environmental Economics: The nature of value vs. the value of nature

What is “value”?

What is “value”?

Webster’s Dictionary Defines Value as:

1 : a fair return or equivalent in goods, services, or money for something exchanged

2 : the monetary worth of something : marketable price

3 : relative worth, utility, or importance <a good value at the price> <the value of base stealing in baseball> <had nothing of value to say>

7 : something (as a principle or quality) intrinsically valuable or desirable <sought material values instead of human values -- W. H. Jones>

Utility in Value

Utility is defined as the level of happiness or satisfaction associated with alternative choices.

Economists assume that when individuals are faced with a choice of feasible alternatives, they will always select the alternative that provides the highest level of utility.

What is Environmental Economics?

A mechanism using economic theories and empirical analyses that characterizes relationships between the performance of the economy and environmental pollution control;

OR It can be defined as the study and in-depth

analyses of economic and policy issues relating to economic costs and benefits of environmental pollution control programs, policies, and guidance.

Why do we need to consider Environmental Economics?

To perform analyses of the economic impacts of environmental pollution control programs.

To address the development dimensions of environmental policy – evaluating the social and economic impacts, in particular the impacts on poverty, and designing policies that are both cost-effective and equitable.

To examine the environmental implications of development policy – making tradeoffs between poverty reduction and environmental protection.

Concepts of Value

Non-Utilitarian Concept(Typically Intangible Values)

Utilitarian Concept(Typically Tangible Values)

Total Economic Value

Total Economic Value (TEV) Concept is attributed to Pearce and Warford

1993, World Without End Theoretical structure for assessing ecosystem

value as a whole

TEV

CA

TEG

OR

IES

CO

MM

ON

LY U

SED

VALU

ATI

ON

MET

HO

DS

USE VALUE NON-USE VALUE

TOTAL ECONOMIC VALUE(TEV)

Direct use value

ConsumptiveNonconsumptive

Indirect use value Option value

Bequest valueQuasi-option value

Existence Value

1. Changes in productivity

2. Cost-based approaches

3. Hedonic prices4. Travel costs5. Contingent

valuation



3. Contingent valuation





TEV CategoriesTEV CategoriesDirect Use

Direct use values are based on consumptive or nonconsumptive uses.

Consumptive use is a use that reduces the overall supply of resource, while nonconsumptive use causes no reduction in quantity or supply of that resource

TEV CategoriesTEV CategoriesIndirect Use

Indirect use values can be described as support and protection provided to economic activity by regulatory environmental services.

Many ecosystem services are used as intermediate inputs for the production of goods, while other services indirectly contribute to consumption of goods.

An example of indirect use value of services through intermediate inputs would be pollination in food production, while indirect contribution to consumption would be water purification.

TEV CategoriesTEV CategoriesOption Value

A value of information about future returns net of environmental damages conditional on refraining from making an investment that would entail uncertain future environmental damages.

TEV CategoriesTEV CategoriesExistence Value

Existence values are non-use values often referred to as conservation values, or passive use values.

These are values applied to a resource that individuals do not intend to use, but would feel a “loss” if the resource were to disappear.

This could be stated as value ascribed to the knowledge of existence.

Studies have linked these applied values to the knowledge of maintaining a resource for one’s descendents and the knowledge of assured survival for a resource like habitats or species

TEV

CA

TEG

OR

IES

CO

MM

ON

LY U

SED

VALU

ATI

ON

MET

HO

DS

USE VALUE NON-USE VALUE

TOTAL ECONOMIC VALUE(TEV)

Direct use value

ConsumptiveNonconsumptive

Indirect use value Option value

Bequest valueQuasi-option value

Existence Value



3. Hedonic prices4. Travel costs5. Contingent

valuation








Substitute Cost Method is the focus of this research

Research

Introduction

Development pressures are increasingStormwater runoff characteristics are

changed by developmentStormwater runoff models existModels produce complicated

scientific/engineering dataA common metric is needed to compare

varied elementsThe common metric is the Ecological

Services Value (ESV)

What is the problem?

Stormwater Runoff Impacts

It is often difficult for decision makers and political officials to understand complex scientific and engineering analysis, as it relates to stormwater runoff

The desire for economic development and sources of new revenue is creating intense pressure on decision makers to allow development of lands

Without a common metric, it is difficult to evaluate environmental impacts

Why is it a problem?

Decisions Will Be Made

Development decisions are often made without respect to impacts of stormwater runoff

Few tools are available to evaluate complex development decisions with well recognized, simplistic terms

Without a common metric, decision makers may not consider the impacts of development on stormwater runoff

Why is it important to solve it?

Ecosystem Deterioration

Assuming that predevelopment conditions are optimal for downstream areas, if impacts are not mitigated, significant damage can occur in the form of pollution and/or flooding

Without the appropriate comparisons, leaders may make poor decisions that could have negative impacts on society

Research Question

What is the monetary value of the natural services provided by undeveloped lands with respect to stormwater runoff impacts?

Hypothesis

H0 = The proposed methodology and tool produces the required inputs for the ESV

equation.

n

iOCES iiCCV

1

)(

Where:

VES = Ecological Services Value

CC = Capital costs of the construction of the stormwater control

CO = Operations and maintenance costs of the stormwater control

Methodology & Tool DevelopmentResearch Approach

Research Stormwater Runoff ModelsWith Respect to ESV Equation Needs

Identify Model Inputs

Write Computer Code to GenerateModel Inputs through GIS

Test Custom Generated Inputs with Models

Write Computer Code to Accept and Extract Model Output to Calculate ESV

Write Computer Code to Express ESVGraphically

Classify Aerial/Satellite ImageryFor Research Area

Generate Inputs Using Decision-ToolAnd Execute Models

No

Yes

Model Execution Complete,ESV Calculator Accepted Model

Output, ESV DisplayedGraphically for Decision Support

Existing Stormwater Models

WinSLAMMSource Loading and Management Model

WCSWatershed Characterization System

L-THIALong-Term Hydrologic Impact Assessment

WinTR-55

Decision Support Tool Development

Input Support Manual input Importation of text files Importation of databases Derivative inputs of a GIS

Output Graphical representations Reporting functions

The Decision Support Tool will be developed in the form of an extension for ESRI’s ArcGIS

Expected Results

Existing models are expected to:Determine the characteristics of stormwater runoffSelect and determine varied combinations of

stormwater controls for the reduction of quantity and the enhancement of quality

Calculate the cost and operations of the selected controls

The proposed methodology and tool is expected to provide the required inputs necessary for the calculation of the ESV.

Manual Calculation Examples

1. Low Density Residential Site

2. High Density Residential Site

3. Commercial Site

ESV Calculation

Assumptions:

1. Pre-development is the optimal condition

2. Pre-development can be achieved through technology

3. Land cost is not factored

Low Density Residential Example

Source Area Delineations

FLAT ROOFS

PARKING

SMALL LANDSCAPED AREA

STREETS

Backyards40%

Driveways9%

Frontyards28%

Roofs8%

Sidewalks1%

Streets14%

Low Density Residential ExampleSource Area Distribution

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

Base Conditions Biofiltration Wet Detention Biofiltration and Wet Detention

Ru

no

ffV

olu

me

(cf)

Runoff Volume (cf) Pre-Development Runoff (maximum)

ESV for Low Density Residential

Calculated cost runoff reduction per cubic foot$1.71

Reduction required from pre-development conditions to base developed conditions876,298.8 cu ft

Site Acreage = 13.86

ESV = $1,498,471.29

High Density Residential Example


FLAT ROOFS

PARKING


STREETS

OTHER PAVED AREAS2%

PITCHED ROOFS20%

SMALL LANDSCAPEDAREAS

49%

STREETS29%

High Density Residential ExampleSource Area Distribution

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

Base Condition Biofiltration Wet Detention Biofiltration and Wet Detention

Ru

no

ffV

olu

me

(cf)

Runoff Volume (cf) Pre-Development Runoff (cf)

ESV for High Density Residential


Reduction required from pre-development conditions to base developed conditions1,294,188 cu ft


ESV = $2,782,504.20

Commercial Example


FLAT ROOFS

PARKING


STREETS

Commercial ExampleSource Area Distribution

FLAT ROOFS20%

PARKING34%

SMALL LANDSCAPEDAREA25%

STREETS21%

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

Base Conditions Biofiltration with LanduseRouting

Wet Detention Biofilter with Landuse Routingand Wet Detention

Ru

no

ffV

olu

me

(cf)

Runoff Volume (cf) Pre-Development Runoff

ESV for Commercial


Reduction required from pre-development conditions to base developed conditions8,708,669 cu ft


ESV = $4,766,005.00

Practical Example

A municipality is presented with the decision to allow a commercial retail development in an undeveloped area.Question:

What is the monetary value of the services provided by the existing natural system (i.e. ESV), with respect to stormwater runoff?

If the ESV is greater than the costs the interested party is willing to support, the decision makers must determine if the amount of stormwater runoff impact is acceptable, hence informed consent.

Conclusions

This research will produce a methodology and decision tool: 1. To aid in quantifying the environmental impact and cost

associated with land disturbance/development 2. Through the determination of a common metric, aid in

understanding relationships between:1. Economic development perspectives2. Stormwater pollution control engineering cost implications3. The value of natural stormwater services provided by the

ecosystem

Lastly, this research will contribute to the greater body of knowledge on the topics of stormwater runoff impacts, environmental economics, and geographic information sciences.

SICS Consultants, LLCwww.sicsconsultants.com

Steve McKinney256.289.6152

[email protected]

CALL ME!!! Cause baby needs new shoes!!!!

Alexander McKinneyAlexander McKinney

Watershed Conference - "The value nature vs the nature of value" - 2006

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Transcript of Watershed Conference - "The value nature vs the nature of value" - 2006