Elsevier

Ecological Economics

Volume 49, Issue 1, 10 May 2004, Pages 19-30
Ecological Economics

Analysis
Contingent valuation, net marginal benefits, and the scale of riparian ecosystem restoration

https://doi.org/10.1016/j.ecolecon.2003.10.015Get rights and content

Abstract

A study was undertaken to estimate the benefits and costs of riparian restoration projects along the Little Tennessee River in western North Carolina. Restoration benefits were described in terms of five indicators of ecosystem services: abundance of game fish, water clarity, wildlife habitat, allowable water uses, and ecosystem naturalness. A sequence of dichotomous choice contingent valuation questions were presented to local residents to assess household willingness to pay increased county sales taxes for differing amounts of riparian restoration. Results showed that the benefits of ecosystem restoration were a non-linear function of restoration scale and the benefits of full restoration were super-additive. We estimated the costs of riparian restoration activities by collecting and analyzing data from 35 projects in the study area. After adjusting our estimated valuation function for socio-economic characteristics of the local population, the benefit/cost ratio for riparian restoration ranged from 4.03 (for 2 miles of restoration) to 15.65 (for 6 miles of restoration). Riparian restoration in this watershed is therefore an economically feasible investment of public funds at all measured spatial scales.

Section snippets

The need for marginal economic analysis of ecosystem restoration

Ecological systems provide an array of benefits to humans that are not generally accounted for in market transactions. Consequently, economic activities can degrade ecological systems and valuable ecosystem services may be underprovided or entirely lost. If ecosystems are resilient to changes caused by degradation, it may be possible to restore ecosystem services either to some pre-existing level or to a level that is commensurate with the demands of the current human population. However,

History of the Little Tennessee River ecosystem

In this paper, we conduct a benefit–cost analysis of restoration activities along the Little Tennessee River (hereafter LTR) located in the southern Appalachian Mountains. The Little Tennessee River (LTR) originates in Rabun County, GA; it flows north into North Carolina before terminating at Fontana Dam, just south of the Great Smoky Mountains. The LTR basin contains about 100,000 ha of mountainous terrain of which 49% is part of the Nantahala National Forest, 37% is in privately held forest,

Prior riparian restoration activities and costs in the LTR watershed

A restoration program for the LTR watershed was initiated in 1995 and 59 projects had been completed by 2001. A total of 54 projects have set aside 45,118 ft, or 8.5 miles, of riparian buffer. This activity consists of planting trees and grasses to stabilize the riverbank. On 14 projects, fences were installed to prohibit livestock from entering the river. And on five projects, alternative water systems were developed for watering livestock.

Only 35 of the riparian buffer projects had sufficient

Issues in the valuation of freshwater ecosystems

Economic valuation of ecosystems is complicated by the fact that ecosystems are characterized by multiple, interdependent services that possibly exhibit complex dynamics and discontinuous change around critical thresholds (Limburg et al. 2002). Faced with this complexity, marginal economic valuation of ecosystems has typically proceeded via simplification. In a review of published research on the valuation of freshwater ecosystems from 1971 to 1997 (30 studies), Wilson and Carpenter (1999)

Ecosystem valuation survey design

Hoehn et al. (2003) recognized that the economic value of freshwater ecosystems is derived from the services they provide, and stressed the importance of linking ecosystem science with ecosystem services in conducting stated choice experiments. For our study, conferred with a team of economists conferred with at team of ecologists from the USDA Forest Service Coweeta Hydrologic Laboratory to discuss the set of ecosystem services that have been impacted by land uses in the LTR watershed and the

A computerized survey instrument

A computerized survey instrument was developed to facilitate communication of information about the sources of riparian ecosystem degradation in the LTR watershed, the various riparian restoration and protection activities that could be implemented to address the problem, and ecosystem services that would be enhanced by the watershed programs. This format allowed us to make extensive use of photographs and diagrams depicting restoration activities. Land use maps were included to depict land use

Citizen focus groups and valuation panels

Four focus group sessions were conducted in the study area to facilitate the development of the computerized survey instrument.8 Two major concerns with the survey instrument emerged from the citizen focus group sessions. First, some people found it difficult to distinguish between the different programs, and recommended presenting a matrix showing the level of ecosystem services provided by each program. This structure,

Statistical analysis

Binary responses to the referendum questions were analyzed using a random utility model. For each of the different programs shown in Table 1, respondents (i) were asked if they would vote to support the LTR watershed program at the stated bid amount. The probability of voting YES can be expressed asPr[ν(zj,y−tj)+εij≥ν(z0,y)+εi0]where ν is indirect utility, zj is a vector of ecosystem services for program j, z0 is a vector of ecosystem services for the status quo, y is income, tj is the tax

Statistical results

Standard and random effects versions of the statistical model were estimated (Table 3). A likelihood ratio test showed that the random effects model was statistically superior to the standard probit model (χ2 statistic=58.41, significant at > 0.01 level). The correlation coefficient (ρ) in the random effects model was significantly different than zero at greater than the 0.01 level and the magnitude of ρ suggests that preferences among respondents were heterogeneous after controlling for the

Comparing benefits and costs of riparian ecosystem restoration

Annual median WTP values were estimated using the values for the socio-economic variables computed from our sample and using the population values for Macon County as reported in the 2000 Census (Table 4). In both statistical models, WTP values estimated using Census data were less than WTP values estimated using sample means. Population adjusted valuation functions derived from the statistically superior random effects model were used to compare ecosystem restoration benefits and costs.

Using

Conclusions

Scale is an important factor in conducting benefit/cost analyses of ecosystem restoration projects. In this study, respondents were willing to pay a premium for total restoration of the LTR ecosystem relative to more modest restoration levels, and the benefits of ecosystem restoration were super-additive in the sense that the value of total restoration was greater than the sum of benefits measured for partial restoration programs. In turn, this result showed a strong preference for programs

Acknowledgements

This research was made possible by joint funds provided by the US Environmental Protection Agency, the USDA Forest Service Southern Appalachian Ecosystem Management Project, and the Georgia Agricultural Experiment Station. The authors would like to acknowledge the support and advice provided by Jim Vose (Coweeta Hydrological Laboratory, USDA Forest Service), Dave Loftis (Bent Creek Experimental Forest, USDA Forest Service), Chis Geron (U.S. E.P.A.), Doug Johnson (Natural Resources Conservation

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