Category: water

Fourth quarter 2021 and first quarter 2022 journal roundup!

Fourth quarter 2021 and first quarter 2022 journal roundup!

This quarter, I focus on three recently published articles that highlight the value of environmental goods and services: regulations to combat the emerald ash borer, the value of agricultural land, and the value of wetland restoration. 

Hope, Emily; McKenney, Daniel; Pedlar, John; Lawrence, Kevin; MacDonald, Heather. 2021. “Canadian efforts to slow the spread of Emerald Ash Borer (Agrilus planipennis Fairmaire) are economically efficient.” Ecological Economics, vol. 188. 

Emerald ash borer” by NatureServe is marked with CC BY-NC 2.0, via Openverse.

The emerald ash borer is an invasive insect that kills most species of ash tree. Managing the spread of the pest can be very expensive, with inconsistent results. The United States Department of Agriculture has actually removed federal regulations designed to slow the spread of the emerald ash borer, citing the high costs and the uncertain benefits. Canadian agencies have likewise been attempting to determine whether the benefits of regulation exceed the cost. The authors developed a model simulating the spread of the emerald ash borer under various conditions, and then modeled the likely effect of different regulations on that spread. Finally, they determined the economic impact of the emerald ash borer by calculating the cost of removing trees in urban areas and replacing 50% of them. (They did not model the cost of insecticide application due to the complexity of modeling such application at a national level.) For rural areas, the authors calculated the cost of the emerald ash borer by using the stumpage value of the trees. 

Regulations designed to slow the spread of the emerald ash borer include limitations on transporting products containing wood from ash trees, treatments for products that are transported, and periodic audits. As the “true” efficacy of the regulations is unknown, the authors modeled the regulations at varying levels of efficacy. Finally, they then determined the net present value of the regulations. Results demonstrate that, even if regulations are only 25% effective at slowing the spread of the emerald ash borer, benefits outweigh the costs. This is the case even though the authors did not include the economic value of a healthy forest. If that were included, the benefits of those regulations would likely be much larger.

Agricultural landscape certification as a market-driven tool to reward the provisioning of cultural ecosystem services

Borrello, M.; Cecchini, L.; Vecchio, R.; Caracciolo, F.; Cembalo, L.; Torquati, B. 2022. Ecological Economics vol 193. 

File:Bessac 16 Polyculture 2013.jpg” by JLPC is marked with CC BY-SA 3.0.

One of the primary difficulties that agricultural landowners face is the high cost of keeping their land in agriculture, relative to other land uses. And yet, agricultural land provides benefits to society beyond just the value of the food produced on that land. It is a classic example of an environmental externality. This article examines the potential of issuing a “traditional agricultural landscape certification” for the preservation of olive groves in Italy. They found that such a certification commanded a price premium in the market, indicating that the cost to farmers of keeping their land in agriculture could be partially rewarded through the market. 

Richardson, M.; Liu, P.; Eggleton, M. 2022. “Valuation of Wetland Restoration: Evidence from the Housing Market in Arkansas,” Environmental and Resource Economics 81:649–683.

Planting live stakes in standing water” by WSDOT is marked with CC BY-NC-ND 2.0.

Continuing with the theme of valuing environmental goods and services, this article examined the value of wetland restoration (through the Wetland Reserve Program) by looking at the housing market in Arkansas. This article adds to the literature on the economic value of wetlands by looking at temporal variations in the housing market relative to the starting and ending date of wetland restoration projects. Therefore, rather than looking at the value of an already existing wetland, this article examines how improvements in wetland quality could impact surrounding property values. Their research finds a substantial increase in property values – an average of 6 to 10%!  They also find that the wetland size and type were likely to influence the magnitude of the effect, with forested wetlands having a larger positive impact on housing values than pond, lake, or emergent wetlands. Interestingly, open water wetlands had a much smaller effect than non-open water wetlands. The reasons why are unclear.

Point-Nonpoint Nutrient Trading in the Long Island Sound Watershed

Point-Nonpoint Nutrient Trading in the Long Island Sound Watershed

Photo credit: Long Island Sound Study

rbouvier consulting is proud to announce the publication of Feasibility of Point-Nonpoint Nutrient Trading in the Long Island Sound Watershed, the culmination of a year’s long project with NEIWPCC (formerly known as the New England Interstate Water Pollution Control Council). The report summarizes the potential for nutrient trading to meet the goals of the Long Island Sound Study.

Our work, together with the work of folks from NEIWPCC and Footprints in the Water LLC determined that “expanded water quality trading is unlikely to be an effective tool to meet water quality goals under current ecological, economic, and regulatory conditions in the Long Island Sound watershed.”

To read more about the project, including our report, here.

Waters of the United States: What’s economics got to do with it?

Waters of the United States: What’s economics got to do with it?

On June 27, 2017, the Environmental Protection Agency proposed a rule that would change the definition of the Waters of the United States (WOTUS).  On whose advice did they do this?  Why, economists’, of course!


Let me back up.  In 2015, then-President Obama issued a document redefining which rivers, streams, lakes and marshes fell under the jurisdiction of the EPA and the Army Corps of Engineers.  This rule has come to be known as the Waters of the United States rule.

Non-policy wonks can be forgiven for wondering: 1. how a government can redefine what comprises that waters of the US, and 2. why the move would be so controversial.

The 2015 rule (which was never actually implemented, as it was stayed by the U.S. Court of Appeals for the 6th Circuit) was called by then-speaker of the House of Representatives John Boehner as “a raw and tyrannical power grab that will crush jobs… and places landowners, small business, farmers, and manufacturers on a road to a regulatory and economic hell.” A pretty strong statement.

What the 2015 rule would have done was to clarify (or extend, depending upon your point of view) exactly which waterways the EPA and the Corps can oversee under the Clean Water Act.  Prior to 2015, the Clean Water Act covered only “navigable waters,” such as large lakes and rivers but did not necessarily include tributaries, wetlands, or smaller streams.  The rule of 2015 expanded that definition to include protections for tributaries that may or may not run all year round, such as small streams and wetlands.

But why did economists get involved?  Every proposed rule by the Executive Office must undergo a benefit-cost analysis, demonstrating that the benefits of the proposed rule outweighs the costs.  Bill Clinton first imposed this test in the 1990s, to protect against overbearing regulations.  Leaving aside the merits and drawbacks of imposing such a test, let’s look at what that would involve in this instance.

First, we would need to look determine which bodies of water would now be included under the 2015 definition.

Second, we would need to examine the costs needed to comply with the rules for these newly regulated waters and the potential economic effects of imposing these costs (loss of profitability, job losses, etc).

Next, we would need to investigate the benefits of including the new waters under the regulatory umbrella.  And finally, we would have to compare the benefits and the costs – not as easy as it sounds, especially if the benefits and the costs occur at different times.

As with many environmental regulatory cost-benefit analyses, the costs of imposing a new regulation are relatively easy to calculate.  In this case, they include permitting costs, administrative costs, associated environmental compliance costs, and wetland and stream mitigation costs.  They may also include project relocation costs, if a proposed development were to be located in one of these newly-regulated areas.  These are measurable and concrete costs, and they are not insubstantial. The new definition could have potentially affected municipalities, ranchers, farmers, golf courses, and home owners, among others – anyone with a stream or a wetland on their property (of course, assuming that those waters aren’t already regulated by the state, as they are in Maine).

Benefits are more difficult.  What would have been the benefits of including tributaries, transitory stream, and wetlands under the federal regulatory umbrella?  According to supporters of the 2015 rule, benefits would have included the increased health of larger bodies of water (and by extension, improved human health as well as ecosystem health).  In order to protect a lake or a river, the argument goes, you can’t just regulate what goes into the mainstem of the river – you have to monitor what gets into the tributaries as well. But making that link from reduced pollution to improved aquatic health to ecosystem benefits is anything but straightforward.  That’s what many environmental and resource economists spend their careers doing.

Benefits could include the avoided costs of drinking water filtration, better flood control, avoided risks of cleanups from spills or other damage, and increased health of fish and shellfish populations.  To estimate these benefits, economists at the EPA used “ecosystem services” (see my blog post here).  They identified peer-reviewed economic literature that estimated the value of protecting, preserving, replacing, and increasing the size of wetlands.  Then, from that literature, they arrived at a per-acre value and multiplied that by the number of acres projected to come under the enlarged jurisdiction.

Crude? No doubt. Developing a country-wide estimate on the value of protecting wetlands is not a pretty process.  But at least it gives a number, an estimate of value.  If we consider wetlands to be assets, then protecting more of those assets against harm should have some sort of value. The Obama EPA found that the benefits of expanding the definition of the waters of the United States exceeded the costs by a ratio of at least 1.3:1 (under the most conservative assumptions) to as much as 3:1.

When the Trump Environmental Protection Agency proposed rescinding the 2015 rule (thus reverting to the “state of the world” before the 2015 rule), they needed to show that the benefits of rescinding the rule exceeded the costs. They couldn’t accept the Obama EPA’s numbers, because what was previously a benefit would now become a cost, and vice versa.  So what did they do? They cast doubt upon the Obama EPA’s estimate of the benefits of protecting ecosystem services, in part by saying that some of the studies were too old and out-of-date, and in part by questioning the methodology.  That’s fine – economists regularly squabble about methodology.

Here’s the kicker, though.  Rather than try to improve the methodology, or arrive at a “better” number somehow, they did not include the benefits of protecting ecosystem services at all.  Because the number was “uncertain,” they literally wrote “uncertain” in the column for ecosystem services, and then proceeded to add up the numbers anyway.  In other words, they assigned protecting wetlands and tributaries a value of 0. ZERO.  Anyone looking at the “bottom line” and not bothering to read the entire document would not have caught the error.

Estimating the benefits of environmental protection and conservation is not an easy job. And many environmental advocates feel a little queasy at the prospect of assigning a “value” to ecosystems.  However, by not assigning a value to them we are allowing others to do so – and the value that they choose could be zero.  If we’re serious about protecting our valuable ecosystems from increasing threats, then we need to demonstrate that environmental protection has an economic value – and that it’s not zero.  Only once we can talk about regulations confidently in terms of benefits and costs, can we hope to adequately measure the impact of our (in)actions.

What do you think? Do you have any experience with WOTUS – good or bad?