SLIDE 1
Quantifying the Non-Market Benefits of Coastal Adaptation and Natural Infrastructure: Implications for Benefit-Cost Analysis
Robert J. Johnston
Clark University Webinar for the New Brunswick Environmental Network November 6th, 2019
Quantifying the Non-Market Benefits of Coastal Adaptation and - - PowerPoint PPT Presentation
Quantifying the Non-Market Benefits of Coastal Adaptation and - - PowerPoint PPT Presentation
Quantifying the Non-Market Benefits of Coastal Adaptation and Natural Infrastructure: Implications for Benefit-Cost Analysis Robert J. Johnston Clark University Webinar for the New Brunswick Environmental Network November 6 th , 2019 What
SLIDE 2
SLIDE 3
No One-Size-Fits-All Approach
SLIDE 4
Predetermined Notions
Good decisions can sometimes be hindered by misguided
assumptions about the economic benefits and costs.
For example, it is often assumed that the economics of
coastal adaptation primarily concerns cost-effective protection of built capital/infrastructure.
Giving automatic priority to homes, infrastructure and
markets can lead to policies that reduce net economic benefits.
Even when the biophysical outcomes of adaptation can be
projected, the socioeconomic consequences are not always obvious.
SLIDE 5
Common Example—Damage Costs
Among the most commonly cited estimates of economic
cost due to coastal hazards are replacement or damage costs to homes and infrastructure.
Reduction or avoidance of these costs is often reported as
an economic benefit of adaptation.
But replacement or damage costs alone are usually not
valid measures of either economic cost or benefit.
These costs can either under- or overestimate true benefits
- r costs.
SLIDE 6
Damage Costs versus Economic Costs
Example #1: A rarely-used bridge-to-nowhere damaged
by a flood.
Repairing this bridge would cost a $100 million. Is the benefit of protecting this bridge $100 million? No—because the bridge has little real value to society.
Example #2: A heavily-used dirt road damaged by a
flood.
Due to flooding emergency vehicles cannot reach residents who
require assistance. Other people cannot evacuate.
Repairing this road would cost $20,000. Is the benefit of protecting this road $20,000? No—because real losses due to road damage are much greater.
SLIDE 7
Quantifying Economic Benefits and Costs
Economic benefits and costs do not necessarily equate to
monetary flows in markets.
Economic activity does not equal economic benefit. An economic benefit simply reflects a change in the
welfare of an individual or group.
An economic cost is the loss of something that would
- therwise provide a benefit (or the loss of a benefit).
Benefits and costs can result from activity in markets
(e.g., consumption of market goods) or from changes in nonmarket goods and services.
SLIDE 8
Types of Economic Values
Non-Market Use Non-Use Consumptive Non-Consumptive Existence Bequest Altruistic Total Value Market
SLIDE 9
Economic Values
For market goods, people make purchases that express
values (we can see the tradeoffs they make).
Values typically measured as consumer and producer
surplus.
For non-market goods, no markets exist. Non-market
valuation is required to asses these values.
Examples—clean water, air, wildlife, climate,
recreation, natural flood protection.
The economic theory underlying value estimation is the
same for market and non-market goods, but the methods used to measure these values differ.
SLIDE 10
What’s the Net Value to Consumers? Consumer’s Surplus
Surplus to consumers for all units of production
P R I C E
QUANTITY
Common Non-Market Valuation Methods
Revealed Preference (Use Value)—Quantify values based on
- bserved behavior in or out of markets
– Recreation Demand Models – Hedonic Property Value or Wage Methods – Ecological Productivity Methods – Defensive Behavior Methods – Factor Input Methods – Related Market Behavior
Stated Preference (Use + Nonuse Value)—Quantify values based
- n responses to carefully designed surveys
– Contingent Valuation – Choice Experiments
Benefit Transfer—Use results from a study elsewhere to quantify
values for a site where no results are available
SLIDE 11
Illustrative Example from Delaware
Example: A 2012 study for the Delaware Dept. of Natural
Resources and Environmental Control quantifies benefits and costs of management for Delaware Bay Beaches.
Narrow beaches on Delaware Bay supporting local
communities, recreation and natural services.
Key policy question – what should the State do to address
erosion and loss of these beaches and communities?
SLIDE 12
Project Area
SLIDE 13
The Economic Analysis
Beach width, housing loss and other biophysical
projections provided by Johnson, Mirmiran & Thompson (2012) for each beach, under four management scenarios.
The analysis considers predicted changes in beach width
through 2041, along with associated effects on housing, infrastructure, ecosystem services, and other benefits and costs.
Four options identified by the state:
Scenario 1—Beach Nourishment Scenario 2—Managed Retreat Scenario 3—Basic Retreat Scenario 4—Do Nothing
SLIDE 14
SLIDE 15
SLIDE 16
SLIDE 17
SLIDE 18
Example – Non-Market Recreational Values
Beach and Visitor Type Beach Nourishment Basic Retreat Enhanced Retreat Pickering (total) $659,832 $306,567 $169,168 Kitts Hummock (total) $625,966 $330,514 $278,198 Bowers (total) $1,173,049 $579,326 $927,590 South Bowers (total) $393,726 $82,450 $290,372 Slaughter (total) $2,391,604 $1,583,761 $2,194,251 Prime Hook (total) $1,092,704 $63,236
- $365,880
Broadkill (total) $9,729,112 $7,837,672 $7,268,543 TOTAL ALL BEACHES $16,065,994 $10,783,525 $10,762,243
- Note. All estimates represent Present Value over 2011 to 2041, discounted at 4% and compared to No Action Scenario.
Recreation demand model estimates annual recreational benefits
for different beach widths, based on visitation patterns (Parsons et al. 2013).
Table shows change in non-market benefits realized by beach
visitors, compared to a default of No Action.
SLIDE 19
Scenario
(A) Sand, Fill and Demolition (PV, $mill) (B) Housing Acquisition Payments (paid by State) (PV, $mill) (C) Housing Acquisition Payments (received by property
- wners)
(PV, $mill) (D) Recreation (PV, $mill) (E) Housing Services (PV, $mill) (F) Reduction in Additional Flood and Erosion Damages (PV, $mill) (G) Net Benefits (PV, $mill; sum of A through F) (H) Net Benefits not Including Additional Flood and Erosion Damages (PV, $mill)
Beach Nourish- ment (Scenario 1)
- $61.1
- $0
$0 $16.1 $18.2 $2.7
- $24.1
- $26.8
Basic Retreat (Scenario 3)
- $0.5
- $61.3
$61.3 $10.8
- $43.1
$3.0
- $29.8
- $32.8
Enhanced Retreat (Scenario 2)
- $4.5
- $149.1
$149.1 $10.8
- $130.9
$10.6
- $114.0
- $124.6
Net Benefits Compared to No Action
SLIDE 20
No Action Provides the Greatest Social Benefit
Nourishment benefits a small group of coastal
homeowners but imposes large costs on others.
Retreat requires substantial costs of removing homes and
immediate loss of housing value.
The option with the greatest net economic benefit is No
Action (beaches erode and homes are continually lost).
Community Nourishment Basic Retreat Enhanced Retreat Net Benefit (PV, $mill) Net Benefit (PV, $mill) Net Benefit (PV, $mill) Pickering
- $3.2
- $0.5
- $1.8
Kitts Hummock
- $4.6
- $1.6
- $6.9
Bowers
- $3.1
- $2.9
- $5.8
South Bowers
- $3.8
- $0.4
- $1.4
Slaughter
- $11.6
$0.7
- $8.5
Prime Hook
- $4.6
- $3.4
- $36.4
Broadkill $6.8
- $21.9
- $53.2
Total
- $24.1
- $29.8
- $114.0
Notes: Net benefits calculated relative to the No Action Scenario. The table reports all figures in 2011 dollars. The reported values are the present value of the stream of annual estimates aggregated across 30 years (from 2011 to 2041) and discounted at 4%.
SLIDE 21
Common Wisdom Can be Wrong
Such outcomes highlight the benefits of looking at each
area objectively, on a case-by-case basis.
Preconceived notions and objectives can lead to
misguided actions and priorities.
Even when the biophysical outcomes of adaptation can be
projected, socioeconomic consequences and values are not always obvious.
Findings such as this
highlight the importance of tradeoffs in adaptation.
SLIDE 22
Example #2: Quantifying Residents’ Values
Choice Experiments are survey-based stated preference
methods that estimate values from survey respondents’ choices over alternative, hypothetical policy options.
Questions mimic public votes. Respondents choose
among policies with different environmental effects and costs.
By evaluating respondents’ choices over
many different multiattribute alternatives, we can calculate tradeoffs that reveal values (or willingness to pay).
Methods such as these are the only means
- f measuring use and nonuse values.
SLIDE 23
Simple Conceptual Example
Management Outcome Status Quo (No Policy) Option A Quantity of Outcome X X1 X1 Quantity of Outcome Y Y1 Y1+A Change in Annual Household Taxes $0 $10 HOW WOULD YOU VOTE?
□ □
SLIDE 24
Project Overview
Choice models are applied to evaluate how two target
communities in Connectictut, USA can best adapt to coastal storms and flooding.
The primary goal is to quantify economic benefits realized
by communities under alternative adaptation scenarios, and adaptation strategies likely to gain the strongest community support.
Reflected in residents’ values for outcomes and
tradeoffs.
Particular attention is given to tradeoffs among the
- utcomes of hard and soft adaptation.
SLIDE 25
Study Location
SLIDE 26
Different Waterfronts and Vulnerabilities
SLIDE 27
Design of the Choice Experiment
Choice experiment survey design and testing was
conducted over two years, including input from—
Focus groups (13) and interviews with residents,
- fficials and scientists.
Future climate change and flooding scenarios for each
community.
Community hazard mitigation plans and additional
findings from the scientific literature.
Combined input used to characterize adaptation effects
that are likely to be most relevant to the public.
Determine most effective ways to communicate these
effects so that residents can make informed choices.
SLIDE 28
Primary Resources and Tradeoffs
Attributes in the choice experiment characterized: Homes expected to flood in coastal storms. Loss/gain of natural habitats such as tidal marshes. Loss/gain of recreational resources such as beaches. Extent of coastal armoring Road flooding (highlighted by policymakers but not
residents)
Cost (e.g., to taxpayers). Uncertainty
SLIDE 29
The Choice Experiment Survey
Waterford and Old Saybrook during Hurricane Sandy
SLIDE 30
Communicating Risks and Tradeoffs
SLIDE 31
Communicating Risks and Tradeoffs
SLIDE 32
Communicating Methods and Outcomes
SLIDE 33
Old Saybrook Waterford Baselines and attribute levels determined by current
conditions and future flooding scenarios for each town.
SLIDE 34
Old Saybrook Waterford Options A and B reflect feasible adaptation possibilities
that “mix and match” different outcomes.
SLIDE 35
Old Saybrook Waterford Cost levels are hypothetical and chosen according to an
experimental design, enabling values to be estimated.
SLIDE 36
There were 72 unique choice questions for each town,
blocked into 24 distinct survey versions (3 per survey).
SLIDE 37
Details of Implementation and Analysis
Independent DCEs for each community. Survey implemented by mail during June-August 2014. Sample of 2,881 randomly-selected Waterford and Old
Saybrook residents.
Of 2,513 deliverables, 808 returned for a response rate of
32.2% (31.2% Waterford; 32.8% Old Saybrook).
Choice experiment with three choices (A, B, Neither). Mixed logit model in Willingness to Pay (WTP) space
(Scarpa et al. 2008; Train and Weeks 2005).
Allows for heterogeneity across respondents.
SLIDE 38
Results: Willingness to Pay
Waterford Old Saybrook When compared across towns, results show patterns
consistent with theoretical expectations.
Beach protection is highly valued in both towns. Wetlands are valued more highly in Waterford ($12.53 vs.
$1.28), where they are more scarce.
SLIDE 39
Results are Consistent with Expectations
Values for home protection are consistent with
diminishing marginal returns.
Most homes in Waterford are not at risk. Results
show no significant WTP for additional home protection.
Old Saybrook has greater vulnerability (safe homes
are more scarce), leading to significant but small WTP for home protection ($0.19 per home).
No statistically significant value is associated with
changes in seawalls (ceteris paribus).
SLIDE 40
Tradeoffs and Values
Residents value action to mitigate coastal hazards, but
- nly a small portion of total value is related to the
protection of private homes.
Results also enable calculation of tradeoffs. For example: The average Waterford household values the
preservation of beach acres about 50% more than preservation of wetland acres (1.5 = $18.83 / $12.53).
An adaptation plan would have to prevent the expected
flooding of nearly 100 homes (per Category 3 storm) in Old Saybrook to offset the value of one acre of beach loss (98.4 = $18.69 / $0.19).
SLIDE 41
Understanding Public Values
Focus group results make clear that residents view the
protection of private homes as the responsibility of homeowners.
Individuals are willing to pay to protect their own home,
but not others’ homes.
The majority of respondents live in homes that are not at
high risk.
Results can help public officials understand residents’
values for adaptation outcomes and the type of adaptation plans that will garner the greatest public support.
Can be used as direct input into benefit cost analysis
- r to predict public support.
SLIDE 42
Conclusion
Coastal adaptation presents a challenging set tradeoffs. When used correctly, economics can help identify
tradeoffs that are most socially beneficial from those that are biophysically possible.
Objective economic analysis can help prevent decisions
that make society worse off (for which costs > benefits).
It is important to consider the full range of economic
benefits and costs, not only those that are easy to observe.
SLIDE 43