Presentation Outline

Transcription

1 Page 1 Economic Valuation of Natural Resource Damages The Trustees Perspective Presented to National Advanced Conference on Natural Resource Damage Litigation Theodore Tomasi, Ph.D. Santa Fe, New Mexico July 16, 2007 Disclaimers Presentation Outline Key Damage Concepts Overview Recreation Passive use Ecological approaches Trustee versus RP conceptual approaches The Key Concept of Substitution Uncertainty and Risk aversion Baseline, Baseline, Baseline Theoretical damages v- real behavior Ground water 1

2 Page 2 Disclaimer 1 I am not a Trustee expert! (at least not for a long while) Disclaimer 2 The Trustees are not a single entity so some but not all and Some of the time but not always should be kept in mind during my remarks 2

3 Page 3 Key Damage Concepts Natural Resource Damages Government Trustees Hold Valued Natural Resources In Trust For The Public 3

4 Page 4 Natural Resource Damages Government Trustees Hold Valued Natural Resources In Trust For The Public Spills and Historic Releases Can Injure Natural Resources Natural Resource Damages Government Trustees Hold Valued Natural Resources In Trust For The Public Spills and Historic Releases Can Injure Natural Resources RPs are Obligated to Pay Damages to Restore Injured Natural Resources and Compensate for Interim Losses 4

5 Page 5 Natural Resource Damages Government Trustees Hold Valued Natural Resources In Trust For The Public Spills and Historic Releases Can Injure Natural Resources RPs are Obligated to Pay Damages to Restore Injured Natural Resources and Compensate for Interim Losses Recovered monies are to be spent on natural resource restoration (depending on the State or cause of action) Scaling Restoration Key issue is: how much restoration is enough? 5

6 Page 6 Scaling Restoration Key issue is: how much restoration is enough? Focus on services of natural resources Scaling Restoration Key issue is: how much restoration is enough? Focus on services of natural resources Estimate the amount of service loss due to release - injury 6

7 Page 7 Scaling Restoration Key issue is: how much restoration is enough? Focus on services of natural resources Estimate the amount of service loss due to release - injury Identify restoration action(s) that restore resource services to baseline (primary restoration) compensate for any residual loss of services (compensatory restoration) Scaling Restoration Key issue is: how much restoration is enough? Focus on services of natural resources Estimate the amount of service loss due to release - injury Identify restoration action(s) that restore resource services to baseline (primary restoration) compensate for any residual loss of services (compensatory restoration) Pay for restoration - damages Plus trustees costs of process 7

8 Page 8 Ecological Services Ecological services are beneficial outcomes of biophysical functioning in ecosystems Valued directly or indirectly by people Ecological risk drivers can impair functioning and reduce services Ecological services are related to, but not necessarily measured by, risk assessment endpoints Example Services Provided By Trees Nutrient Cycling Direct/Indirect Food Source Scrubbing of Particulates Nesting Sites Wind Break Resting/Stopover Sites Nest Materials Protection Shade Perching Sites Indirect Food Source Soil Stabilization 8

9 Page 9 Ecological Services of Sediments Filtering Food Source Substrate for Rooting of SAV Nutrient Cycling Substrate for Attachment Value-to-cost Scaling Approaches Estimate injury and value it in dollars (compensable value) Spend that much on restoration 9

10 Page 10 Value-to-cost Scaling Approaches Estimate injury and value it in dollars (compensable value) Spend that much on restoration Value-to-value Estimate injury and measure it in dollars Measure benefits of restoration in dollars Do enough restoration to equate the two Value-to-cost Scaling Approaches Estimate injury and value it in dollars (compensable value) Spend that much on restoration Value-to-value Estimate injury and measure it in dollars Measure benefits of restoration in dollars Do enough restoration to equate the two Resource-to-resource Approximation of value-to-value Uses ecological metrics 10

11 Page 11 Economic Values People change behavior in response to injury Take fewer recreation trips to injured site Buy a house in a different area Switch to bottled water Dig a new well to replace one taken out of service Behavioral responses provide data for valuation Trustee View People hold values independent of an opportunity to express them, and When given the opportunity with a constructed choice situation, People can sensibly express their values via a behavioral intention that Would closely correspond to a real behavior 11

12 Page 12 Recreation Valuation Measuring Benefits Basic concept is willingess-to-pay (WTP) How much money would an individual pay to preclude the injuries? Can be measured as a change in consumer surplus 12

13 Page 13 Consumer Surplus $ Consumer surplus P 0 Expenditure T(P,Q B ) Demand (WTP) at baseline Recreation Trips Travel Cost Models The cost of gaining access to a site functions as a price of fishing Those who live close by site take several of trips Those who live farther away take fewer trips This is a demand curve Can estimate statistically, and calculate consumer surplus 13

14 Page 14 Simple Travel Cost Model 50 mi 100 mi 25 mi 10 trips 5 trips 3 trips 50 mi 25 mi 100 mi Change in Water Quality Change in Consumption Advisories for Recreational Game Fish Change in Amount of Fishing Change in Fishing Locations Change in Cost and/or Value of Fishing 14

15 Page 15 Consumer Surplus $ Change in Consumer Surplus (Benefits) P Expenditure 0 T(P,Q I ) T(P,Q B ) WTP at Baseline WTP with Injuries Recreation trips Choice Among Fishing Destinations Site A Site B 20 miles away 50 miles away Boat ramp No boat ramp Fish consumption advisory No consumption advisory Catch rate =.5 fish per hour Catch rate =.3 fish per hour Random Utility Models 15

16 Page 16 Passive Use Passive Use Value People may hold values for resources that are injured, but independent of observable behavioral trail May apply if population-level effects and endangered species are important Ecosystem services support quality of life and so use them indirectly or passively Trustee view is that such values are ubiquitous and apply to more than just large-scale and irreversible effects 16

17 Page 17 Passive Use Use surveys to obtain data on a behavioral intention What would you do if? Would you pay $X for a program that does? Contingent valuation Choice experiments (conjoint analysis) Trustee view is that, carefully done, such studies provide useful data in damage assessment Conjoint Analysis Used in marketing research Choice among packages of features on car/price Given these alternative cars, which would you choose Vary across person and sample Estimate WTP for features Adapted to environmental valuation Can be combined with RP data Or not ( Total Value Equivalency Analysis ) 17

18 Page 18 Conjoint Example State agencies can achieve different environmental futures, but with limited budgets must make trade-offs. Option A No restoration of wetlands to provide fish spawning habitat Catch rates for recreational anglers go up by 1 fish per day Loss of endangered fish of 1% of population Cost for a family like yours $20/month Option B Restoration of 50 acres of wetlands to provide fish spawning habitat Catch rates for recreational anglers go up by 1/2 fish per day Loss of endangered fish of 10% of population Cost for a family like yours $70/month Which do you choose? Lawyers and Biologists Agree: Economists Make Their Eyes Twitch 18

19 Page 19 Lawyers and Biologists Agree: Economists Make Their eyes Twitch Scaling using Ecological Metrics Biological/physical scaling approaches Habitat equivalency analysis (HEA) Resource Equivalency Analysis (REA) Trophic scaling Passive use values included in principle Value-to-Value Approach Value per Unit of Injured Resource X Change in Service Metric from Injury = Value per Unit of Restored Resource X Change in Service Metric from Restoration 19

20 Page 20 HEA Value per Unit of Injured Resource X Change in Service Metric from Injury = Value per Unit of Restored Resource X Change in Service Metric from Restoration HEA Change in Service Metric from Injury = Change in Service Metric from Restoration Interim Lost Use Model 100% Baseline Services No Change in Services Without Release Time me 20

21 Page 21 Interim Lost Use Model 100% Baseline Services Services Decrease Due to Release (Initial Injury) Time me Interim Lost Use Model 100% Baseline Services Services Recover to Baseline through Time Time 21

22 Page 22 Interim Lost Use Model 100% Baseline Services Shaded Area = Injury Time Restoration Scaling: Damage is Cost of Restoration 100% Services from Compensatory Restoration Services Interim Lost Services Scale restoration project such that: New Services = Interim Lost Services Time 22

23 Page 23 Issues in HEA Scientifically defensible only if One service affected (or all move together proportionally) Small effects Restoration in kind and same quality Homogeneous values in population Essentially ad hoc approaches to circumvent these in negotiated settlements Resource Equivalency Analysis Unit of measure is a Discounted Animal Year (DAY) Impacted populations are elevated to levels above where they otherwise would have been Compensation requires the population to produce the same number of DAYs as it otherwise would have Population Level Debit Credit With Release and Restoration Baseline Population Years 23

24 Page 24 What Drives Differences between Trustee and RP Conceptual Approahces? Substitution Other than in human use revealed preference (RP) models (e.g. RUMs), Trustee approaches specify limited substitution E.g. community structure -v- food services Populations -v- individuals Compensatory mechanisms in populations E.g. reduced clutch size is an injury, separate from potential offset due to higher chick survival Substitution in production and preferences Who is being compensated? People or nature? People make substitutions 24

25 Page 25 Ecological Services of Sediments Filtering Food Source Substrate for Rooting of SAV Nutrient Cycling Substrate for Attachment Substitution Trustees do not tend to give ancillary credit for additional services provided by restoration projects E.g. purchase and protect habitat for an injured specie (redwoods for murrelets), but cannot sell credits for other species provided by that habitat (spotted owls) injured by someone else This view is evolving re: banking/trading credits 25

26 Page 26 Substitution Simplified Trustee scaling methods (HEA) do not (readily) admit substitution across services or metrics Uncertainty and Risk Aversion High degree of risk aversion Avoid potential for negative outcome Lack of knowledge of ecological mechanisms Lead to more restrictive criteria for restoration selection that RP views On-site, in-kind Don t think you re going to build a boat ramp or improve some trails and be done 26

27 Page 27 Baseline Disentangling physical effects from contamination Joint and Several Perceptions E.g. fish consumption advisories due to multiple contaminants Theories of Damages Trustees envision damages from potential effects Exceedance of regulatory standard implies service loss Fact of contamination (above detection limit but below a standard) implies a service loss 27

28 Page 28 Theories of Damages Multiply a volume of affected media by some indicator of value per unit as a proxy for a service loss approach Replacement costs are a good proxy for value per unit even if the resource will not actually be replaced Theories of Damages Individuals can answer questions in surveys accurately as long as basic design principles are adhered to in Trustee view Those surveyed can represent those not surveyed, even those who have never heard of the resource and injuries to it 28

29 Page 29 NRD Measurement Issues Ground Water Ground Water Services Extractive Services Extracting and using water for residential, commercial, industrial, agricultural purposes Buffer (insurance) value future extraction In-Situ Services Subsidence prevention Salt water intrusion prevention Ecological Services Discharge to aquatic systems GW as pathway rather than receptor 29

30 Page 30 Trustee View of GW Focus on the stock of water that exceeds some concentration criterion Value that stock using a proxy for a resource value E.g. the New Jersey formula South Valley New Mexico Appeals to both use and non-use concepts for GW Little applicable literature for GW 30