Valuing Ecosystem Services: Oysters, Denitrification, and Nutrient Trading Programs Geret S. DePiper, Douglas W. Lipton, and Romuald N. Lipcius May 21, 2015 The opinions expressed in this presentation are solely the authors, and do not represent those of NOAA Fisheries
Research Goals Analyze the role of denitrification/nitrogen sequestration and harvest in optimal management of natural oyster reefs Assess NPV of Harris Creek restoration initiative
Chesapeake Bay Nitrogen Phosphorus Sediment US EPA (2010)
Bio-economic Models Wild stock Kasperski & Wieland (2010) Mykoniatis & Ready (2015) Aquaculture Miller (2009)
Powell et al. (2006) Mann & Powell (2007) Powell & Klinck (2007) Shell as limiting factor
Biological model Jordan-Cooley et al. (2011) Three equations governing oyster population dynamics O = live oyster population B = oyster shell (reef) S = sedimentation
Live oyster population Oyster growth = logistic growth disease and predation smothering do dt = O r(1 ) + ε µ O[ K ε ] O 1+ exp( h( + B S) 2
Oyster shell Reef growth = Oyster mortality Shell degradation db dt µ ε = O[ + ε ] γb O 1+ exp( h( + B S) 2
Sedimentation Sediment rate = Deposition rate erosion ds dt = C exp( η ( O + B))exp( F0O y 0 exp( y 0 C exp( η ( O y 0 + B)) )) βs
Economic Value Value = Harvest + Denitrification + Sequestration Harvest Denitrification Sequestration O x = ( ph ch (1 ( )) x K = = p N F0O y0 C exp( η ( O + p N λ(1 exp( exp( y y O r(1 ) + ε µ αo( K ε ) O 1+ exp( h( + B S)) 2 0 0 B)) )))
Numerical solution Deterministic Dynamic programming CompEcon Toolbox for Matlab 5% discount rate 3%, 7%, 11.8% sensitivity $28.9 bu -1 harvest price $18.63, $44.79 sensitivity $10 lb -1 nitrogen price $0, $4, $20 sensitivity Jordan-Cooley et al. (2011)
0.035 Oyster harvest 0.03 Oyster Harvest Volume (m 3 ) 0.025 0.02 0.015 0.01 0.005 0 1 3 5 7 9 11 13 15 Year Baseline Low Carrying Capacity Low Growth Rate High Growth Rate High Predation
Oyster stock 0.2 0.16 Oyster Volume (m 3 ) 0.12 0.08 0.04 0 1 3 5 7 9 11 13 15 Year Baseline Low Predation High Predation Low Carrying Capacity
Net Present Value 4.5 4 3.5 Total Value ($ m -2 ) 3 2.5 2 1.5 1 0.5 0 1 3 5 7 9 11 13 15 Year Baseline High Nutrient Credit Low Carrying Capacity
Harris Creek Restoration $31.6 million restoration of 377 acre oyster reef Assumptions: 6 years until restored Value begins to be generated in year 7 50 year time horizon (ensure sustainability assessed) NPV calculation for each modeled scenario
Harris Creek Restoration NPV 24 simulations over 50 year time horizon 16 positive NPV (67%) 8 negative NPV (33%) Metric Mean Median STD Min Max NPV $ million 19.84 18.55 27.2-21.1 67.3 Break-Even years 15.25 14 6.6-34 Oyster Stock Oysters m -1 380 430 170 0 580
Conclusions Optimal management includes both ecosystem service provisioning and harvest Reef level heterogeneity important Dynamics more sensitive to biological vs economic parameters Harris Creek NPV positive for 67% of simulations Private funding for restoration likely not viable
Questions? References Jordan-Cooley, W. C., R. N. Lipcius, L. B. Shaw, J. Shen, and J. Shi. 2011. Bistability in a Differential Equation Model of Oyster Reef Height and Sediment Accumulation. Journal of Theoretical Biology 289: 1 11. Kasperski, S., and R. Wieland. 2010. When is it Optimal to Delay Harvesting? The Role of Ecological Services in the Northern Chesapeake Bay Oyster Fishery. Marine Resource Economics 24: 361 85. Mann, R., and E. N. Powell. 2007. Why Oyster Restoration Goals in the Chesapeake Bay Are Not and Probably Cannot be Achieved. Journal of Shellfish Research 26(4): 905-17. Miller, A. L. 2009. An Economic Evaluation of the Nutrient Assimilation Potential for Commercial Oyster Aquaculture in the Chesapeake Bay. M.S. Thesis. Blacksburg: Virginia Polytechnic Institute and State University. Mykoniatis, N., and R. Ready. 2015. Spatial Harvest Regimes for a Sedentary Fishery. Environmental and Resource Economics: 1-31. Powell, E. N., J. N. Kraeuter & K. A. Ashton-Alcox. 2006. How long does oyster shell last on an oyster reef? Estuar. Coast. Shelf Sci. 69:531 542 Powell, E. N., and J. M. Klinck. 2007. Is Oyster Shell a Sustainable Estuarine Resource? Journal of Shellfish Research, 26(1): 181-94.
Full Results Model Total $/m 2 Harvest $/m 2 Denitrification $/m 2 Sequestration $/m 2 NPV ($Million) Break-even Year Baseline 51.28 17.72 25.31 8.25 26.3 15 100% Cull mortality 43.46 12.32 25.31 5.83 20.1 18 Shell degradation = 0.9 46.60 14.41 25.31 6.88 21.1 17 Shell degradation = 0.5 56.69 21.50 25.31 9.88 32.5 13 Nitrogen price/lb = $0 18.40 18.40 0 0-10.8 - Nitrogen price/lb = $4 31.83 18.24 10.12 3.46 4.4 34 Nitrogen price/lb = $20 83.97 17.35 50.62 16.00 63.3 8 Harvest cost = $9 42.35 9.50 25.31 7.54 16.3 20 Harvest cost = $3 72.27 37.92 25.31 9.05 50.1 10 Oyster price = $12.15 61.48 27.39 25.31 8.77 37.9 12 Oyster price = $8.55 42.98 9.89 25.31 7.79 17.0 19 Discount rate = 0.03 71.27 24.63 35.35 10.69 58.5 12 Discount rate = 0.07 39.66 13.60 19.29 6.77 8.2 22 Discount rate = 0.118 25.95 8.62 12.64 4.69-12.1 - Natural Mortality = 0.2 87.49 44.42 25.31 17.76 67.3 8 Natural Mortality = 0.6 26.07 0.60 25.30 0.17-2.1 - Carrying Capacity = 0.1 9.23 3.67 7.79-2.23-21.1 - Intrinsic growth = 0.7 16.76 0 18.58-1.83-12.7 - Intrinsic growth = 1.3 84.76 41.23 25.31 18.22 64.2 9 Sediment deposition = 0.08 17.83 6.43 9.93 1.47-11.4 - Sediment Decay Rate = 0.04 52.80 18.64 25.31 8.86 28.1 15 Burial Scaling factor = 30 60.60 24.25 25.31 11.05 36.9 12 Burial Scaling factor = 10 22.78 0 23.87-1.09-5.9 - No harvest 27.56 0 25.31 2.25-0.05 -
Comparison with Jordan-Cooley et al. State Variables 0.25 Live Oysters Dead Oyster Sediment 0.2 Volume (m 3 ) 0.15 0.1 0.05 0 0 5 10 15 20 25 30 35 40 45 50 Year
Approximation Collocation Policy iteration (Newton s method) Linear spline approximation for state space Oyster population = 90 nodes Reef growth = 7 nodes Siltation = 4 nodes Tolerance set to square root of machine precision ~1.49e-8
Value function residual 6 4 x 10-5 2 0 residual -2-4 -6 0-8 0.1 yster Stock 0.2-0.5 0 0.5 1 1.5 2 Reef Height
Present value 0.14 0.12 0.1 0.08 Value 0.06 0.04 0.02 0 1 0.5 Reef Height 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 Oyster Stock
Nutrient trading
Schulte et al. (2009) 29.89 acres of reef restored to high relief (HRR) in 2004 (25 45 cm) Less than 2 oysters m -2 density pre-restoration Persistent 1000 oysters m -2 density on HRR after restoration (sampled in 2007 & 2009)
Oyster nutrient credits Shellfish Aquaculture: Ecosystem Effects, Benthic Pelagic Coupling and Potential for Nutrient Trading Roger I. E. Newell Roger Mann A Report Prepared for the Secretary of Natural Resources, Commonwealth of Virginia. June 21, 2012
Crassostrea virginica: Denitrification and Nitrogen Sequestration Newell et al. (2005) Kellogg et al. (2013) STAC (2013)