Lowering Barriers to Cost-Effective Restoration

Lisa A. Wainger, PhDUniversity of Maryland Center for

Environmental ScienceUS EPA Office of Research & Development

The Costs and Benefit AnalysisWhat are the best assumptions?

1. Mix of practices affects costs & benefits2. Site and landscape features affect costs,

effectiveness & benefits3. Ecosystem services included / excluded from

analysis affect benefit estimates4. Program implementation choices affect costs

AcknowledgementsAnalysis primarily drawn from soon to be released report:

An Optimization Approach to Evaluate the Role of Ecosystem Services in Chesapeake Bay Restoration Strategies

Analysis Team• RTI International – Marion Deerhake, George Van

Houtven, Robert Beach, Ross Loomis, Mike Gallaher, Dallas Wood

• Abt Assocates – Isabelle Morin, Lauren Praesel, Viktoria Zoltay, David Mitchell, Ryan Stapler, Elena Besedin

• EPA Office of Research and Development – Jay Messer, Lisa Wainger, Rob Wolcott, Andrew Almeter

• Many others contributed ideas, data and information

Optimization Approach Key Questions

1. What mix of pollution-control projects provides the least cost way to achieve water quality goals in an impaired watershed

2. How does the consideration of “bonus” ecosystem services affect the desired mix of projects?

Summary of Optimization Analysis

1. Establish cost-effectiveness of grey & green practices2. Evaluate availability of acres for implementation of

green practices3. Develop ecological production functions and benefit

functions to value ecosystem services4. Optimize to select the least-cost mix of practices

meeting all 3 TMDL targets with / without bonus ecosystem services

5. Analyze sensitivity to assumptions6. Quantify cost savings and ecosystem service benefits

of alternatives

Some Important Caveats• Analysis assumptions only partially constrained

by current rules and policies• Not a comprehensive set of BMPs – e.g., missing

CAFOs, erosion control practices• Not a comprehensive set of monetized benefits• Benefit transfer does not consider changes in

supply vs demand ≠ WTP• Does not represent all social tradeoffs of choices;

does not represent policy recommendations• Short-term project = reliance on readily available

data; intermediate level of model detail

Grey and Green Management / Restoration Practices Included

Point Source BMPs• POTW Advanced Nutrient

Removal• Industrial Advanced

Nutrient RemovalNonpoint Source Urban

Stormwater BMPs• Extended Detention Ponds• Bio-retention Planters• Urban Forest Buffers• Urban Grass Buffers• Urban Wetlands

Nonpoint Source Agricultural BMPs

• Forest Riparian Buffers• Grass Riparian Buffers• Conversion to Forest• Land Retirement• Livestock Exclusion• Restored Wetlands• Winter Cover Crops• No-Till Agriculture• Payment for Reducing

Fertilizer Application (AFT)

8

What we know: Cost-Effectiveness of BMPs Varies by Location

Nitrogen runoff effect on Bay mainstem habitat quality by watershed

Source: TMDL Executive Summary

How much spatial variability of costs did we capture with readily available data?

Basin factors• Variable runoff rates (county)• Variable BMP removal effectiveness

(GM region)

Attenuation factors • Variable nutrient delivery to Bay by

location (HUC)• “Effectiveness” factor based on Bay

residence time (HUC)

Cost Factors• Opportunity costs = rental rates

(state)• Direct implementation costs =

reimbursements (county/state)• Availability of implementation

locations (HUC)

Optimization ResultsCost-effective Locations of Nitrogen & Sediment Reductions by Land-River Segment (Base Case)

Marginal Cost Curve for Achieving N target in Susquehanna Basin

0 5 10 15 20 25 30$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00

AgUrbanPoint

N Reduction (millions of lbs)

Cost

($/l

b)

N reduction goal = 33.14 M lbs

Spatially Averaged Unit Costs Conceal Management Opportunities

Marginal Cost ($)

(cost of the last unit of nutrient

reduction)

Total Nutrient Reduction from 1985 Baseline

0 E3

Economies of scale

Diminishing Marginal Returns

13

The Geography of Ecosystem Service Benefits

1. Where do benefits accrue? headwaters - oceans

2. How effective is the restoration?

3. How many ecosystem services “users” are affected?

4. How much is each service user affected?• sensitivity to

environmental change• substitutability

Estuarine and Near-Shore Benefits of Chesapeake Bay TMDLs

TMDLs designed to protect:• Migratory fish spawning and

nursery • Shallow-water Bay grass• Open-water fish and shellfish • Deep-water seasonal fish and

shellfish • Deep-channel seasonal refuge

Resulting water-quality related Ecosystem Service Benefits:• Health and safety (+air)• Recreational opportunities

(swimming, boating, fishing)• Commercial fishing• Visual and olfactory aesthetics• Property value support• Non-use benefits of aquatic

species / ecosystems• Water treatment cost savings

Terrestrial and Upstream Ecosystem Service Benefits (Bonus ES)

• Recreational opportunities - (waterfowl hunting, game hunting, trout fishing, birding, hiking, upstream boating)

• Aesthetic benefits - (open space, freshwater quality)

• Health (air quality improvements)

• Property value support (non-Bay adjacent)

• Flood risk reduction• Climate change risk mitigation (carbon sequestration,

GHGs)

• Amenity-derived economic support• Educational support (distributed natural sites)

• Non-use benefits of species and ecosystems (bog turtle, brook trout)

Red = Valued in optimization analysis

50

0 100

Wetland Assessment Score

Poor Sub- Optimal

OptimalMarginal

% S

ites

/ Pe

rmits

0

Ambrose, et al. 2006

Sources of Benefit Uncertainty: Restoration / BMP Effectiveness

Optimization Results Cost Offsets from Ecosystem Services

Alternative Scenarios: Base Case & 3a (2:1 offset ratios)

$218 M/yr

$90 M/yr

$1.46 B/yr

$1.17 B/yr

$1.49 B/yr

$1.16 B/yr

$301 M/yr

$63 M/yr

Both Scenarios: Basin level load reductions & 10% transaction costs on offsets

Base Case Base Case3a 3a

Summary of Cost Offsets from Ecosystem Service Benefits

• For the “base case” bonus ecosystem services return at least $90M/yr of the $218M/yr gross costs to achieve the TMDL

• The least net cost solution increases those costs to $310 M/yr, but reduces the net social costs from $128 to $63 M/yr

• But solutions would result in retirement of approximately 1.7 M acres of working ag land (including half of the cropland in the basin)

Value of competing services inform tradeoffs

Private Crop Yields

Public Ecosystem

Services

A

B

Other ResultsCost of TMDL Compliance (N loads only)

by Geography of Trading Area

Tributary Bay-wide0

50

100

150

200

250

300

350

400

450

UrbanAgriculturePoint Source

million $

21

Fine-scale allocation of load reductions reduces ability of credit buyers to find low-cost sellers

Nitrogen runoff effect on Bay mainstem habitat quality by watershed

Source: TMDL Executive Summary

Non-monetized co-benefits

• The EO targets restoring 58 sub-watersheds to healthy status for brook trout – the base scenario restores 122 sub-watersheds.

• The 30,000 acre wetland EO strategic target could be met for an additional $6 M/yr or 3% of estimated costs.

Improving benefit assessmentsIdentifying where changes in supply are likely to

generate benefits

% native range preserved

Benefit / Utility

(population viability)

30%

Non-use service benefits are enhanced by improvements in conservation status

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Improved Efficiency from Joint Production of Multiple Ecosystem Service Benefits

As Suggested by Optimization Analysis

0

TMDL Program costs

Benefits

$X

$X + $238 M

$300 M

Downstream Benefits Only

Upstream + Downstream Benefits

ConclusionsBenefits• Joint production of upstream + downstream ecosystem services

could reduce net program costs– Simple analysis suggests ~40% of costs offset (base case)

• Quantifying potential changes in ES benefits that can’t be monetized augments the benefits picture

Costs• Accounting for performance risk greatly increases costs (high

model sensitivity to offset/trading ratios)• TMDL Program rules can affect costs (e.g., larger areas for offset /

trading are likely to reduce costs)• Unit costs can be misleading if they hide economies of scale and

diminishing marginal returns