rex h. caffey director and associate professor center for natural resource economics & policy...
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Rex H. CaffeyRex H. CaffeyDirector and Associate ProfessorDirector and Associate Professor
Center for Natural Resource Economics & PolicyCenter for Natural Resource Economics & PolicyLouisiana State University AgCenterLouisiana State University AgCenter
Louisiana Sea Grant College ProgramLouisiana Sea Grant College Program
Restore America’s EstuariesRestore America’s EstuariesDecember 12, 2006, New Orleans, LADecember 12, 2006, New Orleans, LA
What Benefits Are We Really After?What Benefits Are We Really After? Examining Cost Efficacy and Project Examining Cost Efficacy and Project
Selection in CWPPRASelection in CWPPRA
ObjectivesObjectives
Economics at the Ecosystem Scale
LA Case Study: LA Case Study: Grappling with benefitsGrappling with benefits
• A mandate for “economic efficiency” in rationale of most large scale programs. No blank checks
• Economics – allocation of scarce resources amongst competing interests.
Economics and Large Scale Economics and Large Scale RestorationRestoration
• Economics is more than just project justification. Not just “At Risk” accounting
2050 ?
1956
How should we allocate our How should we allocate our limited restoration dollars?limited restoration dollars?
Case StudyCase StudyEconomics in CWPPRA (1991-2005)Economics in CWPPRA (1991-2005)
“...coastal wetland restoration projects in Louisiana (will) provide for the long-term conservation of such wetlands... based on the cost-effectivenesscost-effectiveness of such projects in creating, restoring, protecting, or enhancing coastal wetlands...”
(Public Law 646: CWPPRA, Sec. 3952 1(b)).
Efficiency MandateEfficiency Mandate
• 155 Authorized projects, 109 Active projects.
Stage 1: What determines costs?Stage 1: What determines costs?
• Quantify the effect of specific factors that determine cost-efficiency of “Active” Projects.
Cost Function:• Average Annual Habitat Units• $/AAHU = f {size, location, tech, sponsor, policy, time}
• Descriptive Statistics• Multiple Linear Regression Model
Cost-Efficacy for Active Projects Cost-Efficacy for Active Projects (n=109)(n=109)
$0
$10,000
$20,000
$30,000
0 200 400 600 800 1,000
AAHU
$ per AAHU
$0
$4,000
$8,000
$12,000
USFWS NRCS NMFS USACE EPA
Average Costs: Average Costs: SponsorsSponsors
$0
$2,000
$4,000
$6,000
$8,000
R1 R2 R3 R4
Region 2Region 2
Average Costs: Average Costs: RegionsRegions
Vegetative Planting Vegetative Planting (2%)(2%)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
$900 per AAHU$900 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
$1,736 per AAHU$1,736 per AAHU
Hydrologic Restoration Hydrologic Restoration (27%)(27%)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Freshwater Diversion Freshwater Diversion (9%)(9%)
$2,341 per AAHU$2,341 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Sediment & Nutrient Trapping Sediment & Nutrient Trapping (5%)(5%)
$2,839 per AAHU$2,839 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Outfall Management Outfall Management (3%)(3%)
$3,602 per AAHU$3,602 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Sediment Diversion Sediment Diversion (6%)(6%)
$4,077 per AAHU$4,077 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Marsh Creation Marsh Creation (10%)(10%)
$4,698 per AAHU$4,698 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Shoreline Protection Shoreline Protection (27%)(27%)
$9,461 per AAHU$9,461 per AAHU
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
VP HR FD SNT OM SD MC SP BI
Barrier Island Restoration Barrier Island Restoration (10%)(10%)
$10,416 per AAHU$10,416 per AAHU
y = 273386x-0.8089
R2 = 0.3989
$0
$10,000
$20,000
$30,000
$40,000
0 200 400 600 800 1,000
$ p
er
AA
HU
'
Shoreline Protection
A Closer Look at Expensive Project Types:A Closer Look at Expensive Project Types:
y = 505012x-0.8342
R2 = 0.3534
$0
$5,000
$10,000
$15,000
$20,000
$25,000
0 200 400 600 800 1,000
AAHU
$ p
er
AA
HU
'
Barrier Island
20012004
2002
20002001
2004
CNREP 2006
y = 2E+06x - 886520R2 = 0.6147
$0
$10
$20
$30
$40
$50
1 3 5 7 9 11 13
Priority Project List
FFC
(M
illions) '
How are total cost changing?How are total cost changing?
CNREP 2006
What’s happening to benefits? What’s happening to benefits?
y = -34.426x + 699.67R2 = 0.2692
0
200
400
600
800
1,000
1 3 5 7 9 11 13Priority Project List
AA
HU
s
CNREP 2006
And consequently ...Costs per unit? And consequently ...Costs per unit?
y = 1166.7x - 2277.9R2 = 0.7926
$0
$5,000
$10,000
$15,000
$20,000
1 3 5 7 9 11 13
Priority Project List
$ p
er
AA
HU
'
CNREP 2006
• Stage 2: Role of Cost-Efficiency and other factors in project selection of Candidate Projects.
Stage 2: Project selection factors?Stage 2: Project selection factors?
Candidate Selection Model:• Selection = f {FFC, CE, Criticality, Size, Type,
population)• Binary Logit Model
• ~ 350 “Nominated” projects, 299 Candidate Projects.
Results:Years 1-5, Costs negatively correlated with selectionYears 6-10, Costs negatively correlated with selection Years 11-15 Costs positively correlated with selection
• Transparency and validity of benefit calculation- How is “Bang” being calculated?- Communicate the science behind decisions
• Meaningful participation in prioritization process- Project origin: Bottom up vs. Top Down?- Seat at the table from the beginning
• Project trajectory becoming a major issue- How long will it take to get the benefits?- Strong public support for rapid-land building
Public Concerns Public Concerns
Observations and Lessons LearnedEconomics & Coastal Restoration
We can do better than “at risk” accounting
Cost-efficacy an effective metric for project selection and re-assessment, adaptive management
If you don’t like the answers you get, don’t blame economics – costs are not the problem, benefits are!
Thank You
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