Estimating the Benefits of Great Estimating the Benefits of Great Lakes RestorationLakes Restoration

Jennifer ReadAssistant Director and Research Coordinator

Lynn VaccaroCoastal Research Specialist

• Invasive species control• Habitat restoration• Nearshore water quality – sewer upgrades• Areas of Concern cleanup• Toxic pollution reduction• Non-point source pollution – ag and urban BMPs• Sustainable development• Indicators and information

Great Lakes Regional Collaboration Great Lakes Regional Collaboration Strategy (December 2005)Strategy (December 2005)

Expected costs: $26 billionExpected costs: $26 billion

Estimating the Benefits of RestorationEstimating the Benefits of Restoration

Great Lakes Regional Collaboration Restoration Strategy

Team of Natural Scientists Predict Likely Ecosystem Changes

Team of Economists Predict Economic Benefits

• Short-run multiplier effects for federal spending• Improvements in environment• Health improvements• Attraction and retention of skilled people• Additional construction and other economic

activities over the long run• Development of new technologies

Many Types of BenefitsMany Types of Benefits

• Reduced runoff, erosion and sedimentation• Less damage due to flooding• Enhanced groundwater supplies• Protection of waterfront properties• Healthier fish and wildlife communities

o Protection of endangered species and biodiversityo Improved fishingo Preservation of sport fishing related employmento Improved waterfowl huntingo Improved bird watching

Riparian, Wetland and Coastal Restoration

Benefits of Sport Fish AbundanceBenefits of Sport Fish Abundance

Avoiding expected 25% - 50% decline = $0.9 – 3.5 billion over 20 yearsImproving by 5 - 25% = $0.2 – 2.3 billion over 10 years

1% improvement in 1 species = 2 – 10 cents per angling day1% improvement in all species = 15 – 30 cents per angling day

– Based on real fishing expenses or surveys of hypothetical situations– 37 studies about value of fish abundance in GL region (list in report)

23.1 million GL fishing days a year (National FWS Survey)

Value of benefits declines over time (6% discount)

• Less sediment in rivers and nearshore waters– Reduced costs for dredging– Reduced costs for municipal water treatment– Benefits to commercial and industrial users of water

• Reduced pathogens– Lower health care expenses and fewer sick days– Fewer beach closures, more swimming

• Fewer nutrients and algae blooms– Higher waterfront property values

Sewer upgrades, Non-point source controls

Water Quality BenefitsWater Quality Benefits

Restoration Plan Reduce sedimentation by 10-25%

Savings for municipal water treatment = $50 – 125 million over the long run

1% increase in sediment leads to a 0.05% increase in water treatment costs- conservative estimate from 400 U.S. utilities

Operating costs for plants that use GL water = $600 millionAnnual savings of $3 -7 millionValue of savings declines over time (6% discount)

• Less toxins in fisho More people would eat fish rather than McDonaldso Improved health for families that currently eat GL fish

• Lifting of fish advisorieso Improved recreational opportunities

• Healthier populations of fish and wildlife• Improved survival of endangered species, biodiversity• Higher property values around AOCs

AOC Clean-up, Toxic pollution controls

Benefits of Remediating Areas of ConcernBenefits of Remediating Areas of ConcernBenefits for homes near AOC = $6 - 7 billion

Within 5 miles of AOC = 5% suppression in property value- Based on 6 studies comparing property values at different distances from AOCs

1.2 million homes within 2 miles of AOC, each $150K - Based on 2000 census, ignores rentals and commercial property

Value to basin residents = $12 - 19 billion11 million homes in Great Lakes basin

Surveys indicate willingness to pay $150 per year for cleanup

Clean up phased in over 10-20 years, 6% discount rate

Summary of Specific Economic BenefitsSummary of Specific Economic Benefits

Affected Value Present Value BenefitImproved catch rates for anglers $1.1 – 5.8 billion

Maintenance of sport fishery wages and profits $100 – 200 million

Lower water treatment costs $50 – 125 million

More swimming $2 – 3 billion

More swimming and improved enjoyment $2.5 billion

Improved birding $100 – 200 million

Improved waterfowl hunting $7 – 100 million

Benefits for basin residents $12 – 19 billion

Total Quantified Specific Benefits $18 – 31 billion

Aggregate Long-run Benefits $29 – 41 billion

Short Term Multiplier Effects $30 – 50 billion

GLRC Strategy Return on InvestmentGLRC Strategy Return on Investment

= $80 – 100 Billion in Benefits+

Many existing studies of ecosystem valuation can help Many existing studies of ecosystem valuation can help predict benefits of restoration projects.predict benefits of restoration projects.

Important Considerations:Important Considerations:• Be specific about expected environmental changesBe specific about expected environmental changes• Identify a change that can be quantified and valued in $$Identify a change that can be quantified and valued in $$• Find a study from a comparable systemFind a study from a comparable system• Identify time period for expected improvements, consider Identify time period for expected improvements, consider

discounting future benefits, consider inflationdiscounting future benefits, consider inflation• Even rough, back-of-the-envelope calculations are useful to Even rough, back-of-the-envelope calculations are useful to

funders, media and partners!funders, media and partners!

Take Home Lessons – DIY Economic AnalysesTake Home Lessons – DIY Economic Analyses

Jennifer ReadJennifer Read

jenread@umich.edujenread@umich.eduwww.miseagrant.umich.edu/economywww.miseagrant.umich.edu/economy

America’s North Coast:America’s North Coast:

A Benefit-Cost Analysis of a Program to A Benefit-Cost Analysis of a Program to Protect and Restore the Great LakesProtect and Restore the Great Lakes

John C. Austin, Non-resident Senior Fellow, Brookings

Soren Anderson, Assistant Professor, MSU

Paul N. Courant, Dean of Libraries, U-M

Robert E. Litan, Senior Fellow, Brookings