Determining and Scaling Habitat Services

1. Determining and Scaling Habitat Services Natural Capital Meeting April 20, 2009 Wilmington, DE

2. Overview of Presentation • Habitat service flows • HEA as scaling tool • Metrics used in HEA

3. Habitat Equivalency Analysis (HEA)

4. Habitat Service Flows Compensatory Resource ResourceServices InterimLost Services Resource Services B Baseline Service Level C A Time Incident Primary Compensatory Restoration Begins Full Natural Restoration Recovery Begins

5. Brief History of Habitat Equivalency Analysis • Originally developed in 1992 to quantify damages associated with oiled wetlands • Applied to cover injuries due to chronic contamination, spills and vessel groundings in variety of habitats

6. When to Consider Use of HEA • When values per unit of replacement services and lost services are comparable (same type, quality, comparable value) or value differences are known • When definition of injury and benefits using a common metric is possible • Metric defines the injury more specifically and becomes the basis for restoration • When replacement of habitat/resource services feasible • When replacement methodology is sufficiently understood to determine model parameters

7. Graphical Representation of HEA

8. HEA Methods • Measuring Resource Services • How big are areas A and B? • Discounting Through Time • How do we compare A and B despite differences in the timing of service flows? • Resource-to-Resource Conversions • How do we compare A and B when the resources are different?

9. HEA Steps • Quantify injury (loss) • Determine discount rate • Determine shape of path and time to recovery • Identify/evaluate/select compensatory restoration alternative • Determine parameters for compensatory restoration • Compute total discounted measure of lost service flows (debit) • Compute total discounted measure of services provided by compensatory project (credit) • Calculate size of compensatory project

10. Measuring Resource Services • Losses from injury and gains from restoration must be quantified • Metrics may be selected to represent resource function • E.g., stem height and density of Spartina in an oiled or restored marsh; abundance of benthic organisms in contaminated sediments • Injury may be quantified directly (e.g. bird mortality)

11. Importance of Metrics For Assessment • HEAs simplify very complex ecosystems • Properly implemented HEAs based on metrics that are highly correlated with most relevant resource services for that case • Critical HEA parameters, such as recovery, maturity and relative productivity only make sense in context of specific metric • Common metrics include: • Percent vegetative cover, short-shoot density, benthic biomass, species abundance, etc.

12. Measures vs. Metrics Two hypothetical wetlands - each 100 acres and each with an expected lifespan of 50 years • Both wetlands will provide 5,000 acre-years of services over their lifespans (undiscounted) • Only in the context of metrics can we talk about the relative services • that each marsh actually provides

13. Array of Possible Metrics for Marshes

14. Factors Influencing Metric Choice • Nexus with relevant injured and restored services • Appropriate metric may differ by case, even for the same type of habitat • Ability to quantify • Cost of quantification • Sampling methods required • e.g., destructive vs. non-destructive

16. Discounting Over Time • Since multiple time periods involved, need to consider discount rate • Also known as rate of time preference – describes preference for present use vs future use • Method for putting all measurements (dollars or DSAYs) into present value terms

17. Discounted Service Flows

18. Summary • HEA used to scale services lost from injury to services gained from restoration • Can be used to scale differences in services between existing and future scenarios • Choice of metric important • Other valuation methods for human uses of natural resources

19. Questions?

20. Extra Valuation Slides

21. Stated Preference Methods

22. Stated Preference Techniques • Unlike HEA, can directly address issue of resource value • Used in Value-to-Value and Value-to-Cost Approaches • Focuses on most important resource characteristics • Commonly applied in market and non-market settings (e.g. product development and resource valuation)

23. Sample Survey Question

24. Obtaining an Estimate of Value • Econometric model fits payments and environmental characteristics to a statistical distribution • Loss can be expressed in monetary terms, or in units of required restoration • A variety of potential restoration scenarios can be evaluated

25. Revealed Preference Methods

26. Scaling Recreational Services • Travel Cost Models estimate the value of recreational sites and site characteristics • Exploit analogy to market behavior • Price, Quantity, Consumer Surplus • Benefits Transfer borrows information from previous analysis

27. The Travel Cost Method If people drive 75 miles to get to a resource, and the cost of driving is $1.00 per mile in time and expense, the trip must be worth at least $150 75 miles Recreation Site Those who travel only 25 miles are getting surplus value of $150 – $50 = $100. 25 miles

28. The Travel Cost Demand Curve Consumer Surplus Price Recreation Site 50 25 3 Quantity 0 7 50 miles 75 miles Price = ƒ(distance) = Out-of-Pocket Travel Cost + Time Cost

29. Obtaining an Estimate of Value • Estimate consumer surplus values for many sites • Compare (using regression analysis) site values to site characteristics • Estimate value of characteristics (e.g. urban environment, fish consumption advisories)

30. Benefits Transfer • Previous studies are applied to new problems • Some measure of impact at the affected site is required, usually involving observed levels of recreational activity • Important to consider characteristics of site where value/parameter obtained and methods used