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COMPREHENSIVE FLOODPLAIN MANAGEMENT : Promoting Wise Uses of Floodplains

CA Department of Water Resources/ CIFMCG Workshop. COMPREHENSIVE FLOODPLAIN MANAGEMENT : Promoting Wise Uses of Floodplains. July 2006. Comp FPM Workshop. Ecosystem Evaluation. Workshop Modules. Comprehensive FPM NFIP Overview FPM No Adverse Impact Strategies

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COMPREHENSIVE FLOODPLAIN MANAGEMENT : Promoting Wise Uses of Floodplains

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  1. CA Department of Water Resources/ CIFMCG Workshop COMPREHENSIVE FLOODPLAIN MANAGEMENT: Promoting Wise Uses of Floodplains July 2006

  2. Comp FPM Workshop Ecosystem Evaluation

  3. Workshop Modules • Comprehensive FPM • NFIP Overview • FPM No Adverse Impact Strategies • Natural Floodplain Functions and Societal Values • Flood Management Economic Analysis • Ecosystem Evaluation Methods • Case Study • Technical and Financial Assistance

  4. Ecosystem Evaluation • Ecosystem Evaluation Methods • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  5. Ecosystem Evaluation • Ecosystem Evaluation Methods • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  6. Ecosystem Evaluation Methods • Monetary values can be assigned to most water management benefits (water supply, flood damage reduction, hydropower, etc.) • Multi-objective projects often include ecosystem restoration • Problem—how do we evaluate ecosystem benefits? • Should ecosystem benefits be monetized?

  7. Ecosystem Evaluation Methods • Cost-effectiveness analysis • Tradeoff analyses • Benefit-cost analysis

  8. Ecosystem Evaluation Methods • Cost-effectiveness analysis • Evaluates cost/unit relationships ($/acre, $/habitat unit, etc.) • What alternative provides the “most bang for the buck”? • Can be combined with incremental-cost analysis to determine most cost-effective scale of project • Avoids monetizing ecosystem benefits • Can not be directly combined other monetized benefits (flood damage reduction, water supply, etc.)

  9. Ecosystem Evaluation Methods • Tradeoff analysis • Displays all monetary and non-monetary effects of the project • Assigns “points” or some other quantitative measure to both monetary and non-monetary benefits • Allows both types of benefits to be directly compared with each other • Often requires “weighting” of benefits • “Weights” often based on judgment

  10. Ecosystem Evaluation Methods • Benefit-cost analysis • Requires monetization of all benefits • All benefits and costs can be directly compared with each other • Ecosystem benefits can be difficult to monetize

  11. Ecosystem Evaluation • Ecosystem Evaluation Methods/Resources • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  12. Monetizing Ecosystem Resources • Difficulties in monetizing ecosystem resources • Reluctance to place dollar amounts on “intrinsic” values • Lack of markets & market prices • Ecosystem resources are often “public goods” • Institutional barriers (P&G)

  13. Monetizing Ecosystem Resources • Ecosystems perform complex functions which provide: • Biological support for organisms • Goods and services to society • If societal goods and services can be identified and measured, then they likely can be valued monetarily • Any monetary values placed on ecosystem “human goods and services” MUST NOT be interpreted as the “total” value of the ecosystem!

  14. Ecosystem Evaluation • Ecosystem Evaluation Methods/Resources • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  15. Resource Values • Monetization requires identifying resource values • Use value: resource contributes to consumer satisfaction or producer profits • Visit natural areas for recreation, wildlife viewing, etc. • Harvest of natural products (fish, berries, wood, etc.) • Protect natural areas for future generations to visit • Non-use value: resource is valuable without use • Protect natural areas even if there are no plans to visit them

  16. Ecosystem Evaluation • Ecosystem Evaluation Methods/Resources • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  17. Willingness to Pay • Resource valuation is based upon “willingness to pay” • Three measures of “willingness to pay” • Revealed willingness to pay • Imputed willingness to pay • Expressed willingness to pay

  18. Willingness to Pay • Revealed willingness to pay -- willingness to pay can be estimated using market-related transactions

  19. Willingness to Pay • Revealed willingness to pay methods • Market price method: prevailing prices for goods and services traded in markets • Examples: prices paid for berries, fish, wood products, etc. • Productivity method: estimate changes in net income if natural resources is used in production process • Examples: improved reservoir water quality may decrease treatment costs and/or increase productivity for a firm using water supplies)

  20. Willingness to Pay • Revealed willingness to pay methods (cont’d): • Hedonic pricing method: estimates the value of environmental amenities that affect the prices of other goods • Example: homes located next to parks or open spaces can have higher property values • Travel cost method: estimates value of recreation benefits based upon consumer’s expenditures to visit a site • Example: recreation surveys to determine distance traveled and related expenses

  21. Willingness to Pay • Imputed willingness to pay methods – willingness to pay can be approximated by the cost of avoiding damage or replacing ecosystems

  22. Willingness to Pay • Imputed willingness to pay methods: • Damage costs avoided method: estimate the value of property protected or the cost of actions taken to avoid damage • Example: damage to properties that would suffer flood damage if a wetland were lost to development

  23. Willingness to Pay • Imputed willingness to pay methods (cont’d): • Replacement cost method: uses the cost of replacing an ecosystem or its services as an estimate of its value • Example: the value of a wetland to be lost can be estimated by the cost to purchase an existing functioning wetland or by restoring a degraded wetland)

  24. Willingness to Pay • Imputed willingness to pay methods (cont’d): • Substitute cost method: uses the cost of providing substitute services as a measure of value • Example: the value of a wetland to be lost can be estimated by the cost of providing structural infrastructure (levees, floodwalls, etc.)

  25. Willingness to Pay • Expressed willingness to pay -- willingness to pay can be determined by asking people what they would be willing to spend for ecosystem amenities

  26. Willingness to Pay • Expressed willingness to pay methods: • Contingent valuation: surveys are used to ask people how much they would be willing to spend for environmental amenities • Example: How much would you be willing to pay to restore Hetch Hetchy Valley?

  27. Willingness to Pay • Expressed willingness to pay methods (cont’d): • Contingent choice: surveys to ask people to state a preference between one group of environmental amenities (with a given cost) and another set of environmental amenities (with a different cost) • Example: would you be willing to spend $ x for Project A or $ y for Project B?

  28. Willingness to Pay • The Corps and the Bureau do not currently accept monetary values for ecosystem benefits • Both agencies are investigating ecosystem benefit valuation methods • The Corps uses cost-effectiveness and tradeoff analyses to determine the best ecosystem restoration proposal

  29. Ecosystem Evaluation • Ecosystem Evaluation Methods/Resources • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  30. Benefit Transfers • Benefit estimates developed by other studies • Benefit transfers are most reliable when: • original and current study site have similar socioeconomic and environmental characteristics • environmental change is very similar for the two sites • original valuation study used sound valuation techniques

  31. Ecosystem Evaluation • Ecosystem Evaluation Methods/Resources • Monetizing Ecosystem Resources • Resource Values • Willingness to Pay • Benefit Transfers • Example Analyses

  32. Cost-Effectiveness/Tradeoff Approaches

  33. Hamilton City Flood Damage Reduction and Ecosystem Restoration Project(USACE/State Reclamation Board)

  34. Study Area

  35. Objectives • Reduce the risk to public safety from flooding • Reduce damage due to flooding • Reconnect river and its floodplain • Increase quantity and quality of riparian and related floodplain habitat

  36. AlternativeLeveeAlignments

  37. Benefits & Costs(Average Annual)

  38. Cost-Effectiveness ScreeningBenefits vs. Total Costs

  39. Final Plan Selection • Criteria: Maximize total non-monetary and monetary benefits over total costs • Two Methods: • Tradeoff Analysis (Engineering Circular 105-2-404) • Cost-Effectiveness/Incremental-Cost Analyses

  40. Tradeoff Analysis • Combines monetary and non-monetary benefits • “Proportion of maximum” method • Equal weight to monetary and non-monetary factors: • 0.50 monetary (flood damage reduction and costs) • 0.50 non-monetary (ecosystem restoration)

  41. Tradeoff Analysis • Monetary weights assigned in proportion to maximum annual costs and benefits: • Maximum annual flood damage reduction benefits = $577,000 • Maximum annual costs = $3,048,000 • $577,000/$3,048,000 = 0.08/0.42 • 0.08 + 0.42 = 0.50

  42. Tradeoff Analysis Alt 6 Example = 0.1836 = (0.9477 x 0.5) + (1.0000 X 0.08) + (-0.8816 X 0.42)

  43. Cost-Effectiveness/Incremental-Cost Analyses for Combined Plans • Based upon “remaining costs” to allow monetary and non-monetary benefits to be merged for Cost-Effectiveness and Incremental-Cost Analysis • Remaining costs = Total Project Costs – Flood Damage Reduction Benefits

  44. Cost-Effectiveness ScreeningRestoration Benefits vs. Remaining Costs

  45. Cost-Effectiveness Analysis Best Buy Plans—provide the greatest increase in outputs for the least increase in cost and have the lowest incremental cost per unit of output relative to the other cost-effective plans

  46. Incremental-Cost Analysis“Best Buy” Plans

  47. Recommended Plan • Construct 6.8 miles of setback levee (90% x 75-yr) • Remove most of “J” levee • Restore 1,500 acres of native habitat

  48. Economic Costs and Benefits of Recommended Plan (1,000s)

  49. Monetization Approaches

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