The replacement value of flood plains as nutrient sinks: a case study of the river Elbe

Transcription

1 The replacement value of flood plains as sinks: a case study of the river Elbe Alexandra Dehnhardt Institute for Ecological Economy Research (IÖW) Potsdamer Str. 105, Berlin, Germany tel.: +49 (30) , alexandra.dehnhardt@ioew.de Abstract The increasing reduction of wetlands such as riparian areas is regarded as a serious loss due to their high ecological value. A growing need for the assessment of wetland values and the beneficial ecosystem services they provide is noted. An overview of recent studies using different approaches to assign monetary values to different valuable functions is given. In a case study of the river Elbe in Germany the function of flood plains as sinks to improve water quality is considered. The value of these services is assessed in monetary terms using the replacement cost approach, considered the most appropriate in this case. Besides methodological questions, the suitability of monetary valuation in river basin management is discussed. Introduction Flood plains are considered as highly-productive sites with a high ecological value. Thus, different services are provided by wetlands as a contribution to the welfare of society. Furthermore, the increasing loss of wetlands (local as well as world-wide) is recognised more and more as a serious problem in the public perception. There is a growing interest and necessity for the quantification and evaluation of these services. An economic valuation of ecosystem services must cover various objectives. Firstly, the economic value of the considerable loss of wetlands could be calculated. Secondly, the monetary value of the benefits of wetland restoration measures becomes important for conservation interests to include in cost-benefit based policy evaluation and social decisions. Ecological services are based on highly complex structures and processes of ecosystems. This makes the individual perception of their beneficial contribution to human welfare more difficult. Since natural resource economic approaches refer usually to the measurement of individual preferences, appropriate ways to assess benefits difficult to perceive must be found. Thirdly, an economic valuation plays an important role in reducing complexity and developing human perception of ecosystem services. Assessing the (monetary) benefits of restoration measures can help meet the requirements of an integrated, ecosystem approach to the management of land and water resources. Applying a holistic approach in the management of river catchment areas, the European Union had created a new directive to establish a common framework for the management of the aquatic environment. Therefore, the monetary valuation of an improved aquatic environment as a result of restoration measures within management play an important role. By assessing the value of riparian areas in monetary terms, a methodological contribution for decision making in the context of the Water Framework Directive can be made. Within the case study of the German river Elbe there are two goals. On the one hand, valuing ecological services as one part of the total economic value was required for a cost-benefit analysis of restoration measures along the Elbe within a research programme. On the other hand, based on the discussion and application of a valuation approach it seeks to contribute to the methodological discussion for appropriate approaches for economic valuation applicable within river basin management

2 The paper is organised as follows. In the next section a brief overview of the ecological services provided by wetlands and different valuation approaches are given. Some recent studies focusing on the function of wetlands and different approaches used to assign monetary values to this function are discussed. Afterwards, a case study of the river Elbe in Germany is presented in which the monetary value of restored flood plains regarding their function as nitrogen sinks is assessed, using the replacement cost approach. The economic value of wetland services River systems provide many goods and services with a value to society. Following de Groot (1994), the ecosystem services in general can be characterised in terms of different biodiversity functions: lifesupport functions, carrier functions, production functions and information functions. The life support functions refer to the ecosystem services that contribute to the ecosystem s selforganising capacity, its resilience as well as the maintenance of a multifunctional system for the regulation of ecological processes that provide e.g. clean water, flood control or biodiversity. According to the concept of the Total Economic Value which classifies different value categories, this study focus on the indirect use values. These refer to the benefits derived from the hydrological, biochemical or ecological functions of wetland ecosystems. In particular, the biochemical function of the river Elbe flood plains related to maintenance of water quality is considered. Many valuation studies which aim to assess the value of wetland ecosystem services in monetary terms have been conducted recently. They focus either on distinguished wetland services or on the ecosystem services in total. The measurement of the value of these different services varies substantially in the valuation methods that are used and the specification of services covered. The results vary considerably as well. For the evaluation of the flood protection function of wetlands, often the damage cost approach is used. If ecological services are directly associated with an economic activity, i.e. can be viewed as an argument in the production function of a produced good (e.g. fishery, forestry, technical water treatment) an increase in producer surplus can be considered to measure the benefits of an environmental improvement (net factor income method). In principle, the sum of producer and consumer surpluses would be the correct measure for welfare effects. In order to quantify surplus changes as a result of environmental improvements, information about the supply and demand curve would be necessary. These functions are usually unknown. Therefore, changing price and quantity and/or cost and revenue effects are used to estimate welfare effects in practice. Thus, only changes in producer surpluses are regarded. Consumer surpluses remain unconsidered. In principle, this can be viewed as the underlying approach of the replacement cost method which regards the value of an ecosystem s service as the price of the cheapest alternative (see Woodward, Wui 2001). There are some valuation studies which used the Contingent Valuation Method. Since the statement of individual preferences as a fundamental prerequisite for this method in the case of highly complex and hardly perceptible functions requires a highly perceptive faculty, the suitability of this approach concerning indirect use values remain uncertain. The contingent valuation approach might therefore not be the first choice when dealing with ecological services. Hence, most studies which focus on the potential of wetlands and thus an improvement of water quality are based on the replacement cost approach. The table (see annex) gives an overview and the results of different empirical studies using the replacement cost approach in the context of the water quality function of wetlands. Even if these studies in principle are based on the measurement of replacement costs, they differ in their objectives, their basic assumptions and also in the detail of methods used. The approach of some studies is to be discussed briefly as follows

3 Many Scandinavian studies put their focus on the load to the Baltic sea and then analyse different pollution abatement strategies. These include on the one hand, investments in wetland construction or restoration as well as investments in sewage treatment plants and, on the other hand to agricultural measures such as reductions in fertiliser input (and related reduced revenues). Thus Byström (1998, 2000) estimates the benefit of wetlands in the catchment area of the Baltic Sea with regard to a defined reduction goal (e.g. 50%) by comparing the cost effectiveness of two different political scenarios (with and without wetland) for the reduction on the non-point nitrogen pollution from agricultural areas. The replacement value is defined as the savings in total abatement costs that are made possible by using wetlands as an abatement measure in cost-effective reduction of nitrogen load to the Baltic Sea. (Byström 2000:347). However, in this study the wetlands considered encompass only areas permanently influenced by water and whose restoration enhances the during the subsurface water transport to the stream; a process which takes place anyway. This approach is comparable to the method which is pursued in the context of other studies concerning the Baltic Sea which aimed to obtain the value of wetlands by estimating the marginal cost of two reduction scenarios (Gren 1993, Gren et al. 1994). A much more complex view is pursued by Gren (1993) and Gren et al. (1994). As the costs of a wetland restoration compared to the investment costs in sewage treatment plants are identified, the valuation includes, here beside nitrogen function, other values regarding biodiversity and the self-organising capacity of ecosystems. This approach is based on a valuation of the life support value of wetlands (Folke 1991), an aggregated total ecosystem value (including primary and secondary values of ecosystems). In a first step, the net primary production (NPP) is quantified using energy analysis. Based on this, the economic value is derived in a second step due to a comparison with the (replacement) costs of technical measures to obtain the same service. Although the author estimates monetary values for specified services based on the total value, the general problem remains that not all ecosystem services (e.g. ) are directly related to NPP. Furthermore, using energy analysis as a basis to assign monetary values can be criticised. Energy content of biomass cannot be compared with the energy gained from fossil fuels and the relationship between energy content and consumers preferences is rather weak (Woodward, Wui 2001). The values obtained and listed in the table differ considerably according to the specific characteristics of the studies. It is therefore obvious that empirically gained results cannot be transferred to other cases. Woodward and Wui (2001) recently used meta-analysis as a tool to synthesise the results of numerous valuation studies and to gain insight into a presumed valuation function that determines a wetland s value given its site-specific characteristics. However, they conclude that due to different basic conditions, focused functions and values as well as valuation approaches, the prediction of a wetland s value based on previous studies in the sense of a benefit transfer would be rather imprecise. Thus, the need for site-specific studies remains. In summary regarding the ecological service improvement of water quality, the replacement cost method seems to be the most common approach and, despite still existing methodological problems, the most appropriate. Hence, if specific ecosystem functions can alternatively be achieved by a technical substitute, then the cost of this substitute to replace this function can be regarded as the economic value of the wetland s service (see also Gren et al. 1994; Byström 2000; Mitch, Gosselink 2000). As a reference condition, usually an environmental standard e.g. a defined water quality, is considered. If the ecosystem service to maintain this water quality standard is lost, then suitable alternative measures have to be considered and the related costs, e.g. investments in sewage treatment plants, can be taken into account when evaluating the (lost) ecosystem service. A fundamental prerequisite is however that the substitute provides exactly the same service as the natural resource which is to be valued. Furthermore, the functional relationships between the ecosystem considered, the ecological functions and the service that leads to a societal value (and a correspondent technical substitute) must be capable of being identified. In the case of close relationships between the service and the societal value, not only is quantification much easier but - 3 -

4 transparency and acceptance for a political decision maker is enhanced. Compared to other approaches, the replacement cost method is supposed to be rather easy to understand and therefore might be suitable to enhance social perception of indirect use values which is an advantage of this method. However, it should be noted that one can only evaluate the defined function of an ecosystem (in the Elbe case: the nitrogen function of flood plains). No other benefits are included. Thus, this value might be regarded as the lower bound of the societal value of ecosystem services. The value of the of river Elbe flood plains Within the project Monetary valuation of a sustainable development along the river Elbe, the monetary value of changes in ecological services due to restoration measures is assessed. Due to flood protection measures, requirements of navigation and agricultural use of river banks along the Elbe, approximately 85% of the former flood plain area has disappeared since the middle of the 19 th century. The focus is on evaluation of the ecosystem services of flood plains (as a special type of wetlands); particularly, the effects of an enlargement of areas by dyke relocations along the river. In principle, flood plains show a substantial capacity for nitrogen and can thereby enhance the water quality of a river. As a result the function of the Elbe flood plains as sinks was considered mainly. Compared to other wetland valuation studies, the specific site conditions of flood plains (in contrast to constructed wetlands within a catchment area) have to be taken into account. Flood plain capacity as a filter aims primarily to enhance the self-purification potential and with this the water quality of a river. Therefore, only effects on the longitudinal load are taken into consideration and the valuation focuses only on this service. The assessment of the monetary value of the function of restored flood plains using the replacement cost approach required three steps in general: 1. the identification and quantification of the nitrogen reduction effects (the ecosystem function) 2. the definition of the reference scenario (i.e. the substitute and costs) and finally 3. the economic valuation (the ecosystem service) 1. In a first step, the nitrogen reduction effect was only quantified for two specified project regions (approx ha) because of the availability of site-specific data. The surface area available for nitrogen reduction in the case of flood plains (as compared to other types of wetlands) is primarily determined by the flood dynamic of the river, i.e. the duration and frequency of flooding, as well as the morphology of the flood plain surface. Accordingly, the results vary substantially depending on site-specific conditions. The quantitative potential for these areas were estimated using a statistical model developed by Behrendt et al. (1999). In a second step, the potential for all regarded restoration measures along the Elbe (in sum 15,000 ha) was estimated. Up to 1-10% of annual reduction effects in nitrogen load for the Elbe could be obtained by dyke relocation measures. However the maximum reduction can only be achieved with optimal conditions, i.e. a long flood duration and very high denitrification rates. As the denitrification process is highly dependent on water temperature, the most limiting factor for the Elbe is that the usual flooding time is during the winter and the spring. High denitrification rates occur only in summer time. Thus, for further monetary valuation, a conservative value of an entire nitrogen reduction of 3,000 tons per year is assumed; reached with an average rate of 200 kg nitrogen per hectare and year. 2. For assessing the replacement cost value of the ecological service nitrogen, the next step requires identification of a technical substitute and quantification of the costs necessary to provide an equivalent service. The benefit of the flood plains only refers to their nitrogen potential during a flooding event. Therefore no differentiation is made between the sources of loads. The reduction in flood plains is independent from the source of the load, i.e. non

5 point source loads are included as well as point source pollution. When considering the equivalent technical substitute, it has to be taken into account that sewage treatment plants only reduce nitrogen loads from point sources and political strategies such as agricultural measures only include non-point source pollution. Thus, when considering the cost of alternative measures for nitrogen reduction, the focus is on different functional processes in detail. The final effect (improvement of water quality) is the same, however. On a closer look, the process equivalent to the nitrogen function in the flood plains is the denitrification process in sewage treatment plants. Therefore, the marginal cost of denitrification seem to be a suitable reference for benefit assessment. 3. The replacement value of the restored flood plains is assessed on the basis of different scenarios that provide the same service: (a) marginal costs of waste water treatment in sewage treatment plants (5-8 1 /kg N, Grünebaum 1993), (b) the marginal costs of avoidance of nitrogen loads by agricultural measures (mean 2,5 /kg N). The results considerably differ according to the site-specific conditions mentioned above. Thus, the replacement value varies for the two specific project regions (each approx. 850 ha) depending on the scenario between annually 99,000 (sc. b) and 290,000 (sc. a) for adverse site conditions and 1,740,000 (sc. b) and 5,140,000 (sc. a) for appropriate site conditions. For the total Elbe, (about 15,000 ha additional flood plain area) a value of between 6.9 mill. (sc. b) and 20.5 mill. (sc. a) is achievable annually. With regard to the range of variation in monetary benefits, these results are comparable to the valuation studies discussed above. These results are considered as indirect use values (when compared with use values obtained by a Contingent Valuation) in cost-benefit valuation of sustainable development along the river Elbe. Discussion The results show high variability depending on basic assumptions and processes considered. The site conditions are of high importance for as well as specific denitrification rates. The results for the two specific project regions have shown that for the nitrogen service the flood dynamic is the substantial factor of influence. If the restoration of flood plains is to be successful concerning their water purification function, the morphological structure of the surface area has to be considered. Regarding the nitrogen load of the Elbe, i.e. the water quality, the quantitative effects of the measures are rather small. Compared to other studies, the comparatively low effect occurs because of the only temporary (in contrast to permanent) influence of water. If the linkages between the ecological and economic system and the relationships are well known, the functional values of flood plains are comparatively simply to estimate, in principle. However, as the monetary value of the nitrogen shows a high dependence on the cost of the alternative option, a particular technical substitute and its respective associated costs should be taken as a basis for the valuation using the replacement cost approach. In summary, a valuation using marginal costs of nitrogen abatement seems to be an appropriate approach and was therefore used in the Elbe project. The approach differs in detail from other studies which used the replacement cost method, because the value was derived directly from the calculated marginal costs of the substitutes. Other studies focused also on the empirical estimation and modelling of cost functions for wetland restoration and marginal nitrogen abatement costs. The value was finally derived from possible cost savings comparing two cost-effective scenarios. Within this case study, the basic assumption was made that an improvement of water quality in the Elbe is related to a societal benefit. No quality standards were specified. Concerning the river basin management and the related Water Framework Directive, ecological objectives are defined for each 1 1 = approx. 0,9 US $ - 5 -

6 surface water (the so called good ecological status) and have to be achieved in a given period of time. Within the management plans, alternative measures to achieve these environmental objectives have to be assessed; including economic issues. Therefore, valuation methods which are practical and suitable for estimating functional values of restored river systems are needed. In future, the replacement costs approach might contribute to the development of feasible methods within this framework. References Behrendt, Horst; Opitz, Dieter (2000): Retention of Nutrients in River Systems: Dependence on Specific Runoff and Hydraulic Load, in: Hydrobiologia 410, Byström, Olof (1998): The nitrogen abatement cost in wetland, in: Ecological Economics 26, pp Byström, Olof (2000): The replacement value of wetlands in Sweden, in: Environmental and Resource Economics 16, pp , Kluwer Academic Publisher Constanza, Robert; d'arge, Ralph; Groot, Rudolf de; Farber, Stephen; Grasso, Monica; Hannon, Bruce; Limburg, Karin; Naeem, Shahid; O'Neill, Robert V.; Paruelo, Jose; Raskin, Robert G.; Sutton, Paul; Belt, Marjan van den (1997): The Value of the World's Ecosystem Services and Natural Capital, in: NATURE Vol. 387, Dister, Emil (1994): The Function, Evaluation and Relicts of Near-Natural Floodplains, in: Kinzelbach, Ragnar (Hrsg.): Biologie der Donau. Stuttgart, Jena, Gale, P.M.; Devai, I.; Reddy, K.R.; Graetz, D.A. (1993): Denitrification Potential of Soils from Constructed and Natural Wetlands, in: Ecological Engineering 2 (1993), Gren, Ing-Marie (1995): Economic Evaluation of Danube Floodplains Gren, Ing-Marie (1995): The Value of Investing in Wetlands for Nitrogen Abatement, in: European Review of Agricultural Economics 22 (1995), Gren, Ing-Marie (1999): Value of Land as a Pollutant sink for International Waters, in: Ecological Economics 30(1999), Gren, Ing-Marie; Folke, Carl; Turner, Kerry; Batemann, Ian (1994): Primary and Secondary Values of Wetland Ecosystems, in: Environmental and Resource Economics 4 Gren, Ing-Marie; Söderquist, Tore; Wulff, Fredrik (1998): Nutrient Reductions to the Baltic Sea: Ecology, Costs and Benefits, in: Bejer Reprint Series No.92 Gren, Ing-Marie; Turner, Kerry; Wulff, Frederik: (Hrsg.) (2000): Managing a Sea. The Ecological Economics of the Baltic Groot, R.S.d. (1994): Environmental Functions and the Economic Value of Natural Ecosystems. In: Jansson, A.; Hammer, M., Folke, C., Costanza, R. (Hrsg.): Investing in Natural Capital, Washington DC: Island Press, pp Grünebaum, Thomas (1993): Stoffbezogene Kosten der kommunalen Abwasserreinigung. In: Neue Ansätze im integrierten Umweltschutz. Schriftenreihe Gewässerschutz - Wasser - Abwasser, Bd. 139, Aachen. Heimlich, Ralph E.; Wiebe, Keith D.; Claassen, Roger; Gadsby, Dwight; House, Robert M. (1998): Wetlands and Agriculture: Private Interests and Public Benefits Jansson, Äsa; Folke Carl; Langaas, Sindra (1998): Quantifying the Nitrogen Retention Capacity of Natural Wetlands in the Large-Scale Drainage Basin of the Baltic Sea Kronvang, Brian; Hoffmann, Carl Christian; Svendsen, Lars M.; Windolf, Jorgen; Jensen, Jens P.; Dorge, Jesper (1999): Retention of Nutrients in River Basins, in: Aquatic Ecology 33, Mitsch, William J.; Gosselink, James G. (2000): Wetlands. Third Edition. John Wiley & Sons. Nunes, Paulo A.L.D. ; van den Bergh, Jeroen C.J.M. (2001) : Economic Valuation of biodiversity: sense or nonsense? In: Ecological Economics 39 (2001), Vought, Lena B.-M.; Dahl, Jonas; Pedarson, Carsten Lawge; Lacoursiere, Jean O. (1994): Nutrient Retention in Riparian Ecoton, in: Ambio Vol. 23 No. 6, Woodward, Richard T.; Wui, Yong-Suhk (2001): The economic value of wetland services: a meta-analysis. In: Ecological Economics 37 (2001),

7 table 1: nitrogen valuation studies using the replacement cost approach ecological service life support total life support bio-chemical nitrogen secondary value nitrogen method approach result value [ /ha] reference EA / RC loss of wetland s gross primary production 2,5-7 mill 39 Folke (1991) 1 comparing with the costs of replacing them SEK with feasible human-made technologies EA / RC considering only the costs that are related to 8 Folke (1991) 2 technical substitutes for the biochemical EA / RC / CVM processes primary and secondary value according to the value of improved water quality (CVM), (denitrification rate: 100 kg N/ha) EA / RC multifunctional production of secondary values: costs compared to the value of improved water quality CVM / RC comparing the costs of alternative nitrogen abatement strategies (wetlands, agriculture, waste water treatment plants); value of improved water quality obtained by CVM; secondary values obtained using RC) sink RC comparing two different abatement strategies for a 50% reduction of nitrogen load (with and without wetlands). value is derived from total cost savings sink RC comparing two different abatement strategies for a 50% reduction of nitrogen load (with and without wetlands; denitrification 100 kg/ha) sink RC assuming lower marginal costs of nitrogen abatement (25 ) because of other site conditions MSEK for 6400 ha Gren et al. (1994) Gren et al. (1994) Gren (1995) Byström (2000) 410 Gren (1995) 162 Gren (1995) water quality and quantity RC Gupta, Foster (1975) 2 water quality and quantity RC Thibodeau, Ostro (1981) 2 RC (coastal wetland) 1 0,4 Farber (1996) 2 RC (riverside wetland) Thibodeau, Ostro (1981) RC Gren (1995) 2 reduction RC cost savings in waste water treatment (coastal wetland) Breaux et al. (1995) 1 reduction RC cost savings in waste water treatment (coastal wetland) Breaux et al. (1995) 1 control RC ,9 279 Joworski, Raphel (1978) 1 1 in Woodward, Wui (2001) RC = replacement cost, EA = energy analysis, 2 in Heimlich et al. (1998) CVM = contingent valuation - 7 -