What is A Triple Bottom Line Economic Analysis of Improving Urban River Quality?

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1 What is A Triple Bottom Line Economic Analysis of Improving Urban River Quality? Leland Deck, Ph.D. Managing Economist Stratus Consulting Inc. Washington, DC Prepared for: Anacostia River Business Summit September 20, 2011

2 The Triple Bottom Line (TBL): Economics of Sustainability TBL = a comprehensive benefit-cost analysis Identifying and portraying all benefits & costs Internal and external, market and nonmarket goods Three bottom lines Financial results Social outcomes Environmental benefits

3 Choosing the Least Cost Option May Not Deliver Social and Environmental Values to the Community Social Environmental 1 Financial

4 Options that Meet Broader Goals May Increase Financial Costs to a Utility, but Yield Larger Net Benefits to the Community Social 2 Environmental 1 Financial

5 Case Study: Philadelphia Water Department s CSO Control Program Alternatives 2009 Study for PWD Engineering by Camp, Dresser & McKee Green approaches LID with stream & wetland restoration Grey approaches Tunneling Transmission, Plant Expansion and Treatment Transmission and Satellite Treatment 17 options

6 Green Infrastructure/LID Program Components Four GI/LID alternatives (25%, 50%, 75% and 100%) Trees Green Streets Green roofs Bioretention areas Stream restoration Green space, urban parks Wetlands (created and restored)

7 Going to Look At One Alternative: 50% LID vrs 30 Tunnel Same reduction in # of combined sewer overflow events Same present value of costs of implementation Initial installation costs 40 year O&M costs

8 Scale of Implementation 50% LID 637,483 trees 402 acres green roofs 5,011 acres vegetated area 351,415 Heavy vehicle trips 149,768 Light vehicle trips 26,801 kw-hr of energy 193 acres of wetlands 30 Tunnel 579,837 heavy vehicle trips 289,919 concrete truck trips 2.0 million kw-hr of energy 36.3 million cu ft concrete 11.2 million kw-hr of energy for pumping/treatment per year

9 Methods and Assumptions Mapping program components to specific outcomes External costs and benefits Standard physical & economic approaches Benefits transfer Present values over 40-year timeframe Present both physical and monetary units Omissions, biases, and uncertainties Sensitivity analyses

10 TBL Benefit/Cost Categories Social Recreation Improved Aesthetics and community livability Increased property value Energy use/savings Green jobs Public health/reduced heat stress Traffic flow Financial Green = Grey Environmental Water quality and aquatic habitat Wetlands Carbon footprint Air quality

11 Public Health/Urban Heat Stress Reduction Increased vegetation mitigates urban heat island effect LID options result in reductions of degrees F annual average temperature Avoided 196 deaths from Excessive Heat Events EPA Value of Statistical Life ($8 million per life saved ) HEAT STRESS REDUCTION BENEFITS = $1,058 million

12 Aesthetic/Property Value Benefits 2-5% increase in value applied to median 2007 home sale prices Only included residential property # affected properties corresponds to proportion of greened area Assumes 50% of PV due solely to aesthetics PROPERTY VALUE BENEFITS = $575 million

13 Increased Recreation Stream & wetland restoration attracts more recreational users Benefits are additional recreational trips ( user days ), and direct use value derived from each trip 102 million new non-creekside user days 248 million new Creekside user days RECREACTIONAL BENEFITS = $525 million

14 Water Quality and Ecological Habitat Benefits Value based on meta-analysis of willingness to pay (WTP) Scaled values for households outside of City WTP = $9.70 to $15.54 per year per household WATER QUALITY BENEFITS = $336 million

15 Air Quality Health Benefits: Trees Reduce Air Pollution Based on U.S. Forest Service research on ozone and smog Tree planting schedule and assumptions about tree growth (time to maturity) EPA models used to estimate projected health impacts & dollar value Per year: 1-2 deaths, 1 heart attack, 3 hospital admissions, 250 work loss days HEALTH BENEFITS FROM TREE/AIR QUALITY IMROVEMENT = $131 million

16 Poverty Reduction from Local Green Jobs Grey and green infrastructure generate different types of jobs Green generates more low skilled jobs Average annual cost of social services in Philadelphia = $10,000 per unemployed worker 15,266 work years (380 jobs per year) GREEN JOB BENEFITS = $125 million

17 Energy: Up during Construction, Then Savings Due to Cooling Effect of Trees Energy used for excavation, O&M, and fuel wasted in traffic delays Energy saved due to cooling effects Over 40-year period: 490,000 gallons of fuel used 600,000 kbtu natural gas saved 370 million kwh of electricity saved VALUE OF ENERGY SAVINGS = $34 million

18 Air Pollutant Emissions Benefits Net reduction in emissions Cement making and transportation 1,530 MT SOx 38 MT NOx Reduces air pollution (soot and smog) EPA valuation methods applied to value health benefit ($ per ton) EMISSION REDUCTION BENEFITS = $46 million

19 CO 2 Emission Reduction Benefits Construction and O&M increase CO 2 Reduced energy use and absorption by trees decrease CO million MT net reduction Internationally recognized valuation approaches applied ($/ton) CARBON FOOTPRINT REDUCTION = $21 million

20 Construction-related Disruption Additional fuel use and emissions due to added time and distances Time lost due to longer travel times Total delay under 50% LID = 346,883 hrs COSTS OF CONSTRUCTION DISRUPTION = $6 million

21 Wetland Benefits Benefits include Improved water quality Groundwater recharge Shoreline anchoring Flood control Habitat Per-acre value applied based on economic literature 193 acres of wetlands created or restored WETLAND BENEFITS = $2 million

22 Overview of TBL Results SOCIAL (> $2.3B) = ENVIRONMENTAL (> $400M) FINANCIAL

23 Full report available at: