Substitute Costs: A Method for Determining Ecological Service Values in Stormwater Management

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Technology

Published on March 20, 2009

Author: smckinney

Source: slideshare.net

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Many alternatives exist for estimating the value of the natural environment. These approaches have been developed over the past 40 to 50 years and began principally because of increasing awareness that continued economic development of nations had an associated cost in environmental degradation. To understand the motivators and problems associated with the need for environmental controls and preserving economic growth, it is necessary to discuss some of the principles associated with the study of environmental economics. The major goal of the study of environmental economics is to aid humanity in balancing economic growth with the environmental impacts it creates through evaluating policy. Using environmental economics as a mechanism for policy assessment allows the evaluation of potential gains from specific courses of economic growth and the trade-offs in environmental services that may be necessary. Based on a melding of economics, environmental science, engineering, and public policy, this research demonstrates the calculation of an Ecological Service Value (ESV) using the substitute cost valuation method for a single ecosystem service; stormwater management. Geographic Information Systems (GIS) is used to provide the required input parameters for the WinSLAMM (Source Loading and Management Model for Windows) stormwater runoff model, which provides the input variables for the ESV calculation. In addition, a brief history of significant literature and valuation methods is provided to aid in understanding the application and development of the specific method of substitute costs.

For: Dr. Mindy Lalor – Committee Chair Dr. Robert Angus Dr. Paul D. Blanchard Dr. Sarah Culver Dr. Alan Shih 1

Introduction Development pressures are increasing  Stormwater runoff characteristics are changed by  development Stormwater runoff models exist that compare pre-  and post- development stormwater characteristics Models produce complicated scientific/engineering  data A methodology is needed to derive a common  metric to aid in comparing the value of an ecological service to the value of planned development The Ecological Services Value (ESV) method  provides an approach to deriving a common metric 2

Points of Interest ESV method: The was successful is reproducible can be used by policy makers 3

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Stormwater Runoff Impacts It is often difficult for decision makers and political  officials to understand complex scientific and engineering analysis, as it relates to stormwater runoff The desire for economic development and sources of  new revenue is creating intense pressure on decision makers to allow development of lands Without a common metric, it is difficult to compare the  value of the environmental services currently provided (which may be lost) with the value of the potential development 5

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Decisions Will Be Made Development decisions are often made  without respect to impacts of stormwater runoff Few tools are available to evaluate complex  development decisions with well recognized, simplistic terms Without a common metric, decision makers  may not consider the impacts of development on stormwater runoff 7

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Ecosystem Deterioration Assuming that predevelopment conditions  are optimal for downstream areas, if impacts are not mitigated, significant damage can occur in the form of pollution and/or flooding Without the appropriate comparisons  between the costs of impact mitigation and the financial benefits or other value derived from development, leaders may make poor decisions that could have negative impacts on society 9

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What is “value”? Webster’s Dictionary Defines Value as: 1 : a fair return or equivalent in goods, services, or money for something exchanged 2 : the monetary worth of something : marketable price 3 : relative worth, utility, or importance <a good value at the price> <the value of base stealing in baseball> <had nothing of value to say> 7 : something (as a principle or quality) intrinsically valuable or desirable <sought material values instead of human values -- W. H. Jones> 11

Utility in Value Utility is defined as the level of happiness or  satisfaction associated with alternative choices. Economists assume that when individuals  are faced with a choice of feasible alternatives, they will always select the alternative that provides the highest level of utility. 12

What is Environmental Economics? A mechanism using economic theories and  empirical analyses that characterizes relationships between the performance of the economy and environmental pollution control; OR  It can be defined as the study and in-depth analyses of economic and policy issues relating to economic costs and benefits of environmental pollution control programs, policies, and guidance. 13

Why do we need to consider Environmental Economics? To perform analyses of the economic impacts of  environmental pollution control programs. To address the development dimensions of  environmental policy – evaluating the social and economic impacts, in particular the impacts on poverty, and designing policies that are both cost- effective and equitable. To examine the environmental implications of  development policy – making tradeoffs between poverty reduction and environmental protection. 14

Concepts of Value Concept Non-Utilitarian (Typically Intangible Values) Concept Utilitarian (Typically Tangible Values) 15

Total Economic Value Total Economic Value (TEV)  Concept is attributed to Pearce and  Warford 1993, World Without End Theoretical structure for assessing  ecosystem value as a whole 16

TOTAL ECONOMIC VALUE (TEV) USE VALUE NON-USE VALUE Existence Value Indirect use value CATEGORIES Direct use value Option value Consumptive Bequest value TEV Nonconsumptive Quasi-option value 1. Changes in 1. Changes in 1. Changes in 1. Contingent productivity productivity productivity valuation COMMONLY USED 2. Cost-based 2. Cost-based 2. Cost-based VALUATION METHODS approaches approaches approaches 3. Hedonic prices 3. Contingent 3. Contingent 4. Travel costs valuation valuation 5. Contingent valuation 17

TEV Categories Direct Use Direct use values are based on consumptive  or nonconsumptive uses. Consumptive use is a use that reduces the  overall supply of resource, while nonconsumptive use causes no reduction in quantity or supply of that resource 18

TEV Categories Indirect Use Indirect use values can be described as support and  protection provided to economic activity by regulatory environmental services. Many ecosystem services are used as intermediate  inputs for the production of goods, while other services indirectly contribute to consumption of goods. An example of indirect use value of services through  intermediate inputs would be pollination in food production, while indirect contribution to consumption would be water purification. 19

TEV Categories Option Value  Option value is about the value of preserving the choice to use ecosystem services in the future by not taking actions on the environment that are irreversible 20

TEV Categories Existence Value Existence values are non-use values often referred  to as conservation values, or passive use values. These are values applied to a resource that  individuals do not intend to use, but would feel a “loss” if the resource were to disappear. This could be stated as value ascribed to the  knowledge of existence. Studies have linked these applied values to the  knowledge of maintaining a resource for one’s descendents and the knowledge of assured survival for a resource like habitats or species 21

Substitute Cost Method is TOTAL ECONOMIC VALUE the focus of this research (TEV) USE VALUE NON-USE VALUE Existence Value Indirect use value CATEGORIES Direct use value Option value Consumptive Bequest value TEV Nonconsumptive Quasi-option value 1. Changes in 1. Changes in 1. Changes in 1. Contingent productivity productivity productivity valuation COMMONLY USED 2. Cost-based 2. Cost-based 2. Cost-based VALUATION METHODS approaches approaches approaches 3. Hedonic prices 3. Contingent 3. Contingent 4. Travel costs valuation valuation 5. Contingent valuation 22

Substitute Costs Method This approach is based on the principle that the value of  the resource may be assigned based on the cost of replacing or finding a substitute for the resource, or the cost of repairing damage caused by the use of the resource.  The central premise of substitute cost determination is that a “substitute” can be found for the resource in question and that a cost can be determined for that substitute.  Therefore substitution is technologically limited within the context of ecosystem valuation.  For the cost determination to be valid, the substitute must be equal to or greater than its predecessor. 23

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Research Question can the monetary How value of the natural services provided by undeveloped lands with respect to stormwater runoff impacts be determined? 25

Hypothesis The proposed methodology produces the required inputs for the ESV equation. n V ES (C Ci C Oi ) i1 Where: VES = Ecological Services Value CC = Capital costs of the construction of the stormwater control CO = Operations and maintenance costs of the stormwater control 26

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Approach Summary Geoprocessing   Definition: the use of GIS to manipulate data  Used in this approach to derive the input variables and data for stormwater modeling.` Modeling   The use of a modeling software to determine the pre- and post- development stormwater characteristics of a site  WinSLAMM was selected for this research ESV Calculation   Use of the Ecological Services Value equation with the results of the stormwater model to determine value of the stormwater management services by the undeveloped site  Amortization of the “Year One ESV” for 20 years at 6% 28

B o u n d a ry fo r e a ch AOI Geoprocessing D e fin e e xte n t fo r e xtra ctin g L ID A R Terrain Data b y se le ctin g e a ch AOI Source Data  AOI L ID A R  1ft. dispersion LiDAR E xtra ct L ID A R b y A O I e xte n t Derived Data  L ID A R o f AOI  Mean Aspect Surface G e n e ra te su rfa ce u sin g ID W Model in te rp o la tio n  Mean Slope Surface S u rfa ce M odel Model U se su rfa ce m o d e l U se su rfa ce m o d e l Purpose of data  to g e n e ra te slo p e to g e n e ra te a sp e ct m odel m odel  To ascertain the A sp e ct S lo p e M odel M odel inclination direction C a lcu la te th e C a lcu la te th e and severity m e a n a sp e ct fo r m e a n slo p e fo r th e th e a re a o f in te re st a re a o f in te re st u sin g zo n a l u sin g zo n a l sta tistics sta tistics M e a n a sp e ct M e a n slo p e 29

D e fin e m a xim u m sym m e trica l e xte n t Geoprocessing M a xim u m C o lo r o rth o Hydrologic Data e xte n t p h o to g ra p h y E xtra ct a e ria l p h o to g ra p h y Source Data  O rth o  6 in. resolution aerial p h o to s b y m a xim u m e xte n t photography D e fin e A O I  Site observations AOI Derived Data  D e fin e S o u rce  Source areas A re a s A d d S o u rce A re a Purpose of data  typ e a ttrib u te s D isso lve b y  Describes the sizes, S o u rce A re a typ e divisions, and surface A d d a re a fie ld s characteristics of the C a lcu la te a re a land cover types C o n ve rt a re a to m o d e l u n its S o u rce A re a s 30

D e fin e A O I Geoprocessing AOI Soils Data E xtra ct so ils d a ta by AO I Source Data  NRCS AOI SSURGO S o ils  NRCS 1:24,000 SSURGO S o ils b y AOI Derived Data  D isso lve b y M a p U n it S ym b o l (M U S Y M )  Hydrologic Groups  Type distribution A d d a re a a n d p e rce n ta g e fie ld s Purpose of data  C a lcu la te a re a  Describe the type, distribution, and C o n ve rt m o d e l u n its ability of the soil to infiltrate stormwater C a lcu la te p e rce n ta g e s S o ils 31

Geoprocessing U n io n S o u rce A re a s a n d S o ils Model Parameter  S o u rce S o ils Consolidation A re a s  Source areas and S o u rce soils were combined A re a s w ith S o ils  Distributions of source areas and A d d a re a fie ld soils types were C o n ve rt to m o d e l calculated u n its  Units converted to O u tp u t a re a p e r so il typ e b y S o u rce match requirements A re a for WinSLAMM M o d e l P a ra m e te rs 32

Modeling WinSLAMM WinSLAMM (Source Loading and Management Model)  is a simulation model used to determine the volume and constituents of a stormwater runoff from a site First, for the pre-development condition, the total site  area is entered specifying the area of each soil hydrologic group Next , for the “base condition”, is the entry of the “source  areas” of a site without any stormwater controls. Last , for the “control condition”, is the design, sizing,  and input of stormwater controls to reach the targeted reductions in volume and particulate discharge 33

Modeling WinSLAMM The ability to calculate the construction and operations  costs of the stormwater controls inputted occurred as of version 9.2. These are the sources of costing data. Costs of Urban Nonpoint Source Water Pollution Control Measures 1. prepared by Southeastern Wisconsin Regional Planning Commission, 1991. Costs of Urban Stormwater Control by Heaney, Sample, and Wright 2. for the US EPA, 2002. BMP Retrofit Pilot Program prepared by CALTRANS, 2001. 3. Engineering News Record (ENR) Cost Indices 4. 34

ESV Calculation Model results for the predevelopment, base,  and control conditions are used to identify runoff volume and particulate solids  Capital costs and operations and maintenance costs are identified from the control condition results  The ESV equation is used to calculate year one  “Year One ESV” is amortized for 20 years at 6% 35

Research Sites Commercial Site 1. High Density Residential Site 2. Low Density Residential Site 3. 36

Site 1 Results 37

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S o u rc e A r e a D el in e ati on s F LA T R O O F S P A R K IN G SM AL L L AN D S C A PE D AR EA STR EE T S 39

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Soils Distribution by Type Docena complex, 0 to 4 percent slopes Etowah loam, 2 to 8 percent slopes Gorgas-Rock outcrop complex, steep Allen fine sandy loam, 8 to 15 percent slopes Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes Allen fine sandy loam, 8 to 15 percent slopes Docena complex, 0 to 4 percent slopes Etowah loam, 2 to 8 percent slopes Gorgas-Rock outcrop complex, steep Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes 47

Site 2 Results 48

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S o u rc e A r e a D el in e ati on s F LA T R O O F S P A R K IN G SM AL L L AN D S C A PE D AR EA ST R EE T S 50

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Soils Distribution by Type Fullerton-Urban land complex, 8 to 15 percent slopes Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes Docena complex, 0 to 4 percent slopes Decatur silt loam, 2 to 8 percent slopes Decatur silt loam, 2 to 8 percent slopes Docena complex, 0 to 4 percent slopes Fullerton-Urban land complex, 8 to 15 percent slopes Sullivan-Ketona-Urban land complex, 0 to 2 percent slopes 59

Site 3 Results 60

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S o u rc e A r e a D el in e ati on s F LA T R O O F S P A R K IN G SM AL L L AN D S C A PE D AR EA ST R EE T S 62

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Soils Distribution by Type Decatur-Urban land complex, 2 to 8 percent slopes Holston-Urban land complex, 2 to 8 percent slopes Decatur-Urban land complex, 2 to 8 percent slopes Holston-Urban land complex, 2 to 8 percent slopes 67

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WinSLAMM Control Condition Results Site 1 Site 2 Site 3 2,335,415.000 1,263,731.000 243,570.300 Runoff Volume (cf) 1290.994 21.321 Particulate Solids Yield (lbs) 573.931 Particulate Solids 8.862 7.281 1.403 Concentration (mg/L) Cost per cubic foot Runoff $0.58 $2.15 $0.63 Volume Reduced ($/cf) Cost per pound Particulate $127.72 $49.18 $22.09 Solids Reduced ($/lb) 69

ESV Calculation Assumptions Predevelopment is the optimal 1. condition. 2. Predevelopment can be achieved through technology. 3. If predevelopment is not available for particulate solids, then 0 is assume. 4. Land cost is not factored. 70

ESV Results – Commercial Site Control Cost to reach Predevelopment Runoff $4,766,005.00 Control Cost to reach Base or better Solids $3,852,282.98 Total Capital Costs $8,618,287.98 Operations and Maintenance Costs $1,053,491.00 Interest of a 20 year amortization @ 6% $21,358,650.32 Capital Cost + 20 years of O & M $29,688,107.98 Year One ESV $10,725,269.98 Total ESV $51,046,758.29 71

ESV Results – High Density Residential Site Control Cost to reach Predevelopment Runoff $2,782,504.20 Control Cost to reach Base or better Solids $913,715.22 Total Capital Costs $3,696,219.42 Operations and Maintenance Costs $253,225.00 Interest of a 20 year amortization @ 6% $6,302,764.15 Capital Cost + 20 years of O & M $8,760,719.42 Year One ESV $4,202,669.42 Total ESV $15,063,483.57 72

ESV Results – Low Density Residential Site Control Cost to reach Predevelopment Runoff $552,024.14 Control Cost to reach Base or better Solids $431,431.84 Total Capital Costs $983,455.98 Operations and Maintenance Costs $123,365.00 Interest of a 20 year amortization @ 6% $2,482,593.04 Capital Cost + 20 years of O & M $3,450,755.98 Year One ESV $4,975,937.98 Total ESV $5,933,349.03 73

Conclusions This research produces a methodology that:  1. Leverages GIS technology for the generation of the required inputs for stormwater runoff models 2. Implements a proven, calibrated, verified stormwater model in WinSLAMM that produces the results needed for the ESV calculations 3. Provides policy makers with a functional, reproducible approach to assessing the value of the stormwater management services provided by natural systems for use in cost-benefit analysis in development decisions Lastly, this research contributes to the greater body of  knowledge on the topics of stormwater runoff impacts, environmental economics, and geographic information sciences. 74

Thank you for your patience, time, and support. For: Dr. Mindy Lalor – Committee Chair Dr. Robert Angus Dr. Paul D. Blanchard Dr. Sarah Culver Dr. Alan Shih 75

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