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Economic Value of Forest Ecosystem Services: a Review

Economic Value of Forest Ecosystem Services: a Review

THE SOCIETY

Economic Value of Services: A Review

By Douglas J. Krieger, Ph.D. THE ECONOMIC VALUE OF FOREST ECOSYSTEM SERVICES: A REVIEW By Douglas J. Krieger, Ph.D.

an analysis prepared for The Wilderness Society CONTENTS Page i

Acknowledgments...... ii

Executive Summary ...... iii

Chapter 1. Ecosystem Services: Values and Valuation...... 1 Economic Value of Environmental Goods and Services...... 1 Measurement of Economic Values...... 2 Valuation approaches and value measures...... 4

Chapter 2. The Value of Forest Ecosystem Goods and Services...... 7 Watershed Services...... 7 quantity...... 9 ...... 10 Stabilization and Erosion Control...... 12 Air Quality...... 12 Regulation and ...... 13 Biological Diversity...... 14 and Tourism...... 15 General recreation...... 15 and fishing...... 17 Non-timber Commercial Forest Products...... 20 Cultural Values...... 21 Aesthetic and passive use values of and wilderness...... 21 Endangered ...... 23 Cultural heritage values...... 23 References...... 26 TWS Offices...... 31

Figures Figure 1. values of U.S. forests ...... iv Figure 2. Consumer surplus for a change in an ecosystem good or service ...... 3

Tables Table 1. Range of estimated forest ecosystem service values by region...... v Table 2. Estimate of forest ecosystem values...... 8 Table 3. Water quantity service values of forests...... 11 Table 4. Summary of water quality values of forests...... 13 Table 5. Summary of carbon sequestration values of forests ...... 15 Table 6. Recreation and tourism values of forests...... 19-20 Table 7. Summary of cultural values of forests...... 24-25

Economic Value of Forest Ecosystem Services: A Review Page ii ACKNOWLEDGMENTS

Cindy De Grood, Research Analyst in The Wilderness Society’s and Economics Research Department (EERD), conducted preliminary research for this report. EERD Economist Carolyn Alkire reviewed the report and made helpful suggestions with assistance from colleagues Spencer Phillips and Pete Morton.

Research for this report was supported by a grant from the Alex C. Walker Educational and Charitable Foundation.

March 2001 The Wilderness Society 1615 M Street, NW , D.C. 20036 Phone: 202-833-2300 Fax: 202-429-3945

Cover Photo by Charlie Orr, “Big , California”

Editor: Deanne Kloepfer Designer: Mitchelle Stephenson

Economic Value of Forest Ecosystem Services: A Review EXECUTIVE SUMMARY Page iii

The importance of natural forest Resource economists have long recog- to well-being cannot nized the market distortions caused by be overstated. Forests provide raw materi- unpriced goods. They have developed als for , fuel and shelter. In forests, techniques to estimate monetary values, ecosystem components such as micro- and ecological economists have applied , and vegetative cover inter- those methods to estimate values for act to purify air and water, regulate the ecosystem services. This paper reviews climate and recycle nutrients and wastes. estimates of the economic value of forest Without these and many other ecosystem ecosystem goods and services in the goods and services, as we know it . Globally, Costanza et al. would not be possible. (1997b) estimated the total value of for- When we make decisions to alter natur- est ecosystem goods and services at $4.7 al forest ecosystems, we often give little trillion annually and the total annual value thought to the consequences that change of all temperate/boreal forests at $894 may have on forest ecosystem services or billion. There are about 520 million acres to the ultimate cost of losing those ser- of temperate/boreal forest in the United vices. This oversight stems from our States (Pimentel et al. 1997), with an incomplete knowledge about how changes implied annual value for services of about in ecosystems affect the level of services $63.6 billion, using Costanza’s estimates that the systems provide and our inade- (Figure 1). Climate regulation, waste quate understanding of the roles played treatment and food production account by seemingly trivial ecosystem compo- for approximately 75 percent of this total. nents. Forest ecosystem values estimated in Perhaps the most significant factor is studies reviewed for this paper are that few ecosystem services have clearly grouped into eight categories: watershed established monetary values. And this can services (water quantity and quality), soil have a strong impact, considering that stabilization and erosion control, air qual- many decisions about resource use are ity, climate regulation and carbon seques- made by comparing benefits and costs. tration, , recreation and The decision to log a forest tract, for tourism, non-timber products and cultural example, should be based on a compari- values. Table 1 reports ranges of the esti- son of the expected monetary value of mated values within each category for the the timber and the costs associated with entire United States and by region. These the ecosystem goods and services foregone values are not necessarily comparable as a result of . Any ecosystem across regions because they often corre- goods and services that do not have mon- spond to different aspects of a forest etary values are generally not accounted ecosystem service, were arrived at using for in the decision calculus. Neither is the different methods and are expressed in fact that the benefits of many resource different units. While the estimates do use decisions are usually enjoyed by small, not provide meaningful comparisons of fairly cohesive groups of people or the value across regions, they nevertheless current generation, while the costs of indicate the magnitude of values by foregone ecosystem goods and services are region. borne by larger, more dispersed groups or future generations.

Economic Value of Forest Ecosystem Services: A Review Page iv EXECUTIVE SUMMARY

FigureFigure 1. 1.Ecosystem Ecosystem Service service Values values of of U.S. U.S. Forests forests 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Climate Waste Food Recreation Raw Soil Biological Cultural regulation treatment production materials formation control ForestForest Ecosystem ecosystem Servicesservices

The remainder of this summary briefly less (Sedell et al. 2000). In ge n e r a l , reviews sources of value and value esti- re c reational values are pro b a bly higher in mates for each ecosystem service category. arid regions such as the Southwest and Chapter 1 discusses the economic concept in regions that experience substantial of value and introduces techniques used seasonal variation in stre a m fl ow. Studies to estimate monetary values for ecosystem in and Alabama found sub- goods and services. Chapter 2 reviews the stantial existence values for stre a m fl ow. literature relevant to estimating monetary On ave r a ge, Colorado households we re values for forest ecosystem services. willing to pay $95 and Alabama house- holds $57 a year to pre s e rve natural Watershed Services s t re a m fl ow in rivers (Brown 1992). Fo rested watersheds capture and store Water quality is part i c u l a rly import a n t wa t e r, thus contributing to the quantity for municipal uses. The U. S. o f water ava i l a ble and the seasonal fl ow Env i r onmental Protection Age n cy esti- o f wa t e r. Fo rests also help purify wa t e r mates that as many as 3,400 public wa t e r by stabilizing soils and filtering contam- systems serving 60 million people obtain inants. The quantity and quality of their water from watersheds that contain water fl owing from fo rested wa t e r s h e d s national fo rests. The value of the wa t e r a re important to agr i c u l t u re, the ge n e r a- p u r i fication services of fo rested wa t e r- tion of e l e c t r i c i t y, municipal water sup- sheds is re flected in the costs that some plies, re c reation and habitat for fish and communities incur to protect their wa t e r- other species. Estimates of wa t e r sheds. spent $1.4 billion quantity values focus primarily on to protect the quality of water from the s t re a m fl ow and range from $0.26 per 8 0 , 0 0 0 - a c re fo rested watershed that a c re - foot for electricity generation to as s e rves much of the city. To protect their m u ch as $50 per - foot for irr i ga t i o n watersheds, Po rtland, Oregon spends and municipal use. Most values fo r $920,000 and Po rtland, Maine re c reational use are $10 per acre - foot or $729,000 per ye a r.

Economic Value of Forest Ecosystem Services: A Review EXECUTIVE SUMMARY Page v

Table 1. Range of Estimated Forest Ecosystem Service Values by Region Ecosystem Service Region Entire Rocky Southeast Pacific Northeast Southwest United States Mountains Northwest Watershed services Quantity $0.26 to $4.07 to $57/ $50.86/ $940/ household/ acre-foot acre-foot year Quality $64.16/ $920,000 to $729,000 to house-hold/ $3.2 million/ $35 million/ year year year Soil stabilization $1.94/ton $5.5 million/ $90,000 year Air quality $4.16/ (urban) Climate regulation $1 to $6 billion/ $20.75/tree and carbon year (cost to cool sequestration buildings) Biological $4 to $54 diversity billion Recreation Economic $1.3 to $110 $736 million $6 billion (all) $1 billion impact billion (wilderness) to $407 million (fishing) (national forests) (hunting) Wilderness $600 million/ $14/ $12/ $29 million/ recreation year visitor day visitor day year Hunting and $2.07 to $12.3 $237 to $637 $13 to $25/ fishing million million deer Non-timber $300 million/ $910,000/ products year year Cultural values Aesthetic and $280 million/ $14 to $92/ $12 to $99/ $48 to $144/ $4.5 to $167 passive use year household/year household/year household/year million Endangered species $2 to $3.7 $15 to $95/ $40/house- billion/year household/year hold/year Cultural heritage $4.5 million

Economic Value of Forest Ecosystem Services: A Review Page vi EXECUTIVE SUMMARY

Soil Stabilization and Erosion Control Biological Diversity Fo rest helps stabilize soils Biological diversity is important for and reduce erosion and sedimentation. many reasons, including its role as a store- Estimated values associated with soil sta- house of genetic material that can be used bilization primarily re flect the costs to selectively breed and , its associated with sedimentation. Va l u e s contribution to natural pest and disease r a n ge from $1.94 per ton in Te n n e s s e e control and its ability to provide valuable to $5.5 million annually in Orego n’s pharmaceutical products. Willamette Va l l e y. In Tucson, Arizona, a Few studies have addressed the value of h a l f million mesquite trees are ex p e c t e d biological diversity in forest ecosystems, to reduce ru n o ff that would otherwise but it is estimated that the cost to U.S. re q u i re construction of detention ponds agriculture of using chemical pesticides to costing $90,000. replace the natural pest control services from all natural ecosystems would be Air Quality about $54 billion annually.The U.S. Trees trap airborne particulate Forest Service estimates that it would cost and thus improve air quality and human more than $7 per acre to replace the pest health. This paper discusses only one control services of in forests with study of the value of air quality services chemical pesticides. In addition, the polli- from trees. That study concluded that the nation services of natural ecosystems pro- 500,000 mesquite trees whichTucson, vide U.S. agriculture benefits of $4 billion Arizona intends to will, once they to $7 billion annually. reach maturity, remove 6,500 tons of par- ticulate matter annually.Tucson spends Recreation and Tourism $1.5 million on an alternative dust con- Scenic beauty and recreational amenities trol program. Therefore, the air quality associated with forests make them popular value of each tree equals $4.16. recreation destinations. The U.S. Forest Service estimated that recreational activi- Climate Regulation and ties on national forests alone contribute Carbon Sequestration $110 billion annually to this nation’s Trees help regulate climate by trapping Gross Domestic Product. Regionally, the moisture and cooling the ’s surface. economic impact of forest-based Costanza et al. (1997b) imply that U.S. recreation depends to some extent on the forests yield $18.5 billion per year in cli- proximity of population centers as well as mate regulation benefits. Studies in urban on the unique characteristics of a region’s settings conclude that 100,000 properly forest . Estimates of the econom- planted, mature trees in U.S. may ic impact of forest-influenced recreation save as much as $2 billion in heating and vary from $736 million annually in cooling costs. Trees also capture atmos- to $6 billion annually in the pheric , thereby reducing Southern Appalachians region. global warming.The U.S. Forest Service Wild, unroaded offer a unique estimates that such carbon sequestration form of , and many services yield benefits of $65 per ton, studies have estimated the value of wilder- which totals to $3.4 billion annually for ness-related recreation. Based on an aver- all U.S. forests. age value of $41.87 per visitor day, the economic value of recreation on the 42

Economic Value of Forest Ecosystem Services: A Review EXECUTIVE SUMMARY Page vii

million acres of roadless areas in U.S. an ave r a ge of 889 pounds of e d i bl e national forests is $600 million annually. re s o u rces annually. This includes 295 Among residents of the Northeast, use pounds of salmon with a market value of values for eastern wilderness total $29 $590 and 118 pounds of venison with a million annually.Visitors to wilderness m a r ket value of $472. areas in Colorado are willing to pay $14 and in $12 per visit for wilderness Cultural Values recreation. Cultural values associated with forests Forest ecosystems are also important include what economists call passive use destinations for hunters and anglers. In values for forest goods and services 1996, hunters spent 19.4 million days (including endangered species habitat), hunting on national forests, and more the aesthetic value of forest scenery and than 18 million people fished in national values associated with a region’s cultural forests. The economic impact of these heritage. The scenic characteristics of activities is substantial — between $1.3 forests attract tourists to forested regions, and $2.1 billion for hunting and $1.4 and and the resulting economic impact can be $2.9 billion for fishing nationwide. In the substantial. Visitors to the scenic Blue Southern Appalachians region, hunting Ridge Parkway in North Carolina and generated impacts of $594 million and Virginia, for example, contribute $1.3 bil- fishing $407 million in 1996. Hunters on to local economies. Visitors to the federal lands in the Columbia River Basin Southern Appalachians region reported a spend as much as $150 million annually. willingness to pay $18 to $99 per house- In the Pacific Northwest, commercial and hold per year to maintain the scenic quali- recreational fishing generate more than $1 ty of the region’s forests. Forest ecosys- billion in income annually. In Montana, tems also provide habitat for some endan- anglers were willing to pay $2.07 million gered species. Values attached to Pacific to protect high-quality recreational fishing Northwest old-growth forests for north- in just one roadless study area. ern spotted owl habitat range from $35 to $95 per household per year. Non-Timber Commercial Many people attach value to knowing Forest Products that forests exist now and into the future. Fo rests produce many commerc i a l ly Estimates of such existence value for old- va l u a ble products other than timber, growth forests west of the Cascade i n cluding mushrooms, floral gre e n s , Mountains extend from $48 to $144 per medicinal plants and edible plant and U.S. household per year. Residents of w i l d l i fe species. The total market va l u e Wisconsin revealed a willingness to pay o f these non-timber products harve s t e d $7 million to protect wilderness areas in in the Pa c i fic Nort h west amounted to Utah that they are unlikely to visit. A about $300 million in 1992. In New study in Vermont found passive use values York, a single community ge n e r a t e d associated with protecting eastern wilder- $910,000 in sales of non-timber fo re s t ness of more than $167 annually (aggre- p roducts. Non-timber fo rest pro d u c t s gated) for all residents in the Northeast. a re also important sources of s u b s i s t e n c e In the Rocky Mountain region, passive in some regions. In southeastern use values for wilderness protection range , the ave r a ge household consumes from $14 to $92 per household per year.

Economic Value of Forest Ecosystem Services: A Review CHAPTER ONE Page 1

ECOSYSTEM SERVICES: VALUES good at the expense of other goods and AND VALUATION services are often based on a comparison of the associated benefits and costs. Many Goods provided by natural ecosystems of the benefits associated with ecosystem are the basic building blocks of human goods are measured as profit or income. welfare. Natural ecosystems provide much The costs, on the other hand, often of the food we eat, the water we drink, include reductions in the levels of other the clothes we wear, material for shelter, ecosystem goods and services that have no fuel to keep us warm and inspiration and easily determined market value. The value experiences that enrich our . The abil- of these non-market ecosystem services is ity of ecosystems to provide these goods rarely accounted for in tradeoffs among depends on the less obvious ecosystem ecosystem goods and services. In addition, services or processes through which the the benefits from use of some ecosystem goods are created and maintained. The goods and services often accrue to rela- quantity and quality of water available for tively small, concentrated groups in the human use — an ecosystem good — here and now, while the costs in relation depends on the water purification services to lost goods and services are often borne of an ecosystem. The process by which by a larger, more dispersed population and ecosystems provide clean water depends future generations. on complex interactions between vegeta- Resource economists have developed a tive cover, soils, wetlands, variety of techniques to estimate the mon- and other ecosystem components (Daily etary value of non-market environmental et al. 1997). When the components that goods such as hunting, fishing, outdoor contribute to water purification are dam- recreation and water quality, and ecologi- aged or altered, water quality and human cal economists have applied these methods welfare may suffer. to estimate the economic value of various Some goods and services from natural ecosystem services (Costanza et al. ecosystems cannot be produced simultane- 1997b). This chapter introduces the eco- ously at a single location. Cutting down nomic concept of value and briefly trees for products may reduce, at reviews several methods to estimate eco- least for a , the level of carbon nomic values for ecosystem goods and ser- sequestration or erosion control services vices. The objective is to provide back- of natural forests. Clearing for food ground needed to interpret the estimates production may eliminate wildlife habitat of forest ecosystem values summarized in for some species and reduce genetic diver- Chapter 2. sity. Such conversion of natural ecosys- tems causes the most concern when it Economic Value of Environmental takes place on a large scale or when it Goods and Services alters a rare ecosystem that provides glob- In economics, a good or service is valu- ally or regionally valuable goods or ser- able if it increases human well-being.This vices such as habitat for an endangered implies that goods and services have no species. value in their own right. Rather, their A necessary part of providing for value is defined only in the context of human existence involves making tradeoffs human welfare. The economic concept of among different ecosystem goods and ser- value does not imply, however, that an vices. Decisions to use one ecosystem ecosystem’s ability to add to monetary

Economic Value of Forest Ecosystem Services: A Review Page 2 CHAPTER ONE

wealth is the only determinant of how values are also passive use values. They are ecosystem goods and services should be associated with a desire to protect ecosys- used. Many people gain pleasure from tem goods and services for the use or non-consumptive use of ecosystem goods enjoyment of future generations. Option and services — , birdwatching and values, a third kind of passive use values, additional kinds of outdoor recreation. are associated with maintaining the option Other people value ecosystem goods and of use by either the current or future gen- services even though they have not and erations. An example is the value of pro- may never intend to experience those tecting biodiversity to preserve goods and services directly. Such non- the option of extracting genetic material monetary sources of value are part of the for future agricultural or pharmaceutical economic value of ecosystem goods and products. services. While the concept of economic value is Economists classify the values associat- not necessarily based on money, econo- ed with ecosystem goods and serv i c e s mists often estimate monetary values for into two broad categories — use and ecosystem goods and services. Some peo- p a s s ive use, the latter also known as non- ple argue that this should not be done use values (Freeman 1979). Use va l u e s because ecosystems and species have an a re derived from the direct use of env i - inherent right to exist independent of ronmental goods and services, incl u d i n g their use by (Goulder and l o gg i n g, commercial and re c re a t i o n a l Kennedy 1997). A counter argument is fi s h i n g, outdoor re c reation, subsistence that failure to place monetary values on hunting and gathering and the enjoy m e n t environmental goods and services will ulti- o f e nv i ronmental amenities such as a mately lead to their exploitation and loss scenic view. Another source of use va l u e s (Costanza et al. 1997a). As an example, is the indirect provision of goods and one consequence of refusing to determine s e rvices through processes such as a the monetary value of recreation, wildlife wa t e r s h e d ’s ability to maintain wa t e r habitat, scenery and other forest ecosys- q u a l i t y, a we t l a n d ’s ability to prov i d e tem services may well be an emphasis on habitat for migr a t o ry birds or a fo re s t ’s logging — which generates monetary ability to store carbon and thus help value — to the detriment of the unpriced c o n t rol global temperature s . goods and services. Passive use values are unrelated to the physical impacts of an ecosystem good or Measurement of Economic Values service on individual well-being.There is The economic measure of the value of ample evidence that people value many ecosystem goods and services is consumer environmental goods and services even surplus. This is the difference between the though they never intend to use them or maximum amount an individual would be experience them (Randall 1991). People willing to pay for a good and service and may value a natural ecosystem simply the amount that person actually pays. The because it makes them happy to know that concept is based on the fact that some the ecosystem exists. They may value people are willing to pay more for a good endangered species because of a belief or service than others. Therefore, when all that species have a right to exist regardless consumers are charged the same price, of their use by humans. These passive use some people pay less than what they are values are called existence values. Bequest willing to pay. Since these people pay less

Economic Value of Forest Ecosystem Services: A Review CHAPTER ONE Page 3

for the good than the maximum they are one in fixed quantity regardless of price. willing to pay, they enjoy an increase in The scenic beauty of forests, for example, well-being relative to not purchasing the is available to everyone with no price good. Consumer surplus for society as a attached. It is impossible or prohibitively whole is the sum of consumer surplus for expensive to exclude people from the ben- all individuals. efits of such goods and services if they Figure 2 illustrates the concept of con- don’t pay.Thus, markets do not exist, and sumer surplus for a typical ecosystem ecosystem goods and services are often good or service. The demand curve, D, unpriced. A demand curve represents defines the quantity of the good or service changes in the quantity demanded as price that individuals in the aggregate demand changes. Since neither price nor changes in at each price. With high prices, few indi- quantity are easily observable for many viduals are willing to purchase the good ecosystem goods and services, demand is and the quantity demanded is low. As difficult to determine. prices fall, more individuals judge the Assume that the demand relationship for good to be worth the price and purchase a specific ecosystem good and service can it, thus increasing the quantity be defined. The supply curve, S0, in Figure demanded.1 2 repr esents the quantity of the good or se r vice avai l a b le under specific conditions. Figure 2. Consumers surplus The height of the demand curve at any for a change in an quantity repr esents society’s maximum ecosystem good or service willingness to pay for a marginal increa s e in quantity. The consumer surplus associ- S0 S1 ated with the marginal cha n g e in quantity is the differ ence between the height of th e demand curve and the price, whi c h in this case is zero. The consumer surplus associ- ated with quantity q0, therefo r e, is the sum of consumer surplus for each margi n a l cha n g e in quantity from zero to q0. This is the area under the demand curve between a quantity of ze r o and q0. D Suppose that an activity increases the 0 1 0 q q Quantity quantity of the good or service available to everyone — a stream restoration pro- ject, say, increases the quantity of ecosys- While a demand relationship exists for tem services associated with a natural any good or service, estimating the stream. The line S1 represents this new demand for many ecosystem goods and quantity.The consumer surplus associated services may be challenging, in part with the stream restoration project is the because many ecosystem goods and ser- difference between consumer surplus prior vices are public goods available to every- to the restoration and consumer surplus after the restoration. The shaded area of 1 In the context of ecosystem goods and Figure 2 represents this value. services, the horizontal axis can represent For a complete discussion of consumer either quantity or environmental quality. surplus and valuation of ecosystem ser-

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vices, see resource economics texts such as and care about air quality, then housing Randall (1987) or Freeman (1993). prices should reflect differences in air quality.The hedonic approach would col- Valuation Approaches and lect information on home sales (prices) Value Measures. and the environmental amenities available Economists have developed several spe- at locations where homes were sold. It cialized techniques to address the diffi- would employ statistical techniques to culties inherent in estimating demand — separate the influence of air quality from and thus consumer surplus measures — other factors that affect housing prices for unpriced or non-market goods and and then estimate the portion of the sale s e rvices. The remainder of this section prices of the homes that is attributable to reviews the most common techniques to air quality. This observed willingness to p rovide an understanding of h ow the pay for air quality, as an addition to the resulting value measures relate to the eco- price of a home, is used to calculate a nomic concept of value depicted in demand function for air quality and thus F i g u re 2. the consumer surplus associated with dif- Travel cost method. One commonly ferent levels of air quality. used method to estimate the value of Contingent valuation. The travel cost non-market goods relies on travel expendi- and hedonic methods use observations of tures incurred to visit a site (Freeman actual behavior — traveling or purchasing 1979). This approach is applied to recre- a home — to estimate demand and con- ational and other site-specific activities or sumer surplus. Both techniques rely on the resources that necessitate travel costs to ability to link market behavior to a non- experience the goods or services associated market ecosystem good or service. This is with the site. Consider, for example, the not possible for passive use values. An challenge of estimating the value of a alternative valuation method, called con- . Wilderness is a non-mar- tingent valuation, was developed to esti- ket good - visitors rarely pay to use it. But mate passive use values. they do incur travel costs to visit a wilder- Instead of re lying on observed behav- ness area. The travel cost approach queries i o r, the contingent valuation method asks visitors to a site to determine the relation- people what they would be willing to pay ship between visitation rates and distance for an ecosystem good or serv i c e traveled. The observed variation in visita- ( M i t chell and Carson 1989). Th e tion rates (quantity of visitors) and travel a p p ro a ch uses a questionnaire or inter- cost (a proxy for price) describes demand view to present respondents with a mar- for the site. The demand function permits ke t - l i ke situation wh e re they can ex p ress a consumer surplus estimates of the eco- m o n e t a ry value for a care f u l ly described nomic value of the site. n o n - m a r ket good or service. For ex a m p l e , Hedonic approach. The hedonic the refe r endum fo rmat asks wh e t h e r approach applies to situations where the respondents would vote for or against a price of a market good reflects access to refe r endum that would raise taxes a speci- an ecosystem good or service (Freeman fied amount to provide a non-marke t 1979). In the case of estimating the value p u blic good. Responses across a rep re s e n- of air quality, we know that levels of air t a t ive sample of people provide the info r- quality may vary across an urban area. If mation necessary to estimate demand and homebuyers are aware of this variation economic va l u e .

Economic Value of Forest Ecosystem Services: A Review CHAPTER ONE Page 5

The travel cost, hedonic and contingent protect the watershed that supplies New valuation methods are the only valuation York City, residents would likely be will- approaches that estimate demand relation- ing to pay the much greater cost for a ships and, thus, consumer surplus for water treatment plant to ensure the quality non-market goods. There are a number of of their water. Even if the city had other approaches, described below, that incurred the cost of a water treatment estimate proxies for consumer surplus and plant, the expenditure would still be less other measures of economic impact. than the proper consumer surplus measure Defensive (averting) expenditures. O n e of value because it is based on actual s u ch method relies on the existence of expenditures rather than maximum will- t e chnological substitutes for some ecosys- ingness to pay. tem services. A water treatment plant is a Second, technological alternatives are substitute for the water purification ser- rarely perfect substitutes for ecosystem vices of a fo rested watershed. Such defe n- services. A water treatment plant provides s ive (or ave rting) ex p e n d i t u res to preve n t clean water for municipal use but not for or counteract the loss of an ecosystem recreational activities, fish habitat or other s e rvice with a substitute provide one mea- uses that stem from a healthy forest s u re of the value of the service (Fre e m a n ecosystem. 1993). Benefits transfer. Under certain condi- Note that defe n s ive ex p e n d i t u res are a tions, value estimates for ecosystem goods valid measure of value only if the ex p e n s e and services in one location or setting can is actually incurred (Heal 2000). New be used to estimate value in another loca- York City spent $1.4 billion to pro t e c t tion or setting.This approach is called its watershed and the water purifi c a t i o n benefits transfer.The validity of the bene- s e rvices that the watershed provides. In fits transfer approach depends on the doing so, the city avoided spending a quality of the original estimation and on m u ch greater amount on a water tre a t- how closely the valued good and valuation ment plant. In this case, the cost to setting match the new setting (Boyle and replace the water purification services of Bergstrom 1992, Brookshire and Neil the fo rest with a water treatment plant is 1992). Benefits transfer is a widely used not a measure of value because the city approach because it is relatively easy and chose the less ex p e n s ive altern a t ive of inexpensive to apply. p rotecting the watershed. Instead, the Commercial value. The methods above cost the city incurred to protect the c over situations wh e re market prices fo r watershed and ave rt a reduction in wa t e r ecosystem goods and services are not quality is the correct measure of va l u e . ava i l a ble. In some cases, market prices do The measure does not correspond to con- exist. Coastal wetlands provide import a n t sumer surplus because it measures actual habitat for many commercial fish species ex p e n d i t u res rather than maximum will- that have we l l - d e fined market values. In ingness to pay. this case, the commercial value of t h e Defensive or averting expenditures rep- wetlands for fish production is the pre- resent the lower end of the scale regarding sent value (based on market prices) of t h e the value of ecosystem services. First, they f u t u re fish that will result from pro t e c- rely on actual expenditures for the least- tion of the wetland. The measure is only cost alternative rather than maximum will- p a rtial because it incorporates only the ingness to pay. If it were not possible to value of the wetland for the pro d u c t i o n

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o f c o m m e rcial species, while ignoring itors to the region in which the wilderness other va l u e s . is located. Those visitors will have a direct Gross expenditures. Another common impact on the local economy through method estimates the gross expenditures their spending on food, gas, lodging and incurred to enjoy a good or service. This supplies. Measures of these direct impacts approach is often used in relation to recre- include income, profits, employment and ational activities such as the total expendi- tax revenue. Local businesses directly tures on travel, equipment and supplies impacted by tourist activity will indirectly for a fishing trip to measure the value of affect businesses that supply them goods fishing. Gross expenditure is an indication and services — for example, the firm that of the importance of an activity, but it supplies food products or kitchen appli- does not measure economic value as ances to a restaurant. And increased local defined by consumer surplus. The gross income generated from the direct and expenditure measure allocates expenses to indirect will generate an activity that are not specific to the induced impacts such as increased spend- activity. Also, it does not estimate demand ing by workers and the additional income curves and maximum willingness to pay and jobs supported by that spending. (Sorg and Loomis 1984). While measures of economic impact pro- Economic impact. Many studies esti- vide an indication of the impact of an mate the total economic impact of an activity on a local economy, they do not activity on a regional economy. As an measure economic value as defined by example, a wilderness area may attract vis- consumer surplus.

Economic Value of Forest Ecosystem Services: A Review CHAPTER TWO Page 7

THE VALUE OF FOREST column of the table was calculated by ECOSYSTEM GOODS applying the estimates from the study — AND SERVICES reported on a per-hectare basis — to the approximately 520 million acres of A recent study of the attitudes of temperate/boreal forests in the United professionals, environmentalists States.2 Values are reported in U.S. and the general public suggests that each dollars per acre. of these groups attach greater significance The Costanza study provides a revealing to the life support processes and moral but rough estimate of the magnitude of values of national forests now than they ecosystem service values on a global scale, did a decade ago (Xu et al. 1997). and the reported values can serve as a Similarly, in a study conducted by basis for estimates relevant to specific Schaberg et al. (1999), residents of North regions or ecosystems. This chapter Carolina ranked five non-market goods reviews existing estimates of economic and services — clean water, contributions values associated with forest ecosystems in to global , endangered species habi- the United States. Forest ecosystem ser- tat, stable forest cycles and climate stabili- vices are organized into eight categories, ty — as the most important benefits that rather than Costanza’s 17, to reflect the forests provide. findings of specific studies reviewed for While people appear to value the non- this paper.Those categories are watershed m a r ket services associated with fo re s t services (water quantity and quality), soil ecosystems, quantifying the value of stabilization and runoff control, air quali- these goods and services in monetary ty, climate regulation and carbon seques- t e rms is difficult. Costanza et al. tration, biological diversity, recreation and (1997b) identified 17 specific goods and tourism, non-timber products and cultural s e rvices provided by ecosystems: gas reg- values. ulation, climate regulation, disturbance regulation, water regulation, water supply, Watershed Services e rosion control and sediment re t e n t i o n , Forest ecosystems are key determinants soil fo rmation, nutrient cycl i n g, wa s t e of the quantity and quality of water avail- t reatment, , biological contro l , able for human use. Inadequate water refugia, food production, raw materials, quantity and quality affect agricultural genetic re s o u rces, re c reation and cultural production, quality of life and human s e rvices. health in many regions of the world. As The authors employed various methods the human population increases and the to estimate the economic market and non- availability of high-quality water declines, market values of these goods and services the watershed services of forests will likely in 16 different ecosystems, including trop- become increasingly important. ical and temperate/boreal forests. While Forests influence water quantity — forest ecosystems probably contribute in both total quantity and seasonal variation some way to the production of all 17 in flows — through a number of interre- goods and services, Costanza et al. were lated processes. The so-called “albedo” able to estimate economic values for only effect refers to the process by which forest 14 and temperate/boreal forest values for vegetation increases evaporation of water 8. Table 2 summarizes the study findings relevant to forest ecosystems. The final 2 Pimentel et al. 1997

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Table 2. Estimates of forest ecosystem values Ecosystem good Market Global values by forest type Value of all or service of servicea ($/acre)b U.S. forestsc (billion $) All Tropical Temperate/ forests Boreal Climate regulation NM 57.1 90.2 35.6 18.5 Disturbance regulation NM 0.8 2.0 n.a. n.a. Water regulation NM 0.8 2.4 0.0 0.0 Water supply M,NM 1.2 3.2 n.a. n.a. Erosion control and sediment retention NM 38.8 99.1 0.0 0.0 Soil formation NM 4.0 4.0 4.0 2.1 Nutrient cycling NM 146.1 373.1 n.a. n.a. Waste treatment NM 35.2 35.2 35.2 18.3 Biological control NM 0.8 n.a. 1.6 0.8 Food production M 17.4 12.9 20.2 10.5 Raw materials M 55.8 127.5 10.1 5.3 Genetic resources M,NM 6.5 16.6 n.a. n.a. Recreation M,NM 26.7 45.3 14.6 7.6 Cultural NM 0.8 0.8 0.8 0.4 Total 392.1 812.2 122.2 63.6

Note: n.a. = not available. a “NM” denotes a good or service that is primarily non-market in nature. “M” denotes a primarily market good or service. “M,NM” denotes a good or service that has significant market and non-market characteristics. b Calculated from the $/hectare estimates of Costanza et al. (1997b) based on a con- version factor of 2.471 acres/hectare. All values are in U.S. 1994 dollars. c Estimates for the United States were based on a total area of 520 million acres of temperate/boreal forest

from the earth’s surface to cause increased impacts of downstream / formation and rainfall (Myers cycles (Myers 1996). 1997). Through the albedo effect, large- In the United States, forest ecosystems scale clearing of forests can alter rainfall play a key role in providing water. Sedell patterns over entire regions by decreasing et al. (2000) estimated that as much as the amount of . Forest ecosystems two-thirds of the runoff in this country also act as a sponge, soaking up and stor- outside Alaska comes from forests, and 14 ing water when it is abundant and releas- percent of that amount from national ing it during dry periods. This process forests. Forests east of the Mississippi serves to even out annual water flows from produce more water per acre than forests forested watersheds and reduce the in the West and account for about 60 per-

Economic Value of Forest Ecosystem Services: A Review CHAPTER TWO Page 9

cent of the total runoff from all forests marginal value of about $40 per acre- nationwide. In the West, national forests foot, the study estimated a conservative are relatively more important than non- consumptive use value of water from federal forests as sources of water. In national forests of about $1.4 billion California, 45 percent of runoff is from annually. A recent study of economic ben- national forests, and national forests in the efits from all forests in the Sierra Nevada Pacific Northwest (the Columbia River region of California concluded that the Basin and the coastal rivers of Oregon productive value of water from the forests and Washington) account for 38 percent was $1.32 billion annually (Stewart of the total runoff in the region. 1996). Most of the value was attributable Forests also contribute to water quality to agricultural use. by reducing and filtering pol- In addition to its value in consumptive lutants from water.The vegetative cover of use, water quantity enhances many recre- forests shelters soil from the force of rain ational activities. The quantity of water while roots help hold soil in place and available in a stream (the streamflow) can reduce soil erosion (Myers 1996). The affect fish populations and fishing activity interaction of vegetation and soils also fil- as well as recreational boating and rafting. ters other contaminants from water. Clean Brown (1992) reviewed studies that water from forest ecosystems is particular- addressed the value of streamflow and ly important to the many municipalities concluded that increased streamflow has that obtain their water from forested positive value up to some maximum above watersheds. The Environmental Protection which additional flow is detrimental to Agency estimated that 3,400 public water the recreational experience. The studies systems serving about 60 million people used contingent valuation and travel cost obtained their water from watersheds con- methods to estimate the marginal value of taining national forests in 1999 (Sedell et an additional acre-foot of water used to al. 2000). National forest watersheds are augment low seasonal flows in streams in particularly important sources of munici- a number of regions. pal water in Oregon and Washington. Estimated values ranged from $1 to Water Quantity. The quantity of water $45 per acre-foot. In general, smaller from forest ecosystems contributes to rivers and more heavily used rivers gener- many valuable activities and services. The ated the largest values. In most regions of U.S. Forest Service estimates that national the country, anglers placed a marginal forest watersheds produce 530.4 million value of less than $10 on an additional acre-feet of water annually with an average acre-foot of water. In the Southwest, how- consumptive use value of $50.86 per acre- ever, values were considerably more. A foot. If all water produced from national study in Colorado (reviewed in forests alone were valued at its average Moskowitz and Talberth 1998) reported value for consumptive use, it would have a streamflow value estimates of $810 to total value of $27 billion annually $940 per acre-foot in the Upper (Dunkiel and Sugarman 1998). Gunnison River Basin. Of course, not all water flowing from Sedell et al. (2000) reviewed values national forests is consumed. Sedell et al. associated with water flowing from (2000) estimated consumptive use of national forests and found that the average water flowing from national forests at (across reviewed estimates) value of water almost 34 million acre-feet per year. At a in streams was about $40 per acre-foot

Economic Value of Forest Ecosystem Services: A Review Page 10 CHAPTER TWO

for offstream uses (, industrial tion studies of the total value of stream- and municipal use). Estimates of the mar- flow in Montana. Estimated values again ginal value of streamflow for generating fell within the range of $4.07 to $35.94 electricity ranged from $0.26 to $17.00 per household per year. per acre-foot, with most values below Table 3 summarizes values associated $2.00, and most estimates of the marginal with water quantity. value of streamflow for recreation were Water Quality. Many municipalities below $10.00 per acre-foot. depend on forested watersheds as a source Th e re are also passive use values associ- of clean water.When these ecosystems are ated with stre a m fl ow. Some people va l u e disturbed, water quality often suffers. The the know l e d ge that the , species cost of constructing and operating water and conditions supported by natural treatment plants to purify polluted water s t re a m fl ows are pre s e rved even though is one common measure of the value of they may never dire c t ly experience them. the water purification function of forested S everal contingent valuation studies esti- watersheds. The city of New York obtains mated total values (use plus passive use) for about eight million for diffe rent aspects of s t re a m fl ow. Two people from the 80,000-acre Catskill studies estimated willingness to pay of watershed. In the late 1990s, the New $95 and $57 per household per year to York State and federal governments com- p re s e rve natural stre a m fl ow in 11 rivers in mitted $1.4 billion to protect the quality Colorado and 15 in Alabama, re s p e c t ive ly of the water in the watershed (Reid 1999, ( B rown 1992). Another study, cited in Moskowitz and Talberth 1998) and thus B rown (1992), estimated that households avoided a cost of $4 billion to $6 billion we re willing to pay $115 per year to to construct a filtration plant and $300 i m p rove lake levels in Mono Lake , million a year to operate the plant. New C a l i fo rnia to reduce salinity, improve Jersey chose to spend $55 million to pro- s u rv ival and diversity and improve visibili- tect the Sterling Forest watershed rather t y. These studies consistently found that than incur an estimated $160 million in most (69 perent to 80 percent) of t h e filtration costs (Lerner and Poole 1999). total value was associated with bequest Portland, Oregon spends $920,000 annu- and existence values rather than use va l- ally to protect its Bull Run watershed, u e s . thereby avoiding the $200 million expense A contingent valuation study in of constructing a filtration plant. Montana estimated the average total value Portland, Maine spends $729,000 annual- of increasing streamflow in five ly on watershed protection, preventing an rivers to maintain trout populations, birds, expenditure of $25 million for a water fil- wildlife and plants at $4.07 to $35.94 per tration facility and $750,000 in annual household per year, with an average of operating costs (Reid 1999). In each of $15 per household per year (Duffield these cases, the money actually spent — 1992). The higher values corresponded to rather than the expenditure avoided — is a greater scope of the proposed stream- the more appropriate measure of the value flow program (five rivers versus one river), of water purification services. respondents who lived closer to the Intact forests in watersheds prevent ero- river(s) in question and respondents who sion that can reduce water quality. Salem, actively used the rivers. Duffield (1992) Oregon’s watershed, for example, lies with- also reviewed four other contingent valua- in the Willamette National Forest. In the

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Table 3. Water Quantity Service Values of Forests Study Geographic scope of values Basis for valuation Value estimates Entire United States Dunkiel and Sugarman All national forests Consumptive use value of $50.86/acre-foot (1998) all water flowing from forests $27 billion/year Sedell et al. (2000) All national forests Consumptive use value of $40/acre-foot water actually consumed $1.4 billion/year Offstream and onstream value $3.7 billion/year of all water Average marginal offstream $40/acre-foot value of water Marginal value for hydroelectric use $0.26 to $17.00/ acre-foot Marginal value of streamflow < $10/acre-foot for recreation Brown (1992) All national forests Recreational value of streamflow $1 to $45/acre-foot Value of streamflow to anglers < $10/acre-foot Total value of maintaining $15 to $115/ streamflow or lake levels household/year California region Stewart (1996) Sierra Nevada region Productive use value of water $1.32 billion/year flowing from forests Rocky Mountain region Moskowitz and Talberth Colorado Value of streamflow $810 to $940/ (1998) acre-foot Duffield (1992) Montana Total value of maintaining $6.38 to $35.94/ streamflow (contingent valuation) household/year Brown (1992) Colorado Willingness to pay to preserve $95/ natural streamflow in 11 rivers household/year Duffield (1992) Montana Willingness to pay to $4.07 to $35.94/ augment streamflow household/year Southeast region Brown (1992) Alabama Willingness to pay to preserve $57/household/year natural streamflow in 15 rivers

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winter of 1996, severe storms caused with sedimentation such as in the Little mudslides in the heavily logged watershed, Tennessee River Basin whe r e sedimentation and the city was forced to spend costs residents an aver a g e of $1.94 per $700,000 on a temporary pre-treatment ton. In the Willamette Valley of Or egon , facility, $200,000 to treat turbid water with its large expanses of national fore s t and $1.2 million on a permanent pre- land, sedimentation imposes costs of treatment system. Additional related about $5.5 million per yea r . Sedimentation expenses included a $100 million water in Por tland, Oregon ’s Bull Run res e r voi r treatment plant and $3.2 million in annu- reduced capacity from 10 billion gal l o n s al operating costs (Moskowitz and to 5.5 billion gallons between 1964 and Talberth 1998). Mitsubishi Corporation, 1972. The sedimentation corresponded to located in Salem, also spent $2 million on substantial logging activity in the wat e r - a private well to provide clean water when shed that supplies the res e r voi r . the city’s water system was shut down. E rosion also damages roads and harm s Water quality affects recreational and fish populations. The U. S. Fo rest Ser v i c e passive use values associated with water. A spent about $125 million repairing land- contingent valuation study in Montana slide damaged roads on national fo re s t s estimated the value of protecting water in Washington and Orego n3 and more quality in Flathead Lake and the Flathead than $4 million over a fo u r- year period River (Sutherland and Walsh 1985). On to repair logging roads damaged by ero- average, households allocated $7.37 per sion on the Siuslaw National Fo rest in household per year to recreational use val- O regon alone. Erosion and sedimenta- ues associated with maintaining water tion associated with logging on the quality. Passive use values totaled $56.96 S i u s l aw also caused an estimated $1.7 per household per year - $10.71 for million in damages to re c reational fi s h i n g option value, $19.88 in existence value over a 30-year period (Moskowitz and and $26.37 in bequest value. The total Ta l b e rth 1998). value of maintaining water quality was Forests also help control storm water $64.16 per household per year. runoff. In Tucson, Arizona, one mature Table 4 summarizes estimates of the mesquite tree is expected to reduce storm value of the water quality services of water runoff by nine cubic feet. Based on forests. the cost of constructing detention ponds to control runoff, the value of a tree for Soil Stabilization and Erosion Control runoff control is $0.18 annually For est vegetation helps stabilize soils (McPherson 1992, Dwyer et al. 1992). and prevent erosion. The costs associated Tucson plans to plant 500,000 mesquite with erosion include reduced soil prod u c - trees in the city.The total estimated value tiv i t y , damaged roads and struc t u r es, fil l e d of these trees for runoff control is di t c hes and res e r voirs, reduced water quali- $90,000 per year. ty and harm to fish populations. Mo s k owitz and Tal b e r th (1998) revi e we d Air Quality studies of the costs associated with log- Trees can trap airborne particulate mat- gi n g , including costs attribut a b le to log- ter and ozone that can be harmful to ging-induced erosion on national for ests in humans and thus contribute to improved se veral regions. Several studies revi e w ed by 3 No time period was given for this the authors addressed the costs associated estimate.

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Table 4. Summary of Water Quality Values of Forests Study Geographic scope Basis for valuation Value estimatesa of values Northeast region Reid (1999) New York City Defensive expenditures to protect $1.4 billion Moskowitz and Talberth water purification services of (1998) forested watershed Lerner and Poole (1999) New Jersey Defensive expenditures to protect $55 million water purification services of forested watershed Reid (1999) Portland, Maine Defensive expenditures to protect $729,000/year water purification services of forested watershed Pacific Northwest region Reid (1999) Portland, Oregon Defensive expenditures to protect $920,000/year water purification services of forested watershed Moskowitz and Talberth Salem, Oregon Defensive expenditures to purify water (1998) affected by erosion in damaged watershed City of Salem $2.2 million plus $3.2 million annual operating costs Mitsubishi Corporation $2 million Rocky Mountain region Sutherland and Walsh (1985) Montana Recreational and passive use of $64.16/household/year water quality (contingent valuation) (total): $7.37 (use), $10.71 (option), $19.88 (existence), $26.37 (existence) a The magnitude of values depends to a great extent on the number of people who obtain water from the watershed.

air quality and human health. Air purifica- replace the dust control service of trees tion functions of forests are particularly implies that the trees have a dust control important in urban environments. Once value of $1.5 million per year, or, adjust- the 500,000 mesquite trees that Tucson, ing for mortality, $4.16 per tree. Arizona plans to plant reach maturity, they should reduce airborne particulate Climate Regulation and matter by an estimated 6,500 tons annual- Carbon Sequestration ly (Dwyer et al. 1992, McPherson 1992). Forests help regulate local climate Tucson’s current street paving program, through their ability to contribute to and which was designed to reduce dust, costs regulate rainfall and temperature. Loomis an average of $0.12 per pound of dust and Richardson (2000) estimated that the controlled every year. Using that amount climate regulation benefits associated with as the defensive expenditure required to the 42 million acres of roadless areas on

Economic Value of Forest Ecosystem Services: A Review Page 14 CHAPTER TWO

national forests are $490 million annually. pr evented. Based on this approa c h, the car- Those estimates were based on the per- bon sequestration value of the rou g h l y 520 acre benefits reported by Costanza et al. million acres of for est in the United States (1997b). Forests also contribute to cool- is $6 billion per yea r . ing. In an urban setting, properly located To put these values in perspective , trees can reduce cooling costs and Costanza et al. (1997b) estimated the use as demonstrated in Madison, carbon sequestration benefits of a l l Wisconsin, where air conditioning and fo rests wo rl dwide at $684 billion annu- heating costs for a typical home increased a l ly. By fo rest type, benefits from tro p i c a l from $671 per year with an energy effi- fo rests we re $424 billion and benefi t s cient design to $700 with no f rom temperate/boreal fo rests we re $260 trees and $769 for an inefficient planting billion. In another summary of e c o s y s- design. Nationally, computer simulations tem values, Myers (1996) rep o rted the estimate that 100 million mature trees in carbon sequestration value of the rain- U.S. cities could reduce annual energy fo rests in the Brazilian Amazon at $46 costs by $2 billion dollars (Dwyer et al. billion and the replacement cost of t h e 1992). The 500,000 mesquite trees carbon storage capacity of all tro p i c a l planned for Tucson, Arizona should save fo rests at $3.7 trillion. an estimated $20.75 per tree in cooling Table 5 summarizes estimates of the costs for buildings every year (McPherson carbon sequestration value of forests. 1992). On a global level, for est veget a t i o n Biological Diversity absorbs atmospheric carbon dioxide and Protecting biological diversity ensures a th e r eby reduces the potential for glo b a l wealth of potentially valuable genetic warm i n g . Tropical for ests — because they material such as that used in selective contain so much vegetation — are parti c u - breeding to improve yields of commercial la r ly val u a b le for carbon sequestration. The crops and livestock (Pimentel et al. 1997). te m p e r a t e / b o r eal for ests of the United Genetic diversity also contributes to devel- States also provide carbon sequestration opment of pharmaceuticals that improve be n e f its, whi c h the U.S . For est Service esti- the quality and length of human life and mated at $65 per ton of ca r b o n to biotechnology that improves crop se q u e s t e r ed, or $3.4 billion ever y year from yields and reduces the use of chemical this country’ s national for ests (Dunkiel and pesticides. Natural ecosystems also pro- Su ga r man 1998). Loomis and Richa rd s o n vide habitat for numerous species that (2000), also using the $65 per ton val u e , naturally control potential agricultural estimated carbon sequestration benefits of pests (Daily et al. 1997). Moskowitz and about $1 billion ever y year associated with Talberth (1998) report that the cost to just the 42 million acres of roadless area s U.S. agriculture of replacing natural pest on the national for ests. The present val u e control services with chemical pesticides of these benefits — assuming a four per- would be about $54 billion annually. cent discount rate — is $26.7 billion Natural ecosystems also provide pollina- an n u a l l y. Pimentel et al. (1997) estimated tion services on which a large portion of the value of carbon sequestration servi c e s commercial agriculture depends (Nabham by using estimates of the coastal flo o d and Buchmann 1997). Natural pollination da m a g es that would be avoided if in c re a s e s services may be worth as much as $4 to in sea levels caused by global war ming wer e $7 billion annually to U.S. agriculture

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Table 5. Summary of Carbon Sequestration Values of Forests Study Geographic scope of values Basis for valuation Value estimates Dunkiel and Sugarman (1998) U.S. national forests Benefits transfer $65/ton $3.4 billion annually Loomis and Richardson (2000) 42 million acres of roadless Benefits transfer $65/ton area on U.S. national forests $1 billion annually and $26.7 billion present value Pimentel et al. (1997) Entire United States $6 billion/year damages avoided Myers (1996) Brazilian Amazonia Defensive expenditure $46 billiona Costanza et al. (1997b) All forests Unknown $684 billion All tropical forests $424 billion All temperate/boreal forests $260 billion a The study does not indicate whether the reported values are in annual or present value terms.

(Moskowitz and Talberth 1998). The present value of a sustainable harvest Some portion of these benefits can be of medicinal plants was $294 per acre attributed to forest ecosystems, although with a 30-year rotation and $1,346 per few estimates specific to forest biological acre with a 50-year rotation. diversity values exist. In one case in Costa Rica, a banana pays an adjacent Recreation and Tourism forested conservation area $1 per hectare Forests hold a wide range of recreation- ($0.40 per acre) every year to provide nat- al opportunities. They are crucial habitat ural pest control services (Reid 1999). In for animals and fish sought by the United States, birds control many hunters and anglers, and they also serve as that damage forests, and the U.S. the source of rivers and streams used for Forest Service estimated that the use of recreational purposes. Forests are the pesticides or genetic engineering to backdrop for non-consumptive recreation- accomplish the level of pest control pro- al activities such as hiking, birdwatching, vided by birds would cost at least $7.34 wildlife viewing and other such pursuits. per acre (Moskowitz and Talberth 1998). In addition, wilderness areas — many of Because the cost has not actually been which are forested — attract substantial incurred, however, this estimate represents recreational activity. A large number of only the cost of replacing the natural pest studies address the economic value of control services of birds and not the value outdoor recreational activities, incorporat- of pest control services. ing common valuation perspectives such as Balick and Mendelsohn (1992), in a estimating the value of an activity day for study conducted in , estimated that different activities, the value of access to the market value of medicinal plants from recreational opportunities and the regional a ranged from $350 per economic impact of recreational activities. acre in a 30-year-old forest to $1,624 per General Recreation. Moskowitz and acre in a 50-year-old forest. When labor Talberth (1998) cite a number of mea- costs were considered, net revenues per sures of the economic importance of acre were $228 and $1,236, respectively. forests for recreation. The U.S. Forest

Economic Value of Forest Ecosystem Services: A Review Page 16 CHAPTER TWO

Service, for example, estimated that the visitors to Montana in 1990 were attract- economic value of recreation in all nation- ed by the abundance of undeveloped al forests was $6.8 billion in 1993 and forestlands and the recreational activiti- projected a value of $12.7 billion for the esthose lands offer.Visitors that were year 2045. In 1996, national forest-based influenced by wildlands were defined as recreation supported 139,000 full-time those who engaged in fishing, hunting, jobs. Regionally, recreational activities or viewing scenery or wildlife. focused largely on forest ecosystems On average, this subset of all visitors accounted for 2770 jobs in southeast described in the study spent $546 per Alaska, $379 million in annual value in group in Montana during their trips - Southern Appalachian national forests and substantially more than visitors not influ- a value of $1 billion in five national enced by wildlands. Throughout forests in the southern Rocky Mountains. Montana, wildland-related recreation gen- The Forest Service further estimated that erated more than $736 million in direct by the year 2000, recreation on national spending and supported almost 12,000 forests would contribute $110 billion to jobs. By activity, fishing generated the the nation’s Gross Domestic Product, greatest direct expenditure ($450 million), compared to a $3.5 billion contribution supporting more than 3,900 jobs directly from logging on national forests (Dunkiel and 3,200 through indirect impacts. and Sugarman 1998). Nature study generated $97 million in National forests contain much of the direct spending and supported 6,000 jobs, remaining undeveloped forestland in this while generated $19 million country — lands that contribute valuable in wages and salaries and supported 1,200 recreational experiences. The 42 million jobs (Power 1992). acres of roadless areas on the national Recreational tourism in the Southern forests attract an estimated 14.6 million Appalachians region (portions of recreation days annually. Based on an aver- Alabama, Georgia, North Carolina, South age value of $41.87 per visitor day,4 the Carolina, Tennessee and Virginia) gener- economic value of recreation on these ates nearly $6 billion per year in total eco- roadless areas is $600 million annually nomic impacts (Barnhill 1999). National (Loomis and Richardson 2000). Spending forests were the setting for much of this by recreational visitors to forested areas activity. Forest ecosystems in the region has a substantial impact on local contribute to clear water in the scenic economies in some regions. Considering rivers that attract substantial whitewater total economic impacts (direct, indirect rafting activity. In 1996, rafting on the and induced), recreation in roadless areas Ocoee River generated more than $3 mil- generates an estimated $576 million in lion in commercial and private user fees income, $916 in value added and 23,700 and contributed more than $300,000 in jobs annually to local economies (Loomis tax revenues to Polk County,Tennessee. and Richardson 2000). Rafting on the Nantahala River generated Yuan and Christensen (1992) found local economic impacts of more than $14 that as many as 60 percent of out-of-state million in 1993. And the impacts of recreational spending ripple outward from 4 Estimated from 20 existing travel cost localities. For five regional rivers, includ- and contingent valuation studies of the ing the Nantahala, every job in rafting value of a roadless area recreation day. created between 1.67 and 1.90 jobs else-

Economic Value of Forest Ecosystem Services: A Review CHAPTER TWO Page 17

where in the Southern Appalachian states’ tor day use value of wilderness, the study economies. For every $1,000 spent on concluded that the 1.2 million acres of rafting, $2,000 to $2,400 were added to designated wilderness that existed in 1980 total income levels within the states had a use value of $13.2 million and that (Barnhill 1999). increasing the total amount of designated While the economic impact of forest- wilderness to 2.6 million acres would based recreation is an indicator of the increase the use value to $21 million. Use importance of forest ecosystems to local values for protecting 5.0 million and 10.0 economies, it is not a measure of the million acres of wilderness in the value of the ecosystem. Several studies Colorado were $33.1 million and $58.2 have estimated consumer surplus measures million, respectively.When use values to of the economic value of forest ecosys- residents of other states were factored in, tems, primarily for wilderness lands. A the marginal value of increasing wilder- contingent valuation study in Vermont, for ness in the state to 2.6 million acres was example, asked respondents how much $78 per acre, or $125 million. they would pay to protect both the Lye In another contingent valuation study, Brook Wilderness Area in the Green cited byWalsh and Loomis (1989), visi- Mountain National Forest in Vermont tors to the Ramseys Draft Wilderness in and all designated wilderness areas (lands Virginia reported a use value of about that Congress has included in the $12 per day. National Wilderness Preservation System) Many people also gain value from view- east of the Mississippi River (Gilbert et ing wildlife species that depend on forest- al. 1992). Respondents reported willing- ed habitats. By one estimate, the value of ness to pay of $9.04 (median) per house- wildlife viewing alone on national forests hold per year to protect the Lye Brook was between $118 and $514 million in area and $10.42 per household per year to 1990 (Moskowitz and Talberth 1998). preserve all eastern wilderness areas. For Clayton and Mendelsohn (1993) estimat- both scenarios, respondents who had visit- ed use values associated with the opportu- ed an eastern wilderness area were willing nity to view grizzly bears on the McNeil to pay more than those who had not - River in Alaska, employing the contingent $9.71 versus $8.64 to protect Lye Brook valuation method to estimate a willingness and $14.28 versus $6.40 to protect all to pay that ranged from $227 to $277 eastern wilderness. Respondents in all cat- per person for a four-day visit. egories attributed about 85 percent of Hunting and Fishing. Forest ecosystems their total valuation of wilderness to pas- support crucial habitat for many game sive use value and the remaining 15 per- animals and fish species. Forests are thus a cent to passive use value. Summed over all key factor in generating the substantial households in the study area (a zone from economic benefits associated with hunting within 26 miles to 75 miles of the Lye and fishing activity. In 1996, hunters Brook area), annual passive use values spent 19.4 million days hunting on totaled $5.7 million, while use values national forests and generating a total eco- totaled $1.1 million. nomic value between $1.3 and $2.1 bil- Walsh et al. (1984) used contingent lion (1990 dollars; Moskowitz and valuation to estimate use and passive use Talberth 1998). The U.S. Fish and values associated with protecting wilder- Wildlife Service estimated that hunters in ness in Colorado. Based on a $14-per-visi- the Southern Appalachians region spent

Economic Value of Forest Ecosystem Services: A Review Page 18 CHAPTER TWO

about $1.3 billion on equipment and trip value of this activity was between $1.4 expenses in 1988. Barnhill (1999) esti- and $2.9 billion (Moskowitz and Talberth mated the total economic impact of hunt- 1998). Regionally, the national forests of ing activities and wildlife viewing in the the Southern Appalachians region con- Southern Appalachians region at $594 tribute to excellent cold-water fish habitat, million and $407 million, respectively, in and the consumer surplus associated with 1996. In the Columbia River Basin, fishing in those forests was estimated to hunters on federal lands, including nation- be between $237 and $637 million in al forests, spend as much as $150 million 1997 (Moskowitz and Talberth 1998). annually to pursue their sport. Another study of the Southern While estimates of economic impacts Appalachians region found that fishing pr ovide evidence of the regional impor- opportunities in the region generated 3.3 tance of sp e c i f ic activities on for ests, they million fishing days with related retail la c k the links between , wildlife sales totaling $173 million in 1996 populations and value that would be most (Barnhill 1999). The total economic useful to for est management decisions. impact of recreational fishing in the six- Two studies revi e w ed here estimate unit state region was estimated at $407 mil- values for animals sought by hunters, and lion. Moskowitz and Talberth (1998) one links those values to for est manage- report that in Washington and Oregon ment decisions. The first study (Liven go o d where national forests contribute to the 1983) used the hedonic travel cost habitat of valuable salmonid species, com- ap p ro a c h to estimate the value that lease mercial and recreational fishing generate hunters in Texas placed on taking a deer. more than $1 billion in income and sup- On aver a g e, those hunters wer e willing to port 60,000 jobs every year. pa y about $25 to be assured of taking one Un d e veloped for estland contributes to deer and about $13 for an additional deer. the quality of st r eams for trout species that The second study (Loomis 1992) ar e parti c u l a r ly sensitive to cha n g es in wat e r em p l o yed a habitat model to link the pres - quality and temperature. Loomis (1992) ence and number of for est roads to red u c e d estimated expected trout populations and elk populations. It then applied the model ca t c h rates for two scenarios — wilderne s s to estimate the expected decline in the designation and opening the area to log- pr obability of taking a six-point or larger ging — for the 145,000-acre Hyal i t e - bull elk that would be associated with log- Por cupine Buffalo Horn Wil d e r ness Study ging in an undeveloped for est, applying the Ar ea in the Gallatin National For est in model to the 145,000-acre Hyal i t e - Montana. The study used the travel cost Por cupine Buffalo Horn Wil d e r ness Study ap p ro a c h to estimate the economic value of Ar ea in the Gallatin National For est in cha n g es in trout fishing conditions associat- Montana. On aver a g e, hunters wer e willing ed with development. Wil d e r ness prot e c - to pay $108 per trip for the exp e c t e d tion generated rec r eational fishing benefit s in c r eased potential of taking a six-point or with a present value of $2.07 million better elk associated with wilderness. Tot a l (1978 dollars), for a total present value in estimated benefits to elk hunters from pro- added fishing benefits of $2.1 million over tecting the area as wilderness wer e more a 40-year planning period. than $12.3 million (1978 dollars). Table 6 summarizes estimates of recre- More than 18 million people fished in ational values associated with forest national forests in 1996. The economic ecosystems.

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Table 6. Recreation and Tourism Values of Forests Study Geographic scope of values Basis for valuation Value estimates Entire United States Moskowitz and Talberth All national forests Economic impact of $6.8 billion in 1993 and (1998) national forest recreation 139,000 jobs in 1996. Dunkiel and Sugarman All national forests Contribution of national forest $110 billion annually (1998) recreation to Gross Domestic Product Moskowitz and Talberth All national forests Total economic value $1.3 to $2.1billion (1998) of fishing in 1996 Moskowitz and Talberth All national forests Total economic value associated $1.4 to $2.9 billion (1998) with fishing (method unknown) Loomis and Richardson 42 million acres of roadless Aggregate user day values $600 million annually (2000) areas on national forests for roadless area recreation Economic impact of $1.49 billion and 23,700 jobs. roadless area recreation Rocky Mountain region Loomis Montana wilderness Elk hunting value of wilderness $108/trip (1992) study areaa protection (contingent valuation) $12.3 million total Loomis Montana wilderness Present value of recreational $2.07 million in 1978 dollars (1992) study areaa fishing benefits associated with protecting wilderness (travel cost) Walsh and Loomis Colorado Use value of wilderness $14/visitor day (1989) protection (benefits transfer) Yuan and Christensen Montana Economic impact of Total of $736 million in direct (1992); Power (1992) wildlands influenced recreation spending and 12,000 jobs. Southeast region Walsh and Loomis Virginia Use value of wilderness protection $12/visitor day (1989) (contingent valuation) Moskowitz and Talberth Southern Appalachian regionb Expenditures on hunting $1.3 billion in 1988 (1998) equipment and trip expenses Moskowitz and Talberth Southern Appalachian regionb Consumers surplus of $237 to $637 (1998) recreational fishing million in 1997 Barnhill (1999) National forests of the Economic impact of $407 million Southern Appalachian regionb recreational fishing Barnhill (1999) National forests of the Total economic impact of $594 million and $407 Southern Appalachian regionb hunting and wildlife viewing million, respectively, in 1996 Barnhill (1999) National forests of the Economic impact of recreation $6 billion annually Southern Appalachian regionb on the national forests

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Table 6. Recreation and Tourism Values of Forests continued Study Geographic scope of values Basis for valuation Value estimates Northeast region Gilbert et al. (1992) Lye Brook Wilderness, Vermont Use value of wilderness $29 million total use preservation (contingent valuation) value of eastern wilderness All eastern wilderness Lye Brook area Median willingness to pay of $9.04/household/year All eastern wilderness Median willingness to pay of $10.42/household/year Pacific Northwest region Moskowitz and Talberth Federal lands in the Columbia Total expenditures for hunting $150 million (1998) River Basin Moskowitz and Talberth Pacific Northwest Economic impact of commercial $1 billion and (1998) national forests and recreational fishing 60,000 jobs annually Southwest region Livengood (1983) Texas Value of taking a deer in $25 for one deer, hunting (hedonic travel cost) $13 for second deer aThe Hyalite-Porcupine Buffalo HornWilderness Study Area in the Gallatin National Forest. bThe Southern Appalachian region consists of Alabama, Georgia, North Carolina, South Carolina, Tennessee and Virginia.

Non-Timber Commercial lion attribut a b le to mushroom harves t s Forest Products (M o s k owitz and Tal b e r th 1998). For ests produce many commerci a l l y val u - For est ecosystems are critical components ab le products besides timber. These inclu d e in maintaining viable habitat for salmonid mu s h r ooms, floral greens, medicinal and species. In some regions, these fish have sub- ed i b le plants and wildlife res o u rc e s . stantial commercial and rec r eational val u e Or egon ’s Willamette National For est pro- and generate large local economic impacts. duced $72 million in sales of the orna m e n - In southeastern Alaska in 1987, commerci a l tal greens salal, huckl eb e r ry, swor d fer n and ha r vest of five salmon species totaled more be a r grass in 1991. More than 1.3 million than 14 million fish with a market value of pounds of se ven medicinal plants wer e har- mo r e than $71.8 million. The commerci a l vested from ’s national for ests in fishing industry in the region direc t l y 1993. Floral greens and holiday and ever - em p l o yed 1,496 people in fishing in 1984 green boughs from national for ests in and, between 1981 and 1984, an aver a g e of Or egon and Washington generated sales of 1,000 people annually in seafood proc e s s i n g $128 million in 1989 and employed (Glass and Muth 1992). As noted in the 10,000 people. The entire non-timber for - pr evious section, commercial and rec re a t i o n - est products industry associated with al fishing combined in the Pac i f ic North we s t national for ests in Oregon and Was h i n g t o n generate more than $1 billion in income and co n t r i b uted about $300 million to the su p p o r t 60,000 jobs annually (Moskowi t z regional economy in 1992, with $41 mil- and Tal b e r th 1998).

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For est products are also important for Highlands. The study concluded that large subsistence living in many regions. In south- tr ees wer e an important scenic cha r a c t e r i s - ea s t e r n Alaska, residents took 174,456 tic of for est . Two additional salmon in 1987 for subsistence purpo s e s , studies estimated willingness to pay for the whi c h was an aver a g e of 143 pounds per density of la r ge trees in for ests and wilder- household (Glass and Muth 1992). Muth ness areas and associated tree density with and Glass (1989) found that households in for est quality. Walsh et al. (1990) in a that region consumed an aver a g e of 88 9 co n t i n g ent valuation study in Colorado pounds of ed i b le for est products annually, as k ed respondents how much they wou l d in c luding 295 pounds of salmon and 118 be willing to pay for a for est quality-pro- pounds of venison. Based on market prices tection prog ram that would maintain stand for commerci a l l y avai l a b le meat and adjust- densities at 125 to 175 trees per acre rel a - ed for protein content, the economic val u e ti ve to zero to 50 trees per acre without of the salmon and venison to a household the prog ram. The aver a g e response was wer e $590 and $472, res p e c t i vel y. $47 per household per yea r . Statewide, In Crown Point, New York, the aver a g e this implies a present value of a fore s t household generated about $1,500 in gros s quality prog ram of $675.9 million, or value (based on market prices) from fore s t $50 per acre. Rec r eation value accounted pr oducts ever y yea r , while the total value of for $13 of the total value while option, pr oducts collected by the entire community existence and bequest values accounted for was $910,780 (Muth and Glass 1989). $10, $10 and $14, res p e c t i vel y. In the other study, Haefele et al. (1992) Cultural Values used a contingent valuation survey of The cultural values associated with for- households within 500 miles of As h ev i l l e , est ecosystems include their aesthetic value No r th Carolina, to estimate use and non- and the value people attach to knowledge use values for protecting for ests in the that forests exist. They also include the App a l a c hian Mountains from further mor- values people attach to forests as habitat ta l i t y . Respondents wer e willing to pay for endangered species that they may or be t w een $18 and $59 per year to prot e c t may not ever see in the wild. the remaining undamaged for ests along Aesthetic and Passive Use Values of and roa d ways. They wer e willing to Forests and Wilderness. Barnhill (1999) pa y between $20 and $99 to protect all attributed a portion of the economic remaining high-quality for ests. Existence impact of tourism along the Blue Ridge values accounted for more than half of th e Parkway to the scenic beauty of the adja- total value of for est protection. Bequest cent forests. The study found that visitors values accounted for almost 30 perce n t , spend $1.3 billion in North Carolina and and use values accounted for about eight Virginia counties contiguous to the pe r cent to 12 percent (Aldy et al. 1999). Parkway, that these expenditures generate Champ et al. (1977) designed a contin- $98 million in tax revenues annually, and gent valuation survey of Wisconsin res i - that visitor spending directly supports dents elicit passive use values and fou n d more than 26,500 jobs. that respondents wer e willing to make Holmes et al. (1997) used the hedonic actual cash donations to support a pro- tr a vel cost approa c h to rank the impor- gram to rem o ve roads from the North tance of scenic characteristics of wi l d e r - Rim of the Grand Canyon and conver t the ness for ests in the Southern App a l a ch i a n ar ea to wilderness. Aggregated to the

Economic Value of Forest Ecosystem Services: A Review Page 22 CHAPTER TWO

en t i r e population of Wisconsin, passive ed passive use values for the Washakie use values for the created wilderne s s Wilderness Area (adjacent to Yellowstone totaled $7 million. Gilbert et al. (1992) National Park) from respondents in also employed a contingent valuation study .Wilderness users reported pas- to ask how much respondents would pay sive use values of $46 per household per to protect both the Lye Brook Wi l d e rn e s s year, while respondents in five cities at in Ver mont and all eastern wilderness. The varying distance from the area reported st u d y estimated passive use values associat- passive use values of $9.70 (urban) and ed with protecting eastern wilderness at $8.40 (rural). The fourth study, also cited mo r e than $167 million annually aggregat - byWalsh and Loomis (1989), was a con- ed over all households in the North e a s t . tingent valuation survey of visitors to the Four studies of passive use values for Ramseys Draft Wilderness Area in wilderness provide additional insight into Virginia. That study reported a consumer this issue. Walsh et al. (1984) undertook surplus of $12 per day for use values and a contingent valuation survey of Colorado about as much for passive use values. residents and estimated passive use Loomis and Walsh (1992) in their con- (option, existence and bequest) values tingent valuation study of willingness to associated with increasing the number of pay for wilderness preservation in acres of wilderness in Colorado. On aver- Colorado estimated current values and age, households attached a passive use projected those values 30 years into the value of $14 (1980 dollars) to the state’s future based on changes in the demo- 1.2 million acres of designated wilderness, graphic makeup of the population. Per essentially equal to use values. Passive use household willingness to pay for protect- values associated with protecting an addi- ing 5.0 million acres of wilderness rose tional 1.4 million acres, for a total of 2.6 from $25.30 in 1980 to $30.76 in 2010 million acres, were $19 per household per (1980 dollars). When projected popula- year. Passive use values for protecting 5.0 tion increases were factored in, total million and 10.0 million acres were $25 preservation value rose from $28 to $49 and $32 per household per year, respec- million over the same time period. tively. Respondents also indicated they Loomis and Richardson (2000) in their would be willing to pay $21 per year to study of the economic benefits of road- protect 125 million acres of additional less areas on national forest land used a wilderness in other states. benefits transfer approach to estimate pas- A second contingent valuation study, sive use values associated with roadless cited byWalsh and Loomis (1989), areas. Based on contingent valuation esti- applied the design of the Colorado study mates from previous research, the study to Utah residents. Total values (use and applied passive use values of $6.72 and passive use) associated with wilderness $4.16 per acre to western and eastern protection in Utah were $53 per year to roadless areas, respectively.The study esti- protect 2.7 million acres of wilderness, mated passive use values of $274 million $64 for 5.4 million acres, $75 for 8.1 per year for roadless areas in the West and million acres and $92 for 16.2 million $6.24 million annually for roadless areas acres. The study did not distinguish in the East. The total passive use value between use and passive use values. associated with protecting the 42 million The third contingent valuation study, acres of roadless area on the national cited byWalsh and Loomis (1989), elicit- forests was $280 million.

Economic Value of Forest Ecosystem Services: A Review CHAPTER TWO Page 23

Endangered Species Habitat. One ratio- sample was willing to pay just over $90 per nale for passive use values is that people year for the prog ram. In the third study, at t a c h a value to knowing that for ests exi s t Ha g en et al. (1992) estimated that the aver - and provide habitat for wildlife species. ag e Oregon household was willing to pay Estimates of existence value for old-growt h $95 annually to protect old-growth fore s t for ests west of the Cascade Mountains range habitat for the owl . fr om $48 to $144 per U.S . household per Howard (1997) estimated the opportu- year (Moskowitz and Tal b e r th 1998). nity cost associated with protecting old- Loomis and Ekstrand (1997) used con- growth forests as endangered species habi- ti n g ent valuation to estimate the value of tat for the northern spotted owl, pileated for est ecosystems as habitat for the threa t - and in ened Mexican spotted owl, whi c h lives pri- Washington State’s Olympic National ma r i l y in the Four Corners region of Forest. The study estimated the timber Arizona, Colorado, and Utah. revenue that would be lost by shifting The aver a g e respondent was willing to pay management priorities from logging to $40.49 annually to protect 4.6 million protection of old-growth stands. The ac r es of ol d - g rowth for est habitat necessary study concluded that the difference in pre- for this species. The present existence val u e sent value of timber was $17,411 per acre associated with protecting the owl ’ s habitat (calculated over a 200-year stand rotation was between $2.0 billion and $3.7 billion. and expressed in 1994 dollars) before log- At least three contingent valuation stud- ging costs were considered. This figure ies have estimated the economic value of represents the present value of timber rev- pr otecting old-growth for est ecosystems as enue that would be foregone to manage habitat for the north e r n spotted owl. One the forest primarily for old-growth habitat co n c luded that the aver a g e Was h i n g t o n rather than for timber production. State household was willing to pay $34.84 Cultural Heritage Values. For ests can also per year to protect spotted owl habitat co n t r i b ute to quality of li f e through their rol e (R ubin et al. 1991). The analysis ext r a p o - as part of an area ’ s cultural heritage. A rec e n t lated the estimates to Oregon, Californ i a decision involving the conversion of fore s t - and the entire United States based on the land in Weston, Massachusetts illustrates the assumption that willingness to pay decli n e s im p o r tance of cultural heritage as a source of by 10 percent for each 1000 miles of di s - value (Fausold 1999). To expand Boston’s tance from the site. Corresponding willing- water supply infrastruc t u r e, the Massachu s e t t s ness to pay estimates wer e $36.91 per Water Res o u r ces Authority wanted to pur- household per year in Oregon, $20.88 per chase a 36-acre parcel of for ested conserva- household per year in Califor nia and tion land, whi c h had been owned by the town $15.21 per household per year in the res t of Weston since 1974. While the fair market of the country. The study estimated the value of the parcel was $236,000, the wat e r total value of pr otecting spotted owl habi- authority even t u a l l y had to pay the town $4.5 tat at almost $1.5 billion per yea r . million to purchase a similar parcel. The mag- A second study estimated aver a g e willing- nitude of the differ ence between fair market ness to pay for a prog ram to increase pro- value and the final settlement ref lects, in part, tection from e for three million acres of the value attached to the cultural signific a n c e ol d - g rowth for est set aside as habitat for the of a particular site. no rt h e r n spotted owl in Oregon (Loomis et Table 7 summarizes existing estimates al. 1994). The aver a g e household in the of cultural values associated with forests.

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Table 7. Summary of Cultural Values of Forests Study Geographic scope of values Basis for valuation Value estimates Entire United States Loomis and Richardson National forest roadless areas Passive use values of roadless $280 million annually (2000) areas (contingent valuation) (nationwide) Southeast region Barnhill (1999) Blue Ridge Parkway, Economic impact of $1.3 billion in tourism expen- North Carolina and Virginia forest scenery ditures, $98 million in annual tax revenues, 26,500 jobs. Haefele et al. (1992) North Carolina Use and passive use values of $18 to $99/ household/year Aldy et al. (1999) healthy forest (contingent valuation) total value (use and passive use) (contingent valuation) Walsh and Loomis Virginia Use and passive use values for $12/day use value, $12/day (1989) wilderness (contingent valuation) passive use value Rocky Mountain region Walsh et al. (1990) Colorado Use and passive use values $47/household/year: of healthy forest $13 (recreation), $10 (contingent valuation) (op-tion), $10 (existence), $14 (bequest) Walsh and Loomis Colorado Use and passive use value of $14 to $32/household/year (1989) wilderness — 1.4 to 10 million acres (contingent valuation) Walsh and Loomis Utah Use and passive use value of $53 to $92/household/year (1989) wilderness — 2.7 to 16.2 million acres (contingent valuation) Walsh and Loomis Colorado Use and passive use value $25.30/household/year (1989) of wilderness (contingent valuation) to protect 5 million acres; total preservation value of $28 million. Walsh and Loomis Wyoming Passive use values for wilderness $8.40 to $46/household/year (1989) - 5 million acres (contingent valuation) Pacific Northwest region and California region Moskowitz and Talberth Western states Existence value for old-growth $48 to $144/household/year (1998) forest (contingent valuation) Rubin et al. (1991) Oregon, Washington, Value of habitat for endangered Total value of $1.5 billion/ California and United States species protection year: $34.84/household/year (contingent valuation) (Washington), $36.91 (Oregon), $20.88 (California), $15.21 (United States) Loomis et al. (1994) Oregon Value of protecting old-growth $90/household/year forest habitat for northern spotted owl (contingent valuation)

Economic Value of Forest Ecosystem Services: A Review CHAPTER TWO Page 25

Table 7. Summary of Cultural Values of Forests continued Study Geographic scope of values Basis for valuation Value estimates Hagen et al. (1992) Oregon Value of protecting old-growth $95/household/year forest habitat for northern spotted owl (contingent valuation) Howard (1997) Washington Opportunity cost of endangered $17,411/acre species protection (contingent valuation) Northeast Region Gilbert et al. (1992) Vermont and eastern states Passive use value of eastern $5.7 and $167 million for wilderness (contingent valuation) Vermont residents and all residents of the east, respectively Fausold (1999) Massachusetts Replacement cost of public $4.5 million for 36 acres forest area Upper Midwest region Champ et al. (1977) Wisconsin Total passive use value of $7 million wilderness (contingent valuation) (residents of Wisconsin) Southwest region Loomis and Ekstrand Arizona, Colorado, Value of protecting old-growth $40.49/household/year (1997) New Mexico, Utah forest habitat for Mexican Spotted Owl (contingent valuation) Moskowitz and Talberth Southwest Existence value of threatened $2.0 and $3.7 billion (1998) species (contingent valuation) (nationwide)

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Economic Value of Forest Ecosystem Services: A Review