Integrating Ecological Risk Assessment and Economic Analysis in Watersheds: a Conceptual Approach and Three Case Studies
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EPA/600/R-03/140R September 2003 Integrating Ecological Risk Assessment and Economic Analysis in Watersheds: A Conceptual Approach and Three Case Studies National Center for Environmental Assessment Office of Research and Development U.S. Environmental Protection Agency Cincinnati, OH DISCLAIMER This document has been reviewed in accordance with U.S. Environmental Protection Agency policy and approved for publication. Mention of trade names or commercial products does not constitute endorsement or recommendation for use. ABSTRACT This document reports on a program of research to investigate the integration of ecological risk assessment (ERA) and economics, with an emphasis on the watershed as the scale for analysis. In 1993, the U.S. Environmental Protection Agency initiated watershed ERA (W- ERA) in five watersheds to evaluate the feasibility and utility of this approach. In 1999, economic case studies were funded in conjunction with three of those W-ERAs: the Big Darby Creek watershed in central Ohio; the Clinch Valley (Clinch and Powell River watersheds) in southwestern Virginia and northeastern Tennessee; and the central Platte River floodplain in Nebraska. The ecological settings, and the analytical approaches used, differed among the three locations, but each study introduced economists to the ERA process and required the interpretation of ecological risks in economic terms. A workshop was held in Cincinnati, OH in 2001 to review progress on those studies, to discuss environmental problems involving other watershed settings, and to discuss the ideal characteristics of a generalized approach for conducting studies of this type. Based on the workshop results, a conceptual approach for the integration of ERA and economic analysis in watersheds was developed. The objectives of this document (by chapter) are as follows: • describe the rationale, limitations, and contributions of the document (Chapter 1) • create a context for understanding by a diverse, technical audience (Chapter 2) • present a conceptual approach for integrating ERA and economics in the context of watershed management (Chapter 3) • present and critically evaluate the methods and findings of the three watershed case studies (Chapters 4-6) • identify research needed to improve the integration of ERA and economic analysis in watersheds (Chapter 7). This report is unique in its focus on the problem of ERA-economic integration and the watershed management context and in its presentation of case studies. The conceptual approach is used as a basis of discussion of each case study to illustrate how its particular methodological advances and insights could be used to fullest advantage, both in the watershed studied and in future integration efforts. Preferred citation: U.S. Environmental Protection Agency (USEPA). (2003) Integrating ecological risk assessment and economic analysis in watersheds: A conceptual approach and three case studies. Prepared by the National Center for Environmental Assessment, Cincinnati, OH. EPA/600/R-03/140R. Available from: National Technical Information Service, Springfield, VA, PB2004-101634; and <http://www.epa.gov/ncea>. ii TABLE OF CONTENTS Page LIST OF TABLES ........................................................................................................................ ix LIST OF FIGURES ...................................................................................................................... xii LIST OF ABBREVIATIONS .......................................................................................................xv PREFACE ................................................................................................................................. xviii AUTHORS, CONTRIBUTERS AND REVIEWERS ................................................................ xix EXECUTIVE SUMMARY ...................................................................................................... xxvii 1. INTRODUCTION ........................................................................................................... 1-1 1.1 THE IMPORTANCE OF INTEGRATED, WATERSHED-LEVEL ANALYSIS.......................................................................................................... 1-1 1.2 GENESIS OF THIS DOCUMENT ..................................................................... 1-5 1.3 OBJECTIVES AND ORGANIZATION............................................................. 1-7 1.3.1 Create a context for understanding by a diverse, technical audience (Chapter 2)................................................................................ 1-7 1.3.2 Present a conceptual approach for integrating ERA and economics in the context of watershed management (Chapter 3) ........... 1-8 1.3.3 Present and critically evaluate the methods and findings of three case studies (Chapter 4-6)............................................................... 1-8 1.3.4 Identify research needed to improve the integration of ERA and economic analysis in watershed (Chapter 7) ........................................... 1-8 1.4 RELATIONSHIP TO EXISTING USEPA GUIDANCE DOCUMENTS.......... 1-9 1.4.1 USEPA Guidelines for Ecological Risk Assessment ............................... 1-9 1.4.2 USEPA Guidelines for Preparing Economic Analyses ........................... 1-9 1.4.3 USEPA Framework for Economic Assessment of Ecological Benefits................................................................................................... 1-10 1.5 LIMITATIONS.................................................................................................. 1-10 1.5.1 Lack of complete integration ................................................................. 1-10 1.5.2 Specificity to a watershed context ......................................................... 1-11 1.6 UNIQUE CONTRIBUTIONS........................................................................... 1-12 1.7 REFERENCES .................................................................................................. 1-13 iii 2. BACKGROUND: ECOLOGICAL RISK ASSESSMENT AND ECONOMIC ANALYSIS IN WATERSHEDS AND THE NEED FOR INTEGRATION.................. 2-1 2.1 ECOLOGICAL RISK ASSESSMENT ............................................................... 2-1 2.1.1 Framework and methods for ecological risk assessment......................... 2-2 2.1.2 Critiques of ecological risk assessment ................................................. 2-11 2.1.3 Watershed applications of ecological risk assessment........................... 2-14 2.2 ECONOMIC ANALYSIS ................................................................................. 2-17 2.2.1 Welfare economics................................................................................. 2-17 2.2.2 Economic value...................................................................................... 2-20 2.2.3 Cost-benefit analysis.............................................................................. 2-25 2.2.4 Complementary analyses ....................................................................... 2-26 2.2.5 Game theory........................................................................................... 2-28 2.2.6 Ecological economics ............................................................................ 2-30 2.2.7 Applications of ecological economics ................................................... 2-31 2.3 ECOLOGICAL AND ECONOMIC ANALYSIS FOR WATER QUALITY STANDARDS................................................................................. 2-33 2.3.1 Water quality standards and ecological risk assessment........................ 2-34 2.3.2 Water quality standards and economic analysis .................................... 2-38 2.4 THE NEED FOR INTEGRATION ................................................................... 2-41 2.5 REFERENCES .................................................................................................. 2-44 APPENDIX 2-A: DISCUSSION OF STATED PREFERENCE METHODS USED IN TWO CASE STUDIES........................................................................... 2-59 APPENDIX 2-B: USING MULTIMETRIC INDICES TO DEFINE THE INTEGRITY OF STREAM BIOLOGICAL ASSEMBLAGES AND INSTREAM HABITAT...................................................................... 2-64 3. A CONCEPTUAL APPROACH FOR INTEGRATED WATERSHED MANAGEMENT............................................................................................................. 3-1 3.1 EXISTING FRAMEWORK FOR WATERSHED MANAGEMENT................ 3-1 3.2 GUIDING CONSIDERATIONS FOR AN INTEGRATED MANAGEMENT PROCESS .............................................................................. 3-2 3.3 DIAGRAMING AN INTEGRATED MANAGEMENT PROCESS.................. 3-7 3.3.1 Assessment planning.............................................................................. 3-10 3.3.2 Problem formulation .............................................................................. 3-11 iv 3.3.3 Analysis and characterization of baseline risk....................................... 3-14 3.3.4 Formulation of alternatives.................................................................... 3-16 3.3.5 Consultation with extended peer community ........................................ 3-18 3.3.6 Analysis and characterization of alternatives ........................................ 3-18 3.3.7 Comparison of alternatives .................................................................... 3-20 3.3.8 Decision ................................................................................................