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How Much Is This Beach Worth? Calculating the Value of the Environment

"Each function of the beach, whether it's the habitat for some important species, the aesthetics of an ocean view, or being able to walk along a beach, all may have value."
Doug Lipton,
Maryland Sea Grant

Most people recognize that the ocean and coast contribute to the U.S. economy, whether it be through fishing, tourism, shipping, development, or any number of commercial activities. But what is the value of spending a day at the beach, having wildlife and clean water at that beach, or ensuring that the beach is there for your children or grandchildren to enjoy? Getting information on the shore's total economic value, some economists say, is vital for managers making decisions on how to best use coastal resources.

"It's terribly important to level the playing field with economic information when decisions must be made," says Dr. Judith Kildow, senior research scientist at the Wrigley Institute for Environmental Studies. "At this point, many resource managers don't have access to studies on the value of ocean and coastal resources."

There are a number of projects under way by states, universities, and the federal government to establish guidelines for collecting and reporting national environmental economic data, develop a national database, and produce regional case studies. When complete, managers could have new information to draw upon to help determine not only the value of coastal resources bought and sold in the marketplace, but the less tangible benefits of the environment, as well.

"Swimming and recreating, acting as a barrier against storms, and preventing the flooding of coastal properties—those are some of the ways that beaches have value," explains Dr. Doug Lipton, marine economic specialist for Maryland Sea Grant. "Each function of the beach, whether it's the habitat for some important species, the aesthetics of an ocean view, or being able to walk along a beach, all may have value."

He adds, "Another unique thing about the environment is that it may have a nonuse value. We may value something simply because it exists. We may never visit it or see it, but it may be important to us to know it's there and healthy, and is not being polluted. That's a legitimate value."

Over the past few decades, economists have developed tools and methods to value many of these "nonmarket" environmental resources, to quantify their values, and to add them up and include them in cost-benefit equations.

Economics 101

To understand environmental valuation, Lipton says, you first need to grasp the word "value" as it is used by economists. "Value means the maximum you are willing to give up something that you have, usually it's in terms of dollars, to obtain something else. The net value of something is the difference between the maximum you would be willing to give up or pay, and what you actually have to pay to obtain it. You can apply that to anything, typically market kinds of goods, such as buying a car, TV, or home.

"It's the same thing with the environment," he says. "What are people willing to give up in order to have a certain state of the environment?" To find the total value of the environment, economists combine the value of resources that are bought and sold in the marketplace, the value of "near-market resources," or those that impact market value, such as an estuary's spawning grounds, and the environment's nonmarket values.

The Power of Numbers

"Decision makers like numbers," says Rodney Weiher, chief economist for the National Oceanic and Atmospheric Administration's (NOAA) Policy and Strategic Planning. "When you're at the table, if all you have is hand waving, you tend to get dismissed."

Weiher says environmental valuation is important for coastal managers because "traditionally, when you do cost-benefit analysis of environmental resources you only quantify those things that are directly using market measures. If you have a proposal to build a hydropowered dam, you determine things like what the cost is to build the dam, how many jobs it will provide, and the value of the power sold over the life of the project. By not including nonmarket aspects of the environment, such as white-water rafting, in the decision, you are typically missing value. It's important to include all the costs and benefits in valuation when making decisions between different alternatives."

Brian Baird, California Ocean Program manager of the California Resources Agency, says having even a "first tier" economic study has had a substantial impact on ocean and coastal management in California. In 1992, the state conducted its first-ever analysis of the economic contribution of seven ocean-dependent industries.

"The results were stunning, back then anyway," Baird says. "It showed an economic contribution of $17.3 billion directly funding 370,000 jobs in the state. Of that $17.3 billion, tourism was $9.9 billion, ports were $6 billion, offshore oil and gas was $860 million, and commercial fishing was $550 million."

In the year that followed the study, California enacted 15 new laws to improve the management and protection of the state's ocean and coastal resources. Baird says in the last two years, a series of additional coastal and ocean legislative efforts and budget initiatives have been enacted by the state legislature and governor, including tripling the support of the state's Sea Grant program.

"It's made a difference," Baird says. "It's what people refer to when they talk about the ocean and coastal economy in this state."

But Baird is the first to admit that the study just scratched the surface of the ocean and coastal environment's total value. "I think if we were to have information about the true value of a beach, or information on people's willingness to pay for the resources, we would see substantially larger and more inclusive numbers." The challenge for managers, he says, is to find existing data or the funding to complete such a study.

Valuation Efforts

The National Ocean Economics Project at the University of Southern California is developing a database of useful information on ocean-related economic activities and resource trends to assist with management decisions, Kildow says. The project is expected to be complete in about four years and will provide the first major in-depth analysis of the size and composition of the U.S. ocean economy over the past 30 years.

"We think what this information will do is level the playing field for resource managers," Kildow says. "Market, nonmarket, and near-market numbers will be drawn on to provide a full picture of the value of the ocean and coastal environment, rather than a partial view."

In a separate effort, NOAA in partnership with Sea Grant programs has conducted a series of regional environmental workshops for state and local planners and managers on methods and techniques of applying environmental valuation to environmental management. Regionally specific Environmental Valuation Guidebooks that include economic and valuation concepts and tools, as well as case studies, are being prepared for the Great Lakes, South Florida, and New England.

"Environmental valuation can help guide us to find that point where society gets the best of both worlds," Lipton says. "It helps us find that balance where we can get the most out of market-based activities, while not doing too much harm to the environment, and our overall quality of life."


For more information on the National Ocean Economic Project, point your browser to wrigley.usc.edu/NOEP/, or contact Dr. Judith Kildow at (213) 740-5539 or jkildow@usc.edu. For more information on the NOAA/Sea Grant regional case studies, point your browser to www.ecosystemvaluation.org, or contact Dr. Doug Lipton at (301) 405-1280 or dlipton@arec.umd.edu. You may also contact Rodney Weiher at (202) 482-0636 or Rodney.F.Weiher@noaa.gov. For more information on California's ocean resources study, contact Brian Baird at (415) 904-5466 or brian@resources.ca.gov.

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