A Quantitative Method for Estimating Probable Public Costs of Hurricanes

/ A method is presented for estimating probable public costs resulting from damage caused by hurricanes, measured as local government expenditures approved for reimbursement under the Stafford Act Section 406 Public Assistance Program. The method employs a multivariate model developed through multiple regression analysis of an array of independent variables that measure meteorological, socioeconomic, and physical conditions related to the landfall of hurricanes within a local government jurisdiction. From the regression analysis we chose a log-log (base 10) model that explains 74% of the variance in the expenditure data using population and wind speed as predictors. We illustrate application of the method for a local jurisdiction-Lee County, Florida, USA. The results show that potential public costs range from $4.7 million for a category 1 hurricane with winds of 137 kilometers per hour (85 miles per hour) to $130 million for a category 5 hurricane with winds of 265 kilometers per hour (165 miles per hour). Based on these figures, we estimate expected annual public costs of $2.3 million. These cost estimates: (1) provide useful guidance for anticipating the magnitude of the federal, state, and local expenditures that would be required for the array of possible hurricanes that could affect that jurisdiction; (2) allow policy makers to assess the implications of alternative federal and state policies for providing public assistance to jurisdictions that experience hurricane damage; and (3) provide information needed to develop a contingency fund or other financial mechanism for assuring that the community has sufficient funds available to meet its obligations. KEY WORDS: Hurricane; Public costs; Local government; Disaster recovery; Disaster response; Florida; Stafford Act     

A COST‐BENEFIT ANALYSIS OF WATER QUALITY PROTECTION IN THE CATAWBA BASIN1

ABSTRACT: The primary objective of this study was to perform a cost‐benefit analysis of maintaining the current level of water quality in the Catawba River basin. Economic benefits were estimated using a stated preference survey method designed to value respondents' willingness to pay for a management plan to protect water quality in the Catawba basin over time. From the surveys conducted with 1,085 area residents, we calculated an annual mean willingness to pay of $139 for the management plan, or more than $75.4 million for all taxpayers in the area. Over the five‐year time horizon in which respondents were asked to pay for the management plan, this resulted in a total economic benefit of $340.1 million. The Watershed Analysis Risk Management Framework model was used to estimate the amount of management activities needed to protect the current level of water quality in the basin over time. Based on the model results, the total cost of the management plan was calculated to be $244.8 million over a ten‐year period. The resulting cost‐benefit analysis indicated that the potential benefits of this management plan would outweigh the costs by more than $95 million.     

ENVIRONMENTAL AUDITING: Economic Values of Recreational Power Boating Resources in Pennsylvania

/ The travel cost method was used to estimate the economic value of seven major power boating resources in Pennsylvania. A significant relationship between number of visitor trips and cost per visitor trip existed for five of the seven water bodies. The annual total value for those five resources was $396 million, which was 2.5 times greater than the total out-of-pocket expenditures of approximately $157 million visitors spent to visit them. Research results can help resource managers plan and craft programs and policies that are founded on economic values of the natural resources involved.     

The availability of primary nickel from the market economy countries

The US Bureau of Mines has determined the potential availability of nickel from 36 deposits or districts in 16 market economy countries (MECs). More than 95% of production in MECs was analysed. The study indicates the quantity of nickel available in resources and potential annual production at net production costs and on a total cost basis with a 0% and a 10% discounted cash flow rate of return (DCFROR). The properties included in this study contain approximately 33 million tonnes of recoverable nickel. About 26 million tonnes of nickel is potentially recoverable from nickel laterite deposits, of which 4.5 million tonnes can be produced at $2.50/lb or less with a 0% DCFROR. Approximately 7 million tonnes of nickel is potentially recoverable from nickel sulphide deposits of which about 6.3 million tonnes could be produced at $2.50/lb or less at a 0% DCFROR. Sensitivity studies indicate that the total cost of producing nickel from laterite deposits is most sensitive to increases in energy costs, and that the total costs of producing nickel from sulphide deposits is most sensitive to increases in labour costs and by changes in byproduct revenues.     

Avoided deforestation as a greenhouse gas mitigation tool: economic issues

Tropical deforestation is a significant contributor to accumulation of greenhouse gases (GHGs) in the atmosphere. GHG emissions from deforestation in the tropics were in the range of 1 to 2 Pg C yr(-1) for the 1990s, which is equivalent to as much as 25% of global anthropogenic GHG emissions. While there is growing interest in providing incentives to avoid deforestation and consequently reduce net carbon emissions, there is limited information available on the potential costs of these activities. This paper uses a global forestry and land use model to analyze the potential marginal costs of reducing net carbon emissions by avoiding deforestation in tropical countries. Our estimates suggest that about 0.1 Pg C yr(-1) of emissions reductions could be obtained over the next 30 to 50 yr for $5 per Mg C, and about 1.6 Pg C yr(-1) could be obtained over the same time frame for $100 per Mg C. In addition, the effects of carbon incentives on land use could be substantial. Relative to projected baseline conditions, we find that there would be around 3 million additional hectares (ha) of forestland in 2055 at $5 per Mg C and 422 million ha at $100 per Mg C. Estimates of reductions in area deforested, GHG mitigation potential, and annual land rental payments required are presented, all of which vary by region, carbon price paid, and time frame of mitigation.     

Evaluating the PM damage cost due to urban air pollution and vehicle emissions in Seoul, Korea

This study evaluated the prospective damage costs of PM(2.5) inhalation. We performed a health risk assessment based on an exposure-response function to estimate the annual population risk in the Seoul metropolitan city, Korea. Also, we estimated a willingness-to-pay (WTP) amount for reducing the mortality rate in order to evaluate a statistical life value. We combined the annual population risk and the value-of-statistical-life to calculate the damage cost estimate. In the health risk assessment, we applied the PM(2.5) relative risk to evaluate the annual population risk. We targeted an exposure population of 5,401,369 persons who were over the age of 30. Using a Monte-Carlo simulation for uncertainty analysis, we estimated that the population risk of PM(2.5) inhalation during a year in Seoul is 2181 premature deaths for acute exposure and 18,510 premature deaths for chronic exposure. The monthly average WTP for 5/1000 mortality reduction over ten years is $20.20 USD (95% C.I: $16.60-24.50) and the implied value-of-statistical-life (VSL) is $485,000 USD (95% C.I: $398,000-588,000). The damage cost estimate due to risk from PM(2.5) inhalation in Seoul is about $1057 million USD per year for acute exposure, and $8972 million USD per year for chronic exposure. It is important to note that this cost estimate does not reflect all health damage cost estimates in this urban area. This recommendation is a model for evaluating a mortality risk reduction and as such we must re-evaluate an integrated application of morbidity risk.     

Cost/Benefit Considerations for Recent Saltcedar Control,Middle Pecos River,New Mexico

Major benefits were weighed against major costs associated with recent saltcedar control efforts along the Middle Pecos River, New Mexico. The area of study was restricted to both sides of the channel and excluded tributaries along the 370 km between Sumner and Brantley dams. Direct costs (helicopter spraying, dead tree removal, and revegetation) within the study area were estimated to be $2.2 million but possibly rising to $6.4 million with the adoption of an aggressive revegetation program. Indirect costs associated with increased potential for erosion and reservoir sedimentation would raise the costs due to increased evaporation from more extensive shallows in the Pecos River as it enters Brantley Reservoir. Actions such as dredging are unlikely given the conservative amount of sediment calculated (about 1% of the reservoir pool). The potential for water salvage was identified as the only tangible benefit likely to be realized under the current control strategy. Estimates of evapotranspiration (ET) using Landsat TM data allowed estimation of potential water salvage as the difference in ET before and after treatment, an amount totaling 7.41 million m³ (6010 acre-ft) per year. Previous saltcedar control efforts of roughly the same magnitude found that salvaged ET recharged groundwater and no additional flows were realized within the river. Thus, the value of this recharge is probably less than the lowest value quoted for actual in-channel flow, and estimated to be < $63,000 per year. Though couched in terms of costs and benefits, this paper is focused on what can be considered the key trade-off under a complete eradication strategy: water salvage vs. erosion and sedimentation. It differs from previous efforts by focusing on evaluating the impacts of actual control efforts within a specific system. Total costs (direct plus potential indirect) far outweighed benefits in this simple comparison and are expected to be ongoing. Problems induced by saltcedar control may permanently reduce reservoir capacity and increase reservoir evaporation rates, which could further deplete supplies on this water short system. These potential negative consequences highlight that such costs and benefits need to be considered before initiating extensive saltcedar control programs on river systems of the western United States.     

Controlling groundwater pumping online

Groundwater over-pumping is a major problem in several countries around the globe. Since controlling groundwater pumping through water flow meters is hardly feasible, the surrogate is to control electricity usage. This paper presents a framework to restrict groundwater pumping by implementing an annual individual electricity quota without interfering with the electricity pricing policy. The system could be monitored online through prepaid electricity meters. This provides low transaction costs of individual monitoring of users compared to the prohibitive costs of water flow metering and monitoring. The public groundwater managers' intervention is thus required to determine the water and electricity quota and watch the electricity use online. The proposed framework opens the door to the establishment of formal groundwater markets among users at very low transaction costs. A cost–benefit analysis over a 25-year period is used to evaluate the cost of non-action and compare it to the prepaid electricity quota framework in the Batinah coastal area of Oman. Results show that the damage cost to the community, if no active policy is implemented, amounts to (−$288) million. On the other hand, the implementation of a prepaid electricity quota with an online management system would result in a net present benefit of $199 million.     

Agricultural and recreational impacts of the conservation reserve program in rural North Dakota, USA

The Conservation Reserve Program (CRP), created in 1985, provides conservation benefits and agricultural supply control through voluntary, long-term retirement of crop land. While the effects of the CRP on the agricultural sector are well understood, the implications of its conservation benefits for rural economies remain largely undocumented. To quantify the effects on rural economies, this study addressed the net economic effects of decreased agricultural activity and increased recreational activity associated with the CRP in six rural areas of North Dakota from 1996 to 2000. Based on the level of economic activity that would have occurred in the absence of the program, net revenues from CRP land if returned to agricultural production in the six study areas were estimated at $50.2 million annually or $37 per acre of land currently enrolled in the CRP. Recreational (hunting) revenues as a result of the CRP in the study areas were estimated at $12.8 million annually or $9.45 per CRP-acre. The net economic effect of the CRP (lost agricultural revenues and gains in recreational expenditures) indicated that several areas of the state are not as economically burdened by the CRP as previous research has suggested. In addition, the net economic effects of the program would appear more favourable if revenues from all CRP-based recreation were included. The degree that recreational revenues offset agricultural losses might be further enhanced by enterprises that capitalize on the economic opportunities associated with expanded recreational activities on CRP lands.     

Can California coastal managers plan for sea-level rise in a cost-effective way?

This paper examines five representative sites on the California coast to illustrate a cost-effective methodology using tools and data that local decision makers can apply to analyse the economics of sea level rise (SLR) adaptation. We estimate the costs/benefits of selected responses (e.g. no action, nourishment, seawalls) to future flooding and erosion risks exacerbated by SLR. We estimate the economic value of changes to public/private property, recreational and habitat value, and beach related spending/tax revenues. Our findings indicate that the costs of SLR are significant but uneven across communities, and there is no single best strategy for adaptation. For example, Los Angeles's Venice Beach could lose $450 million in tourism revenue by 2100 with a 1.4 m SLR scenario while San Francisco's Ocean Beach would lose $80 million, but the impacts to structures could total nearly $560 million at Ocean Beach compared to $50 million at Venice Beach.     

Measuring the Net Economic Value of Recreational Boating as Water Levels Fluctuate1

Abstract: The purpose of this article was to show how the value of recreational boating can be assessed and how that value can be linked to water levels. Data were gathered via a survey of recreational boaters to determine days boated and willingness‐to‐pay (net economic value) for boating on Lake Ontario and on the St. Lawrence River in 2002. Depth measurements were taken at marinas and yacht clubs, boat launch ramps, and private docks. Stage‐damage curves were used to pinpoint at what water levels and to what extent boaters would be impacted. Boaters recreated an estimated 1.3 million days in 2002 and spent an estimated US$178 million in New York counties bordering Lake Ontario and the St. Lawrence River. The mean net economic value per day per boat (above current expenditures) was $69.36, with an estimated total net economic value of US$90 million. Using Lake Ontario as an example, the stage‐damage curves show that the overall negative impact would be small, between 245 and 248 ft. Maintaining water levels within that range for the entire boating season would be ideal for Lake Ontario boaters and associated businesses.     

ECONOMIC EFFECTS OF RIVER RECREATION ON LOCAL ECONOMIES1

ABSTRACT: Outdoor recreation is a major, growing use of water resources in the United States. The economic effects of expenditures by visitors to three recreational river sites on local economies surrounding the sites were estimated using an input-output model (IMPL.AN). Expenditure data were from the Public Area Recreation Visitors Study (PARVS). Results indicate that visitor spending stimulates a considerable amount of economic activity and growth in local economies. Economic effects include increases in total gross output ranging from $2.6 million to $13.4 million, increases in total income ranging from $1.2 million to $5.6 million, and increases in employment ranging from 60 to 292 jobs.     

VISITOR VALUES AND LOCAL ECONOMIC IMPACTS OF RIPARIAN HABITAT PRESERVATION: CALIFORNIA'S KERN RIVER PRESERVE1

ABSTRACT: Preservation of the few remaining ecologically vital riparian areas in the southwestern United States is a significant policy concern. This article reports on two economic aspects of preserving a nationally renowned riparian birding area in Southern California. First, the article examines visitor willingness to pay (WTP) for habitat restoration and estimates an annual WTP of US $77 per visitor to preserve the habitat, about a half‐million dollars a year for estimated visitor numbers in 2000 and 2001. Second, it documents visitor expenditures in the local economy to be approximately three‐quarters of a million dollars per year. This direct visitor spending attributable to the riparian habitat generates around US $1.3 million in increased local business activity in this relatively remote rural area.     

The price of pollution: costs estimates of environmentally related disease in Oregon

The purpose of this study is to estimate the environmentally attributable costs associated with diseases and disabilities in Oregon. We utilised actual Oregon data on disease rates and costs whenever available. If state-specific data were not available, we extrapolated from national estimates. We then used environmentally attributable fractions to estimate the environmentally attributable costs. The estimated environmentally attributable costs are the following: adult and childhood asthma: $29.6M; adult cardiovascular disease: $342.4M; adult and childhood cancer: $130.5M; childhood lead poisoning: $866.2M; birth defects: $3.0M; and childhood neurobehavioural disorders: $185M. Policymakers and researchers in other states are encouraged to apply the methods we have presented here to calculate the environmentally attributable costs associated with diseases and disabilities in their state. Knowing that many of the environmental contributors to disease are often preventable, policymakers are encouraged to make environmental public health a top priority.     

Analysis of Feedstock Supply Costs for Wood-fired Electric Power Plants in Liberia, West Africa

In Liberia, as in many developing countries, electrification of towns and cities throughout the country has long been a major development goal. However, fuel expenditures by the Liberian Electricity Corporation (LEC) for its rural public stations represent a major and growing burden on the financially hard-pressed utility. In this paper we evaluate the economics of supplying wood to rural electric power plants utilizing different sources of feedstock. We also evaluate the cost implications of differences in wood supply requirements based on the use of steam or gasifier technology, and from variation in plant utilization level.
The wood supply we consider as sources are: (1) retired rubber trees; (2) the harvesting of secondary-growth forest just before the land is returned to temporary cultivation; (3) the establishment of commercial short-rotation wood energy plantations; and (4) adding to the system of shifting agriculture the planting of fast-growing wood species. The results indicate that wood can probably be supplied under a wide range of supply and demand conditions for US$1.00–1.70 per GJ. We estimate that wood steam plants can generate power for about $0.09-0.14 per kWh and gasifier plants for $0.10-0.18 per kWh. These costs are well below the present cost of oil-based rural electric power generation in Liberia (about $0.20–0.27 per kWh).     

Economic amenity values of wildlife: Six case studies in Pennsylvania

The travel clost method (TCM) and contingent valuation method (CVM) were used to evaluate the economic value of six different ecotourism activities involving observation of wildlife in Pennsylvania. The six activities were: catch-and-release trout fishing; catch-and-release trout fishing with fly-fishing equipment; viewing waterfowl; watching elk; observing migration flights of raptors; and seeing live wildlife in an environmental education setting. TCM results provided significant statistical relationships between level of use and travel costs for the two types of trout fishing activities. CVM provided estimates of consumer surplus for the other four sites. The consumers' surplus value (1988 dollars) of all six activities to participants amounted to a total of more than $1.28 million annually—twice the total out-of-pocket expenditures of approximately $640,000 spent to visit the sites. The economic amenity values of the six activities compare favorably with similarly derived values in other studies for hunting, fishing, hiking, and backpacking in dispersed recreation environments and wilderness areas in western states.     

The Worldwide Availability of Gold

This paper summarizes Bureau of Mines research relating to the state of the world gold industry. The authors discuss the world gold industry structure, demonstrated gold resources, current production, and the long-term cost and availability of potential future gold production.
The long-term cost and availability of primary gold production from 111 significant producing mines and developing deposits in 13 market economy countries (MECs) is evaluated. Total recoverable gold available (as of January 1984) from the evaluated mines and deposits is estimated at 819 million troy ounces. The Republic of South Africa is estimated to account for 87% of total recoverable gold. The USA and Canada account for 4% and 4.5% of the total, respectively. Eighty-three per cent of total recoverable gold is available at a constant 1984 break-even price of $400 per ounce, and 70% is available at $300 per ounce. South Africa accounts for 90% of the gold available at $400 per ounce or less. Gold resources in the Soviet Union and China are discussed but not evaluated for costs of production. Some conclusions of the analyses are that South Africa should remain the largest world producer until the year 2000 and annual MEC output in the year 2000 should not be significantly different from current output, given constant 1984 gold prices of more than $300 per ounce.     

Evaluating agricultural nonpoint-source pollution programs in two Lake Erie tributaries

During the past three decades, numerous government programs have encouraged Lake Erie basin farmers to adopt practices that reduce water pollution. The first section of this paper summarizes these state and federal government agricultural pollution abatement programs in watersheds of two prominent Lake Erie tributaries, the Maumee River and Sandusky River. Expenditures are summarized for each program, total expenditures in each county are estimated, and cost effectiveness of program expenditures (i.e., cost per metric ton of soil saved) are analyzed. Farmers received nearly $143 million as incentive payments to implement agricultural nonpoint source pollution abatement programs in the Maumee and Sandusky River watersheds from 1987 to 1997. About 95% of these funds was from federal sources. On average, these payments totaled about $7000 per farm or about $30 per farm acre (annualized equivalent of $2 per acre) within the watersheds. Our analysis raises questions about how efficiently these incentive payments were allocated. The majority of Agricultural Conservation Program (ACP) funds appear to have been spent on less cost-effective practices. Also, geographic areas with relatively low (high) soil erosion rates received relatively large (small) funding.     

Allocation of supplementary aeration stations in the Chicago waterway system for dissolved oxygen improvement

The Chicago Waterway System (CWS), used mainly for commercial and recreational navigation and for urban drainage, is a 122.8 km branching network of navigable waterways controlled by hydraulic structures. The CWS receives pollutant loads from 3 of the largest wastewater treatment plants in the world, nearly 240 gravity Combined Sewer Overflows (CSO), 3 CSO pumping stations, direct diversions from Lake Michigan, and eleven tributary streams or drainage areas. Even though treatment plant effluent concentrations meet the applicable standards and most reaches of the CWS meet the applicable water quality standards, Dissolved Oxygen (DO) standards are not met in the CWS during some periods. A Use Attainability Analysis was initiated to evaluate what water quality standards can be achieved in the CWS. The UAA team identified several DO improvement alternatives including new supplementary aeration stations. Because of the dynamic nature of the CWS, the DUFLOW model that is capable of simulating hydraulics and water quality processes under unsteady-flow conditions was used to evaluate the effectiveness of new supplementary aeration stations. This paper details the use of the DUFLOW model to size and locate supplementary aeration stations. In order to determine the size and location of supplemental aeration stations, 90% compliance with a 5 mg/l DO standard was used as a planning target. The simulations showed that a total of four new supplementary aeration stations with oxygen supply capacities ranging from 30 to 80 g/s would be sufficient to meet the proposed target DO concentration for the North Branch and South Branch of the Chicago River. There are several aeration technologies, two of which are already being used in the CWS, available and the UAA team determined that the total capital costs of the alternatives range from $35.5 to $89.9 million with annual operations and maintenance costs ranging from $554,000 to $2.14 million. Supplemental aeration stations have been shown to be a potentially effective means to improve DO concentrations in the CWS and will be included in developing an integrated strategy for improving water quality in the CWS.     

Costs and benefits of urban erosion and sediment control: The North Carolina experience

The EPA’s new nonpoint source pollution control requirements will soon institutionalize urban erosion and sediment pollution control practices nationwide. The public and private sector costs and social benefits associated with North Carolina’s program (one of the strongest programs in the country in terms of implementation authority, staffing levels, and comprehensiveness of coverage) are examined to provide general policy guidance on questions relating to the likely burden the new best management practices will have on the development industry, the likely costs and benefits of such a program, and the feasibility of running a program on a cost recovery basis. We found that urban erosion and sediment control requirements were not particularly burdensome to the development industry (adding about 4% on average to development costs). Public-sector program costs ranged between $2.4 and $4.8 million in fiscal year 1989. Our contingent valuation survey suggests that urban households in North Carolina are willing to pay somewhere between $7.1 and $14.2 million a year to maintain current levels of sediment pollution control. Our benefit-cost analysis suggests that the overall ratio is likely to be positive, although a definitive figure is elusive. Lastly, we found that several North Carolina localities have cost recovery fee systems that are at least partially self-financing. This article is based on research by the authors for the North Carolina Department of Environment, Health and Natural Resources (DEHNR). The views are those of the research team and do not necessarily reflect the position of DEHNR.