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Do you have a story to share about how you used Non-Market values in the public policy process? Please contact us and let us know.
1. Non-Market values in natural resource damage assessment: The case of the Exxon Valdez Oil Spill
In 1989 the supertanker, the Exxon Valdez, ran aground in Prince William Sound, Alaska and spilled almost 11 million gallons of crude oil into the bay, wreaking ecological disaster. Tens of thousands of birds and mammals were killed and the beaches were blanketed with oil for miles.
Legally, Exxon was liable for clean-up costs and losses to the Alaskan economy that resulted from the spill (e.g. lost fishing and tourist revenue). But what about the loss to all American citizens that resulted from the destruction of one of the nation's most pristine marine environments? After all, it wasn't just those in Alaska who suffered harm from the spill.
Think of it this way, if a company severely damaged Yosemite Valley in California, we wouldn't just count the loss to Californians in order to calculate the loss to society; we would have to calculate the loss for all Americans for the degradation of this cherished resource. The Federal Government determined that the same was true for Prince William Sound.
Determining the value of this loss required estimating the lost non-use values resulting from the damage caused by the oil spill. The majority of Americans had never visited Prince William Sound, but still may have derived value from knowing that the public resource was protected.
A large scale contingent valuation study (one of the primary Non-Market methodologies) was conducted in order to measure the lost non-use value1 (referred to as passive-use in the study). The researchers determined that the lost non-use values resulting from the spill totaled approximately $2.8 billion—this is loss to the American public above and beyond direct clean-up costs and compensation for the immediate victims of the tragedy.
The primary case against Exxon was ultimately settled out of court, with Exxon fined $1 billion for natural resource damages and restitution for injuries2. While this amount fell well short of the $2.8 billion from the contingent valuation study, it still represents one of the largest sums ever handed down for natural resource damages.
Perhaps more importantly, the passage of the subsequent U.S. Oil Pollution Control Act of 1990 made clear that companies would be responsible for lost non-use values resulting from any future oil spills, thereby greatly increasing the potential liability for oil spills. In addition, in the Exxon Valdez study the authors described a potential Coast Guard escort program to help guide supertankers in shallow waters; an almost identical program was actually implemented by the government and is still in operation.
In 2007 there was a major oil spill in the San Francisco Bay that killed significant amounts of marine life and polluted beaches. It will be interesting to see whether a contingent valuation study is commissioned in order to estimate lost non-use values resulting from this spill.
2. The creation of marine protected areas (MPAs): What can Non-Market values contribute to the discussion?
Led by the National Oceanic and Atmospheric Administration (NOAA), the U.S. government is in the process of creating the first national system of Marine Protected Areas. MPAs seek to preserve the nation's coastal and ocean resources by limiting the scope of certain activities in various parts of the oceans, thereby protecting marine ecosystems just as we do with terrestrial resources through our system of national parks and wilderness areas.
This site provides information to help economists, policymakers,
MPAs are created through a complex mix of scientific analysis, stakeholder participation, public comment, and economic assessment; they seek to balance the consumptive uses of the ocean resources—namely fishing, both commercial and recreational—with non-consumptive uses such as surfing, wildlife viewing, and conservation.
To determine the proper mix of allowable uses within an MPA system it is essential to have good data on the various uses of the ocean, and the economic values attributed to them. Using catch rates and market prices for various kinds of fish and mollusks, and combining these with the impacts these fishing activities have on the broader economy, NOAA can relatively easily arrive at estimates for the value of using the ocean for consumptive purposes.
But what about alternative uses of these resources for promoting greater recreational opportunities or the conservation potential, both of which influence levels of tourism?
This is where Non-Market valuation comes in.
Dozens of studies across the United States (which can be found in the NOEP database) document and estimate the economic value of various sorts of recreational uses the marine environment provides. When there are potentially conflicting uses of the marine environment it is then possible to estimate which uses provide greater economic value and benefit to the communities that surround them.
Not only can this information help with the formation of MPAs, but it can be used to influence other types of legislation that impacts the coastal environment. It is one thing to make the case that the environmental and recreational uses of the marine environment are valuable, and another to be able to provide hard data to back up this claim.
3. Measuring the impacts of climate change: What Non-Market values for scuba diving and snorkeling can tell us?
Climate change is perhaps the greatest environmental challenge the world has ever faced. Much of the discussion on how the world community should respond is centered around the potential costs and benefits of different mitigation strategies.
While much attention has been focused on the potential for greater storms, drought, and the loss of coastal communities due to sea-level rise, climate change also threatens the world's coral reefs and the delicate balance of marine ecosystems due to the potential for greater ocean acidification. The lost economic value caused by coral bleaching and greater levels of CO2 in the ocean could be tremendous, both for consumptive and non-consumptive activities.
Using Non-Market valuation estimates we can examine how degraded coral reefs may impact the scuba diving and snorkeling industry, which generate millions in revenue and would be greatly affected.
4. Mitigating storm damage: The Non-Market value of coastal mangroves and wetlands
Environmentalists and economists have long touted the economic value of ecosystem (environmental) services provided by natural habitats, such as water filtration, storm protection, pollination, and biodiversity (for more info see the Natural Capital project). There is no question that these services provide real value, but measuring them is very difficult.
Again, this is where Non-Market valuation plays a role.
While there is not an especially large body of research on valuing environmental services, especially for coastal and ocean resources, NOEP's database includes some of the best attempts to date.
The Non-Market value of coastal wetlands and mangroves is gaining increased attention as evidence mounts that they can diminish the impact of major storms and wave surges. Due to the devastation wrought by Hurricane Katrina, the Asian tsunami, and the cyclone in Burma, all of which killed thousands of people and caused billions of dollars in property damage, there is a growing recognition that coastal ecosystems serve a critical function in protecting against these types of disasters and lessening their impacts.
Unfortunately, both development pressures and pollution have severely degraded coastal wetlands and mangroves throughout the world, thereby exposing coastal communities to much greater risk. By systematically documenting the protection that these ecosystems provide, and estimating their economic value, it may be possible to stem, and perhaps reverse, their decline.