Coastal Restoration - Annotated Bibliography: Economics as Related to Coastal Habitat Restoration

Restoration Economics

Annotated Bibliography: Economics as Related to Coastal Habitat Restoration

A.B. Borde

Battelle Memorial Institute

P.J. Balducci
J.W. Brawley
S.L. Sargeant

July 2004

Prepared for the
NOAA Coastal Services Center
Charleston, SC

Economics and the Environment

Environmental Valuation: Principles, Techniques, and Applications

Methods for Measuring Natural Resource Values over Time

Habitat Equivalency Analysis

Risk and Uncertainty in Environmental Restoration Programs

Discounting and Time Preference

Irreversibility, Sustainability, Safe Minimum Standard

Social Value versus Economic Impact: Measuring Equity and Efficiency in Environmental Policymaking

*Some documents are in Adobe portable document format (PDF) and require Adobe Acrobat Reader.

Economics and the Environment

Baumol, W., and W. Oates. 1988. The Theory of Environmental Policy: Second Edition. Cambridge University Press. New York, NY.

Summary: This book provides theories underlying environmental economics as it relates to policy matters. It examines the relevance and theory of environmental externalities, market imperfections, and management of exhaustible resources. It also examines environmental policy options to address market failure, including marketable emission permits, taxes, regulations, and subsidies.

Field, B.C. 1994. Environmental Economics: An Introduction. McGraw-Hill [Publishers]. New York, NY.

Summary: This book examines the fundamental principles of environmental economics, including the application of cost-benefit analysis, cost-effectiveness analysis, natural resource economics, markets, and economic efficiency principles in analyzing environmental policies. The book also explores criteria for evaluating environmental policies and examines environmental policies commonly used to achieve environmental goals, including command-and-control strategies, litigation, moral suasion, standards, and incentive programs.

Freeman, A. 1993. The Measurement of Environmental and Resource Values: Theory and Methods. Resources for the Future. Washington, D.C.

Summary: This book provides an introduction and overview of the principal methods and techniques of resource valuation. More specifically, the book illuminates the following environmental valuation methods: contingent valuation, property value models, travel cost, hedonic wage model, and nonuse valuation. It also applies these methods in the measurement of the costs of environmental policies.

Fullerton, D., and R. Stavins. 1998. How Do Economists Really Think About the Environment? Resources for the Future. Washington, D.C.

Summary: This report provides an overview of how economists value the environment and compares environmental resources to other human and physical capital assets. It points out several myths regarding how economists think about the natural environment, including: a) economists believe that the market solves all problems, b) when economists do see a market problem they always recommend a market solution, c) when non-market solutions are considered economists still use only market prices to evaluate them, and d) these economic analyses are concerned only with efficiency rather than distribution. Finally, it rejects the myths and provides contrasting views of how economists actually do view the environment.

Greeley-Polhemus Group, Inc. 1991. National Economic Development Procedures Manual — Overview Manual for Conducting Economic Development Analysis. IWR Report 91-R-11. U.S. Army Corps of Engineers. Fort Belvoir, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/91r11.pdf

Summary: This report provides a discussion of the national economic development (NED) principle that is essential to determine whether the federal government will construct any water resource project. More specifically, the report features pragmatic analysis of appropriate benefit-cost principles, treatment of time preference, and the application of environmental economics principles in the analysis of water resource projects. The NED principle articulates a framework in making decisions concerning water resource projects. Analysts working within this framework and decision-makers who must understand it are this report's intended audience.

Hanley, N., J. Shogren, and B. White. 1997. Environmental Economics in Theory and Practice. Macmillan. London, UK.

Summary: This book provides a guide to several important areas of natural resource and environmental economics: the economics of non-renewable and renewable resource extraction, the economics of pollution control, the application of cost-benefit analysis to the environment, and the economics of sustainable development. This book provides models and an analysis relating to management of non-renewable and renewable resource extraction and the application of benefit-cost analysis to the environment and the economics of sustainable development.

Hanna, S., C. Folke, and K. Maler. "Property Rights and Environmental Resources." In: Property Rights and the Environment, Hanna, S. and M. Munasinghe, eds. Beijer Institute of Ecological Economics and the World Bank. London, UK.

Summary: In this chapter, the authors argue that property rights are fundamental to the use of environmental resources. Most environmental problems can be seen as problems of incomplete, inconsistent, or unenforced property rights regimes. Property rights regimes are comprised of property rights, the bundles of entitlements regarding resources use, property rules, and the rules under which those entitlements are exercised. They exist in a variety of combinations of ownership, locus of control, and the rights and duties of owners. Property rights regimes are necessary but not sufficient conditions for resource sustainability. The "tragedy of the commons" is an environmental outcome that results from an inadequate specification of property rights to environmental services. This chapter provides a detailed analysis of the impact of property rights on market failure and environmental externalities.

Hardin, G. 1968. "The Tragedy of the Commons." Science. Volume 162. Pages 47 to 65.

Summary: This foundational article describes a state where herders with common interests over-exploit the natural environment (common grazing land) for private gain. It describes the concepts of market failure, externalities and regulatory responses. This article provides an overview of some of the foundational concepts associated with environmental economics, and provides a descriptive illustration of the need for public involvement in regulating the environment.

Harrington, K., and T. Feather. 1996. Evaluation of Environmental Investments Procedures: Overview Manual. IWR Report 96-R-30. U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/96r30.pdf

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision-makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Pearce, D.W., and R.K. Turner. 1990. Economics of Natural Resources and the Environment. Harvester Wheatsheaf. London, UK.

Summary: This book provides a detailed examination of how differing schools of thought -- classical, neoclassical, and humanistic -- extend to views of the environment. It provides an analysis of the foundations of environmental economics and describes the interconnection between the economy and the environment, as evidenced by its analysis of the circular economy. This book provides an overview of the theories that underlie environmental economics and detail environmental and economic interactions.

Randall, A. 1987. Resource Economics. Wiley Europe. London, UK.

Summary: This book provides an overview of the role of property rights regimes in environmental economics, and describes the conditions necessary for property rights regimes to be successful -- ownership, specification of rights, transferability, enforceability, and definition of property rights. This book provides an overview of the manner in which a lack of defined property rights can contribute to market failure and analyzes the impact of property rights on economic efficiency in the treatment of environmental resources.

Spurgeon, J. 1998. "The Socio-Economic Costs and Benefits of Coastal Habitat Rehabilitation and Creation." Marine Pollution Bulletin. Volume 37, Number 8-12. Pages 373 to 382.

Summary: This paper provides a comprehensive overview of the merits and limitations of using an economics-based approach to assess and implement initiatives for coastal habitat rehabilitation and creation. A review of the literature indicates that habitat rehabilitation/creation costs vary widely between and within ecosystems. For coral reefs, costs range from US$ 10,000 to 6.5 million/hectare (ha); (1) for mangroves US$ 3000-510,000/ha; for seagrasses US$ 9000-680,000/ha and for saltmarshes US$ 2000-160,000/ha. A review of the economic benefits derived from various coastal habitats based on a "Total Economic Value" approach (i.e. accounting for direct and indirect uses, and "non-uses") reveals that many thousands of US$ per hectare could ultimately accrue from their rehabilitation/creation. The paper concludes that despite its limitations, the "benefit-cost analysis" framework can play an important role both in assessing the justification of coastal habitat rehabilitation/creation initiatives, and by helping to improve the overall effectiveness of such initiatives.

Environmental Valuation: Principles, Techniques, and Applications

Arrow, K., and others. 1993. "Report of the NOAA Panel on Contingent Valuation." Federal Register. Volume 58, Number 10. Pages 4601 to 4614. Available at: http://www.darp.noaa.gov/library/pdf/cvblue.pdf

Summary: This government report provides a detailed analysis of the contingent valuation (CV) method of environmental valuation, and an extensive set of guidelines for CV survey construction, administration, and analysis. Because the past few years have seen a highly charged debate about whether contingent valuation (CV) surveys can provide valid economic measures of people's values for environmental resources, NOAA established a distinguished panel of social scientists, chaired by two Nobel laureates, to evaluate critically the validity of CV measures of nonuse values. This report presents panel findings.

Carson R., and others. 1996. Was the NOAA Panel Correct about Contingent Valuation? Discussion Paper 96-20. Resources for the Future. Washington, D.C. Available at: http://www.rff.org/Documents/RFF-DP-96-20.pdf

Summary: In an effort to appraise the validity of CV measures of economic value, a distinguished panel of social scientists, chaired by two Nobel laureates, was established by NOAA, to evaluate critically the validity of CV measures of nonuse values. The panel provided an extensive set of guidelines for CV survey construction, administration, and analysis, and distinguished a subset of items from their guidelines for special emphasis and described them as burden of proof requirements. Of particular interest was the panel's requirement that CV surveys demonstrate responsiveness to the scope of the environmental insult. That demonstration has come to be called a scope test.

This report summarizes the findings from several contingent valuation (CV) studies conducted by the authors and reports the findings from the first study to adhere to the guidelines established by the NOAA Panel on Contingent Valuation. The results of the study that conformed to the NOAA guidelines provides evidence supporting many of the recommendations of the panel. However, supplementary research in this paper suggests that the panel's concerns regarding temporal reliability, survey-question format, and social desirability biases appear to be unwarranted. Thus, the authors suggest it may be possible to relax some of the panel's standards.

Cole, R., and others. 1996. Linkages Between Environmental Outputs and Human Services. IWR Report 96-R-4. U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/96r04.pdf

Summary: This report identifies relevant socioeconomic use and nonuse values that are associated with environmental projects, and also improves the linkages between environmental output measures and necessary inputs for socioeconomic evaluation. It answers the question: What are the possible changes in the ecosystem that may result from environmental mitigation and restoration projects, and what outputs and services do these changes provide society? The report includes a suite of tables which link management options to ecological inputs, to ecological outputs, and then finally to human services. Also, indirect effects of management options are identified. The report is centered on USACE projects and alternatives, but is applicable to restoration projects sponsored by other organizations as well.

Farber, S. "The Value of Coastal Wetlands for Recreation: An Application of Travel Cost and Contingent Valuation Methodologies." Journal of Environmental Management. Volume 26. Pages 299 to 312.

Summary: This study reports on a survey of Louisiana recreational users of coastal wetlands administered for the purpose of estimating wetlands recreational value. The primary technique was the travel cost method. The value estimates obtained using this method are of similar magnitude to those obtained using a contingent valuation question in the survey. Depending on the time cost value used, the average capitalized value ranged from $36 to $111 per acre. This study provides an overview of the travel cost method of environmental valuation and provides an application of its use.

Feather, T., and others. 1995. Review of Monetary and Nonmonetary Valuation of Environmental Investments. IWR Report 95-R-2. U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/95r02.pdf

Summary: This report examines the conceptual foundation and institutional setting for assessing monetary and nonmonetary techniques of valuing the environment. Placing value on the environment, whether through monetary-based methods or through other evaluation techniques, has been and will continue to be a widely debated topic. Specific objectives of this report are to: 1) describe services provided by environmental resources and systems and methods for their measurement or valuation; 2) review existing research programs and products; and 3) evaluate the resource constraints on potential Corps field applications. Independent expert views from an economist, an engineer, an ecologist, and a psychologist as to environmental outputs and valuation techniques are included as appendices.

Field, B.C. 1994. Environmental Economics: An Introduction. McGraw-Hill [Publishers]. New York, NY.

Summary: This book examines the fundamental principles of environmental economics, including the application of cost-benefit analysis, cost-effectiveness analysis, natural resource economics, markets, and economic efficiency principles in analyzing environmental policies. The book also explores criteria for evaluating environmental policies and examines environmental policies commonly used to achieve environmental goals, including command-and-control strategies, litigation, moral suasion, standards, and incentive programs.

Garrod, G., and K. Willis. 2000. Economic Valuation of the Environment: Methods and Case Studies. Edward Elgar. Northampton, MA.

Summary: This book provides an overview of environmental valuation methods, including use (current, option, anticipatory, amenity) and non-use (bequest and existence) values. It also presents a critical examination of several environmental valuation techniques (hedonic pricing, contingent valuation, travel cost method) and explores a number of other concepts relevant to environmental economics -- willingness to pay versus willingness to accept, expressed versus revealed preference techniques. This book provides detailed analysis of the varying types of environmental values considered in environmental economics and techniques for economic assessment of those values.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Lazo, J., G. McClelland, and W. Schulze. 1997. "Economic Theory and Psychology of Non-use Values." Land Economics. Volume 73, Number 3. Pages 358 to 371.

Summary: This report examines non-use values, the willingness to pay vs. willingness to accept approaches to valuing environmental resources, and intergenerational equity. Potential double counting across generations has led some opponents of the contingent valuation method to claim that non-use values should be eliminated from benefit estimates. This paper shows both theoretically and empirically that this conclusion is not warranted. Depending on individuals' perception of the feasibility of intergenerational transfers and the nature of interdependent preferences, stated willingness to pay for an environmental commodity may or may not include values that are double counted. Paternalistic altruism and current overuse of a natural resource are shown theoretically to provide appropriate motives for bequest values which should be included in measures of environmental benefits.

Leeworthy, V., and J. Bowker. 1997. Non-market Economic User Values of the Florida Keys / Key West. National Oceanic and Atmospheric Administration. Silver Spring, MD. Available at: http://marineeconomics.noaa.gov/SocmonFK/publications/97-30.pdf

Summary: This report provides estimates of the non-market economic user values for recreating visitors to the Florida Keys/Key West that participated in natural resource-based activities. It is the fifth in a series that is being developed as part of the project entitled “Linking the Economy and Environment of the Florida Keys/Florida Bay.” The overall project objectives are to 1) estimate the market and non-market economic values of recreation/tourism uses of the marine resources of the Florida Keys/Florida Bay ecosystem; 2) provide a practical demonstration of how market and non-market economic values of an ecosystem can be considered an integral component of the economy of a region when formulating sustainable development objectives and policies; and 3) foster cooperative management processes.

Lipton D., and others. 1995. Economic Valuation of Coastal Resources: A Handbook for Coastal Resource Policymakers. NOAA Coastal Ocean Program Decision Analysis Series No. 5. NOAA Coastal Ocean Office. Silver Spring, MD. Available at: http://www.mdsg.umd.edu/Extension/valuation/handbook.htm

Summary: This report is the outcome of the NOAA Coastal Ocean Program (COP)-sponsored environmental valuation workshops. As the text to support the teaching of these workshops developed and as the need to transfer this information to a wider audience of coastal managers than workshop attendees became apparent, it was decided to present the Handbook as a stand-alone document. The Handbook is a blend of writing by experts in the field specifically tailored for the management community and provides input by managers who have attended the COP workshops. This report examines environmental valuation concepts and the application of those concepts to a number of relevant case studies involving coastal management.

Mahan, B. 1997. Valuing Urban Wetlands: A Property Pricing Approach. IWR Report 97-R-1. U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/97r01.pdf

Summary: This study examines the hedonic pricing method of non-market valuation of environmental valuation as applied to Oregon wetlands. This study notes that because the values of urban wetlands are not represented in a market, an oversupply of wetlands converted to other uses and an undersupply of protected wetlands may result. In order to improve wetland resource allocation decisions, non-market valuation techniques can be used to estimate the economic value of wetland attributes that represent collective goods. Using the hedonic property pricing approach, this study estimated the value of wetland environmental amenities in the Portland, Oregon metropolitan area.

Smith, V., G. Houtven, and S. Pattanayak. 1999. Benefit Transfer as Preference Calibration. Resources for the Future. Discussion Paper 99-36. Washington, D.C. Available at: http://www.rff.org/rff/Documents/RFF-DP-99-36.pdf

Summary: This paper illustrates a new approach to benefit transfer for the non-market valuation of environmental resources. It treats transfer as an identification problem that requires assessing whether available benefit estimates permit the parameters of a preference function to be identified. The transfer method proposed uses these identifying restrictions to calibrate preference parameters and bases the benefit estimates on that preference function. The approach is illustrated using travel cost, hedonic and contingent valuation estimates, as well as combinations of estimates. It has three potential advantages over conventional practice: (1) it allows multiple, potentially overlapping estimates of the benefits of an improvement in environmental quality to be combined consistently; (2) it assures the transferred estimates of the benefits attributed to a proposed change can never exceed income; and (3) it provides a set of additional "outputs" that offer plausibility checks of the benefit transfers.

Spurgeon, J. 1998. "The Socio-Economic Costs and Benefits of Coastal Habitat Rehabilitation and Creation." Marine Pollution Bulletin. Volume 37, Number 8-12. Pages 373 to 382.

Summary: This paper provides a comprehensive overview of the merits and limitations of using an economics-based approach to assess and implement initiatives for coastal habitat rehabilitation and creation. A review of the literature indicates that habitat rehabilitation/creation costs vary widely between and within ecosystems. For coral reefs, costs range from US$ 10,000 to 6.5 million/hectare (ha); (1) for mangroves US$ 3000-510,000/ha; for seagrasses US$ 9000-680,000/ha and for saltmarshes US$ 2000-160,000/ha. A review of the economic benefits derived from various coastal habitats based on a "Total Economic Value" approach (i.e. accounting for direct and indirect uses, and "non-uses") reveals that many thousands of US$ per hectare could ultimately accrue from their rehabilitation/creation. The paper concludes that despite its limitations, the "benefit-cost analysis" framework can play an important role both in assessing the justification of coastal habitat rehabilitation/creation initiatives, and by helping to improve the overall effectiveness of such initiatives.

Methods for Measuring Natural Resource Values over Time

Adamowicz, W., J. Louviere, and J. Swait. 1998. Introduction to Attribute-Based Stated Choice Methods. National Oceanic and Atmospheric Administration Damage Assessment Center. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/pubscm.pdf

Summary: This report examines traditional environmental valuation methods and investigates the implications of switching to a resource based compensation method. The report concludes that expanding restoration options to include non-monetary compensation implies that attribute-based methods must be used to develop measurement and evaluation tools.

Arrow, K., and others. 1996. Benefit-Cost Analysis in Environmental, Health, and Safety Regulation: A Statement of Principles. American Enterprise Institute. Annapolis, MD. Available at: http://www.aei-brookings.org/admin/authorpdfs/page.php?id=203

Summary: This report frames benefit-cost analysis discussions in terms of its role in legislative and regulatory policy debates on improving the environment, health, and safety. The report is divided into two sections. The first provides some guidance for decision-makers on using economic analysis to evaluate laws and regulations. The second offers specific suggestions for improving the quality of economic analysis in regulatory decision-making.

Callan, S., and J. Thomas. 2003. Environmental Economics and Management: Theory, Policy and Applications. Thomson South-Western. Mayson, OH.

Summary: This book presents and examines analytical tools for environmental analysis, including environmental risk analysis and benefit cost analysis. It explores the application of these tools to air, water, solid waste, toxic waste, and global environmental management issues.

Freeman, A. 1993. The Measurement of Environmental and Resource Values: Theory and Methods. Resources for the Future. Washington, D.C.

Summary: This book provides an introduction and overview of the principal methods and techniques of resource valuation. More specifically, the book illuminates the following environmental valuation methods: contingent valuation, property value models, travel cost, hedonic wage model, and nonuse valuation. It also applies these methods in the measurement of the costs of environmental policies.

Garrod, G., and K. Willis. 2000. Economic Valuation of the Environment: Methods and Case Studies. Edward Elgar. Northampton, MA.

Summary: This book provides an overview of environmental valuation methods, including use (current, option, anticipatory, amenity) and non-use (bequest and existence) values. It also presents a critical examination of several environmental valuation techniques (hedonic pricing, contingent valuation, travel cost method) and explores a number of other concepts relevant to environmental economics -- willingness to pay versus willingness to accept, expressed versus revealed preference techniques. This book provides detailed analysis of the varying types of environmental values considered in environmental economics and techniques for economic assessment of those values.

Garrod, G., and K. Willis. 1997. "The Non-Use Benefits of Enhancing Forest Biodiversity: A Contingent Ranking Study." Ecological Economics. Volume 21, Number 1. Pages 45 to 61.

Summary: This study provides an analysis of non-use benefits, environmental valuation and the discrete-choice contingent ranking approach. The study reported in this paper estimates that substantial non-use values would be generated if the Forestry Commission in the UK were to continue in its current efforts to develop management practices that promote an increase in biodiversity across a large area of its commercial holdings in remote parts of the country which are seldom visited. Rather than adopting a referendum-type contingent valuation method, a discrete-choice contingent ranking approach is used to estimate the general public's willingness to pay to increase the area of these forests managed under each of three forest management standards designed to offer increasing levels of biodiversity at the expense of commercial timber production. This permits relative preferences for different forest management standards to be measured at the same time as willingness to pay to enhance biodiversity.

Goodman, S., W. Seabrooke, and S. Jaffry. "Considering Conservation Value in Economic Appraisals of Coastal Resources." Journal of Environmental Planning and Management. Volume 41, Number 3. Pages 313 to 336.

Summary: This paper presents the findings of a contingent valuation (CV) survey designed to measure non-use values for the natural coastal environment. This was attempted through evaluating public and scientific values of conservation quality. The results suggest that public perceptions of conservation quality are multidimensional, and that it may be difficult for some individuals to express their preferences for the conservation value of natural resources in monetary terms. Additionally, public and scientific judgments differ concerning some of the physical attributes imparting conservation value. These findings have important implications for efforts to consider environmental quality in land and coastal use decisions.

Summary: This report provides a discussion of the national economic development (NED) principle that is essential to determine whether the federal government will construct any water resource project. More specifically, the report features pragmatic analysis of appropriate benefit-cost principles, treatment of time preference, and the application of environmental economics principles in the analysis of water resource projects. The NED principle articulates a framework in making decisions concerning water resource projects. Analysts working within this framework and decision-makers who must understand it are this report's intended audience.

Hanley, N., J. Shogren, and B. White. 1997. Environmental Economics in Theory and Practice. Macmillan. London, UK.

Summary: This book provides a guide to several important areas of natural resource and environmental economics: the economics of non-renewable and renewable resource extraction, the economics of pollution control, the application of cost-benefit analysis to the environment, and the economics of sustainable development. This book provides models and an analysis relating to management of non-renewable and renewable resource extraction and the application of benefit-cost analysis to the environment and the economics of sustainable development.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision-makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Higgins, M., and T. Ardito "Rhode Island Restoration." [Web site]. Available at: http://www.edc.uri.edu/restoration/index.htm

Summary: This Web site provides data, information, and tools to coastal managers, educators, and the public to restore Rhode Island's coastal habitats.

King, D., and M. Mazzotta. "Ecosystem Valuation." [Web site]. Available at: http://www.ecosystemvaluation.org/index.html

Summary: This Web site provides clear, non-technical explanations of ecosystem valuation, methods, and applications. This website describes how economists value the beneficial ways that ecosystems affect people -- ecosystem valuation. It is designed for non-economists who need answers to questions about the benefits of ecosystem conservation, preservation, or restoration.

Kopp, R., A. Krupnick, and M. Toman. 1997. Cost-Benefit Analysis and Regulatory Reform: An Assessment of the Science and the Art. Discussion Paper 97-19. Resources for the Future. Washington, D.C. Available at: http://www.rff.org/rff/Documents/RFF-DP-97-19.pdf

Summary: This report summarizes the state of knowledge regarding benefit-cost analysis and offers suggestions for improvement in its use, especially in the context of environmental regulation. The report notes that the continuing efforts in the 104th Congress to legislate requirements for benefit-cost analysis and the revised Office of Management and Budget guidelines for the conduct of such assessments during a regulatory rulemaking process highlight the need for a comprehensive examination of the role that benefit-cost analysis can play in agency decision-making. This report provides such an examination by detailing the current state of practice in benefit-cost analysis and suggesting techniques for improving its effectiveness.

Lipton, D., and others. 1995. Economic Valuation of Coastal Resources: A Handbook for Coastal Resource Policymakers. NOAA Coastal Ocean Program Decision Analysis Series No. 5. NOAA Coastal Ocean Office. Silver Spring, MD. Available at: http://www.mdsg.umd.edu/Extension/valuation/handbook.htm

Summary: This report is the outcome of the NOAA Coastal Ocean Program (COP)-sponsored environmental valuation workshops. As the text to support the teaching of these workshops developed and as the need to transfer this information to a wider audience of coastal managers than workshop attendees became apparent, it was decided to present the Handbook as a stand-alone document. The Handbook is a blend of writing by experts in the field specifically tailored for the management community and provides input by managers who have attended the COP workshops. This report examines environmental valuation concepts and the application of those concepts to a number of relevant case studies involving coastal management.

Mazurek, J. 1996. The Role of Health Risk Assessment and Cost-Benefit Analysis in Environmental Decision-Making in Selected Countries: An Initial Survey. Discussion Paper 96-36. Resources for the Future. Washington, DC.

Summary: This report describes how information from risk assessments and cost-benefit analyses is used by decision makers in six other industrialized nations, including Japan, Germany, the United Kingdom, the Netherlands, and Canada. The report notes that in other industrialized nations decision makers deal with uncertainties associated with risk assessments differently than in the U.S. They are less likely to employ "default assumptions" to bridge uncertainties and instead tailor risk evaluations to the chemical in question. Furthermore, while U.S. agencies are sometimes required to pair information from risk assessments with data from cost-benefit analyses in order to estimate how much it costs to stem or avert environmental and health effects, the decision makers in the six study regimes primarily use such information to set standards, screen chemicals, and identify potential substitutes for hazardous chemicals. Respondents in the study countries say that both quantitative risk assessment and cost-benefit analysis presently contain too many uncertainties to yield meaningful results. However, trade liberalization and shrinking government budgets are stirring greater interest abroad in how the U.S. conducts and uses risk assessments.

McClelland, G., and others. 1992. Methods for Measuring Non-Use Values: A Contingent Valuation Study of Groundwater Cleanup. University of Colorado, Center for Economic Analysis. Boulder, CO.

Summary: This study examines non-use environmental benefits and the use of the contingent valuation method (CVM) for valuing environmental benefits. The CVM is the only methodology now available for measuring non-use benefits which likely comprise a large portion of values for environmental commodities. The measurement of the total benefits (including use, altruistic, bequest and existence values) of cleaning up contaminated groundwater is necessary to evaluate a variety of programs (e.g., Superfund [CERCLA] and the Resource Conservation and Recovery Act [RCRA]). This study constitutes the third in a series of studies conducted for the USEPA exploring the use of the CVM for valuing environmental benefits.

Office of Management and Budget. 1992. Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs. OMB Circular A-94. Washington, D.C. Available at: http://www.whitehouse.gov/omb/circulars/a094/a094.pdf

Summary: OMB Circular A-94 is designed to promote efficient resource allocation through well-informed decision-making by the federal government. It provides general guidance for conducting benefit-cost and cost-effectiveness analyses. It also provides specific guidance on the discount rates to be used in evaluating federal programs whose benefits and costs are distributed over time. The general guidance will serve as a checklist of whether an agency has considered and properly dealt with all the elements for sound benefit-cost and cost-effectiveness analyses. OMB Circular A-94 identifies procedures used by the federal government in discounting benefits and costs, including those relating to the treatment of real versus nominal costs. It also provides an identification of and basis for OMB-recommended discount rates.

Orth, K., R. Robinson, and W. Hansen. 1998. Making More Informed Decisions in Your Watershed When Dollars Aren't Enough. IWR Report 98-R-1. U.S. Army Corps of Engineers, Institute for Water Resources. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/98r1.pdf

Summary: Decisions regarding potential investments in watershed resources can leave decision-makers comparing “apples to oranges” when the costs of watershed improvements are measurable in dollars but the benefits are not. While traditional benefit-cost analysis simply will not work in these situations, the tools of cost-effectiveness analysis and incremental cost analysis can help by providing information to support decision making. This paper presents a general analytical procedure for cost-effectiveness and incremental cost analyses and three example applications. The examples demonstrate the procedure's applicability to planning for investments in a variety of resources, as well as to problem-solving situations of different complexities. This paper provides an analytical framework and illustrative project-specific application of cost-effectiveness and incremental cost analysis.

Resources for the Future. 1981. A Program of Economics Research on Improving Estimation of Benefits from Reduced Pollution. Washington, D.C.

Summary: This report notes the manner in which traditional benefit-cost analysis suffers when applied to the benefits that accrue through the production of goods and services for which there are no markets. It reports the findings of a committee of economists convened in 1980 for the purposes of considering what is known about pollution control benefit estimation, how much confidence is placed in existing estimates, what methodological questions most urgently need attention, and what major data gaps demand filling. The report contains the committee's judgment on those issues.

Turner, R., D. Pearce, and I. Bateman. 1994. Environmental Economics: An Elementary Introduction. Harvester Wheatsheaf. Hemel Hempstead, UK.

Summary: Environmental Economics: An Elementary Introduction provides a comprehensive introduction to the dynamic relationship between economics and environmental policy. The authors offer a broad overview of important issues, including the changing role of economics during a time of increasing environmental concern, the impact of markets and governmental policy, environmental protection through economic mechanisms, and a practical look at how environmental economics are played out in commercial and scientific arenas. This book provides coverage of the basic elements of cost-effectiveness and benefit-cost analysis, as applied to environmental policies and programs.

Habitat Equivalency Analysis

Commencement Bay Natural Resource Trustees. 2002. Hylebos Waterway natural resource damage settlement proposal report. Review Draft. Available at: http://www.darp.noaa.gov/northwest/cbay/pdf/cbhyover.pdf

Summary: This report discusses the components of the Hylebos Waterway natural resource damage settlement. The settlement relied on the use of habitat equivalency analysis (HEA) to determine how much restoration activity potentially responsible parties will be required to undertake to resolve their natural resource damage liabilities.

Dunford, R.W., T.C. Ginn, and W.H. Desvousges. 2004. "The use of habitat equivalency analysis in natural resource damage assessments." Ecological Economics. Volume 48. Pages 49 to 70.

Summary: This journal article analyzes the use of habitat equivalency analysis (HEA) in natural resource damage assessments. The paper provides a detailed description of the framework with a hypothetical example, then examines each of the HEA assumptions. The paper also describes the challenges in developing estimates for the input parameters of the model.

Fonseca, M.S. 1997. Report for UNITED STATES v. MELVIN FISHER et. al. Case No. 92-10027-CIVIL-DAVIS. Available at: http://www.darp.noaa.gov/library/pdf/melfish3.pdf

Summary: This is one of three reports submitted as evidence in the case of U.S. vs. Melvin A. Fisher. Habitat equivalency analysis (HEA) was used in that case to determine the restoration required due to damage to seagrass beds in Coffins Patch in 1992. This report discusses the restoration options and subsequent restoration and monitoring plan.

Fonseca, M.S., B.E. Julius, and W.J. Kenworthy. 2000. "Integrating biology and economics in seagrass restoration: How much is enough and why?" Ecological Engineering. Volume 15. Pages 227 to 237.

Summary: This paper examines the usefulness of habitat equivalency analysis (HEA) for quantifying the interim loss of resource services. The paper focuses on seagrass beds and uses a case study where field surveys of injured seagrass beds in the Florida Keys National Marine Sanctuary were conducted over several years and provide the basis for computing the intrinsic recovery rate, and thus the replacement ratio. This computation determines the lost on-site services pertaining to the ecological function of an area as the result of an injury and sets this against the difference between intrinsic recovery and recovery afforded by restoration. Joining empirical field data with economic theory has produced a reasonable and typically conservative means of determining the level of restoration necessary to replace lost services. This method was upheld in the courts in the case of US versus Melvin Fisher.

Fonseca, M.S., W.J. Kenworthy, and G.W. Thayer. 1998. "Appendix E: Example Propeller and Mooring Scar Restoration Plan." In: Guidelines for the conservation and restoration of seagrasses in the Unites States and adjacent waters, Fonseca M.S., W.J. Kenworthy, and G.W. Thayer, eds. National Oceanic and Atmospheric Administration, Coastal Ocean Office. Silver Spring, Maryland. Available at: http://shrimp.bea.nmfs.gov/library/digital.html

Summary: This Appendix provides a brief discussion, in general terms, of the method for applying habitat equivalency analysis (HEA). The paper focuses on seagrass restoration.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Julius, B. 1997. Report for U.S. vs. Melvin A. Fisher et al. National Oceanic and Atmospheric Administration Damage Assessment Center. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/melfish2.pdf

Summary: This is one of three reports submitted as evidence in the case of U.S. vs. Melvin A. Fisher. Habitat equivalency analysis (HEA) was used in that case to determine the restoration required due to damage to seagrass beds in Coffins Patch in 1992. This report discusses the findings of a study using Habitat Equivalency Analysis to determine the quantity of equivalent habitat necessary to be restored and/or created, beyond the restoration of injured resources (restoration of trench-like excavations in Thalassia seagrass beds) to baseline conditions. The report is particularly valuable because it demonstrates the use of the technique on a specific case.

King, D.M. 1997. Comparing Ecosystem Services and Values. National Oceanic and Atmospheric Administration. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/kingpape.pdf

Summary: This report provides a critical examination of traditional environmental valuation techniques, an overview of Habitat Equivalency Analysis (HEA), and discusses potential HEA application. The report identifies some typical ecosystem functions and related services and presents some concepts and terms that are useful for comparing ecosystem values. It also identifies two sets of criteria for developing indicators of ecosystem value: one based on capacity, opportunity, payoff, and equity considerations under fixed landscape conditions, and another based on factors such as scarcity, vulnerability, sensitivity, and reversibility under changing landscape conditions. Finally, it illustrates why such indicators are important by showing their essential role in performing HEA and in “scaling” primary and compensatory restoration projects.

Lofton, J.A., and others. 1997. UNITED STATES OF AMERICA, Plaintiff, v. MELVIN A. FISHER, KANE FISHER, SALVORS, INC., a Florida Corporation, M/V BOOKMAKER, M/V DAUNTLESS, M/V TROPICAL MAGIC, their engines, apparel, tackle, appurtenances, stores, and cargo, in rem, Defendants. MOTIVATION, INC., Plaintiff, v. UNIDENTIFIED, WRECKED AND ABANDONED SALING VESSEL, etc., Defendant. United States District Court for the Southern District of Florida, Key West Division.

Summary: Habitat equivalency analysis (HEA) was used in this case to determine the restoration required due to damage to seagrass beds in Coffins Patch in 1992.

Milon, J.W., and R.E. Dodge. 2001. "Applying habitat equivalency analysis for coral reef damage assessment and restoration." Bulletin of Marine Science. Volume 69, Number 2. Pages 975 to 988.

Summary: This article provides a review of the basic principles of habitat equivalency analysis (HEA) and discusses important considerations when applying HEA to coral reef damage assessments.

National Oceanic and Atmospheric Administration. 1995. Habitat Equivalency Analysis: How Much Restoration is Enough? Damage Assessment and Restoration Program, National Oceanic and Atmospheric Administration. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/heagenl.pdf

Summary: This fact sheet provides a brief overview of habitat equivalency analysis (HEA) and its application in determining how much restoration is needed to compensate for environmental losses.

National Oceanic and Atmospheric Administration. 1997. Natural Damage Assessment Guidance Document: Scaling Compensatory Restoration Actions (Oil Pollution Act of 1990). Damage Assessment and Restoration Program, NOAA. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/scaling.pdf

Summary: This Guidance Document provides natural resource trustees with general guidance for selecting approaches to scale compensatory restoration projects, an activity that is part of the restoration selection component of the Restoration Planning Phase of an NRDA. This guidance document outlines a decision-making framework for classifying restoration alternatives and, based on the classification, selecting an appropriate scaling approach and methods to implement the approach. Habitat equivalency analysis (HEA) is discussed as a service-to-service scaling method.

National Oceanic and Atmospheric Administration. 1999. Discounting and the Treatment of Uncertainty in Natural Resource Damage Assessment: Technical Paper 99-1. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/discpdf2.pdf

Summary: This report examines uncertainty in the scale of restoration actions and the effectiveness of restoration implementation. It proposes two approaches for addressing uncertainty. First, it proposes to address uncertainty by incorporating it in the measure of losses and gains. Second, it proposes to include uncertainty in sensitivity analyses relating to discount rates. It also provides discussion of discounting as a necessary tool for calculating the present value of interim service losses and it identifies appropriate discount rates for varying types of damage claims.

National Oceanic and Atmospheric Administration. 2000. Habitat Equivalency Analysis: An Overview. Damage Assessment and Restoration Program, National Oceanic and Atmospheric Administration. Silver Spring, MD. Available at: http://www.darp.noaa.gov/library/pdf/heaoverv.pdf

Summary: This report provides an overview of habitat equivalency analysis (HEA), illustrating the method with a hypothetical example and presenting a mathematical representation of the HEA calculations used to support the HEA. The report also discusses the theory underlying HEA and its potential application for seagrass, coral reefs, tidal wetlands, and other coastal habitats.

Penn, T., and T. Tomasi. 2002. "Calculating resource restoration for an oil discharge in Lake Barre, Louisiana, USA." Environmental Management. Volume 29, Number 5. Pages 691 to 702.

Summary: This paper outlines the use of habitat equivalency analysis (HEA) framework to determine the size of restoration needed to compensate the public for the interim loss of resources and services due to the discharge of oil into Lake Barre, Louisiana. In this case study, the trustees assessed impacts for oiled salt marsh and direct mortality to finfish, shellfish, and birds. The restoration project required planting salt-marsh vegetation in dredge material that was deposited on a barrier island. Using the HEA framework, it was determined that 7.5 ha of the dredge platform should be planted as salt marsh. The planted hectares will benefit another 15.9 ha through vegetative spreading, resulting in a total of 23.4 ha that will be enhanced or restored as compensation for the natural resource impacts.

Strange, E., and others. 2002. "Determining ecological equivalence in service-to-service scaling of salt marsh restoration." Environmental Management. Volume 29, Number 2. Pages 290 to 300.

Summary: This article describes the use of habitat equivalency analysis (HEA) in the context of salt marsh restoration using alternative scaling metrics. This paper makes the point that the outcome of the analysis is highly dependent on the data and assumptions used to implement the scaling method. Although structural attributes such as vegetation may recover within a few years, there is often a significant lag in the development of ecological processes such as nutrient cycling that are necessary for a fully functioning salt marsh. Moreover, natural variation can make recovery trajectories difficult to define and predict for many habitat services. This article points out that HEA is an excellent tool for scaling restoration actions because it reflects this ecological variability and complexity. At the same time warning practitioners to recognize that conclusions about the amount of restoration needed to provide ecological services equivalent to those that are lost will depend critically on the ecological data and assumptions that are used in the HEA calculation.

United States Court of Appeals for the Eleventh Circuit. 2001. UNITED STATES OF AMERICA, Plaintiff-Appellee-Cross-Appellant, v. GREAT LAKES DREDGE & DOCK COMPANY, Defendant-Appellant-Cross-Appellee.

Summary: This is a case before the Court of Appeals in which the defendant appealed the use of habitat equivalency analysis (HEA) for awarding damages. The Appeals court held that HEA was an appropriate method to scale the compensation of seagrass restoration required, that the underlying scientific data was sufficient, and the HEA was peer reviewed and accepted for publication.

Zieman, J.C. 1997. Report for UNITED STATES v. MELVIN FISHER et. al. Case No. 92-10027-CIVIL-DAVIS. Available at: http://www.darp.noaa.gov/library/pdf/melfish1.pdf

Summary: This is one of three reports submitted as evidence in the case of U.S. vs. Melvin A. Fisher. Habitat equivalency analysis (HEA) was used in that case to determine the restoration required due to damage to seagrass beds in Coffins Patch in 1992. This report discusses the methods used to determine the amount of area damaged and an evaluation of the damaged site for recovery and restoration.

Risk and Uncertainty in Environmental Restoration Programs

Fisher, A., and U. Narain. 2003. "Global warming, endogenous risk, and irreversibility." Environmental and Resource Economics. Volume 25, Number 4. Pages 395 to 416.

Summary: This paper examines the optimal rate of emission of greenhouse gases when investment in abatement capital is sunk, some part of the stock of greenhouse gases is non-degradable, and there is an endogenous risk of catastrophic damages in the future. The report notes that the agent wants to avoid two situations: (i) investing in sunk abatement capital today when the damages tomorrow turn out to be negligible; (ii) not reducing the stock of non-degradable greenhouse gases today when damages are revealed to be catastrophic tomorrow. Unfortunately, the stock of greenhouse gases cannot be reduced unless the agent invests in abatement capital. Given this trade-off, and the added feature that the probability of a catastrophe occurring may be endogenous, the paper asks what should be the optimal rate of emission of greenhouse gases. Previous studies have either relied on numerical simulations or failed to capture features of the environment important to global warming. This paper fills these gaps in the literature by developing a stochastic dynamic programming model that allows for sunk capital, a non-degradable stock of greenhouse gases, and endogenous catastrophic damages.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision-makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Heal, G., G. Chichilnisky, and A. Beltratti. 1996. Uncertain Future Preferences and Conservation. Columbia University, Columbia Business School. New York. Available at: http://www-1.gsb.columbia.edu/faculty/gheal/EconomicTheoryPapers/pw-96-03.pdf

Summary: This report examines risk and uncertainty and the impact of irreversibility as it applies to sustainability. The report notes that the value of environmental assets such as biodiversity, unique locations, and the atmosphere may be hard to quantify. The irreversibility of decisions to destroy these assets and the implications of the destruction has been the subject of extensive discussion. The report analyzes the value of such assets under conditions of uncertainty about future preferences, and shows that this uncertainty will imply a conservative motive if it is in a specific sense asymmetric. The incentive to conserve arising from the uncertainty about future preferences may be reflected in an increase in the shadow prices of the asset.

Knight, F.H. 1921. Risk, Uncertainty, and Profit. Houghton Mifflin. Boston, MA. Available at: http://www.econlib.org/library/Knight/knRUP.html

Summary: This document describes Frank Knight’s contribution to the study of economic risk and uncertainty. Knight authored a book published in 1921 that is considered a landmark. Many of the terms defined in his text are used by economists today to describe risk and uncertainty. This text describes how there is more than one way to define these terms, and that the description of risk and uncertainty as related to environmental restoration may be slightly different than that generally practiced by economists.

Males, R.M. 2002. Beyond Expected Value: Making Decisions Under Risk and Uncertainty. IWR Report 02-R-4. Institute of Water Resources, U.S. Army Corps of Engineers. Alexandria, Virginia. Available at: http://www.iwr.usace.army.mil/iwr/pdf/02r4bey_exp_val.pdf

Summary: Risk analysis is comprised of three components: risk assessment, risk communication, and risk management. This document describes a three-step process for incorporation of risk analysis into the decision-making process. Basic technical concepts of risk are discussed and a variety of methods of quantifying risk and visualizing risk measures are demonstrated. A worked example shows how risk-based information can be incorporated into a Multi-Criterion Decision Making (MCDM) process. This report provides examples on quantifying risk with respect to restoration programs.

Marshall, H.E. 1999. "Sensitivity analysis." Chapter 8.12 In: Technology Management Handbook, Dorf, R.C., ed. CRC Press. Boca Raton, FL.

Summary: This chapter defines sensitivity analysis and presents examples of applications. The analysis results are presented as text, tables and graphs to illustrate their utility in making economically based decisions. Advantages and disadvantages to sensitivity analyses are discussed. This chapter is relevant to why and how sensitivity analysis is used to study risk and uncertainty with respect to restoration programs.

Summary: This report examines uncertainty in the scale of restoration actions and the effectiveness of restoration implementation. It proposes two approaches for addressing uncertainty. First, it proposes to address uncertainty by incorporating it in the measure of losses and gains. Second, it proposes to include uncertainty in sensitivity analyses relating to discount rates. It also provides discussion of discounting as a necessary tool for calculating the present value of interim service losses and it identifies appropriate discount rates for varying types of damage claims.

Noble, B.D., and others. 2000. Analyzing Uncertainty in the Costs of Ecosystem Restoration. IWR Report 00-R-3. Institute of Water Resources, U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/00-R-3.pdf

Summary: This report summarizes the findings of a preliminary effort to examine the factors that contribute to the differences between projected costs and actual expenditures, and to identify ways to reduce the uncertainty associated with the costs of habitat restoration projects. Comparisons of estimated and actual costs of real projects include a quantitative analysis of available cost data, and a more qualitative assessment of project costs that builds on observations of individual project managers. This report defines and provides examples of uncertainty analysis with respect to restoration programs.

Perrings, C. 1991. "Reserved rationality and the precautionary principle: technological change, time and uncertainty in environmental decision making." In: Ecological Economics: The Science and Management of Sustainability. Costanza, R., ed. Columbia University Press. New York, NY.

Summary: This chapter is a very good review of uncertainty and the precautionary principle and forms the basis of what is now termed "adaptive management." This reference describes how economists (and ecologists) deal with uncertainty in the face of making decisions regarding environmental (or ecological) management actions.

Water Resources Council. 1983. Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies. Government Printing Office. Washington, D.C. Available at: http://www.iwr.usace.army.mil/iwr/pdf/p&g.pdf

Summary: This document provides the principles and guidelines for planning federal water resources projects. It contains methods for calculating the benefits and costs of water resources development alternatives accurately and consistently, and is intended to ensure proper and consistent planning by the covered federal agencies. Included in the guidance is instruction on how planners should identify areas of risk and uncertainty in their analyses and describe them clearly, so that decisions can be made with the knowledge of the degree of reliability of the estimated benefits and costs and of the effectiveness of alternative plans. This document has been a basic planning document for 20 years for the US Army Corps of Engineers and the Natural Resource Conservation Service.

Willows, R.I., and R.K. Connell. 2003. Climate adaptation: Risk, uncertainty and decision-making. Technical Report. UK Climate Impacts Programme (UKCIP). Oxford, United Kingdom. Available at: http://www.ukcip.org.uk/resources/publications/pub_dets.asp?ID=4

Summary: This report provides guidance to help decision-makers take account of risk and uncertainty associated with climate change. An overview of the concepts of risk and uncertainty is followed by presentation of an eight-step decision-making process, with examples, that demonstrates how assessing complex climate risks can support judgments and decisions concerning appropriate future courses of action. The report helps define the concepts of risk and uncertainty and how quantifying these can lead to better decisions regarding environmental resources.

Yoe, C.E. 1996. An Introduction to Risk and Uncertainty in the Evaluation of Environmental Analysis. IWR Report 96-R-8. Institute of Water Resources, U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/96r08.pdf

Summary: This report explains why incorporating risk and uncertainty into environmental restoration planning studies can improve the quality of the decision-making process. It is written for a new risk analyst and is an overview of the basics of risk and uncertainty analysis. The report provides definitions of many terms and concepts related to environmental planning and restoration.

Yoe, C.E. 2001. Ecosystem Restoration Cost Risk Assessment. IWR Report 02-R-1. Institute for Water Resources, U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/iwrrpt02R1.pdf

Summary: This report provides a basic intuitive definition of risk analysis and presents reasons for performing a risk analysis of project costs. Applicable techniques for estimating cost uncertainties are explained and the results of an example analysis are given. This report helps define risk analysis and examine cost uncertainties with respect to restoration programs.

Yoe, C.E., and K.D. Orth. 1996. Planning Manual. IWR Report 96-R-21. Institute of Water Resources, U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/96r21.pdf

Summary: This document presents a six-step, flexible planning process, meant to provide an effective model for systematic problem-solving. The six steps are 1) Identify problems and opportunities, 2) Inventory and forecast resources, 3) Formulate alternative plans, 4) Evaluate alternative plans, 5) Compare alternative plans, and 6) Select a recommended plan. It was written for new Corps planners with five or fewer years of experience and describes what planning is and how it is best practiced by the Corps. However, the document is meant to provide useful information to other professionals outside the Corps.

Yoe, C., and L. Skaggs. 1997. Risk and Uncertainty Analysis Procedures for the Evaluation of Environmental Outputs. IWR Report 97-R-7. Institute of Water Resources, U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/97r07.pdf

Summary: This report provides an examination of two common techniques used for evaluating risk (sensitivity analysis and Monte Carlo simulations) and provides an overview of an eight-step approach to performing risk analysis. The report notes that ecosystem restoration projects are replete with uncertainty, including the estimation of future environmental outputs. This article helps to differentiate between risk analysis and uncertainty evaluations, and provides examples of sensitivity analyses. Further, it describes the Habitat Evaluation Procedures model for evaluating habitat.

Discounting and Time Preference

Bellas, A., and R. Zerbe. 2003. A Primer for Benefit Cost Analysis. Working Paper. University of Washington. Seattle, WA. Available at: http://faculty.washington.edu/bellas/cba/index.html

Summary: This working paper presents an overview of the principles and theoretical rational for benefit-cost analysis and discounting. It presents a theoretical justification for discounting, outlines basic discounting techniques, covers discounting mechanics, and discusses treatment of real versus nominal dollars. This discusses basic discounting techniques and theoretical justifications for discounting future benefits and costs.

Environmental Protection Agency. 2000. Guidelines for Preparing Economic Analyses. EPA 240-R-00-003. Washington, D.C. Available at: http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Guidelines.html/$file/Guidelines.pdf

Summary: This report discusses practical compromises: benefit cost analysis, economic impact analysis, and equity assessments. The Guidelines for Preparing Economic Analyses (or EA Guidelines) is part of a continuing effort by the EPA to develop improved guidance on the preparation and use of sound science in support of the decision-making process. The EA Guidelines provide guidance on analyzing the benefits, costs, and economic impacts of regulations and policies. The document draws from several previously published sources, including existing economic guidelines materials prepared by the EPA in the mid-1980s, other Agency economic analyses and handbooks, and materials prepared by the Office of Management and Budget in support of Executive Order 12866 on regulatory planning and analysis. It seeks to incorporate recent theoretical, empirical, and modeling advances in environmental economics, drawing upon the considerable body of scholarly literature.

Summary: This report provides a discussion of the national economic development (NED) principle that is essential to determine whether the federal government will construct any water resource project. More specifically, the report features pragmatic analysis of appropriate benefit-cost principles, treatment of time preference, and the application of environmental economics principles in the analysis of water resource projects. The NED principle articulates a framework in making decisions concerning water resource projects. Analysts working within this framework and decision-makers who must understand it are this report's intended audience.

Hanley, N., and C. Splash. "Discounting and the Environment." In: Cost Benefit Analysis and the Environment, Hanley, N. and C. Splash, eds. Edward Elgar. Northampton, MA.

Summary: This chapter examines the use of discounting in assessing environmental benefits and costs and notes that it remains one of the major items of controversy to the application of benefit-cost analysis to environmental management. The chapter presents the justifications for and arguments concerning discounting. The chapter examines several discounting procedures used by economists and assesses their relative strengths and weaknesses. This chapter provides an examination of the theory behind and neoclassical justifications for discounting. It also highlights conservationist arguments against discounting.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision-makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Harrod, R. 1948. Towards a Dynamic Economy. St. Martin's Press. London, England.

Summary: This book examines the evolution of a theory of dynamic economics and contains an argument against discounting.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Lazo, J., G. McClelland, and W. Schulze. 1997. "Economic Theory and Psychology of Non-use Values." Land Economics. Volume 73, Number 3. Pages 358 to 371.

Summary: This report examines non-use values, the willingness to pay vs. willingness to accept approaches to valuing environmental resources, and intergenerational equity. Potential double counting across generations has led some opponents of the contingent valuation method to claim that non-use values should be eliminated from benefit estimates. This paper shows both theoretically and empirically that this conclusion is not warranted. Depending on individuals' perception of the feasibility of intergenerational transfers and the nature of interdependent preferences, stated willingness to pay for an environmental commodity may or may not include values that are double counted. Paternalistic altruism and current overuse of a natural resource are shown theoretically to provide appropriate motives for bequest values which should be included in measures of environmental benefits.

Summary: This report examines uncertainty in the scale of restoration actions and the effectiveness of restoration implementation. It proposes two approaches for addressing uncertainty. First, it proposes to address uncertainty by incorporating it in the measure of losses and gains. Second, it proposes to include uncertainty in sensitivity analyses relating to discount rates. It also provides discussion of discounting as a necessary tool for calculating the present value of interim service losses and it identifies appropriate discount rates for varying types of damage claims.

Summary: OMB Circular A-94 is designed to promote efficient resource allocation through well-informed decision-making by the federal government. It provides general guidance for conducting benefit-cost and cost-effectiveness analyses. It also provides specific guidance on the discount rates to be used in evaluating federal programs whose benefits and costs are distributed over time. The general guidance will serve as a checklist of whether an agency has considered and properly dealt with all the elements for sound benefit-cost and cost-effectiveness analyses. OMB Circular A-94 identifies procedures used by the federal government in discounting benefits and costs, including those relating to the treatment of real versus nominal costs. It also provides an identification of and basis for OMB-recommended discount rates.

Salant, S. 1995. "The Economics of Natural Resource Extraction." The World Bank Research Observer. Volume 10, Number 1. Pages 93 to 109.

Summary: This study investigates the overexploitation of natural resources in developing countries without adequate consideration given to future generations and future national wealth. The report notes that government policies influence how much of a resource is extracted today and how much is saved for the future, and notes that flawed policies needlessly waste national wealth and reduce the opportunities and well-being of future generations. This article provides a strong overview of the time preference problem in environmental economics and documents how inadequate attention to future generations results in a negative impact on national wealth.

Von Tongeren, J. 1993. Integrated Environmental and Economic Accounting: A Case Study for Mexico. The World Bank for the Committee of International Development Institutions on the Environment (CIDIE). London, UK.

Summary: This report presents the results of a case study carried out in 1991 jointly by UNSO, the World Bank, and the National Institute of Statistics, Geography and Informatics (INEGI) in Mexico, with the objective of integrating and linking environmental and economic information and exploring whether environmentally-adjusted national product aggregates for Mexico can be derived. The report describes current efforts to integrate the natural capital stock into national income and product accounts.

Irreversibility, Sustainability, Safe Minimum Standard

Beisner, B.E., D.T. Haydon, and K. Cuddington. 2003. "Alternative stable states in ecology." Frontiers in Ecology. Volume 1, Number 7. Pages 376 to 382.

Summary: This paper provides a review and discussion of ecosystem resilience, alternative stable states, and environmental "drivers." Potential methods used toward assessing ecosystem resilience are discussed.

Bratton, S.P. 1992. "Alternative Models of Ecosystem Restoration." In: Ecosystem Health, Costanza, R., B.G. Norton, and B.D. Haskell, eds. Island Press. Washington, D.C.

Summary: This chapter explores ways in which "ecosystem restoration" has been traditionally defined over time and discusses various problems associated with assumptions that restoration is simply a linear path between two attainable states. This review offers historical information and references to the evolution of restoration practices and theory.

Bromley, D. 1991. "Property Right Problems in the Public Domain." In: Environment and Economy: Property Rights and Public Policy, Bromley, D. ed. Blackwell. Malden, MA.

Summary: This chapter provides analysis of various property rights regimes and notes how the design of a property rights regime on public land (e.g., open access) can impact long-term sustainability. This chapter examines how the definition of property rights, rules, and responsibilities on public lands can impact sustainability.

Ciriacy-Wantrup, S.V. 1952. Resource Conservation. University of California Press. Berkeley, CA.

Summary: This book is one of the pioneering efforts to establish the concept of minimum safe standard and provides an early reference associated with this concept.

Costanza, R. 2000. "Social goals and the valuation of ecosystem services." Ecosystems. Volume 3. Pages 4 to 10.

Summary: This paper is associated with the study of ecosystem valuation. This is a topic that confounds many of the approaches that attempt to balance the risk of environmental degradation against real, quantitative values. These values are dependent upon both direct (easily measured) and indirect (difficult to measure) responses of ecosystems to change. This paper explores the pathways that tie social goals (e.g., positive economic performance) to the services of ecosystems and how values can be determined that can be translated into meaningful policy-making.

Costanza, R., and L. Cornwell. 1992. "The 4P approach to dealing with scientific uncertainty." Environment. Volume 34, Number 9. Pages 12 to 20 and 42.

Summary: This paper describes the 4P Approach associated with "polluter pays precautionary principle" which is highlighted in the article. The 4P approach is essentially a requirement that the private sector be “far-sighted” such that current investments are applied toward staving off future environmental and economic risk and liability. This is based on the argument that true uncertainty (events with unknown probabilities) should be treated differently from risk, where known probabilities are associated with specific events.

Costanza, R., and H. Daly. 1992. "Natural capital and sustainable development." Conservation Biology. Volume 6. Pages 37 to 46.

Summary: This paper provides a good review of the concepts "natural capital" and "sustainable development." Natural capital is part of the resource economist's quantitative measure of substitutability and complementary relationships of natural resources as it pertains to sustainability. This paper describes what natural capital is and how it responds to the pressures of development.

Costanza, R., W.M. Kemp, and W.R. Boynton. 1993. "Predictability, scale, and biodiversity in coastal and estuarine ecosystems: implications for management." Ambio. Volume 22. Pages 88 to 96.

Summary: This paper describes and reviews several aspects associated with ecosystem resilience, irreversibility of ecosystem states, and the roles of "keystone" species in ecosystems and their influence on resilience. This paper provides background information as well as case studies.

Daly, H.E. 1996. Beyond Growth. Beacon Press. Boston, MA.

Summary: This book covers many aspects dealing with the economics of sustainable development. This is a primary source for information on the concept of natural capital and associated economic issues.

Ehrlich, P.R. 1994. "Ecological economics and the carrying capacity of Earth." In: Investing in Natural Capital. Jansson, A., and others, eds. Island Press. Washington, D.C.

Summary: This chapter provides a good review of the development and background of the precautionary principle.

Elmqvist, T., and others. 2003. "Response diversity, ecosystem change, and resilience." Frontiers in Ecology. Volume 1, Issue 9. Pages 488 to 494.

Summary: This article is a review of desirable ecological diversity, resilience and services with respect to ecosystem management and restoration. The authors define response diversity as the diversity of responses among species to environmental change contributing to the same ecosystem function. This article provides background information associated with recent research on terrestrial and aquatic ecosystem management. The authors note that special attention should be paid to response diversity when planning ecosystem management and restoration, since it may contribute considerably to the resilience of desired ecosystem states against disturbance, mismanagement, and degradation.

Fisher, A., and U. Narain. 2003. "Global warming, endogenous risk, and irreversibility." Environmental and Resource Economics. Volume 25, Number 4. Pages 395 to 416.

Summary: This paper examines the optimal rate of emission of greenhouse gases when investment in abatement capital is sunk, some part of the stock of greenhouse gases is non-degradable, and there is an endogenous risk of catastrophic damages in the future. The report notes that the agent wants to avoid two situations: (i) investing in sunk abatement capital today when the damages tomorrow turn out to be negligible; (ii) not reducing the stock of non-degradable greenhouse gases today when damages are revealed to be catastrophic tomorrow. Unfortunately, the stock of greenhouse gases cannot be reduced unless the agent invests in abatement capital. Given this trade-off, and the added feature that the probability of a catastrophe occurring may be endogenous, the paper asks what should be the optimal rate of emission of greenhouse gases. Previous studies have either relied on numerical simulations or failed to capture features of the environment important to global warming. This paper fills these gaps in the literature by developing a stochastic dynamic programming model that allows for sunk capital, a non-degradable stock of greenhouse gases, and endogenous catastrophic damages.

Fisher, A., and others. 1986. Economic Valuation of Aquatic Ecosystems. Cooperative Agreement No. 811847. U.S. Environmental Protection Agency.

Summary: This report covers a suite of areas that are relevant to irreversibility, sustainability, and safe minimum standard. Chapters of specific interest include:
Chapter 1: Introduction and Overview.
Chapter 3: The Hysteresis Effect in the Recovery of Damaged Aquatic Ecosystems: An Ecological Phenomenon with Policy Implications.
Chapter 5: Hysteresis, Uncertainty, and Economic Valuation.
Chapter 7: Methods of Benefit Measurement.
This report provides background and case study material associated with the recovery of aquatic systems to restoration activities.

Hanley, N., J. Shogren, and B. White. 1997. Environmental Economics in Theory and Practice. Macmillan. London, UK.

Summary: This book provides a guide to several important areas of natural resource and environmental economics: the economics of non-renewable and renewable resource extraction, the economics of pollution control, the application of cost-benefit analysis to the environment, and the economics of sustainable development. This book provides models and an analysis relating to management of non-renewable and renewable resource extraction and the application of benefit-cost analysis to the environment and the economics of sustainable development.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision-makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Summary: This report examines risk and uncertainty and the impact of irreversibility of resource management decisions as it applies to sustainability. The report notes that the value of environmental assets such as biodiversity, unique locations, and the atmosphere may be hard to quantify. The implications of the irreversibility of decisions to destroy these has been the subject of extensive discussion. The report analyzes the value of such assets under conditions of uncertainty about future preferences, and shows that this uncertainty will imply a conservative motive if it is in a specific sense asymmetric. The incentive to conserve arising from the uncertainty about future preferences may be reflected in an increase in the shadow prices of the asset.

Holling, C.S. 1992. "Cross-scale morphology, geometry and dynamics of ecosystems." Ecological Monographs. Volume 62, Number 4. Pages 447 to 502.

Summary: Key review and theoretical paper that describes ecosystem functional properties and state changes. This paper serves as an important reference to the discussion of systems ecology and the relationship between stored natural capital and system connectedness.

Ives, A.R., and V.A.A. Jansen. 1998. "Complex dynamics in stochastic tritrophic models." Ecology. Volume 79, Number 3. Pages 1039 to 1052.

Summary: This article provides good background on the relative influences of stochastic events on multi-trophic ecosystems. An analysis of tritrophic ecosystem models and interpretation of stochastic population dynamics is covered with a description of how to apply short-term data sets on the study of long-term population fluctuations. This article provides background on ecosystem stable states and methods of analysis and modeling.

King, D.M. 1994. "Can we justify sustainability? New challenges facing ecological economics." In: Investing in Natural Capital. Jansson A., and others. eds. Island Press. Washington, D.C.

Summary: This chapter is associated with the concepts of benefit-cost analysis and irreversibility. Challenges that are evaluated include the following:

economic analysis is not enough to evaluate sustainability, information about ecological linkages is also needed

economic analysis requires information regarding facts and values; often one or both may be lacking or in conflict with each other, making analysis difficult

ecological systems should be evaluated as a set of processes rather than collections of resources; however, this information may be harder to determine.

Summary: This report is the outcome of the NOAA Coastal Ocean Program (COP)-sponsored environmental valuation workshops. As the text to support the teaching of these workshops developed and as the need to transfer this information to a wider audience of coastal managers than workshop attendees became apparent, it was decided to present the Handbook as a stand-alone document. The Handbook is a blend of writing by experts in the field specifically tailored for the management community and provides input by managers who have attended the COP workshops. This report examines environmental valuation concepts and the application of those concepts to a number of relevant case studies involving coastal management.

Narain, U., M. Hanemann, and A. Fisher. 2002. Uncertainty, Learning, and the Irreversibility Effect. Working Paper No. 935. University of California Berkeley, Department of Agricultural & Resource Economics. Available at: http://repositories.cdlib.org/are_ucb/935

Summary: This article reviews previous work associated with decision-making in light of uncertainty in future benefits. This article serves as a reference in the review of benefit functions in decision making.

National Research Council. 1992. Restoration of aquatic ecosystems. National Academy Press. Washington, D.C.

Summary: This comprehensive book by the National Research Council's Committee on Restoration of Aquatic Ecosystems examines the prospects for repairing the damage society has done to the nation's aquatic resources: lakes, rivers and streams, and wetlands. The book outlines a national strategy for aquatic restoration, gives practical recommendations, and features case studies of aquatic restoration activities around the country.

Pearce, D., and M. Redclift. 1988. "Economics, equity and sustainable development." Futures. Pages 598 to 604.

Summary: This article examines the fundamental principles of sustainability and presents an approach to maintaining the sustainability of natural capital while expanding the economy and building capital. The proposed concept accommodates the main concerns of the advocates of sustainability -- generational equity, economic resilience to external shocks and uncertainty about the functions and values of natural environments in social systems.

Pearce, D.W., and R.K. Turner. 1990. Economics of Natural Resources and the Environment. Harvester Wheatsheaf. London, UK.

Summary: This book provides a detailed examination of how differing schools of thought -- classical, neoclassical, and humanistic -- extend to views of the environment. It provides an analysis of the foundations of environmental economics and describes the interconnection between the economy and environment, as evidenced by its analysis of the circular economy. This book provides an overview of the theories that underlie environmental economics and detailing environmental and economic interactions.

Summary: This chapter is a very good review of uncertainty and the precautionary principle and forms the basis of what is now termed "adaptive management." This reference describes how economists (and ecologists) deal with uncertainty in the face of making decisions regarding environmental (or ecological) management actions.

Schaeffer, D.J., and D.K. Cox. 1992. "Establishing Ecosystem Threshold Criteria." In: Ecosystem Health. Costanza, R., B.G. Norton, and B.D. Haskell eds. Island Press. Washington, D.C.

Summary: Review of the factors that influence the development of ecosystem thresholds — ecological, economical, and political. This chapter provides good, historical background to the overall issue of irreversibility, developing criteria to establish ecological thresholds, and political/economic responses to threshold establishment.

Scheffer, M. 2001. "Alternative attractors of shallow lakes." The Scientific World. Volume 1. Pages 254 to 263.

Summary: This paper describes strongly contrasting ecosystem states, feedback mechanisms, and ecological consequences associated with a series of shallow lakes. This paper provides background on irreversibility and a case study of a particular restoration activity that achieves an otherwise irreversible state.

Scheffer M., and others. 2001. "Catastrophic shifts in ecosystems." Nature. Volume 413. Pages 591 to 596.

Summary: This article provides a definitive review of ecological shifts, alternative stable states, recovery, and hysteresis. All ecosystems are exposed to gradual changes in climate, nutrient loading, habitat fragmentation, or biotic exploitation. Nature is usually assumed to respond to gradual change in a smooth way. However, studies on lakes, coral reefs, oceans, forests, and arid lands have shown that smooth change can be interrupted by sudden drastic switches to a contrasting state. Although diverse events can trigger such shifts, recent studies show that a loss of resilience usually paves the way for a switch to an alternative state. This suggests that strategies for sustainable management of such ecosystems should focus on maintaining resilience.

Zhao, J., and D. Zilberman. 1999. "Irreversibility and Restoration in Natural Resource Development." Oxford Economic Papers. Volume 51. Pages 559 to 573.

Summary: This paper is an economic analysis of the application of the Real Option Theory (ROT) to evaluate activities that may result in costly restoration or other negative benefits. This paper illustrates methods of forecasting economic costs to restoration planning in light of uncertainty and irreversibility.

Social Value versus Economic Impact: Measuring Equity and Efficiency in Environmental Policymaking

Cole, R., and others. 1996. Linkages between Environmental Outputs and Human Services. IWR Report 96-R-4. U.S. Army Corps of Engineers. Alexandria, VA. Available at: http://www.iwr.usace.army.mil/iwr/pdf/96r04.pdf

Summary: This report identifies relevant socioeconomic use and nonuse values associated with environmental projects and also improves the linkages between environmental output measures and necessary inputs for socioeconomic evaluation. It answers the question: What are the possible changes in the ecosystem that may result from environmental mitigation and restoration projects, and what outputs and services do these changes provide society? The report includes a suite of tables which link management options to ecological inputs, to ecological outputs, and then finally to human services. Also, indirect effects of management options are identified. The report is centered on USACE projects and alternatives, but is applicable to restoration projects sponsored by other organizations as well.

Summary: This report discusses practical compromises: benefit cost analysis, economic impact analysis, and equity assessments. The Guidelines for Preparing Economic Analyses (or EA Guidelines) is part of a continuing effort by the EPA to develop improved guidance on the preparation and use of sound science in support of the decision-making process. The EA Guidelines provide guidance on analyzing the benefits, costs, and economic impacts of regulations and policies. The document draws from several previously published sources, including existing economic guidelines materials prepared by the EPA in the mid-1980s, other Agency economic analyses and handbooks, and materials prepared by the Office of Management and Budget in support of Executive Order 12866 on regulatory planning and analysis. It seeks to incorporate recent theoretical, empirical, and modeling advances in environmental economics, drawing upon the considerable body of scholarly literature.

Summary: The Evaluation of Environmental Investments Research Program (EEIRP) is a Corps program intended to provide Corps planners with methodologies and techniques to aid in developing supportable environmental restoration and mitigation projects and plans. It also provides decision makers with information to allocate the limited funds among a range of proposed projects and programs. This report serves as a reference document for environmental planners, highlighting products that can be applied to environmental projects. It is a procedures manual that synthesizes the many products of the EEIRP and shows how they can support environmental planning, which is conducted in accordance with the six-step planning process. It provides an overview of Corps environmental planning and identifies EEIRP products that support specific planning activities. Planners are encouraged to obtain copies of the EEIRP products that pertain to their specific planning challenges.

Hartwick, J., and N. Olewiler. 1998. The Economics of Natural Resource Use. Addison Wesley Longman. New York, NY.

Summary: This book provides an extensive examination of economic concepts for examining natural resource use (welfare economics, property rights, and time preference), sustainability and natural resource scarcity, valuation of land and water, regulation of the fishery, environmental externalities and pollution, non-renewable and renewable resource analysis, dynamic fisher models, and the economics of sustainability.

Higgins, M., and T. Ardito. "Rhode Island Restoration." [Web site]. Available at: http://www.edc.uri.edu/restoration/index.htm

Summary: This Web site provides data, information, and tools to coastal managers, educators, and the public to restore Rhode Island's coastal habitats.

Letson, D., and J. Milon. 2002. Florida Coastal Environmental Resources: A Guide to Economic Valuation and Impact Anaysis. Sea Grant Report 124. Florida Sea Grant College Program, University of Florida. Gainesville, Florida.

Summary: This paper describes the economic impact of Florida Keys-related tourism on three counties in South Florida, Broward, Dade and Monroe including direct and indirect impacts on output, income, and employment. This paper provides a case study of the application of economic impact analysis.

Coastal Services Center

National Oceanic and Atmospheric Administration

Annotated Bibliography: Economics as Related to Coastal Habitat Restoration

A.B. Borde

P.J. Balducci J.W. Brawley S.L. Sargeant

July 2004 Prepared for theNOAA Coastal Services CenterCharleston, SC

Table of Contents

Economics and the Environment

Environmental Valuation: Principles, Techniques, and Applications

Methods for Measuring Natural Resource Values over Time

Habitat Equivalency Analysis

Risk and Uncertainty in Environmental Restoration Programs

Discounting and Time Preference

Irreversibility, Sustainability, Safe Minimum Standard

Social Value versus Economic Impact: Measuring Equity and Efficiency in Environmental Policymaking

P.J. Balducci
J.W. Brawley
S.L. Sargeant

July 2004

Prepared for the
NOAA Coastal Services Center
Charleston, SC