Economic Impact Studies: Practical Tips & Examples - Jen Read
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Economic Impact Studies: Practical Tips & Examples - Jen Read

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  • Cooperative program between um, msu, and noaa Extension through msu Communication and education through um Research through competitive grants program to all michigan universities
  • Michigan Sea Grant Program Review, April 15, 2010
  • Short-run multiplier effects for federal spending Applies to all federal spending in region $1 of spending results in $1.5 to 2.5 of additional spending Labor intensive activities, such as sewer repair, will generate more local employment benefits. Michigan Sea Grant Program Review, April 15, 2010
  • Michigan Sea Grant Program Review, April 15, 2010
  • Restoration of coastal wetlands  More Fish Avoid Expected declines due to invasive species and habitat loss. Assumptions make a big difference Time period used – benefits over 20 years? Discount used Conservative or upper estimates used for ecological and economic outcomes. Michigan Sea Grant Program Review, April 15, 2010
  • Michigan Sea Grant Program Review, April 15, 2010
  • Management strategies in GLRC were intended to reduce sedimentation by 40% Strategies include Ag, urban and stormwater BMPs, wetland and riparian restoration Michigan Sea Grant Program Review, April 15, 2010
  • Michigan Sea Grant Program Review, April 15, 2010
  • Removing and remediating contaminated sediments will reduce real and perceived health risks associated with living near an Area of Concern. Michigan Sea Grant Program Review, April 15, 2010
  • Long term gains = specific quantified benefits (fishing, water treatment) + unquantified benefits Short term gains = multiplier effect associated with any federal investment in the region Michigan Sea Grant Program Review, April 15, 2010

Economic Impact Studies: Practical Tips & Examples - Jen Read Economic Impact Studies: Practical Tips & Examples - Jen Read Presentation Transcript

  • Estimating the Benefits of Great Lakes Restoration Jennifer Read Assistant Director and Research Coordinator Lynn Vaccaro Coastal Research Specialist
  •  
    • Invasive species control
    • Habitat restoration
    • Nearshore water quality – sewer upgrades
    • Areas of Concern cleanup
    • Toxic pollution reduction
    • Non-point source pollution – ag and urban BMPs
    • Sustainable development
    • Indicators and information
    Great Lakes Regional Collaboration Strategy (December 2005) Expected costs: $26 billion View slide
    • Estimating the Benefits of Restoration
    Great Lakes Regional Collaboration Restoration Strategy Team of Natural Scientists Predict Likely Ecosystem Changes Team of Economists Predict Economic Benefits View slide
    • Short-run multiplier effects for federal spending
    • Improvements in environment
    • Health improvements
    • Attraction and retention of skilled people
    • Additional construction and other economic activities over the long run
    • Development of new technologies
    Many Types of Benefits
    • Reduced runoff, erosion and sedimentation
    • Less damage due to flooding
    • Enhanced groundwater supplies
    • Protection of waterfront properties
    • Healthier fish and wildlife communities
      • Protection of endangered species and biodiversity
      • Improved fishing
      • Preservation of sport fishing related employment
      • Improved waterfowl hunting
      • Improved bird watching
    Riparian, Wetland and Coastal Restoration 
    • Avoiding expected 25% - 50% decline = $0.9 – 3.5 billion over 20 years
    • Improving by 5 - 25% = $0.2 – 2.3 billion over 10 years
    • 1% improvement in 1 species = 2 – 10 cents per angling day
    • 1% improvement in all species = 15 – 30 cents per angling day
      • Based on real fishing expenses or surveys of hypothetical situations
      • 37 studies about value of fish abundance in GL region (list in report)
    • 23.1 million GL fishing days a year (National FWS Survey)
    • Value of benefits declines over time (6% discount)
    Benefits of Sport Fish Abundance
    • Less sediment in rivers and nearshore waters
      • Reduced costs for dredging
      • Reduced costs for municipal water treatment
      • Benefits to commercial and industrial users of water
    • Reduced pathogens
      • Lower health care expenses and fewer sick days
      • Fewer beach closures, more swimming
    • Fewer nutrients and algae blooms
      • Higher waterfront property values
    Sewer upgrades, Non-point source controls 
    • Restoration Plan  Reduce sedimentation by 10-25%
    • Savings for municipal water treatment
    • = $50 – 125 million over the long run
    • 1% increase in sediment leads to a 0.05% increase in water treatment costs
      • - conservative estimate from 400 U.S. utilities
    • Operating costs for plants that use GL water = $600 million
    • Annual savings of $3 -7 million
    • Value of savings declines over time (6% discount)
    Water Quality Benefits
    • Less toxins in fish
      • More people would eat fish rather than McDonalds
      • Improved health for families that currently eat GL fish
    • Lifting of fish advisories
        • Improved recreational opportunities
    • Healthier populations of fish and wildlife
    • Improved survival of endangered species, biodiversity
    • Higher property values around AOCs
    AOC Clean-up, Toxic pollution controls 
    • Benefits for homes near AOC = $6 - 7 billion
      • Within 5 miles of AOC = 5% suppression in property value
        • Based on 6 studies comparing property values at different distances from AOCs
      • 1.2 million homes within 2 miles of AOC, each $150K
        • Based on 2000 census, ignores rentals and commercial property
    • Value to basin residents = $12 - 19 billion
      • 11 million homes in Great Lakes basin
      • Surveys indicate willingness to pay $150 per year for cleanup
    • Clean up phased in over 10-20 years, 6% discount rate
    Benefits of Remediating Areas of Concern
  • Summary of Specific Economic Benefits Affected Value Present Value Benefit Improved catch rates for anglers $1.1 – 5.8 billion Maintenance of sport fishery wages and profits $100 – 200 million Lower water treatment costs $50 – 125 million More swimming $2 – 3 billion More swimming and improved enjoyment $2.5 billion Improved birding $100 – 200 million Improved waterfowl hunting $7 – 100 million Benefits for basin residents $12 – 19 billion Total Quantified Specific Benefits $18 – 31 billion Aggregate Long-run Benefits $29 – 41 billion Short Term Multiplier Effects $30 – 50 billion
  • GLRC Strategy Return on Investment = $80 – 100 Billion in Benefits +
    • Many existing studies of ecosystem valuation can help predict benefits of restoration projects.
    • Important Considerations:
    • Be specific about expected environmental changes
    • Identify a change that can be quantified and valued in $$
    • Find a study from a comparable system
    • Identify time period for expected improvements, consider discounting future benefits, consider inflation
    • Even rough, back-of-the-envelope calculations are useful to funders, media and partners!
    Take Home Lessons – DIY Economic Analyses
  • Jennifer Read [email_address] www.miseagrant.umich.edu/economy America’s North Coast: A Benefit-Cost Analysis of a Program to Protect and Restore the Great Lakes John C. Austin, Non-resident Senior Fellow, Brookings Soren Anderson, Assistant Professor, MSU Paul N. Courant, Dean of Libraries, U-M Robert E. Litan, Senior Fellow, Brookings