Proceedings

2002 Decision-Making and

Valuation for Environmental

Policy Progress Review

Workshop

March 21-22, 2002

Washington, DC
EPA/NSF Partnership for Environmental Research i

2002 Decision-Making and Valuation for Environmental Policy Workshop

Table of Contents

Introduction .................................................................................................................................................................. iii

Local Environmental Decision-Making: Non-Mandated Environmental Policies and Public Participation ......................... 1

Troy Abel

Collaborative Research: Cultural Models, Values, and Networks in Environmental Decisions .......................................... 2

Scott Atran, Douglas Medin

Indicators of Ecosystem Value: Deriving Units of Exchange for Habitat Trades, Banking,

and Preservation Priorities .............................................................................................................................................. 4

James Boyd, Lisa Wainger

Establishing Correlations Between Upland Forest Management Practices and the Economic Consequences

of Stream Turbidity in Municipal Supply Watersheds ..................................................................................................... 5

Gordon Grant, David W. Hulse, Ernie Niemi

Land Management With Ecological and Economic Objectives: Developing a Production Possibility

Set of Wildlife Species Persistence and Timber Harvest Value .......................................................................................... 7

Claire Montgomery, Jeffrey Arthur, Darek Nalle, Stephen Polasky, Nathan Schumaker

An Integrated Framework for Analyzing Wetlands Policies: Ecosystem Services, Spatial Targeting,

and Cost Effectiveness................................................................................................................................................... 9

Stephen C. Newbold

Environmental Protections and Endogenous Technical Change: A Theoretical and Empirical Analysis ......................... 10

James J. Opaluch, Shunsuke Manage, Di Jin, Thomas A. Grigalunas

Applying Consensus and Cultural Models To Improve Environmental Decision-Making .............................................. 12

Michael Paolisso, Erve Chambers

Delineating Optimal Habitat Locations for Inclusion in Migratory Flyways.................................................................... 14

Charles ReVelle, John Boland, Justin Williams, Scott Malcolm, Daniel Bain

Negotiating for Sustainable Development: An Evaluation of the CBEP Decision Process.............................................. 16

John Scholz, Mark Lubell, Mark Schneider

The Contribution of Economic Analysts to Environmental Decision-Making: Lessons From

the FERC Experience..................................................................................................................................................... 18

Leonard Shabman, Kurt Stephenson

Estimating the Cost of Carbon Sequestration in Global Forests ..................................................................................... 20

Brent Sohngen, Robert Mendelsohn, Roger Sedjo

Teaching Proper Use of a Household Hazardous Waste Facility.................................................................................... 22

Carol Werner

Index ............................................................................................................................................................................ 23
EPA/NSF Partnership for Environmental Research iii

2002 Decision-Making and Valuation for Environmental Policy Workshop

Introduction

On December 8, 1994, the National Science Foundation (NSF) and the Environmental Protection Agency (EPA)

signed a Memorandum of Understanding establishing a partnership for the support and merit review of fundamental,

extramural environmental research. One of the most successful competitions funded as a result of this partnership

is Decision-Making and Valuation for Environmental Policy (DMVEP).

The DMVEP competition encourages research that will contribute to the development of practical, credible approaches for estimating the benefits and costs of environmental programs and improving decision-making about

environmental issues. DMVEP started in Fiscal Year (FY) 1995 and has held competitions each FY through 2002,

with the exception of FY 2000. In 1997 and 1998, DMVEP held progress review workshops for grantees funded by

the 1995 and 1996 competitions to give grantees an opportunity to report their research findings and discuss the

future directions of the research area. The proceedings document for the 1998 workshop is available on the EPA

National Center for Environmental Research Web Site at http://es.epa.gov/ncer/publications/workshop.

From FY 1997 through FY 1999, NSF and EPA made 45 DMVEP awards, totaling approximately $7.8 million. The

DMVEP competition supported a wide variety of topics during this period. Research was solicited in four related areas:

• Costs and Benefits of Environmental Programs and Policies: This area of research seeks to find and test

integrated models and improved methods to estimate and validate the costs and benefits of environmental

protection programs and policies.

• Ecosystem Valuation: Research in this area identifies valuable ecosystem functions and focuses on how

comprehensive and critical ecosystem changes can be measured in terms of social welfare.

• Human Health Valuation: This area of research seeks to improve methods to estimate values for reductions in mortality and morbidity risks resulting from environmental hazards.

• Decision-Making for Environmental Policy: This area of research examines the behavioral and institutional factors that influence the development, implementation, and evaluation of environmental policies.

The March 21-22, 2002, Workshop on Decision-Making and Valuation for Environmental Policy provides a forum

for investigators funded by the FY 1997, 1998, and 1999 competitions to interact with one another and with EPA,

NSF, and other researchers interested in valuation and decision-making research. For the proceedings volume,

investigators were asked to contribute statements describing the objectives and significance of their work as well as

preliminary findings from their research.

Any opinions, findings, conclusions, or recommendations expressed in this report are those of the investigators who

participated in the research. For further information about the DMVEP program, please contact the appropriate

Program Officers: Susan Carrillo, EPA, (202) 564-4664 or Cheryl Eavey, NSF, (703) 292-7269. Further information on future solicitations and research abstracts may be found on the NSF/EPA Partnership for Environmental

Research Web Site at http://www.nsf.gov/home/crssprgm/epa/start/dmvep.htm.
EPA/NSF Partnership for Environmental Research 1

2002 Decision-Making and Valuation for Environmental Policy Workshop

Local Environmental Decision-Making: Non-Mandated

Environmental Policies and Public Participation

Troy Abel

University of Wisconsin, Green Bay, WI

In recent years, a wide variety of new policy tools

have been designed to facilitate environmental performance in states, firms, and communities. This project

focused on the latter and the emergence of civic environmentalism—communities who voluntarily do more

to protect the environment than is required. Although the

philosophy of many new environmental programs (information disclosure, community-based environmental

protection) rests on changing local decisions, not much

is known about community variation in capacity to undertake innovative policies.

The project began with a query about the factors contributing to a community’s propensity to go beyond environmental compliance? After a comprehensive literature

review, the project was focused on the interrelated concepts of social capital and civics as a surrogate independent variable for community cooperation. A search was

begun for communities that adopted one of many voluntary environmental policies. The adoption of a greenhouse

gas reduction policy was selected as the first dependent

measure to sort communities into two comparison groups:

environmental policy conformers and performers. The

first data collection phase produced a baseline database of

more than 160 socioeconomic variables for 3,142 counties. Project investigators developed an empirical model of

local voluntary environmental policy effort from this initial

dataset. The quantitative analysis employed factor analysis and logistic regression.

Our initial quantitative analysis found that Democratic

politics and a civics factor mattered, but not necessarily

as expected. The former exhibited the strongest positive

relationship to policy adoption propensity; however, the

civics measure produced a negative association.

This research advances our understanding by beginning to compare communities across multiple dimensions to learn more about the determinants of local

policy innovation, the empirical import of social capital

measures, and analytical techniques to differentiate unusual cases from average ones. The research design

employed in this project integrates several theoretical

models to clarify key conceptual and methodological

issues that make it easier for other scholars to study

the process and effects of civic environmentalism. This

research is significant for the advancement of our

knowledge of community environmental policy processes and their effects on environmental outcomes.

Pragmatic benefits from this research relate to improving our understanding of nonregulatory policies at the

local level. This project will help form policy analysis

and policy design in the future, particularly for programs aimed at the community level. If local factors

condition community policy capacity as our research

suggests, then more attention needs to be given to capacity building at the local level.

Although the quantitative measurement and modeling described above advance the understanding of civic

environmentalism on its own, the intention also is to use

the analysis to identify community cases worthy of more

detailed qualitative work. A few provocative scholars

have pointed out the quantitative techniques such as regression focus used by researchers on average cases

when more interest lies in unusual ones. Therefore, the

models are currently being used to identify a matchedpaired sample of two kinds of communities where local

representatives will be contacted to respond to structured and semistructured surveys.
2 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Collaborative Research: Cultural Models, Values, and Networks

in Environmental Decisions

Scott Atran1 and Douglas Medin2

1University of Michigan, Ann Arbor, MI; 2Northwestern University, College of the Menominee Nation,

Keshena, WI

This project focuses on the interactions of mental

models, cultural values and behaviors, and social networks in processes of environmental decision-making

and intergroup conflict. The goal is to promote sustainable environmental practices and further possibilities for

adjudication of norms over transcultural boundaries.

The studies integrate four modeling techniques with roots

in psychology, sociology, and anthropology: (1) mental

models, (2) social network models, (3) the cultural-consensus model, and (4) value assessment and confrontation.

These methodologies are used to assess folk-ecological models, values, and behaviors relative to a rainforest

environment among native and immigrant Maya and Ladino groups in Lowland Mesoamerica, and relative to hardwood forest and aquatic environments among Native

Americans and majority culture sportsmen in northern

Wisconsin (see Figure 1). In both sites, culturally diverse

groups live in close proximity, and share a common environment. This approach allows examination of cultural

differences in mental models of the same environment

and the generality of findings across environments.

The studies show that different cultural groups subject to equal pressures on their common resources respond with strikingly different culturally patterned behaviors and cognitions. Overall, there is a complex interplay between mental models, values, and agro-forestry

practices that are distinctive to each group. Moreover,

groups may have distorted perceptions of each other’s

mental models and behavior. Finally, the studies also suggest a nonobvious role for religion in helping human societies to resolve “The Tragedy of the Commons” and

other ecologically pertinent forms of “The Prisoner’s

Dilemma.” Supernatural agents may act to allow humans

to engage nonhuman resources in relations of “indirect

reciprocity” so as to better monitor and accommodate

nature’s requirements for continuing human support.

Initial results were published in “Folkecology and Commons Management in the Maya Lowlands” (Proceedings of the National Academy of Sciences 1999;

96(13):7598-7603). A comprehensive overview of

Mesoamerican findings will appear as a target article for

international commentary inCurrent Anthropology 43(3).

Preliminary findings for North America have been submitted for publication.

On a theoretical level, these studies are important to

establish a framework for exploration of the relationships between environmental cognitions, values, and

behaviors, and to provide a means of evaluating the transferability of ecological information within and between

cultures. On a practical level, these studies reveal how

intergroup conflict is significantly mediated by differences in mental models and associated values, particularly environmental conflicts between Native Americans

and the majority culture. Mutual recognition of these differences may render even unavoidable controversy and

indeterminacy in ecological behavior less acrimonious

and harmful to human and environmental health. The

results have direct policy implications for state and federal lawmakers and environmental agencies, international

policymakers, and nongovernment organizations.

Recently, the project is looking at younger native Maya

who no longer speak the native language as their first

language. Although the complexity of their ecological

models of plant-animal relationships is fairly rich, they

show evident biases that older natives do not show such

as overgeneralizing the role of palms in animal life. It

was found that Ladinos also overgeneralize the value to

animals of economically important species such as tropical

cedar and mahogany. The cognitive ramifications of these

use biases are still being explored. Also, probes are being

run for goals, attitudes, and values among Menominee

and majority culture hunters. Although each group’s

model encourages conservation, differences in models

lead to misunderstanding and mistrust, particularly in

regard to majority-culture attitudes towards Menominee

(as potential negotiating partners).
EPA/NSF Partnership for Environmental Research 3

2002 Decision-Making and Valuation for Environmental Policy Workshop

Biodiversity = no. tree species/ha.

Tree cover = m2

/ha.

Figure 1. Biodiversity (number of tree species) and tree cover (square meters per

hectare) as a function of ethnic group (Itza’ = Native Lowland Maya, Ladino

= Spanish-speaking immigrants, Q’eqchi’ = Highland Maya immigrants) and

type of land use (milpa = agricultural plot, guamil = fallow, reserve = forest).
4 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Indicators of Ecosystem Value: Deriving Units of Exchange

for Habitat Trades, Banking, and Preservation Priorities

James Boyd1 and Lisa Wainger2

1Resources for the Future, Washington, DC; 2Center for Environmental Science, University of

Maryland, Baltimore, MD

Ecosystem compensation and exchange programs

require benefit analysis to guarantee that compensation

or trades preserve the social benefits lost when ecosystems are destroyed or degraded. Current regulatory procedures tend to underanalyze the social value of ecosystems being traded or ecosystem losses requiring compensating mitigation. For example, a common practice

in wetland mitigation decisions is simply to require an

“acre for an acre” of biophysically similar wetland when

another is destroyed. This kind of compensation rule

fails to account for many of the things that determine the

social value of a particular ecosystem such as a site’s

location in the greater landscape, the importance of local

substitutes for and complements to the site, and future

risks to the site’s ability to provide services.

On the other hand, state-of-the-art economic methods that employ these basic elements of valuation are difficult and costly to apply. The conventional economic solution involves monetization of the value provided by an

ecosystem’s services using hedonic, travel cost, contingent valuation, and other econometrically sophisticated

methods. However, although monetization is desirable in

theory, it is often impractical. In practice, it is rare to see

agency decision-makers or private conservation organizations making land use decisions based on comprehensive monetization exercises.

One resolution to this conflict is a methodological

middle ground: evaluation tools that identify, based on

sound economic principles, likely differences in ecosystems’ social benefits, but that also are easily implemented

by noneconomists using existing data sources. This study

derives, applies, and critiques a set of ecosystem benefit

indicators. Organized around the concepts of ecosystem services and valuation principles, this project shows

how Geographic Information System (GIS) mappings

of the physical and social landscape can improve understanding of the ecosystem benefits arising in specific

locations. The core of the project is the development of

a pilot ecosystem service indicator system and the application of that system to real-world land use decisions.

The indicator system focuses on landscape factors that

limit or enhance an ecosystem’s ability to provide services and limit or enhance the expected value of those

services. This kind of analysis yields an organized, descriptive, and numerical depiction of sites involved in

specific mitigation projects.

The GIS landscape analysis is a clear improvement

over assessment methods that ignore landscape context

when assessing trades and compensating mitigation. First,

landscape analysis allows for qualitative analysis of benefit tradeoffs. Second, in some cases, the indicators allow for relatively unambiguous improvements in decision-making (e.g., when tradeoffs are minimal and one

ecosystem can be seen to clearly dominate another).

Third, the data and tools foster a spatial, holistic approach to benefit assessment. Fourth, there is high confidence that this kind of tool can lead to more transparent and consistent evaluations than crude standardized

trading ratios or reliance on “best professional judgment.”

The project concludes with an evaluation of the limitations associated with indicator-based assessment tools.

Indicators, by their very nature, sacrifice precision and

raise methodological issues that are more explicitly and

better handled by conventional monetization (econometric) tools. An understanding of limitations is therefore an

important component of the pilot project.
EPA/NSF Partnership for Environmental Research 5

2002 Decision-Making and Valuation for Environmental Policy Workshop

Establishing Correlations Between Upland Forest Management

Practices and the Economic Consequences of Stream Turbidity

in Municipal Supply Watersheds

Gordon Grant, David W. Hulse, and Ernie Niemi

University of Oregon, Eugene, OR

This research project evaluated the causes and consequences of increased sedimentation and persistent turbidity during a major flood in western Oregon in 1996.

Turbidity was related to land and reservoir management

activities. The response and costs incurred by the City

of Salem, Oregon, and its water users to the storm and

its aftermath were analyzed, and a framework was developed for understanding the evolving relationships

among land, reservoir, and water supply management

and managers in response to changing social demands

and natural events in the Santiam watershed.

Several complementary approaches were employed

to examine the linkages among forest land use, reservoirs, and municipal water supply during the 1996 flood

and afterwards. Through interviews, a detailed analysis

was conducted of costs incurred by the City of Salem,

including both acknowledged and hidden costs. Using

clay mineralogy, the sources of turbid water were fingerprinted, and these sources were related to land management practices and reservoir management within the

upstream watershed. Geographic Information System

analysis was used to look at the spatial relationships between land management activities and sources of persistent turbidity in the watershed.

The high turbidity triggered diverse economic consequences. Damage from clogging of the filters, plus other

short-run costs to the city’s water utility totaled $1.1 million. Some industrial water customers incurred costs of

$2 to 3 million, primarily in lost revenues, because they

responded to the city’s request to curtail operations during the crisis. The city, at a cost of $1.6 million, subsequently increased its ability to cope with future pulses of

high turbidity by expanding an early-warning monitoring

system, increasing its treatment capacity, securing backup

supplies from other sources, and increasing storage of

treated water. This rare occurrence of high turbidity clarified the value of having a watershed that usually delivers

extraordinarily pure water: on average, it allows the city

to avoid $2 to 4 million in annual treatment costs.

A detailed look at the relationships among landforms,

turbidity, and clay mineralogy revealed that earthflows are

overwhelmingly the dominant source of the extremely fine

clays producing persistent turbidity in the Santiam Basin

(see Figure 1). These clays comprise between 70 and 90

percent of the clay fraction from earthflows but are rare

in other landforms. Along with being highly concentrated

spatially, delivery of clays to the stream network are also

concentrated in time. Almost all major turbidity episodes

occur during large winter storms, but the time between

major storms is a key factor determining turbidity levels.

The flood revealed the complex and often contradictory web of management objectives among the agencies

and parties responsible for water management in the

Santiam. It highlighted how management for one narrow set of objectives might exacerbate problems in another sector. For example, decades of logging in the

North Santiam Basin targeted the most unstable piece of

ground, thereby potentially exacerbating sediment production during storms. The operation of dams for flood

control prolongs the release of persistent turbidity downstream, causing problems for municipal water users.

Relying on the normal behavior of a watershed to produce clean water under all circumstances exposes societal vulnerability to inherent geological hazards.

The next steps will be to communicate these findings to a diverse audience, including city planners, watershed councils, resource management agencies, and

the larger scientific community.
6 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Figure 1. Persistent turbidity pathways in the North Santiam River.
EPA/NSF Partnership for Environmental Research 7

2002 Decision-Making and Valuation for Environmental Policy Workshop

Land Management With Ecological and Economic Objectives:

Developing a Production Possibility Set of Wildlife Species

Persistence and Timber Harvest Value

Claire Montgomery1, Jeffrey Arthur1, Darek Nalle1, Stephen Polasky2, and Nathan Schumaker3

1Oregon State University, Corvallis, OR; 2University of Minnesota, St. Paul, MN;

3U.S. Environmental Protection Agency, Washington, DC

The primary objective of this study was to integrate

biological and economic models in an optimizing framework to address economic issues related to efficiency.

The resulting model was used to estimate the productive

capacity for three outputs (timber, great horned owls, and

common porcupines) on a forested landscape over time,

ignoring landowner types and objectives, and to compare

that to likely management on the study landscape by simulating the current landowner pattern and objectives. The

wildlife species were selected to represent competing conservation objectives; their habitat needs are different.

The study area was a 1.7-million hectare forested landscape in the Oregon Cascade Range. A spatially explicit dynamic simulation model, PATCH,1

 was used to model the impact on wildlife of timber harvest-induced habitat alteration. A

proxy for PATCH, that quickly predicted populations as a

function of habitat attributes, was used in the optimization. The optimization model was solved repeatedly for

the maximum net present value of timber harvest subject

to varying levels of constraints for wildlife population sizes

using a heuristic algorithm. The solutions are an estimate

of the set of maximum potential combinations of the modeled outputs. To simulate likely management, net present

value of timber was maximized on private land (about

45% of the area), and timber harvest was disallowed on

federal land.

Results are illustrated in Figure 1. Three graphs show

maximum potential combinations for each pair of outputs. The current landowner simulation is shown by a

marker on each graph. Maps show the configuration of

owl habitat for three outcomes: maximum timber value,

the current landowner simulation, and the maximum potential combination that achieved the same owl population as the current landowner simulation.

The study illustrates how analysis based on estimation

of productive capacity for a site can be used to search for

opportunities to improve current management. We found

that it might be possible to increase owl populations by 30

percent over likely current management levels without reducing timber values or porcupine populations or conversely, to increase the timber by 13 percent and porcupines by 30 percent without reducing owl populations.

Current management, in which private land is managed

for timber in response to market incentives and federal

land is managed almost exclusively for other forest uses,

appears to be inefficient. Models like this one may prove

useful for identifying situations where the payoff for making

the difficult policy changes to markets and/or to federal

land management to encourage landscape-level management of forests is likely to be great.

Incorporation of more realism in the wildlife models

(e.g., predator/prey relations, more refined habitat preferences), the timber model (e.g., roading, site quality),

and the vegetation model (e.g., disturbance regimes, more

refined vegetation classes) will improve the practical usefulness of this approach. The model can be used to improve understanding of the tradeoffs between alternative conservation objectives by carefully selecting wildlife to model that represent different conservation goals

(e.g., old-forest-dependent endangered species versus

large numbers of species with more general habitat needs).

Finally, there are many forest uses, aside from wildlife

and timber, that might be modeled using this framework

(e.g., fire risk, recreation).

1 Schumaker NH. A users guide to the PATCH model. EPA/600/R-98/135. Environmental Research Laboratory, U.S. Environmental

Protection Agency, Corvallis, OR, 1998.
8 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Figure 1. Results of simulated likely management.

ConsumerSurplusplusRent–NPV

billiondollars (2000)

ConsumerSurplusplusRent–NPV

billiondollars (2000)

PorcupinePopulationSize

GeometricMean

Geometric mean owl population size

Thousands

Porcupine Population–Geometric Mean

Thousands

Owl Population–Geometric Mean

Thousands
EPA/NSF Partnership for Environmental Research 9

2002 Decision-Making and Valuation for Environmental Policy Workshop

An Integrated Framework for Analyzing Wetlands Policies:

Ecosystem Services, Spatial Targeting,

and Cost Effectiveness

Stephen C. Newbold

Department of Environmental Science and Policy, University of California, Davis, CA

This research project focuses on developing a framework for analyzing the potential environmental and economic impacts of alternative wetland management strategies. The broad objectives of this research are to: (1) estimate functions describing relationships between the extent

and configuration of wetlands and other land use types to

the provision of three classes of ecosystem services that

wetlands can provide: water quality enhancement, provision of habitat for wildlife, and flood control benefits;

(2) estimate wetlands restoration costs and exogenous land

use conversion probabilities; and (3) incorporate these into

a spatial optimization model that can determine the optimal

configuration of restoration activities for a range of environmental objectives subject to a budget constraint.

Thus far, models for two ecosystem services from

wetlands have been developed for the Central Valley of

California: the provision of habitat for mallards, and the

attenuation of nutrients from nonpoint source runoff.

Habitat benefits were estimated by a count regression model

that relates breeding mallard abundances to the configuration of land use types in the study area. Water quality

benefits were estimated by a spatially distributed model of

nonpoint source runoff as well as nitrogen and phosphorus attenuation in wetlands. County assessor data were

used to estimate average land values for each land use

type in each county in the study area. Wetlands construction costs were estimated using expected costs for proposed Wetlands Reserve Program projects in California

for the year 2000. The habitat and water quality models,

along with the estimates of restoration costs, were integrated into a numerical optimization framework, and two

decision scenarios in the Central Valley of California were

analyzed. The first scenario was a case of optimal spatial

targeting in a small watershed, and in the second scenario,

sites were selected from those offered for enrollment in

an easement program throughout the study area. The results indicate the potential for gains in effectiveness from

spatial targeting and substantial tradeoffs between environmental benefits. Maximizing habitat quality in the watershed yielded a 38 percent increase in mallard abundance and a 3 percent decrease in nitrogen loads to the

river. In contrast, maximizing water quality resulted in a

25 percent decrease in nitrogen loads and a 2 percent

increase in mallard abundance. Qualitatively, similar results were obtained when sites were chosen from a set of

offered sites throughout the valley, but the tradeoffs were

not as severe. The results also suggest that at traditional

funding levels, the Wetlands Reserve Program in California could reduce nitrogen loads to rivers by approximately

29,000 kg and increase total mallard abundance in the

breeding season by approximately 440 individuals throughout the Central Valley in a given year.

Support of mallard populations and the attenuation

of nutrients from nonpoint source runoff are not the

only environmental benefits that wetlands can provide,

but they were used here to illustrate methods for modeling ecosystem services, targeting restoration activities

using spatial optimization models, and measuring the

tradeoffs between different environmental goals. Future

work will focus on developing a model of flood control

benefits from wetlands, and estimating exogenous land

use conversion probabilities.
10 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Environmental Protection and Endogenous Technical Change:

A Theoretical and Empirical Analysis

James J. Opaluch, Shunsuke Manage, Di Jin, and Thomas A. Grigalunas

Environmental and Natural Resource Economics, University of Rhode Island, Kingston, RI

Technological change is central to maintaining standards of living in modern economies with finite resources

and increasingly stringent environmental goals. Successful environmental policies can contribute to efficiency by

inducing, rather than inhibiting, technological innovation.

Yet, little research to date has focused on the design and

implementation of environmental regulations that encourage technological progress, or in measuring productivity

change in the face of depletion of natural resources and

increasing stringency of environmental regulations.

This research project models and measures productivity change, with an application to offshore oil and gas

production in the Gulf of Mexico using Data Envelopment Analysis. This is an important application because

energy resources are central to sustaining our economy,

and because petroleum products are currently among

the most significant energy resources. The traditional

issue of measuring productivity change was recast by

recognizing that production activities implicitly embody

joint production of market and environmental outputs.

Thus, measures of productivity change consider both

market and nonmarket outputs.

The net effects of technological progress and depletion

on productivity or offshore oil production in the Gulf of

Mexico were measured using a unique field-level set of data

of production from all wells in the Gulf of Mexico for the

time period from 1946–1998 (see Figure 1). Past technology indexes based on simple counts of technological innovations were updated and extended to account for the importance of each innovation using the results of an industry

survey. Results are consistent with the hypothesis that technological progress has mitigated depletion effects over the

study period, but the pattern differs from the conventional

wisdom for nonrenewable resource industries. Contrary to

the usual assumptions of monotonic changes in productivity or an inverted “U” shaped pattern, productivity declined

for the first 30 years of the study period. More recently,

however, the rapid pace of technological change has outpaced depletion and productivity has increased rapidly, particularly in the most recent 5 years of the study period.

Next, the Porter Hypothesis was recast, and a revised

version was tested. The Porter Hypothesis states that stricter

environmental regulations can contribute to productive

efficiency. The Porter Hypothesis was recast to include

market and nonmarket outputs. The results show a longrun upward trend of productivity, accounting for environmental and market outputs. Granger causality tests were

used to examine the direction of causality between innovation and environmental regulation. Although firm conclusions of the causal relationship between environmental

stringency and technological innovation (new inventions)

could not be made, we found a clear causal direction from

environmental stringency to less structural aspects of innovation such as so-called “learning by doing.”
EPA/NSF Partnership for Environmental Research 11

2002 Decision-Making and Valuation for Environmental Policy Workshop

Figure 1. Estimates of Total Factor Productivity (TFP) and depletion in Gulf of Mexico OCS

production, 1946-1998.

Productivity

Index

Year

1950 1960 1970 1980 1990

1.8

1.6

1.4

1.2

1.0

0.8

Depletion

Gross TFP

Net TFP
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2002 Decision-Making and Valuation for Environmental Policy Workshop

Applying Consensus and Cultural Models To Improve

Environmental Decision-Making

Michael Paolisso and Erve Chambers

University of Maryland, Baltimore, MD

This research project seeks to strengthen the capacity of national and state agencies and local communities

to better incorporate stakeholder interests, beliefs, and

values into environmental decision-making. Specifically,

the research combines theoretical and methodological developments from environmental and cognitive anthropology to identify and model environmental stakeholders’

priorities, beliefs, and values related to ecology and pollution. The resulting cultural models are formal representations of shared explicit and implicit knowledge, interests,

beliefs, and values that members draw on to process,

understand, and give value to the contemporary environmental challenges facing their communities, industries,

and ecosystems.

The project includes undertaking field-based research

with three Chesapeake Bay stakeholder groups: environmental professionals, which includes scientists; conservationists and resource managers; and farmers and commercial fishermen, known locally as watermen. For each

of these groups, qualitative and quantitative studies are

being completed of the cultural schemas and models that

organize implicit, assumed environmental knowledge, particularly as it applies to local and state decision-making

related to pollution control and natural resource management. The results of the qualitative research suggest that

the three stakeholder groups share a continuum of underlying values about preserving the environment, and all

strongly support efforts to protect the environment and

sustainably use natural resources. Key values that are

implicitly shared among the groups are a sense of moral

responsibility to protect the environment, a willingness

to sacrifice short-term benefits for longer term environmental good, and a feeling of dependence on the environment for their livelihood and lifestyle. Despite an underlying agreement on core environmental values, farmers and

watermen perceive strong differences between their environmentalism and environmental knowledge, compared

to environmental professionals, and vice versa. This can

be most clearly seen in the comparison of watermen and

environmental professionals in the context of recent decisions to increase regulation of the blue crab fishery.

Using the cultural model approach, a watermen model

of blue crab management was identified (see Figure 1).

Watermen conceptualize the blue crab fishery as jointly

managed by divine providence and secular management.

God, personified in nature, provides crabs for human consumption, and it is beyond the capacity of science and

management to fully understand and regulate nature. For

watermen, nature is too random and variable for science

to understand. What science can and should understand

is how man’s pollution affects blue crabs. In other words,

science can only understand what man has created, not

what God has created. Moreover, science must provide

information for environmental decisions on pollution, with

the end result as a decrease in the pollution that threatens

crab reproduction and the sustainability of the blue crab

fishery. Finally, despite public rhetoric, watermen believe

in a role for natural resource management agencies. This

role should focus on assisting watermen to control the

greed of some individuals whose overharvesting makes it

difficult for a larger group of watermen to continue to be

economically viable. Thus, although nature provides crabs,

humans need to help manage the crabs by addressing pollution problems and developing policies that promote

sustainability of the blue crab fishery. In the end, the research has found that despite public discourse on blue

crab management in which watermen and environmental

professionals are strongly opposed to each other’s positions on regulations, watermen have an underlying cultural model of blue crab management that has components of the ecological model used by scientists and resource managers to guide their decision-making. The fact

that this similarity has not been recognized lends credence

to the viewpoint that there is a need to promote dialogue

among stakeholders at the cultural model or schema level.

The project will continue to explore whether similar

cultural models of environment and pollution exist with

the other stakeholder groups, the farmers, and environmental professionals. Final project activities will emphasize integrating this underlying environmental knowledge,

beliefs, and values into ongoing decision-making for

pressing environmental concerns on the Bay.
EPA/NSF Partnership for Environmental Research 13

2002 Decision-Making and Valuation for Environmental Policy Workshop

Figure 1. Cultural model of watermen’s reasoning about blue crab management.

God Provides Crabs

nature manages crabs nature provides

crabs for human use

Quantity of Crabs

Available for Harvest

pollution destroys

crab habitat

greed threatens

sustainable harvest

regulation promote

sustainable harvest

science studies

pollution effects

DIVINE

PROVIDENCE

SECULAR

MANAGEMENT

Human Actions Harm Crabs Humans Attempt To

Reduce Harm to Crabs
14 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Delineating Optimal Habitat Locations for Inclusion

in Migratory Flyways

Charles ReVelle, John Boland, Justin Williams, Scott Malcolm, and Daniel Bain

Johns Hopkins University, Baltimore, MD

Land development, especially of wetlands, has resulted

in the degradation and elimination of important stopover

habitat for migratory birds within the Atlantic flyway, and

the process of elimination is likely to continue to occur. To

assist in securing the survival of species that use the flyway, a decision support methodology was developed to

identify alternative configurations of newly protected habitat locales. Such locales would be utilized to augment and

enhance the currently protected areas in the U.S. portion of

the Atlantic flyway network.

The methodology selects new areas for protection,

achieving a connected, braided network of habitat stepping stones extending from Maine to Florida (see Figure 1). The methodology consists of a zero-one optimization model to suggest new areas for protection.

The model uses:

• Geographic Units. Seven hundred fifteen counties from

the 17 Atlantic flyway states between Maine and Florida

were used as the basic geographic units.

• Managed Areas.Certain types of federally managed lands

(e.g., national parks, wildlife refuges) comprised the

existing baseline system of protected stopover habitat.

• Bird Species. Two species with well-known wetland

habitat needs, the black duck and the sora rail, guided

the formulation of the Flyway Model.

• Flight Distance Standards. Three alternative distance

standards were used to define allowable distances

between successive stopovers in the network: 97,

121, and 145 km (60, 75, and 90 miles), although

any desired standard can be used.

• “Quality” Index. Aside from location considerations,

the desirability of counties as stopover locales was

measured by a single quality index based on both the

prevalence of wetlands (representing habitat suitability) and land costs.

Two objectives were explored. The first objective was to

maximize the total geographic “coverage” of the flyway region, where a county is defined as being “covered” if it has a

(new or existing) stopover within the specified distance standard. The second objective was to maximize the average

“quality” of new stopover locales, defined in terms of the

quality index. Solutions were developed on the tradeoff curve

between the objectives of coverage and quality. The solutions

should be thought of as approximate plans or policy options.

The results will be useful in the development and evaluation

of wetland policies, programs, and plans administered by

natural resource agencies and conservation organizations.

The flyway model was a first step in a multiyear research effort on nature reserve selection and design. The

presence of the EPA-funded flyway project at Johns

Hopkins indicated prior and important focus to the David

and Lucille Packard Foundation, which awarded funds

for this project through a competitive process, a research

grant entitled “The Multi-Objective Design of Nature Reserves.” This project is a collaboration between Johns

Hopkins University (Dr. Charles ReVelle, Co-P.I.) and

Princeton University (Dr. Simon Levin, Co-P.I). Techniques and models are under development to select the

reserves that assure the representation of multiple species

and address important spatial considerations such as the

shape of reserves and the existence of wildlife corridors.
EPA/NSF Partnership for Environmental Research 15

2002 Decision-Making and Valuation for Environmental Policy Workshop

Legend

County not covered

Covered county

Existing managed area

Newly selected stopover

0 100 200 300 400 Kilometers

Figure 1. Sample solution for augmenting the Atlantic Flyway. Thirty-eight (38) new stopovers are selected to

augment the existing managed areas. Approximately 95 percent of the flyway region is covered under

the distance standards (121, 97 km). The quality achievement rating is 0.36, slightly below the

average quality rating of 0.40.
16 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Negotiating for Sustainable Development: An Evaluation

of the CBEP Decision Process

John Scholz1, Mark Lubell1, and Mark Schneider2

1Florida State University, Tallahassee, FL; 2State University of New York, Stony Brook, NY

The goal of this research project is to understand

the factors that facilitate cooperation between stakeholders involved in watershed partnerships and other

community-based environmental protection initiatives,

with a particular focus on the U.S. Environmental Protection Agency’s National Estuary Program (NEP). The

NEP is one of the most prominent and well-developed

examples of community-based environmental protection, and thus provides an excellent laboratory for the

study of cooperation.

The theoretical perspective for this study relies on

political economic theories of collective action, which

attempt to identify the social, political, and environmental factors that raise or lower the benefits and costs of

cooperation. To understand the effect of collaborative

policies like the NEP on various indicators of cooperation, a comparative approach has been adopted that utilizes surveys of stakeholders from 20 estuaries included

in the NEP and 10 non-NEP estuaries. The main hypothesis is that the NEP can change attitudes and restructure social relationships in ways that increase the

likelihood of cooperation.

Preliminary findings suggest that the NEP has several

interesting effects on the possibility of cooperation. Social networks within the NEP are larger, more likely to

bridge multiple levels of the federal system, span conflicting interest groups, and integrate scientific researchers

(see Figure 1). NEP stakeholders are more likely to believe that estuary policies are effective, although this effect is confined to stakeholders with social values that are

congruent with the consensual approach of watershed

partnerships. The NEP also appears to reduce “cognitive

conflict,” which is the tendency of stakeholders with competing values to have very divergent perceptions of the

severity of environmental problems and the fairness of

estuary policies.

Several positive effects of the NEP on stakeholder attitudes and social connections are demonstrated, which

suggest that collaborative policies deserve continued attention from the environmental policy community. Furthermore, several key beliefs were identified about watershed policies that influence perceptions of effectiveness;

these beliefs provide good targets for policymakers. However, the findings also highlight some of the difficulties of

multistakeholder negotiations and suggest that collaborative policies are not appropriate for all types of environmental problems and stakeholders.

The next step is to focus a sharper empirical lens on key

questions about watershed and community-based policies

that have not been answered. Do watershed partnerships

actually lead to more cooperative behaviors and improve environmental outcomes like water quality? Do successful watershed partnerships have positive spillover effects for other

policies, (e.g., by improving the effectiveness of water permit enforcement)? Do the factors that encourage cooperation among stakeholders vary across types of stakeholders,

(e.g., farmers versus local government officials versus environmental interest groups)? Answering these more detailed

questions will provide an even fuller picture of the evolution

of cooperation in watersheds.
EPA/NSF Partnership for Environmental Research 17

2002 Decision-Making and Valuation for Environmental Policy Workshop

Figure 1. The Tampa Bay NEP Network.

City of Tampa Hillsborough/Pinellas/Manatee Counties

Mote Marine Laboratory

(link to TB NEP)

FLDOT

FL Games &

Freshwater Fish Commission

City of Tampa

Wastewater Facilities

Tampa Bay Regional

Planning Council

Hillsborough County SWFWMD

Parks and Recreation

National Audubon

Society

Surface Water

Improvement

and Management

University of

South Florida

Pinellas County

Utilities

Pinellas

County Govt. Nautilus

Environmental

NMFS

Manatee County Govt.

Manatee County Envt.

Management Dept.

Hillsborough County

Metropolitan Planning

City of Tampa,

Sanitary Services Dept.

Dames and Moore

FLDOH

Hillsborough County

FL Phosphate Council

Hillsborough River

Holland and Knight LLP Greenways Task Force

See * for

remaining links

Pinellas County

Parks Dept.

Tampa

Bay

Cargill NEP

Fertilizer St. Petersburg

FL Marine Research Institute

FLDEP

Tampa Bay

Watch

*

-Self-employed

-The SunCoast Conservancy

-U.S. EPA

Hillsborough

County Board of

County Comminssioners

Tampa Bay

Study Group

Hillsborough

County EPC
18 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

The Contribution of Economic Analysts to Environmental

Decision-Making: Lessons From the FERC Experience

Leonard Shabman and Kurt Stephenson

Department of Agricultural and Applied Economics, Virginia Tech, Blacksburg, VA

This research project evaluates whether and how

different forms of economic information (benefit estimates, cost estimates, economic impact, etc.) influence

environmental policy decisions. Case studies are being

completed in several areas: hydropower dam relicensing,

natural resource damage awards, and federal water project

investments. This project considers the frequently made

claim that environmental valuation—environmental benefits measurement—is necessary for, and often is central to, environmental decision-making.

Benefit measurement, albeit not for environmental

services, has long been practiced by the Corps of Engineers, the Federal Power Commission (now FERC), and

others responsible for water resources development. More

recently, legislation has called for expanded use of benefit cost analysis in environmental decision-making, and

recent administrations have issued guidelines and requirements for conducting benefit cost analysis. Court and

administrative processes levy fines for oil spills and other

disturbances to the environment, presumably based on

money estimates of the environmental damage.

The economics profession has responded to this apparent demand for benefit measurement with refined theoretical foundations as well as new data collection and analysis methods to support an extensive environmental valuation research program. The environmental economics literature now includes thousands of articles describing,

applying, and comparing measurement techniques. Among

these articles are many arguing that environmental valuation is both desired by decision-makers and makes an essential contribution to democratic decision-making.

The heterodox economists’ (American Institutionalism and neo-Austrian) critique of the profession’s environmental valuation research program argues that such

measurement is inconsistent with the decentralized preference discovery and revealing processes of both markets and democratic decision-making. As a result, they

argue environmental valuation will be of little interest

when making environmental decisions, and an alternative policy-economics research program is needed to

support environmental decision-making.

Based on a review of FERC decisions, it is concluded

that environmental valuation estimates, for the reasons

argued by the critics, are rarely done and if done, have

been used to legitimize decisions made on other grounds.

Instead, the FERC decision-making process is structured to assess tradeoffs of money measures of opportunity cost (forgone power benefits and other benefits)

against measures of physical changes in the environment. However, the understanding and measurement of

opportunity costs often are limited. Economics research

into improved opportunity cost measurement would make

a more significant contribution to FERC decision-making than further work on environmental valuation.
EPA/NSF Partnership for Environmental Research 19

2002 Decision-Making and Valuation for Environmental Policy Workshop

Figure 1. The contribution of economic information to environmental policy.

Environmental

Policy Contexts

• Operating

conditions at

hydropower dams

• Natural resource

damages from

industrial sites and

accidents

• Water resource

project evaluation

Development

of Evaluation

Procedures

and Protocols

Types of

economic

analysis,

information, &

logic used or

allowed

Implementation &

Application of

Evaluation

Procedures

Types of economic

analysis, information, & logic

produced

Contributions of

analysis to

decision-making

Policy

Decisions:

• Hydropower

license conditions

• Natural Resource

Damages

• Water Resource

Project Selection

Development, Refinement, and Application of Analytical Tools

(Benefit Measurement, Cost Estimation Procedures, etc.) by

Economics Profession
20 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Estimating the Cost of Carbon Sequestration in Global Forests

Brent Sohngen1, Robert Mendelsohn2, and Roger Sedjo3

1The Ohio State University, Columbus, OH; 2Yale University, New Haven, CT; 3Resources for the

Future, Washington, DC

This research project explores the cost of large-scale,

global carbon sequestration programs in forests. The specific objectives of the project are to develop: (1) a model

of the marginal cost of carbon sequestration in forests;

(2) a global carbon storage database for forested biomes;

and (3) alternative strategies for carbon sequestration in

forests and estimate costs.

This research explores the theoretical link between the

marginal damages from carbon emissions and the annual

marginal benefits of carbon sequestration. A carbon sequestration valuation function is then developed and incorporated into a model of global timber markets. The resulting

carbon sequestration-forestry model is integrated with an

integrated assessment model to complete the links between

sequestration, the carbon cycle, and energy markets. Simulations with different climate damage functions are prepared

to show the optimal time path for carbon sequestration and

the potential costs of sequestration programs.

The results suggest that over the next 100 years,

forests could sequester 38.6 to 102 billion metric tons at

carbon prices ranging from $61 to $187 per ton. Carbon

sequestration in forests could be large enough to have an

effect on carbon abatement prices and the energy market, although the effect is not dramatic. Nearly 70 percent of sequestration is predicted to occur with reduced

deforestation and additional plantations in tropical and

subtropical regions of South America, Africa, and AsiaPacific. The remaining 30 percent of sequestration is

predicted to occur in the temperate zone. Much of the

carbon results from land use change, although changing

rotations and management intensity are relatively more

important in the temperate zones (see Table 1).

To date, there have been no global estimates of the

costs of carbon sequestation, and other studies have not

considered the importance of dynamic factors such as

forest growth and rising climate damages. Failing to account for system-wide and dynamic effects could bias

other estimates of carbon sequestration costs downward.

These estimates account for timber market activity, and

thus account for potential leakage in markets. Most of

the additional storage (70%) is predicted to occur in tropical regions through reductions in deforestation. Surprisingly, storage in markets does not account for much

additional carbon sequestration at the prices considered.

A number of additional steps should be taken with

this research. First, the integrated results could be linked

to estimates of climate and carbon impacts on forest

growth and distribution to assess whether climate impacts affect the cost of carbon sequestration. Second,

although land supply functions are included for all regions of the world, the model does not fully integrate

global forestry and agricultural markets. Additional research should be undertaken to develop a global economic model of forestry and agriculture. Third, given

the potential importance of trading and property rights,

the single global demand function for forest products

and carbon rent should be expanded to include regional

demand functions for forest products to capture potential trade effects and the effects of different distributions

of initial property rights to carbon in forests.
EPA/NSF Partnership for Environmental Research 21

2002 Decision-Making and Valuation for Environmental Policy Workshop

Table 1. Proportion of carbon sequestration arising from different activities in different regions. These

estimates assume that carbon damages rise from approximately $23 per ton of emissions in 2000 to

$188 per ton by 2100.

Land Use Increasing Manage. Market Land Use Increasing Manage. Market

Change Age Intensity Storage Change Age Intensity Storage

2010 (Carbon Price = $33.01) 2100 (Carbon Price = $187.54)

Temperate Regions

N. America 79 21 1 (2) 51 39 7 3

Europe 30 85 0 (15) 63 25 8 4

FSU 97 4 0 (1) 74 18 6 2

China 100 0 0 0 82 13 2 3

Oceania 100 0 0 0 83 5 3 9

Temperate 85 18 0 (3) 63 28 6 3

Tropical Regions

S. America 77 25 0 (3) 90 9 1 0

India 98 0 2 0 90 (1) 3 8

Asia-Pacific 98 3 0 (1) 80 17 4 (1)

Africa 98 3 0 (1) 96 4 1 (1)

Tropical 88 14 0 (2) 89 9 2 (0)

GLOBAL 87 16 0 (2) 81 15 3 1
22 EPA/NSF Partnership for Environmental Research

2002 Decision-Making and Valuation for Environmental Policy Workshop

Teaching Proper Use of a Household Hazardous Waste Facility

Carol Werner

University of Utah, Salt Lake City, UT

“Why do people use toxic household products?” “Can

we teach them to be more careful in their use and disposal

of these products?” The purpose of this research project

was to teach residents about the County’s new Household

Hazardous Waste (HHW) disposal facility, but to do so in

a way that discouraged unnecessary use and waste and

encouraged long-term behavior change. Five behaviors

were targeted: (1) switch to nontoxic alternative products; (2) store chemicals at proper temperatures to extend

shelf life; (3) use up leftovers instead of disposing of them;

(4) share unwanted leftovers with friends; and (5) take

spoiled products to the HHW facility.

Over a 2.5-year period, a holistic program was developed, using psychological principles of how people

process messages, what increases acceptability of the

message, what increases memory for the information,

and what can be done to help people maintain new behaviors. A variety of strategies for getting groups interested in the program were used. One strategy that did

not work was to send materials to church groups and

ask them to develop programs in conjunction with our

“liaison.” Only a handful of churches provided us with

the name of a person interested in organizing their group,

and only one group reported a successful leftover exchange. This approach was abandoned, and speaking at

senior centers took place as a way to find out what might

interest people about HHW. It was learned that people

are concerned about toxics and eager to learn about effective nontoxic alternatives. A new program was developed around these interests. A key feature is that the

individual’s attitude and behavior change are embedded

in a significant reference group so they can learn from

each other. To date, more than 80 groups have participated in our group discussions. Two people from each

group completed a questionnaire as a rough index of

program impact.

Reported Behavior Change. Since our presentation,

33 percent of the respondents had taken something to

the HHW disposal facility. If this percentage of “proper

disposers” generalized to everyone who saw our presentation, the behaviors of more than 400 households

(33% of the estimated 1,275 households not already using the facility) were potentially changed.

Attitudes. Participants’ attitudes and behavioral intentions differed significantly from matched control group

members who had missed the meeting, supporting the

idea that participants had been influenced by their friends’

comments and behaviors during the meeting. How does

this level of change (33%) compare to previous promotion campaigns? Five other respondents—or 10%—reported they had already been using the facility in the 5

years since it had opened. Costs for this impact are fairly

modest (approximately $25 per group for the presentation; average group size of 31).

The current program aims to extend this work in several broad areas: (1) training observers to document meeting content so that those processes can be related to attitude

and behavior change; (2) evaluating the handouts; (3) developing additional mechanisms for institutionalizing longterm change; and (4) packaging the program so that county

personnel in other states would use our program in designing their own education and outreach program.
EPA/NSF Partnership for Environmental Research 23

2002 Decision-Making and Valuation for Environmental Policy Workshop

Index of Authors

Abel, T., 1

Atran, S., 2

Boyd, J., 4

Grant, G., 5

Montgomery, C., 7

Newbold, S.C., 9

Opaluch, J.J., 10

Paolisso, M., 12

ReVelle, C., 14

Scholz, J., 16

Shabman, L., 18

Sohngen, B., 20

Werner, C., 22
$300

Penalty for Private UseOfficial Business Onlywww.epa.gov/ncerqaMarch 2002EPA/600/R-02/006National Center for Environmental Research (8701R)Office of Research and DevelopmentEnvironmental Protection AgencyUnited States