EPA 841-N-12-004

The Economic Benefits of 

Protecting Healthy Watersheds 

April 2012 

Protecting our nation’s healthy watersheds makes economic sense 

Healthy intact watersheds provide many ecosystem services that are necessary for our social and 

economic well-being. These services include water filtration and storage, air filtration, carbon storage, 

nutrient cycling, soil formation, recreation, food and timber. Many of these services have not been 

monetized and therefore the economic contributions of healthy intact ecosystems are often under-valued 

when making land use decisions. Ecosystem services provided by healthy watersheds are difficult to 

replace and most often very expensive to engineer (see chart). An engineered ecosystem service 

replacement may only provide a fraction of the services provided by highly functioning natural 

systems. 

Preventing impairments in healthy watersheds protects valuable ecosystem services that provide 

economic benefits to society and prevent expensive replacement and restoration costs. Maintaining 

riparian connectivity and natural processes in the landscape provide a supporting network for 

ecological integrity, ensuring the sustainable and cost effective provision of clean water over time. 

New water filtration plant $8-10 billion 

Watershed Conservation $1.5 billion 

Capital and operating costs

to filter drinking water in 

New York City 

(2006 dollars) 

Wastewater treatment $8.56/lb Nitrogen 

Forest buffers $3.10/lb Nitrogen 

Chesapeake Bay nitrogen 

reduction 

Conventional wastewater $3.24/1000 gallons 

Wetlands construction $0.47/1000 gallons 

Average wastewater 

treatment costs 

How is monetary value assigned to an ecosystem service? 

Environmentalists and economists frequently suggest that there would be a greater incentive for 

environmental stewardship if ecosystem services were valued in a manner that reflects the large 

contribution they have to our economy and society. Assigning a monetary value to a particular service 

can be very complicated due to issues of scale and the complexity of ecological interactions that make 

isolating the economic effects of one service difficult. Although challenging, valuation is seen as 

essential for encouraging conservation. Economists have developed innovative methods that attempt to 

quantify ecosystem services and the economic benefits of conservation. 

Instead of developing values for individual landscape features, such as a wetland, a healthy stream 

reach or headwaters, many economists have found that holistic valuation techniques that monetize a 

range of services provided by a landscape to be a more effective communication tool. At times, value is 

measured indirectly through payment for ecosystem services (PES) programs that compensate 

landowners for conserving land so that others may benefit from the multitude of ecosystem services the 

land supplies. Value can also be estimated by citizen’s willingness to pay (WTP) to use or protect a 

land area or ecosystem service. 

Another common indirect valuation method is the estimation of avoided costs to society due to 

protection activities. Cost avoidance scenarios are used to communicate the costs associated with losing 

ecosystem services and replacing them. These scenarios are commonly used to show costs saved from 

the prevention of flood damage or impairments that would occur if a floodplain was not intact. 

Watershed protection is less expensive than building new “grey” infrastructure 

Hanson, Craig et al. 2011. Forests for water: exploring payments for watershed services in the US south.” 

World Resources Institute Issue Brief, Issue 2, Pp15. 

www.epa.gov/healthywatersheds 

Did You Know? 

Maintaining the integrity of 

natural biological and 

physical systems provides 

economic benefits through 

ecosystem service provision. 

Degradation of riparian 

ecosystems can cause 

negative economic impacts 

far from the altered site. 

Protecting healthy 

watersheds reduces capital 

costs to supply clean 

drinking water and to treat 

waste water. 

Healthy 

Watersheds 

support healthy 

economies! 

Protecting Healthy 

Watersheds...

--Lowers drinking water 

 treatment costs 

--Avoids expensive 

 restoration activities 

--Sustains revenue- 

 generating recreational 

 and tourism opportunities 

--Minimizes vulnerability 

 and damage from natural 

 disasters 

--Provides critical 

 ecosystem services at a 

 fraction of the cost for 

 engineered services 

--Increases property value 

 premiums 

--Supports millions of jobs 

 nationwide 

--Ensures we leave a 

 foundation for a vibrant 

 economy for generations 

 to come 
 

Protecting healthy watersheds avoids future costs and benefits communities 

Investing in the maintenance of healthy watersheds can significantly lower costs associated with 

water treatment and flooding. In a study of 27 US water suppliers, researchers found that 

protecting forested watersheds used for drinking water sources can reduce capital, operational 

and maintenance costs for drinking water treatment. They found that watersheds with greater 

percentages of protected forest correlate to fewer water treatment expenditures (see table). 

Retaining high quality natural green infrastructure minimizes property damage and clean-up costs 

from flood damage and storm surges. Forested cover prevents runoff from moving rapidly across 

the landscape and allows it to slowly infiltrate into the soil, reducing erosion and high flows. Intact 

wetlands store and capture excess water. For example, wetlands surrounding the Boston area have 

been estimated to prevent $42,111 of flood damage per acre of intact wetland. A healthy watershed 

will reduce the area and impact of a flood, minimize the economic burden on public infrastructure, 

reduce erosion and water treatment costs and can restore natural groundwater recharge. 

Healthy watersheds that maintain protected riparian corridors are expected to be more resilient to 

the anticipated effects of climate change. Expenses associated with recovery from extreme weather impacts increased by a 

factor of six between 1997 and 2007. This rising trend is expected to continue. Floods now cause an average of $8 billion in 

damage every year in the U.S. The most efficient way to avoid excessive future costs is to increase the flexibility of 

ecosystems now so that they may function and retain resiliency under a wider range of climatic conditions. Riparian areas 

that are hydrologically connected to their landscape can 

maintain their functionality, are more adaptable to change, and 

better equipped to handle large storm events. 

Future costs associated with the loss of natural intact systems 

and the services they provide may include constructing new 

infrastructure to manage and treat more stormwater and 

drinking water and greater clean-up costs from natural 

disasters. Comparing future adaptation costs to current 

short-term profits from land conversion can accurately reflect 

the ecological and economic consequences of land use 

decisions. 

Treatment 

Share of forested costs per 3,000 Average annual Cost increase over 

watershed 3 m treatment costs 60% forest cover 

60% $29 $297,110 

50% $36 $369,380 24%

40% $46 $465,740 57%

30% $58 $586,190 97%

20% $74 $746,790 151%

10% $91 $923,450 211%

Percent forest cover and predicted water treatment costs based on 27 US water supply system, based on 

treatment of 22 million gallons per day, the average daily production of water suppliers surveyed. 

For more information, see Postel, Sandra L. and Barton H. Thompson. 2005. Watershed protection: 

capturing the benefits of nature’s water supply services. Natural Resources Forum. Issue 29, Pp 98-108. 

Floods cause an 

average of $8 

billion in damage 

every year in the 

United States 

 

Economic and ecological benefits of conservation development 

Conservation development preserves open space and maintains 

landscape connectivity, while clustering development to the 

least environmentally sensitive areas. Traditional development 

requires intensive and costly additions of grey infrastructure to 

connect new neighborhoods to road and utility networks. In a 

review of 98 communities across 21 states, researchers found 

that for every dollar received from residential development 

revenues, a median of $1.16 was spent on providing services 

to the new community by the local government (see figure). 

Conservation development provides economic benefits to 

communities because it consumes less land, needs fewer roads, 

resources and utility infrastructure. Additionally, many studies 

have shown that people are willing to pay a premium to live in 

conservation developments; these premiums provide greater 

revenues to local communities. 

Page 2 The Economic Benefits of Protecting Healthy Watersheds 

The median cost to provide public services to different land uses per dollar of revenue raised (n=98 communities) 

Reprinted with permission from Crompton, John L. 2007.“The impact of parks and open spaces on property taxes.”The Economic 

Benefits of Land Conservation. Ed. Constance T.F.de Brun. The Trust for Public Land. Pp1-12. 

$0.27

$0.35

$1.16

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

Commercial & Industrial Farm/Forest/ 

Open Space

 Residential
Recreation and tourism 

Recreation and tourism are billion-dollar 

industries in the United States. According to the 

American Sportfishing Association, there are 

over 30 million anglers in the U.S., generating 

over one million jobs and over $45 billion in 

retail sales annually. Healthy intact ecosystems 

are essential to the viability of both commercial 

and recreational fishing. More people in the U.S.

fish (30 million) than play golf (24.2 million) or 

play tennis (10.2 million). 

In a 2003 study, the Outdoor Industry 

Foundation found that the outdoor recreation 

economy contributed $730 billion annually to 

the economy, supported 6.5 million jobs and 

generated $88 billion in state and federal tax 

revenues. Wildlife watchers in The Chesapeake Bay region spend about $3 billion annually on trip-related expenses and 

equipment; this estimate does not include job creation and multiplier effects from these activities. Rural areas near forest 

land and other types of open space often depend on tourist spending to help support their local economies. Outdoor 

recreation and eco-tourism are large economic forces whose foundation rely on the maintenance of healthy watersheds and 

the protection of open space. 

More people in the United States fish (30 million) than play golf (24.2 million) 

or play tennis (10.2 million)

Federal and state tax revenues generated by recreational activity 

Outdoor Industry Foundation 2003

Property value premiums 

People value living near healthy clean water. Studies from Maine and Minnesota show 

that home values declined by tens of thousands of dollars with declines in water quality. 

The aggregate effect of an increase in property values attributed to good water quality on a 

single lake equates to millions of dollars per lake in these areas. Further, recent studies 

around the country (e.g., in Colorado, Pennsylvania, Oregon, Maryland, Ohio and 

Virginia) have shown increased property values and tax revenues from properties near 

open space, green space, walking/biking trails, or riparian areas. Even in tight economic 

times, a relatively higher premium is placed on properties with access to nature. For 

example, a current study of five counties in southeastern Pennsylvania shows that open 

space is attributed with adding $16.3 billion to the regional housing stock value. Clean and 

healthy waterfronts boost property values and revenues for adjacent retail and commercial 

businesses, too. Waterfront business properties are attractive to customers and have 

greater property value premiums when they are near clean waters. Preserving healthy 

watersheds and protecting open space while providing access to people has the potential to boost 

local revenues while providing attractive amenities. 

Quality of life and health benefits 

The EPA and other public health organizations have long acknowledged the link between water 

and air quality to human health. When people think of human health and the environment, they 

often think of the negative health effects from an impacted environment, rather than the positive 

impacts that a healthy environment can have on human well-being. 

There are social and health benefits related to the proximity of people to nature, parks, walking 

trails and biking trails—both in the form of physical exercise and mental stress relief. Forests 

outside of urban areas significantly contribute to human health in urban areas. These health 

benefits have the potential to provide significant cost savings in health expenditures. People who 

exercise regularly and seek stress relief are generally healthier, have fewer insurance claims and 

spend less time in hospitals, thus their societal health care costs are lower. 

Forests outside 

of urban areas 

significantly 

contribute to 

human health in 

urban areas... 

reducing health 

expenditures 

The Economic Benefits of Protecting Healthy Watersheds Page 3 
People support protecting our nation’s environment—it’s good for the economy

Citizens across the United States have overwhelmingly voiced their support of environmental 

protection: between 1994 and 2004 over 75% of conservation referenda on ballots were passed and 

a 2011 Gallup poll shows that nearly 80% of people worry about pollution of lakes, rivers, streams 

and drinking water. 

The United States has spent on average $1 billion per year on stream restoration since1990. These 

numbers are expected to rise as communities work to mitigate environmental problems. Restoration 

efforts are less successful without a supporting ecological network of healthy watersheds. Protecting highly functioning aquatic ecosystems is a cost-effective way to sustainably provide the multitude of services required to meet society’s needs. Studies show that the total economic value of 

intact systems exceeds that of lands converted for intensive economic uses over time. 

Understanding the contribution that healthy watersheds provide to local economies is an important 

tool for land stewardship. Strengthening protection of high quality waters or diverting new 

development from these sensitive areas can have a positive economic and social impact and 

maintain these benefits for generations to come. 

The Economic Benefits of Protecting Healthy Watersheds Page 4 

Selected Publications and Resources 

Ecosystem services provided by conserving forest land 

Forests, water and people: Drinking water supply and forest lands in the Northeast and Midwest United 

States 

http://na.fs.fed.us/watershed/fwp_preview.shtm 

This analysis by the US Forest Service highlights the connection between forests and the protection of surface 

drinking water quality. 

Investing in protecting healthy watersheds avoids future costs 

Forests for water: Exploring payments for watershed services in the U.S. South 

http://www.wri.org/publication/forests-for-water 

This World Resources Institute study from 2011 explores the use of landowner compensation to protect natural 

resources and for avoided costs. 

Green infrastructure: Smart conservation for the 21st century 

Mark A. Benedict and Edward T. McMahon 

http://www.greeninfrastructure.net/sites/greeninfrastructure.net/files/GI_RR.pdf

This 2002 publication lays out the natural green infrastructure concept of protecting ecological hubs and corridors and discusses how protecting these areas avoids future costs. 

Revenues generated in recreation and tourism sectors from healthy watersheds 

American Sportfishing Association 

http://www.asafishing.org/

This organization provides links to several studies that explore the economic impact of the hunting and fishing 

industries, which rely on healthy fish and wildlife habitats. 

Outdoor Industry Association 

http://www.outdoorindustry.org/national-economic-impact-reports.php 

This website provides links to comprehensive economic reports on the impact that outdoor recreational activity 

has on the economy. 

Valuing ecosystem services 

The World Conservation Union (IUCN) Value: Counting ecosystem services as infrastructure

http://www.iucn.org/what/tpas/greeneconomy/resources/documents/?1136/Value-counting-ecosystems-as-waterinfrastructure 

This 2004 IUCN publication is a comprehensive look a how ecosystems provide valuable services and the 

critical need for investment in protecting natural systems. 

 

About Healthy 

Watersheds 

EPA’s Healthy 

Watersheds Initiative 

(HWI) was developed to 

protect the nation’s 

remaining healthy 

watersheds, prevent them 

from becoming impaired, 

and accelerate our 

restoration successes. 

The HWI complements 

existing EPA program 

efforts by focusing on 

protection of high quality 

watersheds. These healthy 

areas are identified 

through holistic aquatic 

ecosystem assessments. 

Protection and restoration 

priorities are developed 

through these assessments 

to strategically implement 

protective actions that are 

both economically and 

ecologically beneficial. 

We can’t afford not 

to protect our 

nation’s remaining 

healthy watersheds! 

If you would like to 

receive a copy of a white 

paper on the economic 

benefits of protecting 

healthy watersheds 

or learn more about 

Healthy Watersheds at 

EPA, 

Contact Laura Gabanski: 

Gabanski.Laura@epa.gov 

or

Visit our website 

www.epa.gov/

healthywatersheds

The Economic Benefits of Protecting Healthy Watersheds Fact Sheet is produced by the U.S. Environmental Protection Agency. Mention of commercial 

products, publications, or web sites in this fact sheet does not constitute endorsement or recommendation for use by EPA or its contractors, and shall not 

be used for advertising or product endorsement purposes. The discussion in this document is intended solely as guidance. Thus, it does not impose 

legally binding requirements on EPA, States, or the regulated community. This guidance does not confer legal rights or impose legal obligations upon 

any member of the public. This is a living document and may be revised periodically without public notice. EPA welcomes public input on this 

document at any time.