1

Market and Non-Market Values of Water Resources and Non-Market

Values of Hydropower Associated With Glen Canyon Dam:

A Theoretical Framework and Literature Review

John Loomis1,

Department of Agricultural and Resource Economics,

Colorado State University2, Fort Collins, CO 80523

April 14, 2014

1. This study has been conducted with initial direction provided by Dr. David Garrett. This document has been 

significantly improved thanks to comments from three anonymous peer reviewers. However, the views expressed are 

solely those of the author, who is responsible for any errors or omission.

2. This analysis does not necessarily reflect the opinions of the Department of Agricultural and Resource Economics nor

Colorado State University.
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Executive Summary

Theory Section

Hydropower: All sources of electricity have their costs and benefits, and hydropower is no different. This 

report provides a theoretical framework in which one can conceptualize the possible non market benefits 

associated with generating a given amount of electricity using hydropower rather than fossil fuel (primarily 

coal). The report then provides a review of the existing international empirical literature on magnitude of 

these benefits in terms of:

 reduced health effects from air pollution

 increased visibility at national parks

 reduction in CO2 emissions

 increased reliance on renewable energy

I assess the relevance of the existing literature values to Glen Canyon dam operations.

The resulting gaps in the empirical literature with respect to Glen Canyon dam operations and insights 

gained from the theoretical framework helps to motivate future research needs to allow a more complete 

assessment of the potential environmental benefits relying on hydropower rather than fossil fuels for an 

incremental or marginal change in electricity production.

Water: This report also investigates the market and non market values of water in the Colorado and 

Green River systems, particularly an incremental or marginal change in the quantity of water. In 

particular we provide an equivalent theoretical framework for evaluating the market and non market 

benefits of water supply. This is followed by a review of the international empirical literature on:

 market values of irrigation water and municipal water 

 non market values of irrigation water

 non market values of water based recreation

We then investigate what these existing empirical studies can tell us about the incremental or marginal 

values of water in the Colorado River system. 

The resulting gaps in the empirical literature with respect to Glen Canyon dam operations and insights 

gained from the theoretical framework helps to motivate future research needs to allow a more complete 

assessment of the potential market and non market benefits of any incremental changes in water supply.

Summary of Theory Results

The theoretical framework suggests there can be non-market benefits for many of the positive environmental 

aspects of hydropower such as air quality, reduced CO2 emissions and being renewable energy. In 

particular, some of the principles derived from economic theory suggest:

 The economic efficiency benefits of market, non-market use and non-use values is measured 

by what a person a person would pay for them, i.e., willingness to pay.

 The magnitude and geographic extent of non-use values is an empirical matter.

 Due to non-rejectability of public goods, not all public goods will be valued by all people.

 The more substitutes there are for a resource the less likely non-use value will be significant.

 Altruism toward others only generates non market values that can be included in an economic 

efficiency or benefit-cost analysis if the source of altruism is paternalistic—a concern that 

other individuals consume the specific public goods. The rationale is explained in the theory 

section.

 Distributional concerns about the general well being of others or employment should be 
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displayed separately as an economic impact of the project or policy and not included in a

Benefit-Cost Analysis (BCA) .

Hydropower Empirical Results

This study reports monetary values for improved health and visibility benefits from the literature, as well as 

monetary values for reducing CO2 emissions. While the benefits of renewable power in general, and wind 

power and solar in particular have been empirically measured, it has not been specifically measured for 

hydropower. This is a gap in the literature that could be investigated by future research.

One of the more definitive findings is for coal. The costs per megawatt hour of air pollution (SO2, NOX 

and PM) and Carbon Dioxide amount to $.95 and $4.64, respectively per MWh. Willingness to pay for 

renewable power (in the form of wind power in NM) is $.27 per MWh. Care must be taken in using these 

values not to double count the value of renewable power and the value of air pollution avoided, as some of 

the reasons for valuing renewable power is to avoid air pollution affects from fossil fuels. 

Water Value Empirical Results

Market values of water provide one indicator of value of irrigation water. Market values of water in 

irrigation in Arizona range from $33-$68 per acre foot for one year lease, to about $700 per acre foot for 

purchase of water rights. For residential water use in Phoenix, the net willingness to pay per acre foot is 

about $200 an acre foot each year. In California as a whole the average one year irrigation lease rate is 

between $83 and $119, but one transaction in Southern California involved a one year lease rate of $258 

per acre foot. Purchase prices for water rights on average in all of California are between $700-$900 per 

acre foot. I could not locate any Southern California specific water right purchases.

For water, the theoretical framework suggests there can be non market benefits for many of the positive 

environmental aspects of water. Non market values of water are most evident in the use values of waterbased recreation in the Colorado and Green River systems. These recreation use values are dominated by 

the value of water based recreation at Glen Canyon Dam (e.g., Lake Powell). However, many of the 

recreation value studies, particularly of rafting and fishing below Glen Canyon Dam are more than two 

decades old, which limits their applicability for making current trade-offs for dam operations today.

Updating these studies is an important avenue for future economic analysis.

Beyond the many studies of water based recreation there has been just one published study on the public’s 

non market value for irrigated agriculture in the western U.S., the results of which are not disaggregated to 

the state level. Thus attempting to estimate the non market values of irrigated agriculture at the state level is 

an important area for future research.

Native American Values

The existing literature stresses only valuing incremental changes in access to Native American’s for their

cultural and natural resources and not attempting to measure their total value. There are only two studies on 

the economic values that Native Americans hold toward natural resources. There is no research in the U.S. 

(and only one study in Australia) on the general public’s willingness to pay to provide natural resources to 

native people’s.
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Table of Contents Page #

Introduction 5

Section I Theoretical Framework for Market and Non Market Values of Hydropower & Water 7

1. General Theoretical Framework 7

2. Some Principles of Non Market Use and Non-Use Values from Equation (2) 12

3. Tailoring the Utility Function to Air Quality Benefits of Hydropower 18

4. Tailoring the Utility Function to Water Resources 20

5. Transitioning from Utility to Willingness to Pay 22

6. Addressing Whether Other Economic Effects are Non Market Values or Not 25

7. Conclusions 28

Section II. Empirical Literature on Non Market Benefits Associated with Hydropower 30

A. Non Market Values of Improved Air Quality 30

1. Health Costs of Fossil Fuel Based Electricity 30

2. Improved Visibility at National Parks 34

3. Benefits of Reducing Greenhouse Gas Emission 37

4. Economic Effects of Air Quality on Agricultural Production, Worker Productivity

Environmental Effects on Water Quality and Forests 45

5. Hydropower as a Renewable Energy Source 45

Section III. Native American and Aboriginal Values 51

Section IV. Market and Non Market Values of Water 55

A. Market Values of Water 55

1. Irrigation Water Valuation from Direct Observations of Water Rights Markets 57

2. Water Markets for Estimating Residential Water Values 59

B. Non Market Values 62

1. Water Related Recreation 62

2. Non Market and Social Values Water 68

3. Non Market Values of Irrigated Agricultural Land 69

4. Open Space Values provided by Agricultural Land 71

5. Non Use or Passive Use Values of Water Resources in the Western U.S. 73

C. Conclusions 74

Section V. Adapting Literature Values to Glen Canyon Dam

A. Air Quality 75

B. Improved Visibility at National Parks 76

C. Benefits of Reducing Climate Change 77

D. Hydropower as a Renewable Energy Source 78

E. Potential Native American Values 79

F. Water Values of Glen Canyon Dam 80

1. Market Values 80

2. Non Market Values of Water 81

Section V. Literature Gaps and Important Areas for Future Research

A. Non Market Values of Hydropower 83

B. Potential Native American Values 84

C. Market Values of Water 84

D. Non Market Values of Water 85

References 86
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Introduction

This study was initiated at the request of water and hydropower associations affiliated with the Colorado

and Green River systems to assess if there are non market values associated with changes in the 

availability of these resources in general, and in the Colorado and Green River systems, in particular. The 

policy setting for this study is potential changes to Glen Canyon dam operations that involve changing 

flow release patterns from the dam. Some of the possible changes in flow patterns could involve reducing 

the amount of peaking power produced, and hence the need replace this power during times of peak 

demand. Some of this replacement power will likely come from fossil fuels such as coal and natural gas. 

While the timing of water flow releases could change when water is available to downstream users, it is 

not likely to change the total amount of water released over a year, or over a ten year period due to 

Colorado River Compact requirements. 

The first objective of this study is to provide a general theoretical framework (Section I) 

incorporating market and non-market aspects of water and hydropower into the standard utility 

maximization framework used for economic valuation.

The second objective is to review what the existing literature has to say about the empirical

evidence of these market and non market aspects of water and hydropower. The literature review was

literally to be global in scope, looking at not just studies in the western U.S., but also internationally.

The third objective is to determine the applicability of the empirical values reported in the 

literature values to potential incremental changes in power production and water releases from Glen

Canyon Dam operations.

The fourth objective recognized that there might be several gaps between theory, the existing

empirical literature and finally the Colorado and Green River systems. Therefore this fourth objective

addresses what new empirical research studies should be undertaken to fill the gaps between the theory 

and existing empirical studies in relation to the market and non market values of water and hydropower 

in the Colorado and Green River systems.

This study reflects the spirit of an increasingly interconnected planet in which management of

large coupled human-environmental systems requires us to confront the weighing of local impacts

(many of which may be non-market in nature) against contributions to regional and even global impacts

and trends (many of which may also be non-market in nature).

1

 

1

I thank Robert Berrens, Department of Economics, University of New Mexico for this insight.
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There is almost no externality-free electricity supply (NRC, 2010), perhaps with the exception of

conservation and roof top solar. Renewable energy sources (hydropower, wind, large scale commercial

solar, geothermal) and non-renewable energy sources (coal, natural gas) all have external environmental 

costs to geographic regions where the production takes place, and in the case of carbon dioxide, to the 

entire world. Thus mitigating regional impacts of one power source may increase pressure in regional

electricity generation grids and markets to use another power source. The primary objective of this study

is to contribute to an assessment of the incremental external benefits of incremental changes in 

availability of water and hydropower while trying not to minimize the importance of the external costs 

of these two resources. Others have studied the external environmental costs of irrigation projects

(Moore, et al. 1996), and external environmental and social costs of dams (World Commission on Dams,

2001). However, per the objectives of the statement of work these other effects will not be investigated 

in any detail, beyond simply to acknowledge them where appropriate in the report. Finally, given the 

focus in the statement of work, the well known fuel cost savings of hydropower, and its flexibility in 

meeting electricity demand are not studied in this report either. 

 
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SECTION I

THEORETICAL FRAMEWORK FOR MARKET AND NON MARKET VALUES OF

HYDROPOWER & WATER

1. General theoretical framework

1a. Definitions of types of goods: Private and Public Goods

Some of the goods produced by Glen Canyon Dam are private goods (e.g., consumption of electricity 

by households) and some are public goods (e.g., air quality). The two primary characteristics that

distinguish private goods from public goods are the following: (a) Private goods are rival in consumption

(one person’s use precludes another person’s use of the same unit of a private good (e.g., a hamburger)).

(b) Suppliers of private goods can also exclude people from consuming the private good via the market, 

i.e., if the person does not pay the market price, they are denied access to the private good. “The most 

common definitions of public goods stress two attributes of such goods: nonexclusivity and nonrivalness 

(Nichloson, 1992:756). Non-rival in consumption means that one person’s use or enjoyment of a public 

good does not “use up that unit of the good”. Therefore another person (or for that matters thousands or 

millions of other people) can simultaneously use or enjoy that same unit of a public good. Nonexclusivity means that once the public good is provided to one person, there is no economically efficient 

way to prevent others from consuming it. However, the third characteristic of a public good, nonrejectability, means everyone gets the same quantity of the public good, whether they obtain utility or

not from it. For most cases (improved air quality, water quality) everyone will receive benefits. However,

non-rejectability can result in a case where some public good (e.g., silvery minnow in the Rio Grande 

River) may be of value to some people, but others might have no value for it at all.

Consumption of private goods primarily has use values to the person consuming them. This consumer is 

able to choose how much of the good to consume to maximize their utility subject to their income and 

the price of the good. In the United States and many developed countries private goods are provided by 

markets. Profit maximizing firms provide many of the private goods. Some private goods are provided 

by government agencies or quasi government organizations, rural cooperatives, non- governmental

organizations, etc. Hydropower from Glen Canyon is an example of a private good (electricity) provided

by a government agency.

In contrast to private goods, the individual consumer cannot usually choose the quantity of

public goods available to them, as there is only one quantity provided to everyone residing in a

particular location. Depending on the nature of the public good, this may be a city (e.g. local urban

drinking water quality), a multi-state region (e.g., protecting air quality over national parks in the 
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desert southwest—see Schulze and Brookshire 1983), or globally (protecting a unique species found 

only in the Amazon). Usually collective action of some form (e.g., referendum voting, voting by 

elected officials or government agency decisions—e.g., EIS) can increase or decrease the amount of 

public goods available in that area.

Public goods can be combined with private goods to produce non-market use goods (e.g., recreation,

improved health) that provide enjoyment or utility to people. Public goods may also provide benefits

to some people who do not directly use the public good on site. These off site values are referred in

the literature as passive use values or non-use values. The components of passive use values include

the enjoyment from just knowing the public good exists for its own sake or the use by others

(altruism) and knowing that preservation today can provide this public good to future generations.

1b. Externalities in Production of Private Goods and Public Goods from Environmental Quality

For markets to provide a socially optimum amount of a private good, all the costs of production must

be reflected in the price paid by consumers. In the case of coal fired powerplants providing electricity,

some of the health and visibility costs of electricity production arising from air pollution caused by the

plant are not fully reflected in the cost of production and hence the price of the electricity to the

consumer. These health and visibility costs are costs external to the market (they are not paid for by the

firm). Air pollution is a non market costs of coal fired electricity production. These external costs are

called negative externalities by economists. Hydropower generates no air pollution externalities (but

there are downstream externalities to endangered species, for example). Hence in some sense replacing

10 megawatts of coal fired electricity with hydropower provides a non market benefit in the form of

avoiding the air pollution externality on those units of production. Improved air quality from replacing

some electricity production from a coal fired powerplant with hydropower has characteristics of a 

public good.

Figure 1 illustrates this example of air pollution externality from a coal fired powerplant. Figure 1

shows the negative externality is the difference between the Marginal Private Cost (MPC) and Marginal

Social Cost (MSC). The shaded polygon in between Q1 and Qo is the quantity of coal generated
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electricity. For simplicity, assume that this is the residual externality after efforts to reduce the 

magnitude of the externality has been performed, e.g., scrubbers are in place. If hydropower

generation can provide Qo-Q1 worth of electricity, this reduces the magnitude of the externality. This 

would be a non market benefit of the hydropower. The avoided externality is a public good since

many people can potentially benefit from the reduced air pollution, or in other words the improved air 

quality. Some of these that benefit from the improved air quality will be visitors to the region (a non 

market use value). Some of these will be those that reside downwind from the power plant (a non 

market health benefit). Some of these people will be people not directly affected by the reduced air

pollution but received non market benefits from knowing the air quality is improved over other 

regions (a non market non use value). Some of this would be benefits of reducing climate change

from reduced CO2 emissions.

Figure 1. Negative Externalities from Electricity Produced from Coal. 

As noted above all forms of electricity production have negative externalities, they just take 

on different forms and magnitudes. Thus in Figure 1, it is equally plausible to replace the word 

“Coal” with natural gas, wind generated electricity or large scale commercial solar facilities 

favored by some large utilities. With wind turbines, bats and bird deaths have been well 

documented (Eveleth, 2013; Barclay, et al. 2007). Covering significant areas of land with solar 

panels will reduce wildlife habitat. In this report we focus more on coal because it is the most 

financially cost effective of alternative electricity sources (Harpman, 2006: 11) to replace 
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incremental amounts of hydropower that may need to be made up at certain times of day, days 

of the week or months of the year due to any changes in operation of Glen Canyon dam. Of 

course the economics of electricity production are changing all the time, with falling natural gas 

prices and falling prices for photovaltaics, coal may not always be the financially cheapest 

power source in the future. 

So now the question is how does one, in principle, measure these non market use and non 

use benefits. It is to the theoretical underpinnings of the empirical measurement of these values 

we now explore.

1c. General Utility function incorporating private and public goods.

Both Carson, et al. (1999) and Freeman (2003) provide a general formulation of utility with

market use, non market use and Passive Use/Non-use Values. A simple utility function is:

(1) Utility= function ((g(X1..Xn, PG1...PGn)).

Utility (U) is a function of all the private goods a person consumes (X1...Xn) and all the Public

Goods (PG1..PGn) available to them such as water quality, air quality, rare species, etc. (Public goods

such as National Defense, Space program, etc. will be suppressed for notational simplicity).

Some public goods will enter the Use portion of the utility function since they serve as inputs to the

individual in producing non market use values such as health and recreation. For example, some rare

species (e.g., whooping cranes) provide both viewing use values for some individuals and passive use

values to users and non-users (see Stoll and Johnson, 1984 for empirical evidence). Freeman (2003:

142) notes that there is no logical reason why an individual could not simultaneously receive utility 

from use and passive use values (PUV) from the same public good.

A slightly different form of the utility function given in equation (1) is often given as an example of a

utility function with the properties that a person receives both use and non-use value from a given

public good (Carson, et al. 1999; Freeman, 2003). Equation (2) presents this variation of the utility

function.

(2) Utility= function((g(Xm, PG), PG))).

In words utility is an overall function of private goods (Xm) represented by a vector of private goods

(X1...Xn) and a vector of public goods (PG1...PGn). The slight, but important difference between

equation (1) and equation (2) is that a subset of the public goods produces non market use values in
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combination with some of the private goods (e.g., boats and fishing poles) and non use values. In

particular, some of the public goods may produce both use (g function) and PUV. However, some

public goods may produce only PUV because no private goods are needed to receive enjoyment from

the public good (e.g., utility gained from an endangered species in a remote location where no visitor

access is allowed).

This utility function in equation (2) is weakly separable between the function g that combines some

private and some public goods (PG) to produce non market use values and the PG by itself which has

non-use value. By weakly separable economists mean that decisions about how much X1 and PG1 to

combine to increase utility due, say, to improved health does not affect the marginal utility from the 

public good PG itself (Nicholson, 1992: 187-188—Also see Layard and Walters, 1978:165-167).
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2. Some Principles of Non Market Use and Non-Use Values from Equation (2)

Irreversibility versus Reversibility: With the aid of this general formulation we can also discuss

several principles of non-use value. First, a reduction in the quantity or quality of PG may bring about

a reduction in non-use value even if the change is reversible, i.e., not irreversible (Carson, et al. 1999:

119; Freeman, 2003: 149-150; Randall and Stoll, 1983: 268). Irreversible changes may result in larger

non-use value, however. A reduction in non-use value can also arise from a reduction in PG that does

not result in complete extinction or elimination of PG (Carson, et al. 1999: 119; Freeman, 2003: 149-

150).

Uniqueness of the Public Good: The public good (PG) need not be unique to generate non-use value 

(Carson, et al. 1999: 119; Randall and Stoll, 1983: 268), but the more unique, i.e., the fewer

substitutes the resource has the greater the non-use value is likely to be. The change in non-use value

from a change in quantity or quality of a reproducible resource with many close substitutes would

likely not generate much change in non-use value, but how small a change in non-use value is an

empirical question that may be addressed through survey research. However, a change in a

reproducible public good with many substitutes may generate local non market use value in the form

of local recreation.

The Role of Altruism in Non-Market Valuation and Non-Use Values

There is evidence all around us of people making sacrifices to help other people, i.e., they are altruistic 

toward others. Economics have long discussed whether altruism should be counted in benefit-cost 

analysis (Flores, 2002:294; Bergstrom, 2004) and non-market valuation—especially non-use value

(McConnell, 1997, Freeman, 2003). In studying this area economists have made distinctions between 

pure altruism and paternalistic altruism. 

 Pure altruism toward others stems from a general concern for the general well being of others 

or their overall level of utility, regardless of what increases that level of utility (e.g., more food, 

better education, more parks, better medical attention). 

 Paternalistic altruism is a concern that others have a specific public good. 

Of particular interest here is that a potential source of non-use value arises from paternalistic altruism 

toward others of the same or future generations (Freeman, 2003: 150-151). If my utility depends on the 

utility derived from the availability of a specific public good to myself and to current or future 

generations then this paternalistic altruism may be a source of existence and bequest to me (McConnell, 
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1997; Lazo, et al. 1997). For example, if I want future generations to have a self sustaining viable

population of condors, this is often referred to as bequest value to me (Lazo, et al., 1997). The non-use 

value arising from paternalistic altruism toward wanting others to have a specific public good is valid to 

include in economic benefit calculations of that public good (Freeman, 2003: 151; McConnell, 1997). 

However, if my altruism toward others stems from a general concern for their well being, i.e., is nonpaternalistic or pure altruism, then in most circumstances it is not valid to include this as an economic 

value (Freeman, 2003: 150)2. Thus, if I care about the well being of farmers in general, then providing 

them money (as is done in the Farm Bill) is pure altruism and would not count as an additive economic 

efficiency non market value. The reason is that in order to raise the income of farmers there is a dollar 

per dollar cost of this transfer. That is, one dollar of increased well being to a farmer, costs myself and 

others collectively one dollar. As can be seen there is no net gain. Another example might be providing 

subsidized electricity to rural families to improve their general well being in a non-paternalistic way 

(e.g., I don’t care if they use the additional electricity to raise their thermostat or play video games 

longer—anything that makes them better off, makes me better off). Providing this subsidy has a dollar 

per dollar opportunity cost to the supplier, and if provided by a government or quasi government 

agency, foregone tax revenue not available to all citizens. Thus, as in the example of the farmer, a gain 

to one group is exactly offset by a cost to others, for no net gain. Further, unlike the public good case 

described immediately below, providing the electricity to one group, means that quantity of electricity 

is not available to another group, i.e., electricity is a rival private good which mean some other group is 

deprived of subsidized electricity. While society might care about the distribution of the subsidy this 

seems to be a distributional issue not an economic efficiency issue (a point suggested by Carol Silva at 

our December 6, 2013 meeting).

In contrast, an intuitive explanation for paternalistic altruism is: besides getting utility from my own

consumption of an existing public good I also get utility from your consumption of the same public

good (Flores, 2002: 293). In this case the benefits are additive. Being a public good, the marginal

cost of allowing another person to consume the existing public good is zero. Thus, there is no

additional cost to the recipient of providing public good. Thus there is a net gain to society if people

exhibit paternalistic altruism toward others with regard to the specific public good. However, as 

Flores (2002: 304) points out if the benefit-cost analysis is evaluating provision of the public good or 

 

2

Bergstrom (2004) is not so definitive on this point, but his theoretical set up is rather restrictive requiring the initial 

allocation of resources be distributionally efficient (p348), an assumption at odds with the real world. 
14

an increase in quantity or quality of an existing public good for which the direct cost to the 

government or opportunity cost of providing the public good is positive then who pays the added 

cost matters. As discussed more below in addressing the implications of altruism in stated preference 

surveys, how the public good is financed matters. 

The theoretical underpinnings for this dichotomy between paternalistic and non-paternalistic altruism

is spelled out in some detail by McConnell (1997) and Lazo, et al. (1997) and summarized by

Freeman (2003: 150-151). Flores (2002) and Bergstrom (2004) provides a more recent theoretical 

discussion but one not as definitive as McConnell (1997). 

Based on my interpretation this literature and the above authors’ examples in their articles as well as

their guidance on Stated Preference (Contingent Valuation) surveys there are some general principles 

for designing CVM surveys if one want to incorporate paternalistic altruism. This next section draws 

directly from Lazo, et al. (1997: 369), McConnell (1997:36) and Flores (2002: 304). To guard against 

eliciting non paternalistic or pure altruism, (and what both Lazo, et al. (1997) and McConnell (1997)

warn could be double counting of benefits and Bergstrom (2004) would claim as overstating benefits), 

these authors provide some guidance on the form of the CVM WTP question. According to Flores 

(2002: 304) “ ...benefit-cost analysis with altruism cannot simply be conducted independent of who 

pays. This result is particular important for studies using stated preference techniques. If researchers 

are eliciting values for public goods, they need to make clear the cost to others in order to minimize 

measurement error”. Thus, if funding to provide the public good will actually result in a mandatory 

payment by others (e.g., taxes or utility bills—as suggested by Carson and Groves), then this needs to be 

communicated to respondents. In this case, one would follow Lazo, et al.’s guidance to choose a 

payment vehicle applicable to all households and reinforce this with the (usual) statement that all 

households must pay for the good if it is provided. A voter referendum format where a majority votes to 

provide the good, all households will pay a broad based tax would seem to be the best fit. This 

suggestion is also consistent with Bergstrom (2004: 348) that CVM questions emphasize payment 

vehicles such as taxes that all would have to pay in order to explicitly get respondents to consider that 

not only will they have to pay the costs, but there will be costs to others. The theory is that with this 

payment vehicle if the respondent only cares about the general welfare of others (i.e., pure altruism), 

then the respondent would not include benefits to others as there would also be costs to others. 

However, if the respondent gains utility from the other person having a particular public good, and 
15

there is no cost to the other person (e.g., it is funded by voluntary donations perhaps via a voluntary 

check off on state income tax or voluntary check off on utility bills, or a tax affecting only a small 

portion of the most wealthy—capital gains tax), then the respondent should include the utility the 

respondent would get from such a paternalistic gain in others utility. As shown in a lab experiment by 

Messer, et al. (2013), this is a challenging task. As one can see, qualitative research with focus groups 

early in any survey design process will be needed to probe respondents’ reasons for voting in favor or 

against provision of the public good to determine if the payment vehicle is getting this point across to 

the respondent. It is a delicate balancing act in survey design to allow for paternalistic altruism while 

avoiding the respondent including any pure altruism. 

Lazo, et al. also suggest that the payment vehicle have a short time frame (they suggest ten years), so

that only the current generation pays, but not future generations pay. This ensures that there would be

no double counting in the bequest value toward future generations. McConnell’s suggestions are a

little more cumbersome to implement, but help to distinguish respondents based on their type of 

altruism. Questions would be designed to ascertain if the respondent receives any benefits from

providing the particular public good to the household or whether any benefits arise from the 

respondent’s view that the public good would raise the other household’s general level of well being.

As can be seen, this would be a difficult question to ask a respondent as it involves a relatively

subtle, but important distinction.

Role of Non-Rejectability of a Public Good: In part because a public good is non excludable 

everyone receives this good, whether they want it or not (e.g., national defense, wolves in 

Yellowstone, flood control if you are living below a dam). Thus it is worth mentioning again that 

only a subset of people who receive a PG may have a non-market use or non-use value for it. Given 

the non-rejectability characteristic of a public good, everyone receives the current level PGo. Much 

like market goods, where not everyone values all private and public goods (e.g., many people do not

value tofu or cauliflower even though it is available in the grocery store at a fairly low price), not

everyone receives non-market use or non-use values from a particular public good. For example, if I

do not go recreational fishing, even changes in native trout may not have a non-market use value. If

the native trout is rare enough (e.g., greenback cutthroat trout), a person might have a non-use value. 

However, there may be some people who simply don’t care about native trout, and receive no non-
16

use value either. Not everyone has paternalistic altruism toward the current generation or future

generations. Rather some people may have non-paternalistic altruism, where they care about the 

overall wellbeing of others of the current and future generation but it does not matter to them whether

the increase in wellbeing of others is from native trout, or better schools, better air quality, or better 

health care. Further, the proportion of the population that may receive non market use value and nonuse value is an empirical question that may be addressed through empirical research. The extent of 

the “market” for non market use values and non-use values may also vary depending on the

uniqueness of PG (i.e., if there are no substitutes within a 1,000 miles of where the person lives, then

non-use values for some people may extend out as much as a 1,000 miles). See Loomis (2000) for 

empirical examples of the extent of non-use values for rare and endangered species.

Figure 2 conceptually illustrates an application of equation (2) to reduction in air pollution from some

management action (e.g., replacing fossil fuel with renewable energy). The reduction in air pollution

in Box #1 has two effects: (a) Box #2—increase in non-use values for the improvement in air quality

(AQ1) at Park X, and possibly globally from reductions in CO2 if these reductions are substantial

enough, (b) Box #3—improvements in agricultural productivity from reduced air pollution reducing

crop yield (Westenbarger and Frisvold, 1995) and improving farm worker productivity (Graff Zivin

and Neidell, 2011), both market effects; improvement of human health (a non market use value) and

scenic visibility of local residents and visitors to Park X (additional non market use values). These

gains in market, non-market use and non-use values have some increase in utility, which as noted

below, can be expressed in monetary terms (Box #4).
17

Figure 2. Production of Use and Non Use Values from Improved Air Quality

 Reductions in Air Pollution:

SO2, NOX, TSP, CO2

Box #1

Non Use Values:

Visibility@Remote Parks

Global Climate Change

Box #2 Direct Effects on Humans

Crop Productivity (Market)

Agricultural Worker Productivity (Market)

Health (Non-Market Use-local)

Visibility at National Parks (Non-Market Use)

Box # 3

Adapted from Freeman (2003).

Value to Humans ($)

Box #4
18

3. Tailoring the Utility Function to Air Quality Benefits of Hydropower

To illustrate how the concepts underlying equation (2) and Figure 1 might be adapted to the case of

reduced air pollution associated with the increased use hydroelectric plant generated electricity in 

lieu of an equivalent amount of coal fired power plant electricity production, consider equation (3):

(3) U= func((g(X1...Xn-1, Xelec, EQ1...EQn-1, AQlocal, AQregional)

Where:

X1...Xn-1 are private goods consumed (e.g., bread, meat, cars, clothing, etc.)

Xelec is electricity consumed, a private good

EQ1...EQn-1 is Environmental quality of other public goods in the region where they live such as water 

quality for drinking (EQ1), water based recreation (EQ2), forest recreation (EQ3)--both non market use

values to national or global (e.g., T&E species or Amazonian rainforests), etc., these examples would 

potentially have non-use values.

AQlocal is Air quality where the person lives and affects their own health and local visibility—a non 

market use value.

AQregional is air quality in other regions where the person does not live but cares about (e.g., a national 

park, wilderness area) either because they visit (non-market use value) or nationally/globally (a

potential non-use value).

There could also be interactions between AQlocal*EQ2 and AQlocal*EQ3 which would represent the

interaction of local air quality on water quality (e.g., lake acidification, nitrogen deposition fueling 

algal growth and hence lower dissolved oxygen, and changes in composition of fish species) and 

forest health for recreation (e.g., acid rain effects on forests).

As noted above, not every person will receive benefits from each EQ1...EQn-1, AQregional.

Equation (3) provides a menu of potential benefits that some individuals may receive from replacing

Y# of kW hours of electricity production from fossil fuel plants. Whether these all of these benefits

are realized by a given individual may depend on one or more particulars of the powerplant.
19

To illustrate and show the application of equation (3) consider the following example. A windfarm

replaces an aging coal fired powerplant. The powerplant is nearby a National Monument and

Wilderness Area which have Class I air quality, but not any major city (i.e., located in a fairly remote

region in the intermountain west). Thus there would be benefits from improving air quality at these

two natural areas to visitors (non market use value) and to many non-visitors (passive use public

good). There would be a reduction in CO2 emissions, a global public good. Closer to home, there

would be a small number of people for whom air quality improved, and they would have a nonmarket use value from improved air quality related health (e.g., fewer cases of bronchitis). There may

be improvements in forest health or water quality if the powerplant’s emissions resulted in significant

acidification of soils or acid rain, as well as improved water quality from less deposition of airborne

nitrogen into lakes. Both of these would be a non market recreation use value. If the powerplant was

large enough that it was a significant contribution to CO2 emissions in the region, then there would

be a non-use public good benefit of contributing to combating climate change.

However, this example is based on several assumptions, the first assumption would likely be about

where the fossil fuel plant is relative to where a person lives and the direction of the wind. Whether

local Air Quality is improved sufficiently to affect the health or local visibility will depend on

whether a particular city is near and downwind from the coal-fired plant whose production is being

reduced. Likewise whether the air pollution from the power plant would be significant enough to

cause acidification of lakes and forests would depend on the sulphur content of the coal and the

pollution control devices on the powerplants that would be used more to replace any reduction in

hydropower.

However, it is likely that Air Quality regionally or nationally would be improved from the substitution

of hydroelectricity for an equivalent amount coal fired electricity. Whether that matters to individuals,

by how much it matters, and how many individuals it matters to is an empirical question that may be

resolvable with survey research. As before, whether these environmental concerns matter to 

individuals, by how much it matters, and how many individuals it matters is an empirical question that

may be resolvable with survey research.
20

G.Tailoring the Utility Function to Water

To illustrate how equation (2) might be adapted to the case of a change (gain or loss) in water

supply coming from a river or reservoir consider equation (4).

(4) U= f(g(X1...Xn-1, Xmuni, EQ1...EQn-4,Wlocal lakes,Wlocal rivers, OSlocal(Land, XIR), Farmerslocal(XIR)), Wregionalglobal lakes, Wregional-global rivers, Farmersregional-national(XIR)

Where:

X1...Xn-1 are private goods consumed (e.g., cars, clothing, books, computers, etc.)

Xmuni, municipal water the household consumes (e,g., cooking, bathing, lawns, etc.), a private

good

EQ1...EQn-4, is Environmental quality of other public goods (this can be local to global such as

T&E species in other countries, Amazonian rainforests). Local would likely be non-market use

values and non-use values for non-visitors.

Wregional lakes, quantity of water in lakes (e.g., water levels in lakes) in the geographic region

where they live. Wregional rivers, quantity of water rivers (e.g., instream flows) in the geographic

region where they live.

If both of these water resources have public access then these would have non market use values

for visitors to these water resources.

OSlocal-region(Land, XIR): amount of open space in the local or regional area where they live.

This may potentially have non market use values if publically accessible, if not they may have

incidental non market use values (Freeman, 2003) as when someone drives by on their way to

work or the airport. It may also have some local non-use value if inaccessible and not viewable.

Farmerslocal(XIR)) availability and timing of irrigation water influencing the profitability of local

farmers for purposes other than open space such as paternalistic altruism toward farmers. This

would be considered a non- use value.

Wnational-global lakes, quantity of water in lakes (e.g., water levels in lakes) nationally or globally

Wnational-global rivers, quantity of water rivers (e.g., instream flows) nationally or globally.
21

These would be potentially non market use values if a person visited, and non-use value to non

visitors.

Farmersregional-national(XIR) availability and timing of irrigation water influencing the profitability of

regional and national farmers for purposes other than open space such as paternalistic altruism

toward farmers in the state or US. This would be considered a non-use value.

Numerous reservoirs provide several of these types of benefits listed above in equation 4. For 

many reservoirs this is almost by design. They were designed as multiple-purpose reservoirs to 

provide water storage for urban and agricultural uses, to provide water based recreation, and in

some cases hydroelectricity and flood control.

To illustrate these concepts and equation (4) consider Chatfield Reservoir, a large reservoir

adjacent to Denver, Colorado. This reservoir provides irrigation water to farmers that maintains

thousands of acres of farmland near the outskirts of Denver. In the absence of this reservoir

providing surface irrigation water, some of this land would not be profitable to farm. The portion 

of this land near existing subdivsions would likely be converted to suburban uses reducing the 

amount of open space to existing surburban residents (a loss in non market use value). However, 

some of this land may be located so far from any urban or suburban areas, that it may simply 

remain idle, providing very similar open space services as the previous irrigated agricultural land 

did to the few residents living in those remote areas. It should be noted that the reservoir itself

provides valuable water based recreation (e.g., water and jet skiing) near Denver to several

million people (a non-market recreation use value). The reservoir also provides a significant

amount of drinking water to suburban Denver cities and towns (a private good use value).
22

5. Transitioning from Utility to Willingness to Pay

This utility-theoretic framework provides the foundation for economic efficiency analysis of 

benefits and costs of projects and policies. The definition of economic benefits in economic 

efficiency analysis is usually maximum willingness to pay (WTP), but depending on what is 

considered the status quo and the assignment of property rights, it can be minimum willingness to 

accept (WTA). There are what is called four Hicksian welfare measures of WTP and WTA. 

These are Compensating Variation, Compensating Surplus, Equivalent Variation and Equivalent 

Surplus. Because we are dealing with unpriced public goods and non marketed goods, the

Surplus measures are relevant since they are quantity based rather than price based. Here we look

at two of the most commonly used in empirical analysis of public goods, as these are the most

relevant:

1. Compensating Surplus: is the maximum amount of money a person would pay for a gain in the 

quantity or quality of a public good. Specifically, it is the maximum amount of money that a 

person would pay and make the person indifferent between their current utility level (Uo) with 

the current amount of the public good (PGo) and the new level of utility (U1) with an increase 

in the public good (PG1), where PG1>PGo. Compensating Surplus is what economists call an 

exact measure of WTP. If in fact the change being evaluated would make the person worse off, 

then a compensating measure could also be a willingness to accept measure (WTA). This would 

be the minimum amount of compensation they would take to accept the reduction in the public 

good and remain at their current level of utility (Uo). 

2. Equivalent Surplus: is the maximum amount of money a person would pay to avoid a loss in the 

current quantity or quality of a public good. Specifically it is the maximum amount of money 

that a person would pay and make the person indifferent between their current utility level (U1) 

with the PG1 amount of the public good and Uo with PGo amount of the public good.

Equivalent Surplus defined in this way is appropriate if the individual does not have any right to 

have the currently higher level of the public good (PG1). For example, when air quality is 4 

times better than required by the Clean Air Act, reductions in air quality to 2 times better than 

the Clean Air Act could be a situation where the individuals would have to pay to avoid the 

reduction in air quality.
23

However, if the individual has a legal right to the current level of air quality (e.g., current air

quality is worse than the level required by the Clean Air Act), then the Equivalent Surplus 

measure would be the individual’s minimum WTA in money the individual would accept in lieu 

of an improvement in air quality. WTA reflects the minimum amount of money a person would

have to be paid to accept the new lower level of air quality and be no worse off than they are now

with the higher level of air quality.

As noted whether WTP or WTA is the appropriate welfare measure depends on what is defined as 

the current situation (i.e., the status quo) and to whom the legal property rights are assigned. As 

suggested by a reviewer, the status quo be could defined as the situation that exists now, whereby 

households view the current amount of hydropower produced as the baseline level of air quality. 

Therefore a worsening in air quality from an incremental switch from hydropower to fossil fuel 

based power may require a minimum WTA measure for the reduction in air quality. Alternatively, 

a person might view the prior Congressional passage of the Grand Canyon Protection Act as 

setting a different baseline, and in this case it would be the WTP to maintain the maintain the 

current amount of hydropower and air quality associated with it. 

Legal cases can and do change the assignment of property rights in some cases. The case of

reducing Los Angeles’ water right in order to protect Mono Lake under a broadening 

interpretation of the public trust doctrine transferred property rights to a portion of the water from

Los Angeles to Mono Lake (National Audubon Society vs Superior Court, 1983, heard before the 

California Supreme Court). In theory, this would change the benefit measure from WTP for more

water in Mono Lake to WTA to reduce the amount of water in Mono Lake.

However, in the case of water releases from Glen Canyon dam, the quantity of water is set by two 

laws. The overriding one is the Colorado River Compact which gives legal rights to downstream 

states to an average amount of water over a 10 year period. As such they are entitled to that 

water. This entitlement at the state level is further reinforced by individual water rights granted 

users under state water rights. It seems reasonable to take these as the status quo when 

performing an economic analysis. Thus in many cases it would be the water right holder’s 

minimum WTA for leasing or selling some of their water. In water markets, the agreed upon 

price provides a starting point for estimating the WTA of the person for the quantity of leased or 
24

sold and likewise the WTP of the buyer for that quantity of water leased or bought. 

The distinction between using WTP versus WTA would be of limited theoretical interest if not 

for the fact that economic benefits empirically quantified by the two measures can be 

significantly different. As such, there has been a great deal of academic debate in the journals

over by how much of a difference between WTP and WTA values there are in theory versus 

practice. According to standard economic theory WTP and WTA should be fairly close for many 

public goods, where the change in WTP or WTA is a small part of income. Empirically there 

seems to be more of a difference than economic theory would suggest (Kahneman, et al. 1990; 

Horowitz and McConnell (2002, 2003) provide a comprehensive empirical review of the 

empirical studies as well as some possible explanations of the disparities). These divergences 

between WTP and WTA have been found in the lab experiences, many of which use real money. 

But the non lab experimental (e.g., field) comparisons have been fraught with difficulties in 

credibly measuring WTA, as most survey respondents are quite unfamiliar with offers by the 

government to pay people to forgo public goods.

Thus the general guidance for conducting non market valuation studies is to measure WTP (Arrow,

et al. 1993; U.S. Water Resources Council, OMB, 2000, 2003, USEPA, 2010). Because of this 

guidance and the fact that a large majority of empirical studies measure WTP, we will emphasize

that in our report. However, the reader should keep in mind, that in some cases minimum WTA

might be the more appropriate measure of the change in economic well being for reductions in 

public goods, if the individual has a legal right to their current level of utility. The mere fact that 

an individual has historically enjoyed this level of public good, does not constitute a legal right

that they are entitled to the current level of the public good. However, when conducting focus 

groups it is worthwhile to keep in mind that some respondents may feel they have a “right” to the 

current status quo, and hence should not be asked their WTP but rather their WTA. 

Stated Preference methods such as the Contingent Valuation Method and Choice Experiments can 

measure Compensating or Equivalent Surplus directly. Most Revealed Preference methods (e.g., 

market demand, actual behavior based methods) measure Consumer Surplus. In most empirical 

applications a consumer surplus measure of WTP is a close approximation of Compensating Surplus

(Vartia, 1983; Creel and Loomis, 1991). However, Revealed Preference methods such as site choice 

models based on the random utility model can also provide compensating measures. Some trip 
25

frequency Travel Cost Models (e.g., those based on count data models) may also provide 

compensating measures, while other specifications of the trip frequency model provide estimates of 

consumer surplus.

6. Addressing Whether Other Economic Effects are Non Market Values or Not

6.a Economic Efficiency Benefits and Benefit Cost Analysis

The use of WTP as a measure of the change in utility underlies what counts as a benefit or a cost in

economic efficiency analysis or Benefit-Cost Analysis (BCA). The U.S. Bureau of Reclamation 

and

U.S. Army Corps of Engineers refer to their BCA as National Economic Development (NED)

analysis (see U.S. Water Resources Council, 1983). Summary statistics for BCA or NED are the 

Benefit-Cost Ratio or Net Present Value (NPV). NPV is the present discounted (for timing)

Benefits minus the present (discounted) Costs of the project or policy and on theoretical 

grounds, NPV is preferred to BCR as the appropriate measure of economic efficiency of a 

project (Gramlich, 1990: 41-42). Regardless of the measure used, the focus on net public 

benefits to the nation continues be the emphasis in the newer Draft Interagency Guidelines 

(2013: 19) that have accompanied the Principles and Requirements for Federal Investments in 

Water Resources (2013). More specifically, the Draft Interagency Guidelines (2013, 16) refer to 

OMB Circular A-4 which requires that benefits be measured by willingness to pay. 

As the name National Economic Development implies, benefits and costs are treated from the 

view point of the nation as a whole. This is required by federal BCA and NED procedures (US

Water Resources Council, OMB, 2003; USEPA, 2010). This also makes economic sense as the 

laws governing many of the projects (e.g., Endangered Species Act, Grand Canyon Protection

Act), the agencies themselves (U.S. Bureau of Reclamation, U.S. National Park Service), and 

much of the taxpayer funds and revenues have a connection to the Federal government.

Effects on state level or multi-county economies is reflected in what the U.S. Bureau of

Reclamation call Regional Economic Development. Development of water and power in one

region has the potential to stimulate economic activity in both the short run and long run in that 

region. In the short run there is a gain in that area from more construction activity (e.g., hotels, 

restaurants, gasoline purchased locally). In the long run, there may be gains in employment in 
26

that area from the personnel needed to operate and maintain the facility. Regional economic

models also calculate a multiplier effect in that local economy from the initial (direct) increase in

expenditures. The IMPLAN input-output model is a commonly used approach for quantifying 

these multiplier effects on a county or multiple counties (MIG, 1997).

Generally speaking Office of Management and Budget (OMB, 2003) does not consider local 

employment gains or losses as national benefits or costs in conducting benefit cost analysis. In the 

OMB Circular A-4 costs are considered opportunity cost, which OMB also defines in terms of 

WTP to forgo a particular benefit. There is no discussion of multiplier effects or input-output 

models in their description of allowable benefits or costs. 

OMB’s reasoning for omission of employment considerations in benefit-cost analysis, is based on 

the longstanding and widley accepted principles of benefit-cost analysis (Gramlich, 1990: 63; 

Sassone and Schafer, 1978: 71). These books conclude that rarely would any gains in regional 

activity represents a net gain to the nation. In order for local gains to count as national benefits 

hinges primarily on whether there were unemployed resources available that could be employed in 

this project for the duration of the project. This in turn depends on the current and future state of the 

economy. If the country is in a prolonged recession, then during the time of the recession there 

would be less opportunity costs to the nation of employing workers in the construction and 

operation of the new development project. But the unemployed resources would either have to have 

the requisite skills or be capable of being trained to perform the needed type of work. If the country 

is not in a recession but the potential workforce is growing such that newly trained labor is entering

the workforce, then these new projects may represent a net gain in output, if these workers would 

otherwise be unemployed. But if these conditions do not hold (i.e., there is reasonably full 

employment—defined by economists as an unemployment rate in the 4-5% range), then starting a 

new project in one location has an opportunity cost of reducing output where the labor is withdrawn 

from. Further, one question that must be asked is if there is limited funding for these projects, then 

the choice to build a project in County A may come at the expense of building the same or similar 

project in County B. In this case it is easy to see there would be no net gain to the national economy

(Young, 2005). One county’s gain in increase expenditures is perfectly offset by another counties 

loss in expenditures.
27

Finally, if there is a given amount of demand for a product, wherever a project is built to meet that

demand, the project will generate economic activity there, but not somewhere else. This situation

is illustrated by the decision of where to build a large coal fired powerplant, the Intermountain

Power Project. Its original location was in Kane County, Utah, nearby Capital Reef National

Park, and downwind of the powerplant was Arches and Canyonlands National Parks. As a result 

of concerns over air pollution violating the Class I air quality of these National Parks, the project 

was moved to Delta, Utah. In this case the employment to build and operate the plant was 

transferred from Kane County to Delta Utah, and from the State of Utah’s perspective and that of 

the nation, there was not change in employment generated by the project.

Thus a gain in economic activity in one geographic location of the country due to inexpensive 

power in that area will come at the expense of a reduction in economic activity in other geographic 

areas. That is, if a rural county or particular area gains a new manufacturing plant, that means that

plant is not built somewhere else. Thus the total amount of employment in the nation is the same,

it is just a transfer of economic activity from one location to another. Therefore, most analysis of

changes in employment are called economic impact analysis, to keep them distinct from economic 

efficiency analysis and Benefit-Cost Analysis.

6b. Distribution Does Matter in EIS’s

However, the distribution of economic activity and other distributional issues based on 

race/ethnicity, low income, Native Americans, etc. do matter and are addressed in EIS’s. In EIS’s

the local economic impacts of various alternatives are often calculated and displayed. Agencies

are required to address Environmental Justice related to race/ethnicity, low income and Native

Americans as required by Executive Order 12898. But again keep in mind, that a project in

location A improves the well being of one group in location A means that this project is not able 

to improve the well being of people in location B.

Thus, a complete economic effects analysis should display these distributional economic

consequences. However, general distributional concerns about the well being of others are not

market nor non market values in the sense of economic efficiency. People may certainly care

about the well being others. However, as noted in the Section 2, if Person A’s concern is about

the overall material wellbeing of others (e.g. food, shelter, access to medical services, etc.) then

this non paternalistic altruism is not a non market value (Freeman, 2003; McConnell, 1998; Lazo,
28

et al. 1997). Only if Person A receives utility from knowing Person B consumes the specific 

Public Good, then this paternalistic altruism would count as a non market value (Freeman, 2003;

McConnell, 1998; Lazo, et al. 1997). Donating money to an elementary school general fund to 

pay help improve the school is a form of non-paternalistic altruism. This is in contrast to a donor

that provides money with the condition that the money only be used for nature field trip to a state

forest. Here the donor gets his/her utility from knowing the child is “consuming” nature. This is 

paternalistic altruism, as the utility is derived from ensuring that the recipient consumes a

particular commodity or public good.

7. Conclusion

Based on our review of general economic theory, the theoretical literature on non market valuation, 

and its stylized application to hydroelectricity production and irrigation water several conclusions 

can be reached.

 Consistent with the principles of economics, an individual consumer receives utility/wellbeing 

from consuming a subset of private goods and public goods.

 Some public goods can produce non market use values when combined with private goods 

(e.g., fishing trips at public reservoirs and rivers).

 Some public goods provide non use or passive use values to some individuals.

 Depending on the location and wind direction, improved air quality can potentially have local 

non market use values and potentially non use values.

 The more substitutes there are for a resource the less likely non use value will be significant.

 The magnitude and geographic extent of non use values is an empirical matter.

 Not all public goods will be valued by all people.

 The economic efficiency benefits of market, non market use and non use values is usually 

measured empirically by what a person would pay for them, i.e., willingness to pay.

 Altruism toward others generates non market values if the source of altruism is 

paternalistic—a concern that other individual consume the specific public goods, not from a 

concern about their general material well being.

 Distributional concerns about the general well being of others are not economic efficiency 

benefits and hence should not be included in a Benefit-Cost Analysis (BCA) or National 

Economic Development (NED) account.
29

 Distributional concerns about employment should be displayed separately as an economic 

impact of the project or policy and not included in a NED or BCA.

 Depending on the location of where irrigation water goes (e.g., to fields adjacent to urban 

areas or along highways), open space maintained by profitable irrigated agriculture might 

produce non market use values associated with open space. This requires that if dryland 

agriculture is not profitable it might be developed for other uses. If it is not profitable to 

develop for suburban uses, then withdrawal of irrigation water will simply change the nature 

of the open space from irrigated to dryland, but not the fact it remains open space. 
30

SECTION II

EMPIRICAL LITERATURE ON NON MARKET BENEFITS 

RELATED TO HYDROPOWER

As noted in the theoretical section, electricity produced from hydroelectric dams has both external non

market costs to downstream fisheries as well as external non market benefits. The external non market

benefits of hydropower over fossil fuel electricity production (primarily coal) include:

 Better air quality (health, scenic visibility)

 Reduced carbon dioxide emissions contributing to lessening of climate change

 Reliance on renewable energy

This empirical section of the report will review the empirical evidence on these values, and also help to

identify gaps in the empirical literature. We will take the topics in order listed above.

A. Non Market Values of Air Quality

1. Health Costs of Fossil Fuel Based Electricity

It is widely acknowledged in the literature that emissions of SOx, NOx, and fine particulate matter from

coal fired powerplants impose significant health effects (Rabl and Sapdaro; 2000; Krewitt, et al. 1999; 

NRC, 2010). These health effects range from premature mortality, which several authors quantify as life 

years lost, to hospitalization to asthma and bronchitis. Life years lost are valued using a “value of

statistical life” which is calculated from both revealed and stated preference studies of the willingness to 

pay to reduce risk of premature death. Rabl and Sapdaro calculate that the health costs of coal are about

three times that of natural gas. While these authors indicate that hydropower does not involve air

emissions, they also note that there are ecological costs associated with hydropower.

The Clean Air Task force study performed by Abt Associates using standard EPA methodology found

excessive death and hospitalizations associated with emissions from coal fired powerplants. What is of 

particular relevance to our analysis is that the health damages vary greatly depending on population

density and proximity to the powerplants. The Task Force’s map shows that the intermountain west and

California have the lowest mortality effects from power plant emissions. Even the high end of their range

of estimates is 5 premature deaths per 100,000 population as compared to upwards of 15-20 premature

deaths per 100,000 population in the eastern U.S.

Turning to European studies of the environmental damage costs from fossil fuel electricity, Krewitt, et al.
31

reinforce the above point that damage costs per ton of pollution vary considerable depending on the site

of the powerplant relative to population centers. Their study analyzes not only health effects (reduction in

life expectancy, hospital emissions, etc.) but also materials damages from SO2 to metal and stone

structures. They also include damages to crops in terms of reduced yield. Considering all these costs, they

estimate an average damage in the European Union of 6.4 cents a Kwh and corresponding damages per

ton of $6,000 for SO2, $5,000 a ton for NOx and $20,300 a ton for Particular Matter of 10 microns. Of

course these estimates represent damages to a large number of people living in densely population areas,

in some cases in close proximity to the powerplants. In Section 3 of this report we attempt to scale these

to the intermountain west, by calculating damages per capita from the European Union study of Krewitt,

et al and then scale back up using populations of the intermountain west.

Environmental Adders Approach to Include Social Costs of Fossil Fuel Electricity

A popular approach to empirically summarize all the external costs of fossil fuel electricity (mainly

health but not limited to health) is called the Environmental Adders approach. Environmental adders

reflect environmental costs of different electricity generation technologies. They were developed in the

early 1990’s to incorporate the differential negative externalities associated with different electricity 

generation methods. Thus, these adders consider environmental costs along with the more traditional

capital and O&M cost. Environmental adders were adopted in 18 states as of 1990 (Ottinger, 1990), and

were under study in an additional 8 states as of 1992 (Freeman, et al. 1992). Implementation of the

environmental adder approach was slowed due to electricity deregulation (Keske, et al. 2012).

It should be noted that the general purpose of environmental adders is to provide a level playing field in

evaluating new electricity generation (Keske, et al. 2012), not for application to existing projects.

There was some debate about how to calculate the magnitude of the adders in the face of existing

regulation of criteria air pollution (Joskow, 1992; Freeman, et al. 1992). Nonetheless, seven states settled

on monetary estimates of environmental adders (DOE, 1995). Wisconsin was focused primarily on CO2
32

and NOx. Other states such as Colorado, Oregon, Massachusetts, Nevada, New York and California 

adopted either point estimates or ranges of environmental adders for pollution such as NOx, SOX,

PM10 as well so CO2.

Table 1a summarizes the specific externality values for different pollutants for California and Nevada.

As can be seen the five main environmental adders are for SO2, NOx, and Total Suspended Particulates 

(or PM10), Volatile Organize Compounds (smog precursor) and Carbon Monoxide. These are the ones 

associated with the largest health effects. I have taken the values per ton and divided by the population 

of each state, to put damages per ton per million population. This facilitates transfer to the populations

that would be affected by replacing a portion of the electricity produced from Glen Canyon Dam (GCD) 

with a coal fired power plant. Since these values are derived from studies that are nearly two decades 

old, it is likely that even adjusting for inflation does not result in precise estimates of current damages. 

This is likely due to the fact that the scientific understanding of the health effects of these pollutants has 

changed, and the preferences toward environmental quality and real incomes of the population may 

have changed as well. Thus as Boman et al. (2011) study indicates, estimates that are two decades old 

should be applied with some caution. 

Table 1a. External Damages per Ton for Different Pollutants, by State

Air Pollutant

State SO2 NOX TSP VOC CO

California $ 7,341 $ 14,925 $ 7,541 $ 6,932 N/A

CA/Million

Pop $ 229 $ 466 $ 236 $ 217

Nevada $ 2,808 $ 12,241 $ 7,525 $ 1,656 $ 1,656

NV/Million $ 1,835 $ 8,001 $ 4,918 $ 1,082 $ 1,082

Avg/Million

Pop $ 1,032 $ 4,234 $ 2,577 $ 650 $ 541

State totals updated from 1992 dollars in Table 18 DOE 1995 report to 2012 dollars. Calculations of

damages per million done by the author.

A 500 MW coal fired powerplant puts out 10,000 tons of SOX and NOX per year (Union of Concerned

Scientists, 2013). So as one can see the damages per can be quite substantial even using the low end

damages per million population from California.
33

Keske, et al. (2012) illustrates a comparative analysis of environmental costs and private costs for a

variety of electricity generation sources. She finds that coal has an environmental cost per megawatt

about twice what hydropower does (mostly ecological costs appear to be included consistent with Rabl

and Sapdaro study that emphasize this point). Since Keske, et al case study focused on Colorado they

have a more detailed report and spreadsheet calculator for Colorado environmental externalities. Keske,

et al. (2012) approach of expressing the damages MWh facilitates more direct transfers to changes in

production at GCD. Table 1b uses information from Keske, et al. to develop damages per MWh.

Table 1b. Air Quality Damages Per MWh per Million Population

Tons per MWh

SO2 NOX PM

Coal tons per MWh 0.000047 0.0002 0.00002

Average Damage per ton

Per Million Population

$ 1,032 $ 4,234 $ 2,577

Damages per MWh per

Million Population $ 0.05 $ 0.85 $ 0.05

Tons per MWh from Keske, et al. 2012, damages per ton per million population from Table 1a.

This table should allow one to calculate the damages that might arise if a MWh of electricity from

hydropower had to be replaced with a MWh of electricity from coal fired powerplant. To finalize the

calculation the number of people downwind from the particular coal fire powerplant would need to be

known. This may require some atmospheric modeling of where the emissions from the particular coal

fired powerplant would travel to.

Below in the application of the empirical literature to the Glen Canyon area, we apply these results with

respect to the Navajo Generating Station powerplant at Page, Arizona.

Abt Associates (2010) have one of the most detailed and well developed evaluation of particulate matter

(PM2.5) health costs in the form of a Powerplant Impact Estimator. It includes health effects such as

asthma, emergency room visits and hospital admissions. One of the key features of their software is that 

it facilitates accurate scaling up of the aggregate or total external health costs by the particular

populations receiving the emissions from the particular powerplant. Their model accounts for air

pollution emissions and dispersion so as to reflect the exposure of a county population to the location of 

a particular powerplant. This is a key point overlooked in most other environmental adder studies but 
34

mentioned in most of them as a note of caution: the magnitude or size of the environmental adder 

depends very much on the number of people affected in proximity to the power plant. This makes sense 

as pollution is essentially an environmental bad in the sense its damages are non rival. The more people

affected, the greater the sum of the damages. Thus as previously noted in the report by the Clean Air 

Task Force report, many of the coal fired poweplants in the intermountain west are not by large 

population centers. Hence the environmental adders developed for places like California or other 

densely populated areas may significantly overstate the damages per ton occurring from intermountain

west powerplants. Thus caution should be used when applying national estimates such as the NRC’s 

(2010) average cost per kWh of 3.2 cents for coal and .16 cents per kWh for natural gas to the western 

U.S. These averages likely overstate the damages in the relatively sparsely population intermountain 

west (at least as compared to the densely populated east coast). 

Environmental adders are perhaps most well developed and widespread in Europe. The European Union

effort is known as ExternalE (Krewitt, 2002). Unlike the U.S. states which have assigned relatively low

values to CO2, European Union has put larger emphasis on this pollutant. It is worthwhile pointing out

this ExternalE effort made a preliminary investigation as to whether there were any external costs

associated with depletion of fossil fuels such as coal, and found that depletion was almost too small to 

count (Krewitt, 2002). This is probably even more applicable to the U.S., where estimates of coal 

supplies stretch out more than a hundred years to as much as 250 years (Institute for Energy Research, 

2013).

2. Improved Visibility at National Parks

There has been a long series of studies that have focused on improving air quality over National Parks,

especially those in the desert southwest. These studies date back to the contingent valuation study of

Schulze, et al.’s (1983) survey of households and Rae’s (1983) contingent ranking valuation of air

quality to visitors. Balson, et al. (1991) also conducted a study of the valuation of air quality over Grand 

Canyon in support of pollution control efforts at the Navajo Generating Station. A more recent study of 

WTP for air quality over desert southwest National Parks was performed by Industrial Economics

(2013). Each of these is reviewed below.

Schulze, et al. (1983) applied the CVM to value an improvement in average visibility over just Grand

Canyon National Park (GCNP) and then also for two other NP’s Mesa Verde (MVNP) and Zion NP
35

(ZNP). Their in-person survey used photos of different levels of visibility over these areas. The payment

vehicle was higher electricity bills. Residents in Denver, Los Angeles, Chicago and Albuquerque were

interviewed. Their value elicitation method involved a precursor to the payment card where an

individual circled their dollar amount they were willing to pay. Here we will focus on values of 

residents in the western U.S. Table 2 shows the values, updated from the 1980 survey to 2012 values 

using the consumer price index. What is evident is even in this early CVM study is that this study 

passed what is now referred to as a scope test, whereby WTP for the three National Parks exceeds the

WTP for just Grand Canyon NP.

As can be seen in Table 2, the annual WTP values are significant for preserving the “current” (as of

1980) average air quality over these three NP’s from degradation. However, these values should be 

treated as indicative of the values not precise estimates of current day values, as the underlying 

studies are nearly 35 years old. In the last 35 years, preferences of the population toward values of air 

quality over national parks may have changed and household incomes have changed, possibly 

resulting in somewhat different values today (a general point raised by Boman, et al. 2011). 

Table 2. Annual WTP per Household for Preserving the Current Average Air Quality ($2012)

Region Annual WTP

just for GCNP

Total Annual 

WTP for

GCNP, MVNP

& ZNP

Albuquerque $137 $275

Denver $124 $221

Los Angeles $171 $322

(Source, Schulze, et al. 1983).

Rae (1983) conducted what is called a contingent ranking experiment to value avoiding an increase in

moderate haze over Mesa Verde National Park. The contingent ranking method is an early version of

the conjoint approach where respondents rank their combinations of visibility and cost to them from

best to worst. This was a survey of visitors to the park. In the contingent ranking approach visitors sort 

cards that contain information on visibility and cost to them of higher entrance fees.
36

The benefit per vehicle for a guaranteed clear condition was $3 to $5 per vehicle in 1982 dollars (Rae,

1983: 225) or $8 to $14 in 2012 dollars. The range is due to which without improvement condition of

air quality was told to the visitor. If the without payment scenario shown to the visitor was the current

distribution of haze then WTP was $3 per vehicle for clear conditions. If the without payment picture

had intense haze as the current air quality then WTP was $5 a vehicle for clear conditions. Thus the

WTP amounts vary sensibly in that visitors are willing to pay more for larger improvements in air 

quality.

The Balson, et al (1991) study estimated the benefits of reducing air pollution over Grand Canyon

National Park due to proposed improvements to reduce air pollution at the Navajo Generating Station in

nearby Page, Arizona. A contingent valuation method study was employed. A variety of seasonal 

benefit estimates were made. These ranged from an improvement in the worst 10 winter days per year 

with an annual household WTP of $2.28 (with a median of zero), to upwards of $27 for improving 

visibility during both summer and winter. Winter only was valued substantially less at $6 per year.

Industrial Economics Inc (2013) conducted a choice experiment stated preference study to value

different levels of visibility improvement in the four corner states. This region encompassed 15 Class I 

air quality areas. Class I is the strictest air quality level afforded National Parks and Wilderness areas.

The authors used the choice experiment to isolate the value of the visibility improvement from other

potential benefits of improving air quality such as health or ecosystem impacts. The visibility was 

illustrated using five photographs of air quality, and the number of days each year each level of air 

quality would be attained. The improvement in visibility was conveyed by an increase in the number of

days of good visibility and correspondingly a reduction in the number of days of bad visibility

throughout the year (365 days). The mail survey of 2,000 respondents in the main Four Corner cities 

(Albuquerque, Denver, Phoenix, and Salt Lake City) attained a response rate of 38.6%. The regression

coefficient on cost is negative and statistically significant. This indicates internal validity, as the higher

the dollar amount households were asked to pay, the less likely they were to pay. The annual WTP per 

household for a 5% improvement (progress to natural visibility) each year was worth $6. At the other

end of the spectrum a 100% progress toward attainment of natural visibility was worth $88. This shows 

that respondents could distinguish between the distribution of visibility days across the years, and the

choice experiment passed a scope test.
37

In sum, improving scenic visibility at National Parks and Wilderness areas has substantial value to

households throughout the Four Corners region. This is apart from the value of the improved air quality

to improving human health. Stated preference methods such as CVM and choice experiments are able

to provide economically sensible results where larger improvements in air quality yield higher benefits

than smaller increases in air quality. These values are not only held by visitors (Rae, 1983) but by 

households throughout the Four Corners states, even though the majority of them have not visited these

National Parks, and are probably unlikely to visit all of them.

3. Benefits of Reducing Greenhouse Gas Emissions.

It is recognized that greater reliance on renewable energy to produce electricity will aid in efforts to slow

climate change. Various sources of hydropower are an important part of the renewable energy sector

(Kosnic, 2008). These include small or micro hydropower, adding turbines at existing dams and

upgrading turbine efficiencies at existing hydropower dams (Kosnick, 2008).

There are several ways to determine the social benefits of reducing carbon emissions that would come

from reliance on hydroelectricity as compared to coal fired power plants and to a lesser extent natural 

gas plants. These include: (1) the market value of a carbon emissions permit; (2) estimates of damages

per ton of carbon; and (3) surveys of what the public would pay to reduce greenhouse gas emissions. In 

this section I review all three. In the application to Glen Canyon Dam section of the report (Section V) I

will provide a comparison of the values derived from methods (1) and (2).

Description of the Carbon Markets/Carbon Auctions

Market purchase of carbon emissions permits or auctions of permits have become more common in the

last decade. The European Union which adopted a mandatory cap and trade program was one of the first

and most active. Companies must have sufficient number of emission permits to cover their CO2

emissions. California in 2012 has a CO2 emissions trading program associated with a phased-in

reduction in industrial carbon emissions. The cap on each firm’s emissions gets tighter and tighter over 

time reducing about 2% each year and then 3% each year until it reaches a 15% reduction in 2020. 

Firms must have permits to cover their emissions, or face a penalty equivalent to buying four permits 

for every permit short they are to cover their emissions (Cal EPA, 2011). There is an active carbon 

exchanges in the Northeastern U.S. as well, although not legally binding as in California. On June of 

2013 China launched its first pilot carbon trading program in one of its provinces (China Today, July 

29, 2013).
38

Outside of California and the Northeast, and outside of Europe, the rest of the United States and the most

of the world carbon markets (such as the Chicago Climate Exchange) involve transactions that are

initiated voluntarily by companies/corporations. The motivations of the companies for doing this varies

from being a good environmental steward (environmental corporate responsibility programs) or to begin

“pre-compliance” with what companies believe will be forthcoming mandatory cap and trade programs.

In the United States there are three such voluntary “trading areas”: The Northeastern Regional 

Greenhouse Gas Initiative (RGGI), the Midwest, and the western US/western Canada. RGGI began 

its first formal auction in 2008 (Litz, 2008). RGGI describes itself as a mandatory, marketed based 

CO2 reduction program (see http://www.rggi.org/design). California began its in April of 2013

(Bosworth, 2013).

Allowable Projects to Generate Carbon Credits

Companies’ demand for permits is related to their level of economic activity and their ability to

internally reduce their emissions. The supply of permits can only come from approved projects

designed to either offset carbon emissions (e.g., reliance on renewable energy projects) or from

absorbing carbon, usually via planting forests. Which types of projects are allowable varies by the

“rules” set by the organization capping emissions. For example in California only forestry projects, 

dairy digesters and destruction of ozone depleting substances are counted as generating allowable 

carbon reduction credits for sale (Cal EPA, 2011).

However, world-wide a far broader set of means of generating carbon emission reductions are

allowable. Peters-Stanley and Yin (2013) found that in 2012 the main mechanisms of generating carbon

offsets for sale were forestry (about one-third), wind and other renewable energy sources (about onethird), fuel switching from say coal to natural gas, and hydropower (at 12%) . Distinctions are 

frequently made within the hydropower sector between run of river hydropower and large hydropower 

projects (e.g., large hydroelectric dams). World-wide in 2012, these two different types of hydropower

generated 5% and 7%, respectively of world wide carbon credits (Peters-Stanley and Yin (2013)).

However in the U.S. the Federal Government (USDOE, 2008) and some states, only count new 

hydropower with preference given to run of river hydropower as generating renewable energy credits, 

not large hydroelectric dams. As discussed more in detail in the section on renewable energy credit, the
39

rationale has been that there are external environmental costs imposed by large dams that may partially

negate their CO2 reduction benefits. However, this emphasis on new generations is changing as several 

states are considering relaxing their state guidelines to allow large existing hydropower dams

production to generate carbon credits.

Prices of Carbon Emissions Permits

World-wide Peters-Stanley and Yin (2013) found that in 2011 and 2012 that prices for permits allowing

emissions of one ton of CO2 were between $5-6 a ton. However, there was a great deal of variability. In

Europe the initial distribution of permits resulted in an oversupply and firms also found it less costly 

than expected to reduce their emissions internally. The result was lower emission permit prices driving

down the average price as European purchasers represent about 50% of the transactions. The Chicago

Climate Exchange had prices closer to $1 a ton in 2011/2012 (Peters-Stanley and Yin). U.S and Canada

represent about one third of the transactions on the Chicago Climate Exchange. In contrast California’s

first auction with its legally binding carbon caps resulted in permit prices of $10 a ton (Bosworth, 

2013). In China, the pilot project saw two companies (Petro China and Hanergy Holding Group) each

buy 10,000 tons of carbon credits at $4.60 and $5 a ton (China Today, July 29, 2013).

Overall it appears the market value of reducing carbon emissions is between $5 and $10 a ton depending

on whether: (1) the market is voluntary or mandatory, (2) the initial level of supply of permits; (3) the

ease by which firms can reduce their own emissions to meet their or governments targets and (4) the

particular market. At this point in time there is limited trading between carbon permit markets,

especially between the California market and those outside of California, as the California market is 

focused on emission reductions in California, not elsewhere.

Estimates of the Social Damages from Carbon

Until the last 8 years there have been very few markets for carbon, especially in the U.S. Even with

markets there have been limited number of transactions until recently. As noted in the previous section

the prices for permits also reflect many of the institutional features of the markets themselves such as

initial supply of permits provided and whether the market services areas where there are voluntary

versus mandatory reductions. As such, the current market price for carbon may be an imperfect measure

of the damages that another ton of carbon imposes on society. Therefore, economists have been 

estimating the damages that additional carbon emissions cause since the early 1990’s (Ayres and

Walter, 1991).
40

These damage estimates usually reflect damages of carbon emissions to agricultural productivity, human

health, property damages from increased flood frequencies, and the reduction in the quantity and value

of ecosystem services (USEPA, 2010; Interagency Working Group on Social Cost of Carbon, 2010). 

Many of these estimates come from published interdisciplinary research using what are called Integrated

Assessment Models that combine projected increases in temperature with changes in precipitation, the

resulting changes in the environment, and corresponding effects on economic sectors (USEPA, 2010).

Since a ton of carbon is relatively long lived in the atmosphere it causes the damages listed above for

many years. As such the damage done by a ton of carbon is the present value or the sum of discounted

annual costs over time. As is well known, the magnitude of the present value can be sensitive to the

particular interest or discount rate used in the analysis. Thus EPA (2010) and the Interagency Working

Group on Social Cost of Carbon (2010) provide a range of estimates that vary with the particular

interest rate used. At the 5% discount rate (the highest one reported) the damage per ton of carbon in the

near term is $5-6 a ton. However, at a lower interest rate of 3% the social cost of carbon becomes $21-

$24 a ton. This is the range of values EPA and other federal agencies will be using in their benefit cost 

analyses of regulations that effect carbon emissions.

Since these estimates were based on the literature, they are within the range of damage estimates that Tol

(2005) found based on his comprehensive evaluation of the published literature. A total of 28 published

studies were found in the literature. These studies were authored by 18 independent research teams, and

produced 103 distinct estimates of the social damages of carbon (Tol, 2005). His estimates reflect a

median of $14 a ton and a mean of $16 at ton at a 3% discount rate. These estimates are in the same

range as the estimates that USEPA and the Interagency Working Group on Social Costs of Carbon.

Thus it appears that a reasonable range of damage estimates from the literature would put the lower

bound at $5 a ton, a middle range of $14-$16 a ton, and an upper range of $21-$24 a ton. As can be 

seen the lower range is similar to what many exchanges occur in the carbon markets.

Summary of Stated Preference Studies for Reducing Climate Change

Chronologically the first comprehensive survey of the U.S. adult population was conducted by Berrens,

et al. (2004) and published in Journal of Environmental Economics and Management. Very large
41

samples (over 2,000) were used in the analysis. Here the policy valued was one means of reducing

climate change, via implementation of the Kyoto Protocol. In the full information treatment version of

the web based survey, the respondent had access to 27 separate pages of summary information on

topics concerning climate change. One of the sections was Consequences of Global Warming.

Computer tracking of respondents indicated that about 2-3 pages of extra information were visited by

the typical respondent. The household would pay for implementation of the Kyoto Protocol via higher 

gasoline and energy prices. The vote was an advisory referendum. The standard calculation of annual 

household WTP ranged from a low of $1280 to a high of $1760 per year (Berrens, et al, 2004: 357).

The next nationwide study was conducted by Lee and Cameron (2008) published in the journal

Environmental and Resource Economics. They used a sample of 1,651 U.S. households to ask WTP for

climate change mitigation programs. The with action on climate change program was keeping the climate

as it is now and avoid climate change impacts. The household would pay primarily through higher 

energy taxes. The annual WTP to per household was to avoid “moderate harm” to Agriculture/Water

and Oceans/Water, with the harm falling disproportionately on the poor, averaged $160 per year across

Lee and Cameron’s four scenarios. The annual WTP per household to avoid “substantial harm”

averaged

$717 across the four scenarios, with a disproportionate effect on the poor. The fact that WTP changes

substantially across going from moderate to substantial harm suggests the study passes an internal 

scope test and hence has some degree of internal validity. The four scenarios reflected whether income

taxes as well as energy taxes were raised and whether other developing countries were asked to pay

one-third of the costs of climate change mitigation. The primary limitation of the study was a low 

survey response rate (22%), but this was corrected for statistically by sample selection modeling.

Carlsson, et al. (2010) at Resources for the Future, a long time (50+ years) independent think tank in 

Washington DC, conducted a study of willingness to pay for mitigating the effects of climate change.

This study (like Berrens, et al.) was conducted using an internet panel. As illustrated in their Table 1

(our Table 3), three scenarios were presented respondents.
42

Table 3, Carslon, et al. (2010) Stated Preference Study Valuation Scenario.

A payment card approach was used in which respondents circle their maximum WTP. Zero is one of 

the dollar amounts shown on the payment card. A monthly payment until 2050 was in the form of

increased energy and gasoline prices. There were about 1,000 U.S. households in the sample.

About 25% of respondents were not willing to pay anything to reduce emissions and reduce impacts of

climate change. U.S. monthly WTP for the smallest reduction in emissions and largest remaining

impacts was $17 monthly ($204 annually). WTP for the moderate reductions, was $28 monthly ($336 

annually). The WTP for the greatest (85%) reduction in emissions and avoidance of widespread large

impacts except minor impacts to agriculture and to just the two most sensitive ecosystems (coral reefs 

and the Arctic), was $36 per month ($432 annually). The rank ordering of the increasing WTP for 

larger emission reductions and avoiding severe impacts suggests this study passes an internal scope test 

and hence has some internal validity.
43

Valuation of a smaller reduction in greenhouse gas emissions (17%) was studied by Kotchen, Boyle and

Leiserowitz (2011) in a National Bureau of Economic Research working paper. Using a large sample

(2,034 respondents), an internet panel survey was conducted. A dichotomous choice WTP question was

asked for one of three climate reduction policies: (a) cap and trade program; (b) carbon tax; (c)

Greenhouse gas regulation. Annual household WTP ranged from a conservative $58 to $79 for the cap 

and trade program as the means to achieve the 17% reduction in emissions. Annual household WTP

ranged from $63 to $85 for the carbon tax, and was the highest for Greenhouse gas regulation at $70 to

$90 per household.

Atker and Bennett performed an internet survey of 634 households in New South Wales, Australia,

regarding their willingness to pay for a Carbon Pollution Reduction Scheme. Increased prices of goods

and services were used as the means of payment. Respondents were asked what they expected the rise in

temperature to be in Australia by 2100 with and without the Carbon Pollution Reduction Scheme. They

were also asked about the major impacts that Australia may suffer in absence of the Carbon Pollution

Reduction Scheme. The respondents perceived about a 1

oC (1.8o

F) reduction in temperatures with the

implementation of the Carbon Pollution Reduction Scheme. A majority of responses indicated decreases

in water supply and agricultural production as well as damage to the Great Barrier Reef (Atker and

Bennett, 2011: 424). Four WTP estimates are presented across two logistic regression model

specifications and two scenarios about global cooperation with Australia’s efforts. The range was a low

from $16 to a high of $69 with an average of $44 AUD annual WTP per household, or $48 US dollars.

Table 4 summarizes the studies reviewed in order to provide an overview of the studies and evaluate

patterns in the responses.
44

Table 4. Summary of Willingness to Pay to Reduce or Slow Climate Change

Authors Year Sample

Size

Climate Scenario Valued Annual WTP

per household

Berrens, et al 2002 2,000+ Implement Kyoto Protocol $1280-$1760

Lee & Cameron 2008 1,651 Avoid moderate harm $160

Lee & Cameron 2008 1,651 Avoid substantial harm $717

Carlsson, et al 2010 1,000 30% reduction in emissions,

accept +4oF & geographically

widespread harm remains.

$204

Carlsson, et al 2010 1,000 60% reduction in emissions,

accept +3oF & significant

harm to some areas remains

$336

Carlsson, et al 2010 1,000 85% reduction in emissions,

accept +2oF & harm to only

limited geographic areas & a

few natural resources 

$432

Kotchen, et al 2011 2,034 17% reduction in emissions $79-$89

Atker & 

Bennett

2011 634 Australia; avoid +1.8oF

increase in temperature and

adverse affects to agriculture,

water & Great Barrier Reef

$48

Overall, the general pattern of results shows that larger emissions reductions and avoidance of larger

impacts results in higher WTP.
45

4. Economic Effects of Air Quality on Agricultural Production, Agricultural Worker Productivity and

Environmental Effects of Air Pollution on Water Quality

4a. Air pollution on agriculture: Air pollution can cause market effects on agricultural production

through reducing crop yields (Westenbarger and Frisvold) and on agricultural worker productivity 

(Graff Zivin and Neidell, 2011). Westenbarger and Frisvold (1995) found effects for soybeans and corn

in the eastern U.S. Leung, et al. (1982) have found effects of air pollution on crops in Southern 

California including alfalfa, lettuce and tomatoes. Since these values are not expressed on a per acre 

basis it is difficult to develop per unit value estimates that can be transferred to other locations. 

Nonetheless, even just these two studies suggest significant market benefits from reducing air

pollution, particularly from ozone precursors such as NOx.

4b. Air pollution on worker productivity: Related to reduction in crop yields, is the reduction in

agricultural worker productivity from air pollution. In particular Graff Zivin and Neidll (2011) find that 

air pollution (particularly ozone) reduces agricultural field worker productivity in a statistically 

significant fashion in the Central Valley of California. Hence, the net value of crop production is reduced 

(in addition to the health effects borne by these workers). 

4b. Air pollution on water quality: Nitrogen deposition from air pollution can result in increased

nutrient concentrations in water bodies, especially lakes. The addition of this extra nutrients can kick off 

a cascade of related effects such as more algal growth. Besides the resulting change in lake color toward

a more green tint and loss of water clarity, the increased nutrients can result in reduced dissolved 

oxygen with can reduce desirable fish species such as trout. Studies by CH2MHill (2013) for Utah

indicate that households with recreation users would pay $36 a year to prevent a nutrient induced

deterioration in water quality and $96 a year to improve water quality. Non user households would pay

$24 a year to avoid deterioration of water quality from nutrients. This suggests significant non market

recreation use values and non-use values for reducing nitrogen deposition from fossil fuel production.

5. Hydropower as Renewable Energy

Clearly, hydropower is a renewable energy source, as the water supply is replenished annually through

the hydrologic cycle. States have increasingly adopted renewable energy portfolio standards that require 

a certain percentage of electricity be generated by from renewable sources. As Kosnick (2008) notes only 
46

3 states had these standards in 2003, but by 2008 28 states had these standards. While hydropower is

clearly a renewable energy source, what particular types of hydropower counts is a matter of regulatory

definition.

What types of hydropower can be counted in meeting Renewable Energy Standards?

a. Federal Government

The federal government issued in 2008 (U.S. Department of Energy, 2008) Renewable Energy

Requirement guidance that includes hydropower. For the federal government, only “new” capacity

qualifies, and their definition of new is placed in service after January 1

st 1999. This new capacity

that qualifies is either from increased efficiency or addition of new capacity at an existing

hydroelectric project. Thus any recent increases in Glen Canyon, Flaming Gorge or Hoover Dam

efficiencies would qualify as contributing to meeting renewable energy requirements.

b. State Governments

While hydropower is considered a renewable energy source by nearly all the 30 states with a 

renewable portfolio standard or RPS (Stori, 2013), there are significant restrictions on the counting of

credits from existing hydropower or from hydropower that is not from “run of the river” facilities

(i.e., hydropower facilities that divert water out of the stream/river). As Stori (2013: 2-3) notes,

“The predominant limiting factor to hydropower RPS inclusion is age. RPSs generally give the 

highest priority to new or recent renewable energy development, thereby excluding most 

hydroelectric facilities given that most were installed decades ago. In addition, because of concern

over the ecological impacts of large dams, large hydropower (most frequently defined as greater than 

30 megawatts (MW)) is limited in inclusion in state RPSs.” However, there is currently some 

discussion about relaxing these restrictions in states such as those in New England and the Pacific 

Northwest (Stori, 2013: 3).

To the extent that hydropower is eligible under state and federal guidelines as a power source for

meeting renewable energy standards then hydropower is eligible to supply Renewable Energy

Credits/Certificates (RECs). There are two renewable energy credit markets. These are segmented into 

voluntary markets were firms can purchase these for any number of reasons (e.g., green marketing like 

some ski areas and other companies do) or compliance markets for utilities located in states with 

legislative or regulatory renewable energy standards. Interestingly enough in national voluntary markets 
47

RECs have been selling for about $1 MWh (DOE, 2013) about the same price as in the compliance 

markets in the seven states currently with standards and that allow utilities to use RECs (DOE, 2013).

Role of Hydropower in Facilitating Other Forms of Renewable Energy

Even in states where large existing hydroelectric dams are not counted and hence do not generate

renewable energy credits, EPRI (2013) suggests that hydropower still plays a role in facilitating great

adoption of allowable renewable energy sources such as wind and solar. This is because wind and solar

have short run variability in their generation of electricity due to wind patterns or amount of solar

radiation. As such hydropower, with its low start up and shut down costs, can be used as a “backstop” or 

to fill the gap when there is a drop in wind and solar generation. This service of hydropower may be

more valuable than the traditional value of hydropower when it is used to meet base load power needs

(EPRI, 2013, xii). However, the authors note this value is “...not easy to quantify.” (EPRI, 2013, xii). 

When the EPRI report talks about value, they are generally referring to profits, revenue or income, not

non market values. As they suggest, utilities with growing wind and solar generation capacity would 

likely pay more for availability of hydro to fill the gap than they had in the past. Thus if financial models 

of the value of filling this gap in terms of increasing electricity supply reliability are developed the

estimates would likely be reflected in market bids or transaction prices for hydropower.

Non Market Benefits of Renewable Energy

With increased interest in renewable energy has come efforts among environmental economists to

quantify what households would pay for renewable energy, particularly renewable electricity. Here we

describe the studies and provide a summary of the results. While none of these studies value of

hydroelectricity as a renewable energy (an important empirical gap in the literature), these empirical

studies have important implications for potential renewable energy benefits from hydropower.

Descriptions of the Studies: In the last decade there has been a series of stated preference studies on

household willingness to pay (WTP) for renewable energy programs. Some of these studies simply value

generic programs for green or renewable energy (Ethier, et al. 2000; Vossler, et al. 2003; Weiser, 2007;

Brochers, et al. 2007). Mozumder, et al. (2011) emphasizes windpower primarily but also mentions solar

in his study in New Mexico. Their value of $15 a month is for attaining 20% renewable energy in New

Mexico (Mozumder, et al. (2011: 1125). They note that currently only 5% of NM’s customers served by

the largest utility (serving half the households in the state) voluntarily pays extra toward renewable
48

energy (Mozumder, et al. 2011:1120). Others value the attributes of the green energy program such as

reduced air pollution (Bergman, et al. 2006, 2008; Whitehead and Cherry, 2007; As noted later, this fact 

that survey respondents already include their values of reduced air pollution when answering CVM WTP 

questions for renewable requires caution to avoid double counting of the reduced air pollution benefits of 

when valuing hydropower.). Other surveys value a specific form of renewable energy such as wind 

energy (Champ, et al, 2001). In most cases households are told they will pay through higher monthly

utility bills.

Summary of Results: First it should be noted that not all households would be willing to pay a higher

utility bill for renewable energy. In particular, the stated preference studies from 2000 to 2009 show that 

between 50% to 80% would not pay anything additional on their utility bill for renewable or green 

energy. This is consistent with actual voluntary utility programs where only a fraction of households

actually sign up for such programs when offered. While most of the recent data I could find is fairly old, 

dating from 2000, at that time between 1% and 13% of U.S. and other developed countries (e.g., 

European countries, Australia, Japan) residential customers actually signed up to pay higher utility bills

for renewable energy (Bird, et al. 2002).

However, of the households that indicate they would pay or sign up, the WTP is significant. In particular 

the low end willingness to pay of those that would buy renewable electricity would pay $5-$8 per month

(Longo, et al. 2008; Whitehead and Cherry, 2007; Either, et al. 2000) to $12 to $20 a month (Champ, et 

al. 2000; Mozumder, et al. 2011; Bergman, et al. 2006). The variation in WTP in part reflects what

households were told about the environmental improvements they were “buying” through reliance on

renewable energy. Table 5 summarizes the key findings from each of the studies.
49

Table 5. Summary of Stated Preference Study WTP Results for Renewable Energy

Study % WTP>0 Average 

Monthly WTP

per household 

of those 

WTP>0

($2012)

Good Valued Study 

Area

Bergman, et al

(2006, 2008)

NA $17 Reduced env

impacts

including 

reduced air

pollution

Scotland

Champ, et al. (2001) 24%-43%1$12 Wind Energy Wisconsin

Ethier, et al. (2000) 20%-35% $8 Green Energy New York

Longo, et al. (2008) NA $5 Reduced CO2,

power reliability

England

Mozumder, et al

2011

NA $15 Renewable

energy 

(primarily wind

energy)

NM

Nomura, et al. 2004 NA $23 Green 

Electricity

Japan

Whitehead &

Cherry, 2007

55%-61% $5 Improved air

quality from

green energy

NC

Wiser, et al. 2007 36%-49%1 NA Renewable 

Energy

US

Yoo, et al. 2009 16% $2-$2.51 Increase % of 

Green Energy

Korea

1. Ranges indicate different survey versions (e.g., Champ, et al) or different survey scenarios

(e.g., Wiser, et al.).

Overall a significant portion of the general public indicates some positive willingness to pay a higher

utility bill for renewable energy. However, combining households that will not pay any premium with 

the households whose WTP is lower than the minimum premium utilities require to sign up for green 

energy results in relatively low actual sign ups (with the top ten sign ups ranging from 2% to 7% during 

the 1999 to 2002 time period http://apps3.eere.energy.gov/greenpower/resources/pdfs/nrel_35618.pdf).

By 2007, the median participation rate had increased to 8%, although none of these cities were in 

Arizona (http://apps3.eere.energy.gov/greenpower/resources/tables/topten1210.html. Some of these low 
50

signs up may be due to less awareness of the actual program by consumers, and the transactions costs of 

signing up for the actual program as compared to the survey setting. That is, the survey setting provides 

a description of the program and it was easy to indicate if you would sign up. Nonetheless, in some 

study areas there is a sizeable WTP in areas such as Wisconsin and New York. It should be noted that

860 utilities in the U.S. offer what DOE calls Green Pricing options to consumers to pay an additional

amount on their utility bill to cover the incremental cost of the utility contracting for or investing in

additional renewable energy (http://apps3.eere.energy.gov/greenpower/markets/pricing.shtml?page=0).

There are five Arizona utility companies that offer the green pricing program. At the low end, the extra

cost per kWh ranges from .4 cents a kWh from Arizona Public Service to .8 cents kWh for Tri-State

Generation and Transmission through Columbus Electric Cooperatives (where the renewables come from

wind and hydropower). In 2007, Arizona Public Service also offered customers the opportunity to buy 

blocks of power for 1 cent a kWh premium 

(http://apps3.eere.energy.gov/greenpower/markets/pricing.shtml?page=2&companyid=44. At the high end

is 3 cents a kWh from the Salt River Project (where renewables come from Photovolataics, wind, landfill 

gas, small hydro and geothermal). (See

http://apps3.eere.energy.gov/greenpower/markets/pricing.shtml?page=1 for more details.)

In sum, a segment of consumers value renewable energy for its many positive attributes enough to sign 

up and pay a premium. The non market benefits of renewable energy are the health damages avoided and 

CO2 damages avoided from reliance on renewable energy instead of fossil fuels such as coal in 

particular. There has not been any willingness to pay studies for hydropower as a renewable energy 

source however. 

A note of caution brought up by two reviewers regarding estimating household WTP for renewable 

energy in general, and hydropower in particular, is the potential for double counting. In particular, some 

(perhaps all) of the WTP by a household for renewable energy is probably due to avoiding the air 

pollution damages and CO2 emissions. If survey values value renewable energy, and then adds to it the 

damages avoided from relying on hydropower this would double count avoiding air pollution damages 

and CO2 emissions. 
51

SECTION III.

NATIVE AMERICAN, ABORIGINAL AND INDIGENOUS RESOURCE VALUATION.

Two different perspectives can be taken here. The first is the values the native people have themselves for

their natural and cultural resources. The second is the value of these Native American natural and cultural

resources have to non-native (e.g., white, African American, Hispanic) Americans. In particular, as was

discussed in the section on theory, non-native Americans may derive utility from paternalistic altruism

toward others, and in this case Native Americans. Specifically, non-native Americans may get utility

from providing Native Americans specific natural resources (e.g., irrigation water) in order for those

tribes to continue to farm on their Reservation. This section will review and discus both of these sources

of values of Native American resources.

However, it should be noted at the outset that no conceptual or empirical studies were found on Native

American values for electricity or hydropower. So this summary is what is available on how they value

their own resources and how non Native Americans value Native American resources. Since so little is

done on this topic is an important area for future research.

Both Duffield, et al. (2002) and Hammer (2002) note there has been very little valuation work done on 

Native American’s values of their own resources or the public’s values for Native American’s resources.

Even looking internationally there are only a few studies that we will review here.

We will start with Hammer, 2002 as she provides an overview of the challenges in economic valuation of

Native American (NA) cultural resources. Many traditional tribal members hold strong religious and

cultural beliefs about natural resources that often do not allow for trade-offs between money and the

natural resources. If tribal members are unwilling to make trade-offs this would make economic

valuation nearly impossible.

However, tribal members do consumptively use resources in the sense of hunting, fishing and timber

harvests. But they attempt to balance their consumptive use with preservation of the resource stock

(Hammer, 2002). Also, actions of many NA tribes and tribal members indicate they do make trade-offs

between resources. Duffield in 1997 used the fact that tribal members trade off working in the market for
52

a wage rate for spending more time (and in some cases all their work time) pursuing subsistence activities

instead.

My tentative conclusion from Hammer’s review and the empirical studies discussed below is that tribal

valuation of incremental changes in natural and cultural resource availability may be possible with Tribal

members. But the economists need to avoid attempting to estimate a total value of cultural and natural

resources as this is not possible. It may very well be that while tribal members will trade off small gains

or losses in natural and cultural resources for money, there is some minimum level needed for continued

cultural and traditional practices for which they would not accept any amount of money. Once the 

resource diminishes to the point it endangers their ability to continue their important cultural practices and

transmission of cultural traditions from one generation to the next then there is likely to be no acceptable 

trade off to tribal members (Duffield, et al. 2002). Attempts at valuation in such a situation may be

unusually challenging. In addition, incremental values or the change in values “with vs without” some

management action or impact is more relevant for decision making than estimating the total value of 

cultural and natural resources to Tribal members.

An example of a study that estimates the tribal values of natural resources and associated cultural

practices from tribal members is Duffield, et al. (2002) for the Penobscot River in Maine. The river had

been polluted with dioxin from a old paper mill that had contaminated fish to the point where they were

unsafe to eat.

The purpose of his survey was to estimate the damages to the tribe from not being able to consume fish

they would catch from the Penobscot River, and the associated loss of cultural practices surrounding a 

“fish meal” and related activities involving fish (Duffield, et al. 2002). Duffield et al. cast the loss of the

traditional fish meal as having a use value in that alternative protein food sources had to be substituted 

for the fish meal. He conceptualized that the loss of traditional practices associated with fishing and the

transmission of these traditions to the children was more of a passive use value that the Native Americans

themselves hold.

Conducting a phone and mail contingent valuation survey of Penobscot Tribal members was plausible

since the Tribe had twice in the recent past conducted actual referenda to decide upon important tribal

issues involving monetary amounts. In particular a vote had recently taken place on whether to accept a
53

given amount of money in exchange for relinquishing claims on certain lands the tribe viewed as Tribal

land in Maine.

The design of the valuation question followed a referendum format were the tribal member was asked

whether they would vote to accept a one time payment for slower natural restoration of the river from

pollution (expected to take 30 years) versus not accept the money and receive an accelerated recovery in

two years. In this case the fish would be safe to eat in two years instead of 30. Notice Duffield, et al.

asked a minimum willingness to accept question rather than willingness to pay, since Duffield et al (and

no doubt tribal members) believed they had property rights to an unpolluted Penobscot River for 

purposes of fishing.

The survey was done of all tribal members (about a thousand). Some tribal members were interviewed

over the phone and others sent mail survey. Combining responses to both survey modes a very high

response rate of 79% was attained.

The median lump sum payment needed to compensate for giving up the accelerated recovery of 2 years

for natural recovery in 30 years was $14,000 per tribal member. Duffield also asked half the survey

respondents their willingness to accept a lump sum to forgo a slower active recovery program that would

only make fish safe to eat 20 years from now instead of natural recovery in 30 years. Given that this

active recovery would only make fish consumption safe 10 years earlier than natural recovery, the lump

sum WTA reflected that with a median value of $3,000 instead of $14,000 to forgo safe fish to eat in two

years.

Duffield concluded that this CVM study was able to successfully obtain willingness to accept values

from tribal members themselves because of the prior experience of the tribe with trading off tribal

resources for money. I believe it is a testable hypothesis that one might be able to elicit economic

behavior in a CVM referendum survey from tribal members if the Tribe routinely has a general election

to a tribal council or other tribal governing body.

Gonzalez-Caban et al. (2007) used a multi-mode, phone- mail booklet and follow-up phone interview of

the Kootenay-Salish tribe in Montana to find out their value for reducing the risk of wildfire on their
54

reservation lands. In particular, a CVM survey asked Native American households what they would pay

for prescribed burning and forest thinning to reduce the risk of wildfires. The research team worked with

the locals in the area to develop the survey with a focus group on the survey to make sure it was sensible

to tribal members. The means of payment in the survey was payment into a trust fund. The WTP question

was framed as a voter referendum.

The response rate was 74%, a very good response rate made possible in part by coordination with and the

buy in of the Tribal Council. In addition, there was low (less than 10%) protest responses to the WTP

question by Tribal respondents. Protests were identified as those that would not pay even $1. The most 

often cited refusal to pay $1 for prescribed burning was “someone else should pay” and mistrust of 

government. For the mechanical fuel reduction (thinning) additional protest reasons included that 

“thinning was ecologically damaging” and “program won’t work”(Gonzalez-Caban, et al. 2007: 57). The

coefficient on the dollar amount the respondents were asked to pay was negative and statistically

significant indicating that tribal members were using economic reasoning as the higher the dollar amount 

asked to pay the lower the probability they would pay.

The results indicate that Native American households would pay about $135 per year for a prescribed

burning program, and about $305 per year for a mechanical forest thinning program. These values were

similar to what the authors obtained from non Native American households in Montana for the same

programs on non tribal forests in Montana (Gonzalez-Caban, et al. 2007). The authors felt the CVM

study worked reasonably for Native Americans for this forest fire reduction program.

Rolfe and Windle (2003) look at the values of Aboriginal cultural heritage sites in Australia. In particular,

they not only obtained the values for protecting aboriginal cultural sites for Aboriginals themselves, but

also asked a willingness to pay question of non-Aboriginals in towns near the cultural heritage sites and

those living far away in the city of Brisbane. Rolfe and Windle (2003:4) make the point that cultural

heritage sites may have non use values to those living in distant cities.

As a result of the potential for non use values, Rolfe and Windle use a stated preference method called a

choice experiment to value protection of (depending on the scenario) 25% to 55% of currently

unprotected aboriginal cultural sites. The other attributes in the choice experiment was related to water

and included: (a) condition of vegetation in the waterway; (b) kilometers of waterway in good ecological
55

health; (c) amount of water that remains unallocated (and presumably available for instream flows). Due

to several of the attributes being water related the payment vehicle was increased water rates or water

bills.

A total of 63 Aboriginals participated in the survey, yielding a response rate of 56%. The sample for local

towns was 100 (80% response rate) and city of Brisbane was 58 (response rate of 70%). Thus while the 

samples are relatively small, the reasonably high response rate would suggest they may be representative

of the respective populations.

The choice experiment format involves respondents selecting one alternative that has, in the respondent’s

eyes, the best combination of percentage of aboriginal sites protected and km of streams protected for the

money they are asked to pay. The results suggest that for aboriginals, each one percent increase in

cultural sites protected was worth about $3 per month. However responses by non aboriginal households

suggested that on average they would not pay, and that each percentage increase in sites would require 

compensation of about $2 a month. A similar relationship holds for city of Brisbane resident at $1.78 per

percentage point protected per household. However, by treating the percent sites protected as an attribute

in the choice experiment involves estimating one coefficient and hence one marginal value. To allow for

more flexible estimation of the marginal value of the attribute, the authors used what is called effects

dummies for the different levels (high, medium, low) of percentage of aboriginal cultural sites protected.

These results show that non aboriginal households do value low levels of additional protection, but still

have negative values for large increases in the percentage of non aboriginal sites protected.

As can be seen there has not been any valuation work on Native American’s natural and cultural 

resources to non native Americans (e.g., whites, Hispanics, African Americans). Given the large of 

number of non native households, even small values per household could result in potentially large 

values. 
56

SECTION IV MARKET AND NON MARKET VALUES OF WATER

A. Market Values of Water

Water resources can be characterized in many ways. Water has elements of being a private good (e.g.,

rivalness in use—one farmer’s use reduces the amount available to another farmer; one homeowner’s

use of water for their lawn, reduces the amount available for another homeowner). But water also has

characteristics of a public good as well, in that many people can derive benefits simultaneously from

flows in rivers or water in lakes (e.g., water based recreation and non-use/passive use values). Thus

water has both market and non market values. Some would add a third dimension that water has a social

value that transcends economics. As such, in many areas of the U.S., water markets are not as developed 

as markets for other resources such as natural gas or electricity. But the scarcity and value of water has

resulted in emerging formal and/or informal markets for water. Where possible we will rely upon

evidence from these markets and associated transactions to estimate the economic values of water in 

their private good uses.

However, market values only reflect the value of the last units of water purchased by farmers. For our 

analysis of small changes in the amount of water likely to arise from any changes in the operation of 

Glen Canyon Dam, these market prices may be sufficient. However, if large changes in the supply or 

timing of water to irrigators were to arise, the market values will understate the value of these 

inframarginal units of irrigation water. Thus other methods such as residual imputation and optimization 

models would be necessary to calculate the WTP (i.e., producer surplus) of these inframarginal units of 

water. Unfortunately the literature provides very few empirical estimates for the crops grown in Arizona, 

and most of those estimates are quite old (see Shaw, 2005: 154-155 for a summer of these studies from 

the 1970’s and 1980’s). Only Schuck and Green (2004) provide recent estimates, and these are for the 

Central Valley of California. None of these studies look at the effects of timing of when a given amount 

of irrigation water is available. In the short run (within season) changes in timing of water may have 

higher values than in the long run (across multiple seasons)—see Young (2005) for more discussion. 

Therefore, one year lease values of water may be more appropriate for evaluating short run changes in 

the value of water, and sales of water rights more useful if there will be more permanent changes in 

water availability due to operations of Glen Canyon Dam. Further, the presence of the very large 

reservoir in the form of Lake Mead, may be able to moderate how direct changes in flow releases (e.g., 

timing) would have on downstream irrigators—a point brought up by one peer reviewer. 
57

In this first section we focus on market values of water in irrigated agriculture and municipal/industrial

uses as a private good for diversion and consumption. We emphasize the economic values of irrigation

water because the vast majority (85% to 90%) of water use in the west occurs in irrigated agriculture

(Young, 2005). The value of water is low enough in general crop production (e.g., corn) that as demand

for water grows in cities, municipal water users can bid away a fraction of water from irrigated

agriculture. Thus we study municipal water values second. In both irrigation markets and municipal 

water markets water prices or lease rates may not reflect the full WTP of a farmer or WTP of the 

consumer for incremental changes in water. I say incremental, as this analysis values a change in water 

quantity from a “with some action versus without some action/status quo”, not with or without water as 

it is rare for the change to involve selling or leasing all one’s water. 

In addition, the non market values of river and reservoir recreation is discussed in detail below. 

However, this chapter does not discuss the non-market use and non-use values of maintaining minimum 

instream flows. The reader interested in this topic should see see Ward, (1987) and Loomis and 

McTernan, (2014) for recreation, and Berrens, et al. (1996) for such a discussion of non-use values of 

minimum instream flows for endangered fish. 

1. Irrigation Water Valuation from Direct Observations of Water Markets

Direct analysis of water transactions between willing buyers and willing sellers in markets for both 

short-term leases and permanent sales can be a useful source of information on water users’ valuations of 

irrigation water. However, these prices do not reflect the full WTP of the buyer. This would be measured 

by the buyer’s producer surplus (Young, 2005: 55-56). Producer surplus is the total revenue the buyer 

will realize when they sell the incremental amount of the crop produced from this incremental amount of 

water minus their variable costs of production. Producer surplus is analogous to consumer surplus that 

has previously been discussed and will be evaluated on the municipal water demand side. 

First we will review what water markets tells us regarding water values for irrigation water.

Lease markets for irrigation water. Data on short term (usually one year) water leases can be 

obtained from primary or secondary sources of data. Secondary sources of data in the U.S. include

transactions in one of the many state run or state sanctioned water banks. These banks act as “clearing

houses” to match buyers and sellers of water. Some such as the California State Water bank, lease water 

directly from farmers and then lease it to buyers such as other farmers and cities.
58

Secondary data from water districts can be another source of information on water market

transactions. For example, the Northern Colorado Water Conservancy District (2013) reported that

winning bids b y farmers for one year agricultural water leases of additional/supplemental 

irrigation water from the Colorado Big-Thompson (CBT) project have been the in range of $10-$20 an 

acre foot from 2010 to 2012.

Annual lease rates for water tend to fluctuate widely with local climatic and water supply,

reflecting a short-term demand for water that is quite price-inelastic. Hence using lease rates from only a

few years to infer long-term valuation is tricky. However, using data from the Water Strategist

(http://www.waterstrategist.com/) information on water leasing in the western U.S. from 1990 to 2003

(Brown, 2006) and 1990 to 2008 (Hansen, et al 2012) have been summarized and subject to

econometric analysis. Agricultural user to agricultural user leases water volume weighted average lease

prices were $89 per acre foot over the 1990-2008 time period in the 12 western states studied by 

Hansen, et al. (2012).

However, Brewer, et al. (2008) using similar data found that 1 year leases had median prices that were

much lower at $10.68 per acre foot. This substantially higher average (or mean) value compared to the

median suggest a skewed distribution in water lease prices with some agricultural water leases having

very large values. Hansen, et al. identifies the 2006-2008 time period as a time when average agricultural

lease values averaged $486 per acre feet, although it is not clear if that reflects a one year or multiple 

year lease as it exceeds municipal lease values during that time period.

Of greatest relevance to our study area is that average lease prices for water in agriculture in

Arizona are $68 per acre foot and in California $119 per acre foot (Hansen, et al. 2012). But using 

earlier data, Brewer, et al. (2008) found that one year agriculture to agriculture leases averaged 

$33 an acre foot in Arizona and $39 in California. However, agriculture leases to urban uses

averaged $55 per acre foot in Arizona and $83 per acre foot in California during the same time 

period. It should be noted the averages for California are statewide averages and do not reflect 

what are significantly higher values of water in Southern California where much of the Colorado 

River water goes to. However, there are very few transactions in Southern California. One of 

those transactions involves Colorado River water in the Imperial Irrigation District (IID). This 

irrigation district annually transfers (leases) 200,000 acre feet of water to San Diego for municipal 

purposes at a price of $258 per acre foot (www.wdcwa.org/water-transfer).
59

Market Prices for Perpetual Irrigation Water Rights. Time series data on prices for perpetual

water rights are increasingly available for analysis. Water right prices are long-run and at-source values

because buyers and sellers presumably account for all production, processing, and conveyance costs in

their calculations of willingness to pay and to sell. Transactions for perpetual water rights are

capitalized values, reflecting the anticipated present value of future net benefits.

Using data from the Water Strategist from 1990-2008, Hansen, et al. (2012) found that there were

a substantial number of water right sales for all types of uses (about 2,000 transactions) and about 1.5

million acre foot sold during this time period in the 12 western U.S. states. Data on the purpose of the

water right sales during the 1990-2003 time period indicated that 14% of all water right sales were water

bought for agricultural irrigation (Brown, 2006). However, the volume of water transacted between

agricultural users represented about 7% from 1990-2008, and was only 2% of the total from 2006-2008

(Hansen, et al.). During the 1990-2008 time period the price per acre foot paid by agricultural buyers was

$1,744 per acre foot, although from 2006-2008, that price had risen to $1,976 per acre foot (Hansen, et 

al. 2012). Grafton, et al. (2011) report 13 agricultural to agricultural sales of water rights in the

Reno/Truckee Basin of Nevada averaging about $1,700 an acre foot. This price was about one-tenth

what agricultural to municipal uses were in that same basin (Grafton, et al 2011).

Of greatest relevance for our study is that the average sale price of irrigation water rights

water rights is $705 per acre foot in Arizona and $917 per acre foot in California (Hansen, et al. 

2012). Brewer, et al. (2008) found that agriculture to agriculture sales averaged $722 an acre foot 

in Arizona and $864 in California. However, agriculture sales to urban uses averaged only $182

per acre foot in Arizona (which seems low) and $641 per acre foot in California.

2. Water Markets for Estimating Residential Water Values

Data on water markets for municipal purposes have now accumulated to the point where relying on such

data for at source water values are more feasible now than previously was the case. The trade

publication Water Strategist <http://www.waterstrategist.com/> reports price, quantity and location data

on water transactions for the western U.S. and was used in this analysis. As will be discussed briefly 

below, given the tendency of utilities to price on the basis of average costs, water prices may not 

completely reflect the WTP of end users such as households. While at the margin for small changes in 

water supply available to households the price is likely a good measure of their incremental WTP for 

that small change in quantity of water. In the short run larger changes in availability of water to 

municipal areas may result in loss in consumer surplus for water. This could happen in the short run if 

utilities raised prices for water to encourage conservation or constrained how much water a household 
60

could consume at existing prices (e.g., odd-even day watering). In the long run however, municipalities 

usually can obtain the water they need from irrigated agriculture, so price increases for conservation or 

watering restrictions tend to be temporary. Nonetheless, below we will provide a rough estimate from 

Phoenix and Las Vegas on the consumer surplus from water to municipal users just to provide some 

perspective. 

Water Leasing: From 1990 to 2003, municipalities have been fairly active leasing water from other

municipalities, from agriculture, and from what Brown (2006) describes as water management

organizations (typically water conservation districts that hold water rights). About 18% of all water

leasing transactions in the western U.S. have been by municipalities during the 1990-2003 time period.

According to Hansen, et al. (2012), the water volume weighted average leasing price paid by

municipalities has stayed fairly constant over the 1990 to 2008 time period at about $150 an acre foot in

constant dollars. However, Brewer, et al. (2008) report median one year lease prices were about $41 per

acre foot over a similar time period in the western U.S. (Again this indicates that there likely is a skewed

distribution of municipal lease prices, with some being quite high. However, the Hansen, et al. average

value may reflect multiple year leases creating a problem of comparability).

Water Right Sales: Broadly speaking, a water right entitles the owner to receive perpetually a specified

quantity of water at a specified location. Water right transfers from irrigators to municipalities have been

the dominant direction of water right sales in the western U.S. In the western U.S. as a whole, the price of

purchasing water rights has risen from $560 per acre foot in 1990 to nearly $10,000 per acre foot in 2008 

(Hansen, et al. 2012). The volume-weighted long term average from 1990 to 2008 was $1,543 per acre

foot. However, for the Truckee River Basin in the Reno Nevada area, the price for more than a thousand

agriculture-to-urban water rights sales has averaged $17,685 per acre foot (Grafton, et al. 2011: 13),

suggesting a skewed distribution in this market as well. In the South Platte River Basin of Colorado

agriculture to municipal trades averaged about $6500 per acre foot between 2002 and 2008 (Grafton, et

al. 2011). As an example of an upper bound on Municipal water values, San Diego County Water

Authority is using a desalination plant to provide water at about $2,000 an acre foot.

Table 6 presents state level median prices for both one year leases and permanent sales of water rights

from agricultural users to municipal users from 1987-2005. This table is based on Brewer, et al. (2008)

who also originally developed these data from the Water Strategist. These median values reflect long

term values, but as seen in Hansen, et al., do not reflect relatively high increases in west wide average
61

prices occurring during the 2006-2008 time period. The prices in Table 6 further reflect intuitions about

relative water scarcity, with higher prices observed in rapidly growing but water-short areas such as

Colorado, while lower prices or even lack of markets are observed in Montana, Idaho and Oregon.

Table 6 Agricultural to Municipal Water Median Lease and Sale Prices ($/Acre foot) 1987 to 2005.

1 year lease Water rights

Arizona $ 55 $ 183

California $ 83 $ 641

Colorado $ 29 $ 3,687

New

Mexico

none $ 1,593

Nevada $ 24 $ 1,953

Utah $ 92 $ 331

Wyoming $ 45 $ 1,440

Adapted from Brewer, et al. (2008)

As with many markets, the prices likely do not reflect any externalities of such leasing or trades in terms

of changes (positive or negative) in instream flows or water quality between the new point of diversion

and the prior point of diversion.

Consumer Net WTP or Consumer Surplus Values for Residential Water Use

Even when these prices are charged for water, they may not reflect the full net WTP or consumer surplus 

realized by the household if the household is quantity constrained such they cannot buy all the water they 

desire at the current price. In that case there would be a consumer surplus lost on the difference between 

the quantity they wish to purchase at the current price and the quantity they are constrained to. Much of 

the constrained water use would be for out of home use, as a substantial portion of arid west water use 

occurs out of doors (e.g., lawn watering, pools). If a change in timing of water releases from Glen 

Canyon Dam resulted in less water during summer months being released such that water rationing 

became necessary in the short run while the utility acquired additional water, there would be a temporary 

loss in consumer surplus for water. Ideally to estimate the consumer surplus, a demand curve for 

municipal water would be estimated, and the consumer surplus would be calculated from that demand 

curve. At present there are a limited amount of empirical demand curves for municipal water in our study 
62

area from which to calculate the consumer surplus or net WTP. 

A demand curve for Las Vegas, a city which receives some of its water from the Colorado River will 

allow us to estimate the consumer surplus received by Las Vegas households. Lott, et al. (2013) estimate 

that the price elasticity of demand for municipal water to Las Vegas households is -.2817, a very price 

insensitive (inelastic) demand. Peak monthly usage during summer months is about 18,000 gallons a 

month. For purposes of illustrate, assume reductions in water flows during the peak summer time was 

minus 15% or -3,000 gallons. Using equation 7-2, in Young (2005), the loss in gross value of that water 

to the household is $12.53 per month. However, the loss in consumer surplus is only $3.53 since the 

household saves the cost of not purchasing that water ($3 per thousand gallons times $3,000 gallons—

price from Lott, et al. (2013: 28). This loss in consumer surplus would translate into a WTP of $380 per 

acre foot for this water. Applying the same methodology to data in Yoo, et al. (2014) to a 16% reduction 

in monthly water use in Phoenix (what occurred from 2000-2008) the loss in gross value in Phoenix was 

$6.71 per household per month. Subtracting the mid point of the 2000-2008 prices times the reduction in 

quantity of water during that time, yields a loss of consumer surplus of $1.44. per month to Phoenix 

households. The loss is smaller in Phoenix than Las Vegas since the estimate of the price elasticity of 

demand is more price sensitive (elastic) in Phoenix than in Las Vegas. The WTP to avoid this reduction 

in water is about $200 per acre foot. 

B. Non Market Values of Water

There are several non market values of water. As discussed in the theoretical section these include direct

use values such as recreation and non-use values such as existence value. First we review the water

related recreation use values, then turn our attention to other non market values associated with

traditional water uses such as irrigation water, and then finally to non use values of water.

1. Water Related Recreation Use

Water supports a great deal of recreation activities including fishing, boating, swimming, and water

skiing. These activities are quite popular will millions of visits annually.

Table 7 presents information on use of National Park Service (NPS) units associated with the Colorado

River, and its tributaries such as the Green River and the Gunnison River. These areas include not only

National Parks but also include National Recreation Areas (NRA’s), and National Monuments (NM).
63

Table 7. National Park Service Colorado River Units and Associated Visitation (Source

Duffield, et al. 2007).

Park Unit Waters Type of

Water

Total 2005

Visitationa

Colorado R.

Water-related

2005 visitationb

Canyonlands NP Colorado & Green Rivers River 393,381 11,508

Curecanti NRA Blue Mesa (Gunnison River),

Morrow Point and Crystal

reservoirs

Reservoir 882,768 882,768

Dinosaur NM Green and Yampa Rivers River 360,584 12,802

Glen Canyon

NRA

Lake Powell

Colorado River

Reservoir

River

1,863,055

45,671

1,863,055

45,671

Grand Canyon NP Colorado River River 4,401,522 22,000c

Lake Mead NRA Lake Mead

Colorado below Hoover Dam

Lake Mojave

Reservoir

River 

Reservoir

7,692,438 7,692,438

aTotal 2005 recreational visitation from the NPS Public Use Statistics

Office http://www2.nature.nps.gov/mpur/index.cfm

b The NRA units (Curecanti, Glen Canyon, and Lake Mead) are assumed to be entirely water-based recreation.

c Total float use of Grand Canyon has been relatively stable at 20,000 to 24,000 visits in recent years

(Grand Canyon NP Management Plan FEIS)

Table 8 reports river recreation use at non National Park Service rivers in Colorado, including those on 

National Forests and Bureau of Land Management lands (no data for Utah is available).

Table 8. Commercial Rafting Companies River Use on Significant Non NPS Rivers in Colorado

River Use Days

Animas 41,921

Colorado (in CO) 94,994

San Miguel 3,782

Yampa 17,667

Source: Greiner and Werner, 2012

Figure 1 presents total recreational angler use in Glen Canyon NRA, the stretch below Glen

Canyon Dam and above Lee’s Ferry. The cold, clear water for the dam has made this reach a significant

trout fishery. Figure 1 reflects both shore angler use and boat angler use (Loomis, et al 2005). Use has

varied somewhat over the years, declining during the first half of the 2000’s. In part this is believed due

to decreasing size of fish being caught as well as fish catch per hour falling from 1.5 to .5 (Loomis, et 

al., 2005). Depending on the year, angler use is about evenly split between the two modes of fishing.
64

F igure 1 . Le e s Fe rry-G le n Ca nyo n To tal Ang ler Use

b y Y ear

Lees Ferry angler use

-

5,000

10,000

15,000

20,000

25,000

30,000

1995 1997 1999 2001 2003 2005

Year

Anglers

Economic Values of Water Based Recreation

The economic benefits of recreation is measured by the visitor’s net WTP or consumer surplus. This is

the measure of benefits used by federal agencies such as the U.S. Army Corps of Engineers and U.S.

Bureau of Reclamation. This is also the benefit measure required by the U.S. Water Resources Council

(1983) for benefit-cost analysis or in National Economic Development or NED account.

Valuation Methods

The two most commonly used methods to value recreation on public lands include the Travel Cost

Method (TCM) and the Contingent Valuation Method (CVM). TCM uses variations in visitor travel

costs and number of trips to trace out a demand curve. From the demand curve the analyst can calculate

the amount the visitor would pay in addition to or in excess of their travel costs. This is the visitor

consumer surplus or net WTP. CVM creates a simulated market in which visitors are asked if they

would pay a higher cost per trip. The increase is varied across the sample, and a logistic regression is

used to calculate the sample average consumer surplus or net WTP.
65

Table 9 reports the results of the most relevant studies for the economic values of water based recreation

along the Colorado River, its tributaries and the associated reservoirs.

Table 9. Summary of Literature and Estimates of Colorado River NPS Units Direct Recreational

Value Estimates. Source Duffield, et al. 2007.

Study Description WTP Estimate WTP Estimate

(2005 $ per visit)

Bishop et al.

(1987)

Study of values of

Grand Canyon - float boaters

(CVM)

$236-$1,653 per trip

depending on river flow

level (1985$)

$430 - $3,000

Hammer

(2001)

Study of Grand Canyon – Floaters

(TCM)

$134 per trip (private)

$314 per trip (commercial)

$157 (private)

$368 (commercial)

Martin et al

(1980)

Study of Lake Mead - Fishing

Values (TCM)

$44.63 to $61.44 per

angler day (1978-9$)

$643 - $887

Douglas and

Johnson (2004)

Travel Cost study of

Lake Powell – Recreationists

(TCM)

$70.84 - $159.35 per

visit consumer

surplus (1997 $)

$86 - $194

Duffield &

Neher (1999)

Visitor survey of Glen Canyon

NRA and Grand Canyon NP

Visitors. (CVM)

Glen Canyon NRA - $384

per party trip

Grand Canyon NP - $319

per party trip (1988$)

Glen Canyon $109

Grand Canyon $142

Douglas and

Harpman

(2004)

Survey of Glen Canyon - improved

trip quality scenarios (angler

harvest, water quality)

$8.63 to $38.92 per visita

(1997 $)

$11 - $47

McKean et al.

(1995)

Survey of Blue Mesa Reservoir

visitors (TCM)

$37 to $101 per visit

(1986$)

$69 - $187

a

Not total value of current trip, but incremental values due to improvement.

Duffield, et al. (2013) using data from the National Park Service’s visitor surveys to estimate a travel

cost method (TCM) demand model for a sample of 58 National Park, National Monument and National

Recreation Area. From the TCM demand function he calculated net willingness to pay per trip for each

these 58 National Park, National Monument and National Recreation Area. He then regressed the

resulting net WTP on the characteristics of these three types of areas including their geographic location,

population within 10 miles, size, type of Park Unit, etc. The resulting meta analysis regression model 

explained 70% of the variation in value per day. From this he could calculate estimates of WTP per day

at other National Park Units. For our purposes we use his estimates for the units listed in Table 10 down

below. For National Parks in the intermountain west the value per day is $124. For National Monuments

it is $153 per day. For National Recreation Areas it is $93 per day.

Table 10 combines Duffield, et al. (2013) valuation estimates for each type of National Park Unit 

(discussed above) with visitor use estimates in Table 7. The only exception is the estimate for rafting in 

Grand Canyon National Park which is an average of the lower bound of Bishop, et al. and Hammer 
66

shown in Table 9 above.

Table 10. Net Economic Value of National Park Service Colorado River Units and Associated

Visitation

Park Unit Waters Type of

Water

Colorado

R. Waterrelated

Total Water

Recreation

Benefits

Canyonlands NP Colorado & Green River River 11,508 $1.4 million

Curecanti NRA Blue Mesa (Gunnison River),

Morrow Point & Crystal Res.

Reservoir 882,768 $82 million

Dinosaur NM Green and Yampa River River 12,802 $1.9 million

Glen Canyon

NRA

Lake Powell &

Colorado River-Day Rafting

Reservoir

River

1,863,055

45,671

$173 million

$4.2 million

Grand Canyon NP Colorado River River 22,000 $8.8 milliona

Lake Mead NRA Lake Mead

Colorado below Hoover Dam

Lake Mojave

Reservoir

River 

Reservoir

7,692,438 $715 million

a. Calculated as the average of the lower bound of Bishop, et al. and Hammer from Table 9 above as this is a 

more site specific value for this unique activity.

As can be seen in this table the largest recreation values are associated with Lake Mead NRA and Glen

Canyon NRA.

There have also been separate studies of the economic value of fishing below Glen Canyon dam. The

first one in 1985 by Richards, et al. used the TCM to estimate a value per angler day. Updating his 1985

values yields a value of $580 per trip. Bishop, et al. (1987) used dichotomous choice CVM and 

estimated a value for fishing under two different flow regimes (constant and fluctuating). Their updated 

values range from $250 with constant flows to $200 with fluctuating flows. When combined with the 

10,000 to 25,000 anglers each year (Figure 1), yields an annual value of at least $2 million per year

(Bishop et al. low value and low average use of 10,000 anglers per year) to as much as $14.5 million

(Richard’s high value of $580 per trip times high annual use levels of 25,000 anglers per year). 

However, given that both of these values date from the 1980’s an important future avenue for research 

is to perform a more recent study of angling in Glen Canyon.

There has been one study of day use rafting below Glen Canyon Dam by Bishop, et al. (1987). They

found a value per day of nearly $50. When this value is multiplied by annual 40,000 rafting days, the 

annual value of current use is $2 million. This value is also reflective of conditions nearly 25 years ago, 

so this study is in need of updating as well. 
67

Valuation of Water Based Recreation as a Function of Water Levels

The level of water in a reservoir or flows in a river can affect the quality of a recreation experience and

hence the willingness to pay for that experience (i.e., the visitor’s benefits). For example, a full reservoir

allows users to access the lake from all the boat ramps, instead of queuing up just at one or two. Perhaps

more important high reservoir levels provides a greater surface area that allows users to spread out and

reduces crowding and congestion.

In part because of the increased benefits associated with higher water levels, recreation use, particularly

at reservoirs, usually increases with water levels. This relationship has been statistically documented at

Lake Mead and Blue Mesa Reservoir (see Duffield, et al. 2007 for more details). These increases in

recreation use with additional water levels in conjunction with the value per day for such recreation

results in an increase in total recreation benefits. Likewise, reductions in reservoir levels decrease

visitor use and recreation benefits to users.

Table 11 provides estimates of the recreation benefits provided by reservoirs along the Colorado River

and its tributaries. Because the storage volume of these reservoirs are known it was possible to calculate

the incremental or marginal benefits of another acre foot of water in these reservoirs to recreation

visitors.

Table 11. Estimated Marginal Recreational Net Economic Value per Acre Foot of

Reservoir Storage.

Dam and Reservoir Total Recreation

Benefits (million $2005)

Marginal

Recreation

Benefits (annual

2005$ per acre foot

Flaming Gorge $32 $12.0

Curecanti Unit 23 27.11 9

Navaho 16 13.90

Glen Canyon Dam/Lake Powell 99 5.14

Hoover Dam/Lake Mead 277 14.46

Davis Dam/Lake Mojave 100 55.04

Parker Dam/Lake Havasu 97 156.24

Updated from Duffield, et al. (2007). Original Source: Booker and Colby (1995), Table 4, p. 885 converted to 2005 dollars.

Likewise moderately high flows in rivers provides larger rapids, faster rate of travel and most

importantly avoids boats getting stranded on the river bottoms or rocks. These characteristics of high 

flows also provide benefits to boaters. However, too high a flows may actually reduce benefits, thus the 
68

benefit-flow function may be quadratic in flow.

Table 12 provides the incremental or marginal net economic values for Grand Canyon float boaters at

alternative river flows. However, the reader must recognize these values are more than 25 years old, 

and thus the values may have changed, and need to be updated. 

Table 12. Marginal Net Economic Value Estimates for Alternative Grand Canyon Float Trips with 

Colorado River Flow Levels.

Flow Value per Trip Value per Day

Commercial

passengers

Private boaters Commercial

passengers

Private boaters

(A) Study year dollars

5,000 cfs $127 $111 $21 $7

29,000-33,000 cfs 898 688 150 43

45,000 cfs 732 376 122 24

(B) 2005 dollars

5,000 cfs 235 206 39 13

29,000-33,000 cfs 1664 1276 277 80

45,000 cfs 1357 697 226 44

Updated from Duffield, et al. 2007; Original Sources: Boyle et al. 1993; Bishop, et al. 1987.

Conclusion on Water Based Recreation

This section finds that water based recreation along the Colorado River and its tributaries is nearly 10

million visitor days per year. Some of this recreation use is commercial (e.g., some rafting, house

boating) but the vast majority of it is non commercial use by individuals for activities such as boating,

fishing, swimming, and water skiing. This has an economic value to the users of over $800 million

annually. These values are sensitive to water levels in reservoirs and rivers.

2. Non market and Social Values of Water

It almost goes without saying that there are many different types of values of water. Burmil, et al. (1999)

in Human Values and Perceptions of Water in Arid Landscapes suggests not only are there several

values of water but they take on increasing importance in arid landscapes such as the desert southwest. 

Rogers, et al. (1999) provides a categorization of the “full” economic values of water that include social

objectives where water can play a role. They note that surface irrigation water can provide positive water

recharge as well as negative return flow externalities such as salinity or nutrients to receiving water

bodies. Water economist Charles Howe (1999:362) recognizes that water has a “...wide range of

cultural, spiritual and religious values...”
69

However, some of these social and cultural values are not subject to economic trade-offs needed to

establish an economic value. That is, no one would seriously consider asking nor answering a 

willingness to pay question regarding their religious value toward anything, water included.

Nonetheless, for many uses of water, such as in irrigated agriculture that may provide open space, people

are willing to make trade-offs. We review the literature on the direct non market values of agricultural

lands to people, and the value of agricultural lands related open space in this section.

3. Non Market Values of Irrigated Agricultural Land

One of the only studies to focus specifically on the non market values of irrigated agricultural lands is by

Pritchett, et al., 2009 and its associated journal article by Thorvaldsen, et al.(2010). The authors

conducted a stated preference willingness to pay study of the values of using water in different purposes. 

The data came from an Internet survey of 17 western states conducted by Survey Sampling Inc. Only 3%

of all email invitees responded but since no study subject was given in the email itself, the authors 

believe there was little self-selection bias with regard to the water topic. Of the 6883 who opened the

email, 6250 or 91% responded. Non response check on demographics suggested some similarity 

between respondents and the western states population. However, it appears single family homeowners

were over represented (from Pritchett, et al, 2009 CWI full report).

The specific valuation method was the dichotomous choice contingent valuation method (CVM). The 

way households would pay for water in each sector was through increased summer months water bill

ranging from $5 to $25 in $5 increments. The respondent indicated if they would pay the increase that 

was randomly assigned to them in their survey version. 

The results indicate that half the respondents were willing to pay something for one or more of the 8

listed water programs. These programs ranged from programs to reduce household water consumption

to keeping irrigated farms in production. The median WTP was $15.65 per household per summer

month, hence $47 annually.

In terms of our interest here was that respondents allocated about 16.2% of the average WTP of $15.65 

to "Keep irrigated farms in production" or about $7.61 per household per year. Thus, there appears to 

be what is a non market WTP of the general public in the West of $7.61 per household for keeping water
70

in irrigated agriculture. But how much of this value is due to a non-market value for open space that

irrigated crop acreage provides is not readily apparent from the study, as irrigated agriculture as a source

of open space is not discussed. Unfortunately these values are not broken out by state in the journal

article or in their longer report. Thus we cannot identify the values for Arizona and California separately.

Another study that used stated preference methods is by Rolfe and Bennett (2004). These authors

demonstrate that some people might be willing to pay to provide water to others so that that those

receiving water may maintain their culture (rural farmers or rural towns) or aboriginal ways of life (in

Australia). Since this is one of the only studies found to estimate a non market value of providing water

to others (a form of altruism) we discuss this study at length for two reasons. One their research goes to

great lengths to describe how they went about and how to properly go about conducting a stated 

preference (here CVM) study of household WTP to provide “free” water to other groups that might be

deemed by some as deserving due to their culture or way of life. Second, their results of are of interest

since they are the only study found that actually monetizes these values.

At the time of the study in Australia water market auctions were taking place that were starting to move

a significant amount of water from rural areas to urban areas due to the far higher value of the water in

the urban areas. However, there were concerns about the effects on the people in areas where water was

being sold from. To paraphrase Rolfe and Bennett (2004) people may have preferences over social

outcomes and these might be characterized as a non use non market value given that people gain

satisfaction from knowing that certain social outcomes will have been achieved without them personally

being involved. Since in their survey the way that these desirable social outcomes (water to rural

farmers, rural towns, the environment and aboriginal people) would be attained was by setting aside 

some free water for these users that would not be subject to auction. Hence, this can be conceptualized 

as a type of paternalistic altruism, in which the donor wants the recipients to have a particular resource

so as to maintain a particular rural or aboriginal way of life. Thus, as discussed in the theory section of

this report, this value is admissible as a non market value (unlike non paternalistic altruism, where the

donor’s concern is just for the overall well being of the other person, and is happy to give them money

to maintain their material well being, without regard to how it does that).

Since Rolfe and Bennett felt that these were non use non market values, they suggest stated preference

methods would be appropriate, either choice experiments or contingent valuation. In this analysis they

used CVM. They asked households in the urban area of Brisbane what they would pay in a higher water 
71

bill to provide free water to: (a) small rural farmers for irrigation (b) small rural towns for municipal and

industrial purposes; (c) environmental organizations; (d) aboriginal people. A dichotomous choice WTP

question was used.

As is sometimes done, “not sure Yes” responses are coded as “No won’t pay responses” to ensure the

WTP estimates are conservative (this is the same recoding made by Welsh, et al. in the Glen Canyon 

Non Use Value study discussed below). With this recoding about half the sample would pay and half 

would not pay the dollar amount they were asked to pay for providing free water to these groups.

Those agreeing to pay were asked to allocate the percentages of the amount they would pay to the four 

different groups. The paying respondents allocated on average about 60% of their WTP to small farmers

irrigation water, about 22% to small rural towns, about 18% to environmental groups, and about 1% to 

aboriginal groups.

When data on average age and household income levels of the sample were used to calculate WTP, the

sample median was negative $11, but the mean was a positive $66. However, when the sample

sociodemographic characteristics were replaced with the population census values for the sample area,

Brisbane, the median was $6, and the mean $74. The authors are cautious though about applying the

sample positive bidders percentages for each of the four groups to the overall Brisbane population WTP

estimates, however.

Rolfe and Bennett conclude that their results suggest that while there may be some community values

associated with accounting for social equity impacts of water, the values may not always be significant 

or positive. Nonetheless, their study demonstrates how one can attempt to monetize these values using

standard non market valuation techniques. If these values are to be included in a non market valuation, 

care must be taken so as to ensure the values reflect paternalistic altruism and not simply a distributional 

issue (e.g., pure altruism) or how a given amount of benefits are distributed among the population. 

4. Open Space Values provided by Agricultural Land

McConnell and Walls (2005) provide a comprehensive survey of non market use values of various types

of open space including forests, wetlands, and agricultural land. One common way to value the economic

value of open space is to see if there is a property price premium associated with houses that are adjacent
72

to or nearby open space relative to other houses. This is clearly a non market use value to residents as

they enjoy seeing the land itself. But trying to isolate the irrigated agricultural component from general

agriculture is difficult. Most of the property value studies aggregate all types of agricultural land into one

category so it is difficult to determine if homeowners have differential values for irrigated lands versus

other types of agricultural land. Since most studies have been in the east, many pasture lands do not

require irrigation, so would not be considered irrigated lands there but pasture lands might often be 

considered irrigated lands in the west. One study did separate out crop land from other open space land

types and found cropland not to have a statistically significant effect on property values in their hedonic

property study in Maryland. Shultz and King (2001) studied the effect of several different types of open 

space on house prices in Arizona. Unfortunately, none of their land types related to agricultural land, let

alone irrigated agriculture (although golf courses were one of the open space land types studied—and 

these are of course heavily irrigated in Arizona).

Stated preference studies such as contingent valuation method (CVM) and choice experiments (CE) have

often focused on agricultural land preservation versus development, rather than on WTP for agricultural

land as distinct type of open space to be valued. So these studies do not shed much light on the value of

irrigated agricultural land as open space. Thus, this is an important area for future research. In some cases, 

transferring water from irrigated lands at significant distance from population centers is not likely to 

result in a net change in open space. The unirrigated will remain as open space as there is no development 

pressure in the area. 

Although some studies show there are multiple benefits of agricultural land preservation Kline and

Wilchens (1996) found that maintaining environmental quality was the main preference for agricultural

land preservation. Maintaining agriculture in order to maintain an agricultural way of life in the

surrounding communities was in the middle ranking. Hellerstein, et al. (2002) found no conclusive

pattern of preferences for type of agricultural land.

In a thorough review of more than two decades of open space studies Bergstrom and Ready (2008:34)

found some evidence from several studies of open space amenity value and that WTP for cropland were 

than to forests and pastureland. But one study did not find any difference. Bergstrom and Ready

conclude that it is “Difficult to draw firm generalizations on this”. But while having active and viable

farms is a strong public preference, too intensive of agricultural can reduce or outweigh amenity values
73

of the contribution of agricultural land preservation to open space values.

With the exception of Pritchett, et al. (2009) and Thorvaldsen, et al. (2010) not many studies have 

explored the economic value of irrigated agricultural lands, particularly in the Western US. Most are

eastern US studies. Therefore the non market values and differential open space values of irrigated

agricultural lands are an important gap to be filled in the literature.

A more revealed preference approach to assessing agricultural preservation/open space values would be

an analysis of open space land purchases. Loomis, et al. (2004) analyzed open space land transactions

along the urban Front Range of Colorado. Colorado has an active open space acquisition program,

funded in part by its lottery and in part by sales tax increment in cities and counties. An analysis of over

100 open space transactions found the mean price per acre was $13,635 for purchase of open space land. 

The value per acre decreased as the size of the parcel increased (in part due to lower transactions cost on

acquiring a single large tract versus several tracts). The higher agricultural land value and development

land value, the higher the open space prices, an indication of the supply costs of open space. The larger 

the population in the area where the open space was located, the higher its value as well.

5. Non Use or Passive Use Values of Water Resources in the Western U.S.

There are several studies of the passive use benefits (e.g., existence and bequest values) that water

resources provide to people. By necessity, all these studies use the contingent valuation method to

estimate households’ WTP. There are almost a dozen such studies, primarily in the western U.S.

(Duffield, et al. 2007). While these studies include two natural lakes, the vast majority of studies

involve maintaining instream flows for rivers, sometimes with specific reference to recreational 

fisheries (see Duffield, et al. 2007 for a listing of these studies) or endangered fish in California

(Hanemann, et al.1991) and the Rio Grande River in NM (Berrens, et al 1996). One study valued

removal of two dams on the Elwha River in WA that blocked salmon migration (Loomis, 1996).

Of course the most relevant and well known non use value study for the Colorado River was performed

by Welsh, et al. (1995). This contingent valuation study valued different fluctuations in the Colorado

River below Glen Canyon Dam. The study described the consequences of these different flow scenarios

in terms of beaches, endangered fish, riparian vegetation and archeological/cultural sites. Households in

the western U.S. were asked to pay in the form of higher electric bills. Households in the rest of the U.S.
74

were asked to pay in higher taxes. A mail survey was conducted. The study received a very high

response rate of 74% for the national sample and 83% for the western sample. To provide conservative 

estimates of WTP, only those responding “definitely yes” to the CVM WTP question were counted as

“Yes” would pay responses. The values per household are then generalized to all the households in the 

two regions. The public good nature (non rivalness in benefits) is evident in the total annual benefits 

reported in Table 13 for the two samples, especially the national sample.

Table 13. Welsh et al. (1995) Estimates of Nonuse Values for Three Glen Canyon Flow

Scenarios. (2005 dollars)

Flow Scenario

Rest of Nation Sample Western (Power Marketing) Sample

Per Household

Annual Value

(millions) Per Household

Annual Value

(millions)

Moderate 

Fluctuations

$17.74 2,791 $29.05 79

Low Fluctuations $26.19 4,386 $28.25 80

Steady Flow $26.91 4,474 $38.02 107

C. Conclusions

In the arid west, irrigated agriculture is the dominant market use of water, with between 85% and 90%

being used for that purpose. Municipal and industrial market uses are relatively small, but highly valued,

being able to “bid” water away from irrigated agriculture.

Water provides both market and non market use values depending on its particular use. In some cases a

flowing river provides instream flow recreation as it runs downstream to where portions of it are diverted

for irrigated agriculture. In other cases there may be more of a competitive nature, whereby water for

diversion directly reduces instream flows for recreational use. Our literature review found numerous

studies of the economic values of recreation for water resources (rivers and reservoirs) along the

Colorado River system (including its tributaries). Our literature review found one study recent study that

indicated residents’ have a small non market value of keeping a significant portion of water in

agriculture.

Water can provide non-use values, although the vast majority of the non-use studies (10 out of 12)

involve rivers rather than natural lakes. Our literature review did not turn up any non-use value studies 

for reservoirs per se (rather one study was found indicating a non-use value for removing two dams and

associated reservoirs that blocked salmon migration in the state of Washington). Determining if and by

how much reservoirs have a non-use value could be an area of future research.
75

SECTION V

ADAPTING LITERATURE VALUES TO GLEN CANYON DAM OPERATIONS

A. Health Damages Avoided by Hydropower

As emphasized above one of the non market values of hydropower is the avoided health damages from

air pollution from substituting hydropower for coal fired power plants. These health damages per ton

are summarized below in Table 14 and 15.

Table 14 External Damages per Ton for Different Pollutants, by State

Air Pollutant

State SO2 NOX TSP VOC CO

California $ 7,341 $ 14,925 $ 7,541 $ 6,932 N/A

CA/Million

Pop $ 229 $ 466 $ 236 $ 217

Nevada $ 2,808 $ 12,241 $ 7,525 $ 1,656 $ 1,656

NV/Million $ 1,835 $ 8,001 $ 4,918 $ 1,082 $ 1,082

Avg/Million

Pop $ 1,032 $ 4,234 $ 2,577 $ 650 $ 541

State totals updated from 1992 dollars in Table 18 DOE 1995 report to 2012 dollars. Calculations of

damages per million done by the author.

Unfortunately, values for other states of more interest to this analysis (e.g., Utah, Colorado, Arizona) are

not available in the literature. However, values for California and Nevada have been adjusted for

population to facilitate application to our other states of interest.

A 500 MW coal fired powerplant puts out 10,000 tons of SOX and NOX per year (Union of Concerned

Scientists, 2013). So as one can see the damages per can be quite substantial even using the low end

damages per million population from California.

Table 15. Air Quality Damages Per MWh per Million Population from Burning Coal

SO2 NOX PM

Tons per MWh 0.000047 0.0002 0.00002

Average Damage per ton

Per Million Population $ 1,032 $ 4,234 $ 2,577

Damages per MWh per

Million Population $ 0.05 $ 0.85 $ 0.05

Tons per MWh from Keske, et al. 2012, Damages per ton per million population from Table 14.
76

This table should allow one to calculate the health damages that might arise if a MWh of electricity from

hydropower had to be replaced with a MWh of electricity from coal fired powerplant. To finalize the

calculation the number of people downwind from the particular coal fire powerplant would need to be

known. This may require some atmospheric modeling of where the emissions from the particular coal

fired powerplant would travel to.

An example of such a calculation could be performed for the Navajo Generating Station at Page, Arizona.

This powerplant is a very large source of NOX that has both health and visibility concerns.

B. Improved Visibility at National Parks Arising from Glen Canyon Dam Hydroelectricity

If there were to be reduced hydroelectric output from Glen Canyon Dam, whether there would be air

quality impacts over National Parks would depend on what the replacement power source would be and

where it is located relative to the National Parks. If the replacement power came from coal fired

powerplant then the location of that plant relative to National Parks matters in terms of impacts on air

quality. And it is not just the plant’s proximity to a National Park, but proximity in terms of typical

wind direction that would matter. Such a determination would require a combination of an integrated 

power modeling and atmospheric modeling. Obviously these analyses are well beyond the scope of this 

economic analysis other than to point out that this is what would be required. However, once the 

decrement in visibility was simulated relative to: (a) current visibility at nearby downwind National 

Parks; and (b) to distribution of visibility over the year, then the analyses of Rae for visitors could be 

applied. The estimates of Balson, et al. (1991) and Industrial Economics Inc (2013) could be applied to

estimate recreation damages and damages to households, respectively.

An example of such an analysis could be conducted of the Navajo Generating Station since its NOx

emissions reduces visibility air quality at 11 National Parks and Wilderness areas that are designated as

Class I air quality (USPA, 2013). The estimates of benefits to National Parks and Wilderness areas not

quantified by the three existing economic values of air quality studies would have projected based on a

benefit transfer of values from the three existing studies.
77

C. Benefits of Reduced Climate Change

CO2 damages per MWh can be calculated using the same approach noted for effects on air quality. 

However, there appears no reason to adjust to damages per million population since climate change is 

truly a global problem. The damages to the globe are presumably embedded into the many damage

estimates. Keske, et al. calculate about .7295 tons of CO2 per MWh. USEPA (2000) calculates 1.1245 

tons per MWh. As noted above the damages per ton of CO2 vary depending on whether the analyst is 

using prices from carbon markets (and which carbon market) or damage estimated for integrated 

assessment models (Tol, 2005). As reviewed in the previous sections, a permit to emit one ton of CO2 

in most markets where emissions are regulated (i.e., non voluntary) ranges from about $5 a ton world

wide average to $10 a ton in California. Alternatively, damages as estimated by the Interagency 

Working Group on the Social Cost of Carbon (2010) for US Federal agencies ranges from $5-6 a ton to

$21-$24 a ton. Tol (2005) review of the literature found $14 to $16 a ton. Thus we provide a range of 

damage estimates from a MWh of coal fired powerplant CO2 emissions. The High estimate of $22.50

per ton is from the upper end of the US damage estimate, the low end of $5 a ton is quite consistent 

across the damage estimate from the U.S. federal agencies and low end of Carbon Markets. The middle

estimate takes Tol’s estimate from his review of the literature $15 a ton. The range of estimates is

presented in Table 16.

Table 16 Damages per MWh from CO2 Emissions at Different Damage Estimates

$/Ton CO2 Per MWh Per MWh

Tons of CO2 per MWh 0.7295a

1.1245b

Low $5 $ 3.65 $ 5.62

Medium $15 $ 10.94 $ 16.87

High $22.50 $ 16.41 $ 25.30

Source a. Keske, et al b: USEPA, 2000

This table should allow one to calculate the damages that might arise if a MWh of electricity from

hydropower had to be replaced with a MWh of electricity from coal fired powerplant.
78

D. Hydropower as a Renewable Energy Source

While hydropower is undoubtedly renewable energy, it has not been viewed as such explicitly in by

researchers doing surveys of the public for renewable energy. In part this may be due to the fact that

unlike solar (and possibly wind) traditional large hydropower projects have been perceived is having

their own undesirable environmental impacts (e.g., blocking fish migration, loss of riverine habitat, etc.).

Further there is mixed signals as to what extent hydropower is eligible under state and federal guidelines

as a power source for meeting renewable energy standards or whether hydropower is eligible to supply

Renewable Energy Credits/Certificates (RECs). There are two renewable energy credit markets that are

segmented into voluntary markets were firms can purchase renewable energy credits for any number of

reasons (e.g., green marketing like some ski areas and other companies do) or compliance markets for

utilities located in states with legislative or regulatory renewable energy standards. Interestingly enough

in national voluntary markets RECs have been selling for about $1 MWh (DOE, 2013) about the same

price as in the compliance markets in the seven states currently with standards and that allow utilities to

use RECs (DOE, 2013).

There are also five Arizona utility companies that offer the green electricity pricing program. At the low

end, the extra cost per kWh ranges from .4 cents a kWh from Arizona Public Service to .8 cents per kWh

for Tri-State Generation and Transmission through Columbus Electric Cooperatives (where the eligible

renewables come from wind and small hydropower (30 megawatts or less) even though Tri-State’s

website indicates it gets a substantial amount of hydropower from Glen Canyon Dam and Flaming

Gorge—see http://www.tristategt.org/greenpower/Small-Hydro.cfm). At the high end is 3 cents a kWh

from the Salt River Project (where renewables come from PV, wind, landfill gas, small hydro and

geothermal).

See http://apps3.eere.energy.gov/greenpower/markets/pricing.shtml?page=1 for more details.

The one CVM survey for renewable power most geographically applicable to the Glen Canyon Dam

region is willingness to pay survey for renewable energy (wind energy is emphasized but solar is

mentioned as well) in New Mexico by Mozumder, et al. (2011). Their study yielded monthly WTP, among 

that those households that would pay extra for renewable power, of $6 a month for 10% renewable power 

and $15 a month on their bills for a 20% of their power coming from renewable sources (Mozumder, et al.
79

(2011: 1125).3 However, they note that currently only 5% of NM’s customers served by the largest utility 

(serving half the households in the state) voluntarily pay extra toward renewable energy (Mozumder, et al.

2011:1120). It is not clear if this value for wind power would be applicable to hydropower, and thus this 

is noted below as an important avenue for future research.

To illustrate how survey information on WTP for renewable power might be applied to hydropower,

consider the following example based on the NM results. According to DOE, NM uses 22.4 Gigawatts of

electricity (2/3 produced from coal) and roughly 10% coming from renewable (mostly wind power as

only about 1% of total energy use comes from hydropower). To increase renewable power from 10% to

20% would require another 2.2 Gigawatts of electricity. Mozumber et al. (2011) estimated WTP for the 

additional 10% renewable power to be $9 ($15-$6) per household. Given the number of households in

NM (about 660,000), the total WTP for another 2.2 Gigawatts of renewable power would be roughly $6 

million annually.

Dividing $6 million by 2.2 Gigawatts (2,200 million megawatts) yields about 27 cents per MWh. So if

Glen Canyon Dam reduced its output, households in NM would be willing to pay about 27 cents more

per MWh for another renewable power source instead of relying on a non renewable such as coal.

Conclusion

To arrive at a benefit per MWh of relying on hydropower rather than coal suggests that the air pollution 

and CO2 emissions are the dominant benefits. Drawing on the results presented above we estimate the

non market costs of using coal for electricity in terms of air pollution (SO2, NOX and PM) and Carbon

Dioxide amount to $.95 and $4.64, respectively per MWh.

E. Potential Native American Values Affected by Glen Canyon Dam Operations

There are two sources of values for any impacts to Native Americans that might arise from changes in

management of Glen Canyon Dam: (a) Native American valuation of these impacts to themselves; (b)

non-Native American population values for avoiding these impacts to Native Americans.

As noted above, Hammer indicates (a) is a challenging task. However, with regard to (a) the literature

review above also noted there have been a couple of successful attempts of having U.S. tribes answer

 

3

The reported estimates reflect a downward adjustment for potential hypothetical using the ratio of hypothetical to actual 

WTP calculated from Champ and Bishop (2001). 
80

stated preference surveys for valuation of restoration of their lands in Maine (Duffield, et al. (2002) and

forest management in Montana (Gonazlez-Caban, et al.).

Thus it is conceivable that such a study could be done with tribes in the Glen Canyon area, but such study

has not been done to date. Given the significant cultural differences between tribes and the resources

valued in the past two studies, no benefit transfer would be conceivable to arrive at tribal values in the

Glen Canyon area if there were a change in operation of Glen Canyon dam.

There has been even less valuation literature on non-Native American values for protecting Native

American resources. The only study our literature review uncovered was in Australia by Rolfe and

Windle (2003). This was a study of valuation of reserving water for aboriginal people to Australians.

Once again, no feasible benefit transfer can be performed given the cultural differences between the two

types of native peoples and cultural differences between U.S. residents and Australians.

The infeasibility of performing a benefit transfer for Native American values suggest it is a high priority

area for future research. This is noted below.

F. Water Values of Glen Canyon Dam

1. Market Values

Under the Colorado River Compact, water from the Colorado River goes to both Arizona and California.

As such market values of water from both states are relevant here. We rely upon data from market

transactions to provide an indication of market values of water. We emphasize agricultural irrigation

values as the vast majority of the water is used in irrigated agriculture in both Arizona (roughly 80%) and

California. Further the high values of water in municipal uses usually results in municipal water

providers being able to buy or lease water from agriculture.

Agricultural Lease Values in Arizona: The average per acre foot one year lease values range from $33 an

acre foot (Brewer, et al. (2008)) to $68 per acre foot (Hansen, et al. 2012).

Agricultural Lease Values in California: The average per acre foot one year lease values range from $83

an acre foot (Brewer, et al. (2008)) to $119 per acre foot (Hansen, et al. 2012).

It should be noted the averages for California are statewide averages and do not reflect what are

significantly higher values of water in Southern California where most of the Colorado River water goes
81

to. The Imperial Irrigation District (IID) annually transfers leases 200,000 acre feet of water to San Diego

for municipal purposes at a price of $258 per acre foot (www.wdcwa.org/water-transfer).

Agricultural Water Right Values in Arizona: The average per acre foot purchase price for permanent

water rights range from $705 an acre foot (Hansen, et al. 2012) to $722 per acre foot (Brewer, et al.

2008)).

Agricultural Water Right Values in California: The average per acre foot purchase price range from $722

an acre foot (Brewer, et al. (2008)) to $917 per acre foot (Hansen, et al. 2012).

Desalinization of Water in San Diego: As an example of an upper bound on Municipal water values, San

Diego County Water Authority is using a desalination plant to provide water at about $2,000 an acre foot.

2. Non Market Values of Water

Recreation

Perhaps one of the largest economic values of water associated with Glen Canyon Dam is recreation on

Lake Powell. As shown in the prior sections (Table 5) this is estimated at $173 million annually for 1.863

million trips annually. The extended rafting season in Glen and Grand Canyons depends in part on

storage in Glen Canyon Dam. The annual value of day use rafting is about $4.2 million based on use

averaging 45,000 day users and a value per day of $93 (Duffield, et al. 2013). The annual value of the 

Grand Canyon National Park rafting is estimated at $8.8 million base on the average of the lower bound

of Bishop, et al. (1987) and Hammer (2001). The Bishop, et al. (1987) is by far the most thorough study,

but it is decades old. As such this study is candidate for updating.

Also the recreational trout fishery below Glen Canyon Dam would not be possible if not for the cold

clear water provided by Glen Canyon Dam. It has a minimum annual value of $2 million to as much as

$14.5 million depending on angler use (angler use fluctuations significantly from year to year) and which

valuation study is used (Richards, et al. (1985) vs Bishop, et al. (1987)). Given that these studies are 

nearly 30 years old, they area are in serious need of updating and this an important area of future

research.

Non Market Values of Irrigated Agriculture

Only one study was found indicating any non market value of providing water to farmers. A survey was

done in the western U.S. by Pritchett, et al., asking people how much they would pay for different water

programs. In terms of our interest here was that respondents allocated about 16.2% of the average WTP
82

of $15.65 to "Keep irrigated farms in production" or about $7.61 per household per year. Thus, there

appears to be what is a non market WTP of the general public in the West of $7.61 per household for

keeping water in irrigated agriculture. But how much of this value is due to a non-market value for open

space that irrigated crop acreage provides is not readily apparent from the study, as irrigated agriculture

as a source of open space is not discussed. Likewise, how much of the value is for paternalistic altruism

is not evident. A worrisome feature of the Pritchett, et al. study is that it did not inquire about whether

some of the motivation for paying was related to concerns about food supply (a market use value), and

not a non market value. Further, unfortunately these values are not broken out by state in the journal

article or in their longer report. Thus we cannot identify the values for Arizona and California separately.

Another difficulty that one would face in trying to apply their study to quantify non market values of

irrigation water is that respondents were not being asked to value any specific quantity of water (e.g., no 

acre feet of water was presented in the survey).
83

SECTION VI. IMPORTANT FUTURE RESEARCH AREAS

A. Non Market Values of Hydropower

While there are numerous studies on the economic value of renewable energy in general and wind power

in particular, there have been no studies specifically on hydropower as a renewable energy source to

produce electricity. Also I could not find any hydropower specific studies relating hydropower to its

contribution to reducing CO2 emissions. While markets now exist for Renewable Energy Credits

(RECs) and for Carbon Markets, and more than 800 utilities allow consumers to pay extra for renewable

power (http://apps3.eere.energy.gov/greenpower/markets/pricing.shtml?page=0), there has not been any

studies on pure non-use value for hydropower.

It is possible that there may now be some reason to explore this concept, first with focus groups to see if

the concept of non-use value for a market good like electricity is plausible to the general public. The 

second phase of the focus group would focus, as other renewable power studies have, on household’s

willingness to pay higher electricity bills for additional hydropower the respondent’s household would not

use. The additional hydropower could be in the form of paying for increased efficiencies in hydropower

generation at existing large dams, retrofitting old dams with hydropower facilities or new small

hydropower projects that would provide renewable energy to electric service areas other than where the

respondent lives.

If the focus groups indicated this study was feasible the next phase would be to move into pretesting via

“verbal protocols or speak out loud” to evaluate the internal validity any survey instrument. The purpose

is to make sure the respondent is valuing the particular attributes of hydropower that we are intending to

value, and not valuing other aspects of hydropower (e.g., saving coal in the ground, when there is already

a 100-200 year supply) or valuing all electricity or implicitly including the same value twice (e.g., 

valuing the air pollution reduction, CO2 and renewable energy itself, if the primary reason the person 

values renewable energy is due to the pollution and greenhouse gases avoided due to relying on 

renewable energy). This concern for double counting of the benefits of improved air quality and 

reduction in greenhouse gases when estimating WTP for renewable energy was brought up by two of the 

peer reviewers as an important issue to avoid. Building on one of their comments, it seems a choice 

experiment may be a more fine grained approach. In particular, hydropower as a renewable energy 

source, reduced air pollution and reduced CO2 emissions are essentially three attributes in a choice 
84

experiment. Employing a choice experiment would allow isolating the incremental values of 

hydropower as a renewable energy source from the benefits realized from air pollution and CO2 

emissions. 

B. Potential Native American Values

Probably the biggest gap in the literature is that little is known about: (1) how Native Americans relate to

water resources in a market and non-market (cultural values and aesthetic values) sense; (b) how nonNative Americans value Native Americans having incremental quantities of water for irrigation

(paternalistic altruism). It is important in conducting this empirical research that the emphasis be

maintained on valuing just what people would pay to provide the specific resource to the tribe, and not

the tribes overall material well being. Many people may very well feel care about improving the over all

material wellbeing of a tribe, but this is a form of non-paternalistic altruism toward any means of

improving the well being of the tribe, not the specific resource. As discussed in the theory section, nonpaternalistic altruism does not give rise to a non market economic efficiency value. If there is a positive 

cost to the members of the Native Americans of providing this irrigation water, this may offset some of 

the paternalistic altruism non market benefits. Also, as noted above in the literature review in Section

III, care must be taken, particularly when asking Native Americans their values toward natural resources 

to value only incremental changes in the quantity of water for irrigation and other purposes (e.g., 

livestock) as well as cultural/aesthetic purposes. The literature suggests it is not advisable to attempt to

estimate a total value for the continued existence of all of a particular tribal resource.

The choice experiment format that would present Native Americans as well as the general public with a

variety of Native American related attributes would seem to be a more promising avenue than the

traditional contingent valuation method (CVM). CVM tends to focus more specifically on the price/cost

of the project/policy/resource, whereas a choice experiment, presents price/cost of the

project/policy/resource as just one attribute along with other quantity or quality dimensions. This would

seem to defuse somewhat the economic orientation that many Native Americans might find repugnant in

being asked questions about changes in their resource.

C. Market Values of Water

The primary studies needed here is to simply keep existing transactions data on market values of water

from the Water Strategist magazine up to date for Arizona. Second would be to put additional effort into

trying to locate more water transaction values for Southern California, as distinct from the San Joaquin

and Central Valley’s of California, where a great deal of the trading has taken place.
85

E. Non Market Values of Water

Most of the available water based recreation studies that exists are decades old. For example, recreational

fishing downstream of Glen Canyon Dam was last valued in the 1980’s. Both fishing valuation studies

date back to the mid 1980’s, and a seriously out of date. Thus a new study should be performed reflecting

angling in Glen Canyon under current fishing conditions and angler use.

The annual value of the Grand Canyon National Park rafting was estimated by Bishop, et al. (1987) and

Hammer (2001) are one to two decades old. The Bishop, et al. (1987) is by far the most thorough study

so it would serve as the best template for designing an updated study.

Non market use values of irrigated agriculture in Arizona has not been estimated. In the same survey it

would be important to estimate how this value is divided between: (1) the value of preserving of irrigated

agriculture for the benefit of farmers (paternalistic altruism); (2) the value of open space that irrigated

agriculture may provide in some lands near urban areas; (3) value of local foods. There has been no work

done on non-use value of irrigation water, and it might be quite tricky to do this. Specifically, a choice

experiment would be needed to estimate values 1-3, and then have a fourth non-use attribute to make sure

the non-use value of the irrigation water is just that, and not comingled with concerns about food supply

(a private market use value) or values 1-3.

As the reader can see there is a paucity of up to date non market valuation studies of water and

hydropower related to Glen Canyon Dam. These gaps in the literature could be filled by a series of non

market valuation studies over the next several years. The theoretical literature suggests non market

valuation of some of the external benefits of Glen Canyon dam is at least plausible. However, other than

air quality, it is difficult to apply the existing empirical valuation literature from other areas to the effects 

of Glen Canyon Dam.
86

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