The Definition & Value of Chesapeake Bay Environmental Endpoints

1. The Definition & Value of Chesapeake Bay Environmental Endpoints James Boyd and Alan Krupnick Resources for the Future November 1, 2011

2. Ecological Endpoints • A special set of biophysical outputs • Commodities that directly enter firm or home production • Akin to “final goods” • Commodities that require little subsequent biophysical translation to make clear their relevance to utility

3. “Endpoint Theory” • Distinction between “inputs” and “final goods” is fundamental to • Benefit accounting (to avoid double counting) • Benefit comprehension by respondents in stated preference studies (to avoid confusion & error)

4. Production Theory • Key terms • Inputs transformed into • Outputs via • Production functions • Qi = f (Ii1, Ii2, ...) • Same thing in natural systems except functions are ecological

5. Examples Commodities that require little subsequent biophysical translation

6. Note • Focus on endpoints leads to a smaller set of ecological commodities to be valued

7. The Problem With Non-Endpoint Commodities • Requires respondent to understand and translate commodity’s role in subsequent ecological production • To value an “input” need to know • The value of the output • The production relationship between the input and the output

8. Production Function Error • What is the value of “more acres of eagle habitat?” • Need to know two things (1) The value you place on eagle abundance (2) The production function that translates eagle habitat into eagles Respondents will intuit a + relationship But don’t know its magnitude

9. Principle 1 • Commodities should be as close as possible to home production • For accuracy and scenario acceptance* • Obvious? • Perhaps, but often/usually not practiced in SP literature • Note: “comprehension” alone is not the test * A hypothesis to be tested empirically

10. Dual Commodities • Many ecological commodities are both input and output • In production theory, a given commodity can be both input and output • Cars: output, but input when rented • Lettuce: final good at Safeway, intermediate good at McDonalds

11. Dual commodity Process 1 output is Process 2 input

12. Examples But also inputs to production of these Endpoints / final goods

13. Respondent Confusion • Am I being asked about the commodity as an “end in itself”? • Or its value as part of a larger system? • Both?

14. Issues for Survey Treatments • Different degrees of subjects’ ecological intuition • “Naïve” respondents: • Wetlands are open space, the value of open space to me is $X • “Sophisticated” respondents: • The value of open space to me is $X but also • Wetlands support crabs, the value of crabs to me is $Y

15. Issue from above • What are the appropriate endpoints? • Combination of theory and stakeholder interactions • EPA Indicators Workshops • RFF & EPA ORD (Corvallis) sponsored (Boyd & Ringold) • Natural scientists, social scientists, policy offices • Charge: Identify monitorable “final ecosystem commodities” for a range of resource beneficiaries  To improve national stream monitoring programs (e.g., EMAP) or EPA OW programs (e.g., National Aquatic Resource Surveys)

16. Principles used in EPA Workshop to identifying indicators of final ecosystem services • Strictly biophysical features, quantities or qualities that require little further translation to make clear their relevance to human well-being • Comprehensive identification requires identification of ecosystem beneficiaries • Exhaustive & non-duplicative, but clear desire for parsimony

17. A Group Process • Focus on types of users • Industry, agriculture, recreation, aesthetics, stewardship • Concretely, what do different users want more of or less of? • No jargon! (the “next door neighbor test”)

19. Eco-check Index for the Bay(NOAA and UMCES)

20. The “iconic” Bay • Iconic is a stock concept; non-marginal • Is “iconic” a word for “warm glow”? • Resources that underlie being iconic • Cultural: the Watermen, Smith Island • Biological: Bay oysters, blue crabs • Do changes in populations affect iconic status?

21. Future Baseline • Is sea level rise in the baseline? If so, • Does this remove Smith Island and the Watermen from further consideration? • Do crabs and oysters go (locally) extinct in the baseline? If not, • Would increases in their population from TMDLs affect their iconic status? • Conveying the hidden problems

22. Other endpoint (SP) issues • Bundling (CV) vs attribute valuation (CE) • Non-market endpoint proliferation • With our theory as a guide, are there that many? • Bundling of correlated attributes • Sample stratification approach • Don’t use jobs, livelihood • Focus groups help find indices

23. Boundaries • Ocean health: spawning success • Groundwater • Ancillary benefits/costs to BMPs, etc. • Increased trees in buffer zones – viewshed, but positive or negative? • Cultural losses: the Amish? • Added urban green space from addressing urban SWR

24. More Issues • Uncertainty: tough to address • Timing • Design to impute discount rate • Long-term benefits: tough issue. Most analysts use shorter periods. Can do adjustments to values off-line • Interim benefits is latency. Not a big problem

25. Conclusion • Use theory to guide commodity definition • Along with stakeholder process • Determine future baseline (perhaps use multiple treatments) • Solve/make decisions on other issues

26. Valuation Research Issues • Confusion/scenario rejection rates comparing endpoint Q’s to input, process or dual Q’s • Validity test differences • Test with and without “systems” information treatments • Effect of subject prior knowledge on the above

27. Approach • Develop mental models of nature (e.g., degree of decomposition into inputs, processes and outputs), compare to those of experts • Conduct focus groups to develop survey materials: information treatments, commodity descriptions • Conduct pilot studies: use sub-sampling to test treatment effects; develop measures of performance (effect on WTP; variance of WTP; answers to debriefs; passing scope tests) • Ecological science partnering to make necessary linkages and development of protocols for ecological science research and reporting

28. Metrics Categories I. Water Quantity (Amount and Timing, Depth, Width, Velocity) II. Water Quality – Physical (Odor, temperature, clarity, bio-fouling) III. Stream Bed Characteristics (Mud, rock, sand, sediment accumulation) IV. Health risks from contact and drinking water; eating fish V. Species type, abundance, size, health, timing (flora and fauna) VI. Riparian viewshed characteristics VII. Intertemporal “naturalness” – to avoid undesirable resource changes linked to sense of place, culture, history