Accounting for Environmental Change:
A Modernized Approach to Benefit-Cost Analysis
on the Upper Mississippi River
Nature provides valuable services to people, and those services can be measured in economic terms to help decision makers invest in projects that yield the maximum public benefits. In the face of increasingly scarce resources — both natural and institutional — there is a greater push to view navigation projects as multi-purpose projects where ecological restoration and navigation can be pursued as parallel objectives in order to spend time and money more efficiently and maximize public benefits. As the United States Army Corps of Engineers continues to plan infrastructure improvements that enable navigation on the Upper Mississippi River, the need to integrate ecosystem impacts into planning decisions is becoming increasingly apparent.
Our analysis shows that of the 46,706 acres that comprise the study area, 10,294 acres were subject to land-cover conversion between 1975 and 2011 — over one-fifth of the study area. Of these changes, 926 acres were not valued because they represent land cover changes that cannot be plausibly attributed to the locks and dam (e.g., developed land to agriculture). This leaves 9,368 acres of land-cover changes to be valued. This area that is relevant to the valuation exercise is summarized in this map at right.
The benefit transfer process is facilitated by Earth Economics’ proprietary Ecosystem Valuation Toolkit (EVT), a repository of over 2,000 individual ecosystem service value estimates. These estimates are drawn from scholarly literature, government reports, and other grey literature and have been twice-reviewed by Earth Economics analysts to ensure the methodologies and data used to identify ecosystem values are appropriate and rigorous. EVT helps to construct appropriate comparisons between these studies and the area of interest by making it easy to select for attributes such as climate type, ecosystem, and location. Finally, EVT reports the ecosystem service values in dollars per acre, per year, which can then be applied to the area of interest by mapping them onto the changes in land cover. Querying EVT resulted in 39 studies with values that were appropriate for transfer to the example of Melvin Price.
Case Study: Cost Forecasting in Melvin Price Lock and Dam
The original analyses of Melvin Price estimated the flow of costs and benefits attributable to the project and assembled them into benefit-cost ratios. Without accounting for the beneficial goods and services provided for free by nature, a critical cost driver is missing from the original analyses.
From 1989-2011, ecosystem service losses attributable to Melvin Price were conservatively estimated by the land-cover change analysis in this report to be between $23 million and $29 million (2016 USD). While these costs may seem small relative to the other costs, on an annual basis they add roughly 10% to the costs of current operations and maintenance at Melvin Price.
The Mississippi River is one of the most
important ecosystems in the nation
The river transports water, sediment, and nutrients throughout its 2,300-mile course and provides habitat for fish and wildlife.
Riparian areas and floodplains improve groundwater and surface water quality, filter and cycle nutrients, reduce the severity of floods, protect wildlife, and recharge groundwater supplies. For example, woody wetlands contribute about $1,300 per acre, per year in water-storage benefits; grasses provide about $8 per acre/year in soil formation, another ecosystem service.
In addition to providing these ecosystem services, the river sustains an enormous volume of economic activity, including shipping agricultural products via barge.
The industrial agriculture and fossil-fuel industries are the primary drivers of the barge industry, accounting for about 70% of freight on the river.
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