Environmental Valuation & Cost-Benefit News

Abstract: Wetlands have functional values that may extend beyond traditional real estate values. This paper uses contingent valuation and ecological field assessments to place heterogeneous values on heterogeneous wetlands. Wetland functions evaluated are water quality, habitat, recreation, storing floodwaters and erosion abatement. The model used incorporates the public value of wetland functions and adds that value to the common local appraisal cost. Steve A. McIntosh, Rob Southwick and John C. Whitehead use a “percentage willingness-to-pay” value elicitation question in which respondents are asked about the percentage amount that the state government should pay over and above market value to purchase and preserve a wetland function. These values are then mapped into an ecological matrix to value the wetland as a whole. The authors show how these values can be applied in the field.
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Seventy-nine percent of 1022 respondents state that wetlands, when water quality improvements are part of the parcel’s purpose, are worth more than the market value of a piece of land alone. Sixteen percent state that a wetland is worth the same and 4% state that it is worth less.
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Seventy-eight percent of 1019 respondents stated that wetlands are worth more than the market value of a piece of land alone with floodwater storage in mind. Seventeen percent state that a wetland is worth the same and 4% state that it is worth less.
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The raw percentage willingness-to-pay ranges above the market value from a low of 60% for recreation to a high of 71% for habitat. The “somewhat sure” percentage ranges from 55% for recreation to 64% for habitat.
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[The authors also] present percentage willingness-to-pay values that result from ecological field appraisal adjustments.... They consider river floodplain wetlands, glacial till floodplains, prairie wetlands and fens. These values are used in conjunction with site-specific field adjustments that account for deficiencies accompanying specific wetlands. The first step requires a qualified appraiser to assess the functionality of each attribute. Using a swamp as an example, the appraiser determines how functional each attribute is compared to a completely healthy and fully functioning swamp. This is done for each attribute provided by the wetland in question, and then the results for all attributes are summed to arrive at the appraised value for that wetland. The next step is to match each function level ratio to the function willingness-to-pay values.

In the Marion Bottoms Forested Wetland case study, the erosion reduction function is increased from 15% for a forested wetland ...5 to 60% due to placement in Missouri River floodway. The total willingness-to-pay is 245% above market value.

In the Van Meter State Park Marsh case study, the erosion reduction potential was reduced from 60% to 20% due to the wetland’s placement in watershed and the water quality component was increased from 43% to 57% since it is capturing runoff from intensive row crop agricultural lands. The total willingness-to-pay is 212% above market value.
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Conclusions
Wetlands have functional values that may extend beyond traditional real estate values. Since wetlands often have some or most of the five major functions surveyed, true public values can be much higher than market prices for land without those functions. In this study we use the CVM with a “percentage willingness-to-pay” value elicitation question and market price payment vehicle. We find that respondents value each wetland function at 55% to 64% higher than market prices relative to lands without wetland functions.

by Steve A. McIntosh 1, Rob Southwick 2 and John C. Whitehead 3
1. Missouri Department of Natural Resources, Water Resources Center; Jefferson City, Missouri 65102; steve.mcintosh@dnr.mo.gov
2. Southwick Associates, Inc., Fernandina Beach, FL 32035; rob@southwickassociates.com, Department of Economics
3. Appalachian State University; Boone, North Carolina 28608; whiteheadjc@appstate.edu
February 3, 2010