Friday, November 11, 2011

The Benefits of Achieving the Chesapeake Bay TMDLs (Total Maximum Daily Loads): A Scoping Study

http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21647
Abstract; Concerns about nutrient pollution in the Chesapeake Bay have led to the establishment of pollution limits—total maximum daily loads (TMDLs)—which, by 2025, are expected to reduce nitrogen loadings to the Bay by 25 percent and phosphorous loadings by 24 percent from current levels. This paper outlines how the benefits associated with achieving the Chesapeake Bay TMDLs could be measured and monetized. We summarize studies that measure the benefits of improved water quality in the Bay and evaluate whether these studies could be used to value the water quality benefits associated with the TMDLs.In cases where studies conducted in the Bay watershed either do not exist or are out of date, we discuss whether results from studies conducted elsewhere could be transferred to the Chesapeake Bay. We also discuss original studies that would be useful to conduct in the future.
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Lipton and Hicks find that a 2.41-mg/L increase in DO (Disolved Oxygen) ... will increase striped bass catch rates by 95 percent. Based on average catch rates in 2001–2005, this translates into an increase in the number of fish caught per trip in Maryland and Virginia of 1.57 and 0.56 fish per trip, respectively (Van Houtven 2009). Using a travel cost model, Lipton and Hicks estimate the value of catching one more fish per trip of $11 (2007 dollars).
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The only revealed preference study of the value of water quality to boaters in the Chesapeake Bay is by Bockstael et al. (1989).Using data from a survey of 496 boat owners who trailer their boats, the authors estimate a model to explain the number of trips made to each of 12 county sites during a season as a function of the time and out-of-pocket cost of reaching each site and water quality, as measured by N and P loadings. As in their study of beach visits, the authors measure water quality by multiplying N times P concentrations in each location, based on 1977 readings, to produce TNP. They estimate that the value of a 20 percent reduction in TNP to trailered boat owners is approximately $59 (1987 dollars) per year.
Lipton (2004) uses stated preference methods to estimate what various categories of boaters will pay for an improvement in water quality in the Chesapeake. Boat owners are asked to rate water quality in the Bay on a five-point scale, and to indicate what they would pay for a one-unit improvement in water quality for a season. Based on 755 Maryland boat owners surveyed in 2000, the annual value of a one-unit improvement on the five-point scale ranges from $30 for trailered powerboat owners to $93 for sailboat owners (2000 dollars). Overall, mean willingness to pay was $63, with 38 percent of respondents reporting a willingness to pay of zero for water quality improvements.
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Anderson estimates that the increase in producers‘ surplus (profits) of fishers corresponding to full restoration of SAV (Submerged Aquatic Vegetation) to 1960 from 1987 levels would be $1.8 million (1987 dollars).

Increases in the size of the catch also benefit consumers by lowering the price of fish. Anderson (1989) estimates the demand curve for blue crabs, using national data, and then calculates the consumer surplus associated with a fall in the price of crabs due to increased production. The increase in consumer surplus is $2.4 million (1987 dollars). The benefit to consumers of crabs is large—in fact larger than the increase in producer surplus—because of the high demand for the product.
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Using annual data from 1965 to 1979, Kahn and Kemp estimate a bioeconomic model of the striped bass fishery in which the population of striped bass depends on the carrying capacity of the environment, which is a function of SAV. The equilibrium catch in the fishery is a function of the striped bass population and SAV. The demand for striped bass is estimated as a function of regional population and per capita income. Kahn and Kemp simulate the model for various levels of SAV. They conclude that the sum of consumer and producer surplus associated with a 50 percent increase in SAV is approximately $5 million (1978 dollars), although they emphasize that the estimate is crude, given data limitations.

Mistiaen et al. (2003) examine the impact of DO levels on the trotline blue crab fishery in the Patuxent, Chester, and Choptank tributaries of the Chesapeake Bay. Similar to Anderson, the authors estimate blue crab catch as a function of bottom DO and the amount of effort (gear) in the fishery. However, they do not model the level of effort in the fishery, but instead analyze the impact of changes in DO, holding the stock of crabs and level of effort fixed. The authors assume that changes in DO have no effect above a level of 5 mg/L. They find that reducing bottom DO from 5.6 to 4.0 mg/L reduces crab harvests in the Patuxent River by 49 percent, a loss of about $200,000 in revenue to fishers (2000 dollars).
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The present value of benefits of a 30 percent reduction in N (Nitrogen range from $6 to $7.5 million (2002 dollars) when entry is restricted. Under open access, they range from $0.67 to 6 million (2002 dollars), depending on the speed of entry under open access.
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When the demand for crabs is price inelastic (–0.5), the present value of benefits to consumers is about $20 million per year; the benefit is about half of this when the price elasticity of demand equals –1.0.
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Bockstael et al. (1989) report the results of a telephone survey of 959 households in the Baltimore–Washington area in which respondents were asked, ―Do you consider the water quality in the Chesapeake to be acceptable or unacceptable for swimming and/or other water activities?‖ The 57 percent of respondents who judged the water quality unacceptable were asked whether they would pay a stated amount to restore water quality to a level acceptable for swimming. Responses were used to estimate the distribution of willingness-to-pay values, by race and by user status (i.e., whether or not the respondent used the Bay for recreation).16Among users, mean willingness to pay was $183 for whites and $34 for nonwhites. The corresponding figures were $48 and $9 for nonusers (1987 dollars). Applying these figures to all residents of the Baltimore–Washington metropolitan area yielded a value of approximately $100 million for the total benefits of making the Bay swimmable. The nonuse component of these benefits was approximately $28 million.
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Median willingness to pay for a 10,000-acre oyster sanctuary with 1,000 acres of constructed reef was $87 dollars (2000 dollars) per household.
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Van Houtven uses these studies to estimate the average willingness to pay by nonusers for a one-unit improvement in the National Oceanographic and Atmospheric Administration‘s Assessment for Estuarine Trophic Status(ASSETS ) scale (from E=1 to E=2), which he estimates to be $16–$28 (2007 dollars) per household.
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by Maureen L. Cropper and William S. Isaac
Resources For the Future (RFF) www.RFF.org
RFF Discussion Paper 11-31; September, 2011

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