The Value of Riparian Forest Buffers in the Chesapeake Bay Watershed:

An Economic Framework for Policy-making

 

 

Prepared for

 

 

 

Economics and the Chesapeake Bay Workbook Series

 

National Oceanic and Atmospheric Administration

 

 

 

 

 

 

 

 

 

 

 

James F. Casey

Department of Economics

Washington and Lee University

Lexington, VA 24450

540 458 8102

caseyj@wlu.edu


Outline

 

 

 

1.0 Introduction

 

2.0 Forests and the Watershed

 

2.1 The Important function of Riparian Forests

 

3.0 A framework for analysis

 

3.1 Marginal Benefits and Demand

3.2 Marginal Costs and Supply

3.3 Economic efficiency and Markets

3.4 Market Failure: Externalities and Public Goods

         

4.0 Non-market Valuation

 

          4.1 Revealed Preference Techniques

          4.2 Stated Preference Techniques

 

5.0 The Benefits of Riparian Forests

         

6.0 The Costs of Riparian Restoration

 

7.0 Public Policy

 

8.0 Conclusion

 

9.0 References

 

10.0 More Sources for information

 


The Economic Value of RFB in the Chesapeake Bay Watershed

 

1.0 Introduction

          The Chesapeake Bay is an important national treasure.  How important is the Chesapeake Bay? More than 100,000 rivers and streams drain into the bay; making it is the largest estuary on the Atlantic coast and one of the largest in the world [9].  It is a commercial and recreational resources for more than 15 million people living in the watershed.  The watershed encompasses some 64,000 square-miles in parts of six states (see figure 1). 

 

Figure 1. The Chesapeake Bay Watershed

 

The Bay has two of the five major North Atlantic ports in the U.S. and yields approximately 500 million lbs. of seafood annually [9].  The Bay is home to more than 3,600 species of plants, fish and animals.  Its waters have provided sustenance for generations of fishermen and supported the economies of Virginia and Maryland through tourism, commercial fisheries, transportation and numerous forms of recreational activity.  The beauty of the Bay has been written about in prose and poetry for centuries. 

            In the past 100 years the Bay has faced numerous challenges and has always managed to come out on top, but today it faces new challenges.  Many of these are not visible to the naked eye and many originate hundreds, sometimes thousands, of miles away from the Bay itself.  Increased population and development within the watershed and increasing demands for its multiple goods and services present great challenges for preserving and restoring this treasure. 

          The top three stressors on the Bay’s systems are (1) excess nutrients,  (2) toxic chemicals and (3) air pollution changes.  One of the most severe factors affecting water quality is nutrient pollution.    This comes in the form of elevated levels of nitrogen (N), and phosphorus (P).  Livestock waste and fertilizer runoff from cities, suburbs, and agricultural land throughout the entire watershed contribute to nutrient pollution.  Nutrient delivery to the Bay has been identified as one of the primary factors and has been the primary focus of research and policy efforts related to achieving water quality improvements [9].

The health of the Bay, its streams and rivers, is intricately linked to trees.  Forests serve as the living filters of pollutants.  They absorb excess nutrients that would otherwise end up in the rivers and streams throughout the watershed and eventually in the Chesapeake.  Trees provide numerous environmental services.  However, the amount of forest cover in the watershed is decreasing, especially in areas in close proximity to rivers and streams. 

One potential response to the nutrification problem is the creation and restoration of riparian forest buffers (RFB).  The ecological benefits of riparian forest buffers are relatively well known, but the economic benefits and costs are not as well understood.  Numerous studies, mostly in Maryland, have attempted to estimate these costs and benefits.  The primary purpose of this paper is to provide an economic framework for the analysis of the costs and benefits associated with riparian forest buffers.  A secondary purpose is to consolidate the numerous studies estimating the costs and benefits of RFBs in the watershed. 

 

2.0 Forests and the Watershed

Today, forests cover approximately 60% of the land in the Bay watershed approximately 24 million acres [15].  At the time of the early colonies the watershed was over 90% forested.  This forest cover reached a low of about 40% in the post civil war era, and today new development of land for houses, retail and commercial structures are the primary culprits for conversion and loss of forest cover.  It is estimated that by 2020, another 600,000 acres or forestland will be converted to other uses [15]. 

One of the keys to the health of the Bay is how we develop land in the future.  The Chesapeake Bay Riparian Forest Buffer Initiative has been in operation since 1996 and 476 miles of riparian forest have been replanted.  Maryland, Pennsylvania, and Virginia are the three partnering states n this initiative.  To date, MY has restored 317 miles, VA has restored 157 miles, and PA has established target areas and hired 45 watershed coordinators statewide [15].  This is a good start, but clearly not enough has been done to date.

 

2.1 The important function of riparian forests

          Riparian forest buffers are areas of forested land adjacent to a stream, river, marsh, or shoreline which form the transition between land and water environments. Although riparian areas comprise only about 5 to 10 percent of the land in the watershed, they play an important role in maintaining the health of the Bay. Since the 1970s, more than 400 papers have been published looking at various aspects of the nutrient-forest buffer-water interface [7].  The physical and chemical processes of the forest buffer are discussed in this literature.  Although there are numerous kinds of buffers, forests are the most effective type of riparian buffer available.

Figure 2. Forested Buffer in an Agricultural Landscape

Riparian Forest Buffer

Riparian forest buffers improve water quality while providing habitat for wildlife and fish.  They are one of the keys to controlling non-point source pollution. They also help maintain the integrity of stream channels and shorelines, reduce the impact of upland sources of pollution by trapping, filtering, and converting sediments, nutrients and other chemicals, supply food, cover and thermal protection to fish and other wildlife.

The type, size and effectiveness of riparian buffers varies based on the location, environmental management needs and landowner needs. Environmental managers and landowners often use the three-zone riparian forest buffer to plan and design riparian forest buffers [12]. The width of each zone is determined by specific site conditions and landowner objectives.

Figure 3. Three-zone Riparian Forest Buffer [12]

The ability of RFB to function naturally is crucial to the protection of water resources in the Chesapeake Bay watershed [13].  With respect to the condition of the riparian zone and land use, unbuffered streams in agricultural landscapes have significantly higher dissolved nitrate concentrations when compared to even partially buffered streams.  The presence and extent of the RFB affects water chemistry by providing a mechanism to filter suspended sediment from overland flow [8]. 

Figure 4. Information Kiosk: Woods Creek, Rockbridge County, VA

Groundwater data from the Neuse River basin in North Carolina show more nitrate is removed in a 30-foot buffer than in a 15-foot buffer and each is better than no buffer at all [14].  Forested riparian buffers in the Cape Fear River basin also have a high infiltration and retention capacity for inputs of anthropocentric nutrients [1].

 

3.0 A framework for analysis

The objective of this section of the paper is to provide enough of an understanding of fundamental concepts in microeconomics so they may be used  in analyzing the benefits and costs of riparian forest buffer preservation and restoration.  Economists approach almost everything in the world from two sides: the benefit side and the cost side.  Each and every decision that is made has costs and benefits and the appropriate choice, whether it be improving water quality in the Chesapeake Bay or deciding to by a pizza, can be determined by weighing these costs and benefits.  All choices involve trade-offs.  Economic actions, including those pertaining to the environment, have two sides: On the one side they create value or benefits and on the other they encounter costs.  To begin we look at the question of value. 

         

3.1 Willingness to Pay: Marginal Benefits and Demand

“One of the cornerstones of economics is understanding consumer preferences” [6] p.289). 

 

The value side of our analysis is based on the fundamental notion that individuals have preferences for goods and services and given the choice, they will express those preferences for particular goods and services.  The value of the goods and services bundle is the amount the consumer is willing and able to sacrifice in order to obtain it.  In other words, what is the consumer willing to pay?  For example, I may be willing to pay five dollars to obtain a latte from Starbucks while another consumer is not willing to pay this much.  We could then say that I place a higher value on the latte than does the other consumer in this example.  Clearly, I have a higher willingness to pay (WTP).  The concept of willingness to pay is not limited to physical goods.  I may be willing to pay for unobstructed sunsets, or thriving fish populations in the Bay.  Later, we will see how this concept of willingness to pay can be applied to policy decisions concerning the socially optimal amount of riparian forests in the watershed.

There is another way of looking at willingness to pay, which is more familiarly known as demand.  The law of demand states that other things being equal the higher the price of a good, the lower the quantity demanded.  Closely related to the quantity demanded, yet slightly different is the concept of demand.  The term demand refers to the entire relationship between quantity demanded and the price.  Referring to figure 5 it is actually quite simple to see the difference between quantity demanded and demand with an example using a common commodity, one that you may even be consuming as you read this,  coffee.  When the price of coffee rises, from P1 to P2, the quantity demanded falls from C1 to C2.  This is seen as a movement along the demand curve.  But what happens if the price of cream and sugar rises?  Since many of us consume these complementary goods with our morning coffee, we may in fact decide to drink less coffee.  Notice, nothing has happened to the price of coffee, but the demand for coffee has fallen.  This is represented by a shift in the entire demand curve and results in the purchase of less coffee at all prices than was the case before the increase in the price of cream and sugar. 

The demand curve shows the willingness to pay for each additional unit of coffee, also known as the marginal willingness to pay.  This expresses the marginal benefit associated with purchasing one more unit or another cup of coffee, as it may be.  The total willingness to pay is the amount the consumer is willing to pay for the entire purchase rather than going without the good (coffee) and is represented by the entire area under the demand curve.

 

Figure 5.  Demand Curve

3.2 Marginal costs and Supply

Now, let’s turn our attention to the cost side of decision-making.  The best things in life are free!  Is this statement true?  To an economist, it is most certainly false.  Everything has a cost.  If I want to sit on the beach and watch the sunrise, then I can’t sleep.  Watching the sunrise from six to seven in the morning has cost me an hour of sleep.  I did not have to pay to watch the sunrise, but it still cost me something.  I had to make a tradeoff and this tradeoff exhibits the concept of opportunity cost. In addition to the opportunity cost, most production decisions also have direct costs.  That is, the raw material and labor inputs that go into actually making something.  In order to make the concepts of costs and supply less abstract, let’s return to our coffee example.

By definition, the quantity supplied is the amount that producers are willing to sell in a given period of time at a given price based on their costs of production.  Again, the easiest way to depict this relationship is with the use of a simple graph.

 

Figure 6. Supply Curve

C2

 

C1

 

 

The law of supply states that other things being equal, the higher the price of a good, the greater will be the quantity supplied.  As with demand and quantity demanded, there is a subtle yet important difference between supply and quantity supplied.  If the price of coffee rises, from P1 to P2, the quantity supplied will increase, from C1 to C2.  This is seen as a movement along the supply curve in figure 6. But what happens if there are an unusually large number of tropical storms in a given year and coffee plantations around the world are damaged reducing the amount of the primary input, coffee beans?  This would have the expected result of reducing the supply of coffee, notice, not the quantity supplied, but the supply.  This is depicted as a shift of the entire supply curve and leads the higher prices for any given level of output.  Again, this subtle, yet extremely important difference is critical to understanding the costs, benefits, and amount of riparian forest buffers found in the watershed.

 

3.3 Economic Efficiency and Markets

          In the previous section we introduced two concepts.  The concept of demand, which relates the quantity of output and the consumer’s willingness to pay.  And the concept of supply, which relates the quantity of output and the cost of production.  Neither of these, by themselves, is very useful in determining, for example, how much coffee should be produced.  In order to determine how much coffee should be produced we need to bring the two together. 

          When consumers are free to choose the goods and services they want to purchase and producers are free to produce the goods and services they want to sell we see a situation develop where the marginal benefit of consuming one more unit is exactly equal to the marginal cost of producing one more unit and we have an equilibrium.  This equilibrium occurs at a price of (Po) and an amount of coffee (Co) in figure 7.

Figure 7. Market Equilibrium 

D

 

S

 

 

 

            Economists will sometimes refer to this phenomenon as the invisible hand of the market.  Although the invisible hand works for many goods and services, it does not work for all.  Environmental economists are concerned about the failure of the market system, especially as it relates to natural and environmental resources.

 

3.4 Market Failure

Despite the virtues of the market system and the regulating effects of prices, the system does not always work nor is it especially desirable to rely on it for many production and consumption decisions.  Sometimes markets can not accurately measure the costs and benefits of private decisions.  When this occurs we have a market failure and this is especially important for environmental goods and services.  A market failure occurs when there is a divergence between private costs and social costs and/or the private benefits and social benefits. This is also known as a negative externality.  A negative externality occurs when during the consumption and production of the particular product or service someone outside of the market transaction is negatively impacted.  Another market failure that is important for our discussion is the concept of a public good.  A public good is defined by the inability of the producer to capture all of the benefits.

To think more clearly about market failure, it is simplest and most beneficial for us to use the example of a farmer in the watershed deciding how much land to clear for crops and how much to leave as riparian forest. 

In order to do this we will start with another useful tool from the economist’s toolkit: the production possibility frontier (PPF).  The PPF allows us to depict, graphically, all production possibilities, given limited resources, between two goods.  For example, the PPF, in figure 8, shows that at point A the farmer is planting 90 acres and keeping 10 forested and at point B keeps 50 acres forested and plants 50zero acres.  The PPF allows us to see all the possible combinations.  The farmer may decide to plant 100 acres and leave 0 acres of forest, or 80 and 20, or 70 and 30.  The question remains, how will the farmer decide how much to plant and how much to keep forested?  This is where the concepts of marginal costs and marginal benefits come into play. 

 

 

 

 

Figure 8. Production Possibility Frontier

50

 

crops

 

 

          The farmer will decide how much to plant based on the private costs and private benefits he derives from planting.  For example, based on his private costs and benefits, the farmer will choose point A (90 crops, 10 RFB) in order to maximize the net benefits by equating his MB and MC (see figure 9).  But, are all the costs and benefits of this decision borne by the farmer? 

          Clearly the farmer can sell his crops in well-established markets allowing him to capture the benefits, but are all the costs of his decision borne by the farmer?  What if the farmer applies fertilizers and pesticides to his crops and some of these chemicals run off the land and into the creek that runs through his property?  What if the farmer clears his land next to the creek and this destabilizes the creek bank allowing sediment to flow into the water?  What if the water temperature rises because it is no longer protected by the shade of the trees?  Does the farmer bear all of these costs?  Surely someone downstream bears some of these costs.  Water quality is diminished.  Fish habitat decreased.  Therefore, those who drink the water and eat the fish downstream will bear some of the costs generated by the farmer’s decision. 

 

Figure 9. Private Costs vs. Social Costs

cropland

 

            In figure 9, above, point A corresponds to the same point A in figure 8.  The farmer decides to plant 90 acres of crops and accordingly there are only 10 acres left as riparian forest.  However, if all the costs associated with this decision (including all the nonmarket negative externalities) were considered by the farmer, then he would only plant 50 acres.  In figure 9, this difference between the marginal private cost and the marginal social cost is reflected by the two supply curves.  Point B is socially optimal, but the farmer chooses point A.  This covers the divergence between MSC and MPC (negative externalities), but what about the benefits associated with forested riparian buffers?

 

Figure 10. Private Benefits vs. Social Benefits

RFB

Acres

 

10          50

 

P

 

MPB

 

MSB

 

        Here we have a situation where the marginal social benefit of an additional acre of forest is greater than the marginal private benefit to the farmer.  The farmer can not capture any of the rents associated with the provision of these benefits/ecological services, because there is no market for the provision of RFB services other than the potential sale of the timber.  Again, most of the benefits are public goods.  Therefore, the socially optimal amount of RFB does not occur at point A, but rather at point B.  Using figures 9 and 10 it is easy to see how the farmer ends up at point A on the PPF and how it is socially optimal to be at point B.

Many natural and environmental resources, including riparian forests, are not allocated efficiently because of the inability of the market system to capture all the costs and benefits, i.e. there is a market failure.  According to Prato [11], there are three ways to handle the nonmarket benefits and costs of environmental resources.  They can (1) be ignored, (2) recorded in physical, natural and environmental accounts, or (3) they can be determined through the use of non-market valuations.  Ignoring un-valued benefits and costs results in an inefficient use of resources.  Prato also criticizes the second option, saying, “It is difficult to compare the monetary net private benefits of resource use with the physical depletion or over exploitation of resources” [11] p.302). He concludes that the third option, non-market valuation, measures not just private benefits to firms and individuals, but the net benefits and costs to all of society.  In order to quantify the MSC and MSB it is necessary to gather more information using the nonmarket valuation techniques developed by economists over the last 40 years.

 

4.0 Nonmarket Valuation

          Non-market valuation methods center upon two constructs: willingness to pay and willingness to accept compensation.  Willingness to pay, or WTP, is defined as “paying a lower price or receiving a higher quantity or quality of resource, or avoiding a higher price or lower quantity or quality of the resource” [11] p.306).  Willingness to accept compensation, or WTA, is defined as “forgoing a lower price or higher quantity or quality of the resource, or tolerating a higher price or lower quantity or quality of the resource” [11] p.306).  The main difference between these two methods of valuation is the presence of property rights.  If an individual has property rights that guarantee him or her the right of clean water, WTA is used, while if the property rights do not guarantee him or her that right, WTP is used.  Individuals have widely different WTP and WTA values for use of environmental resources, due largely to varying tastes and preferences for these resources [11]. 

          For our purposes, it is useful to think of the farmer as possibly being willing to accept compensation to forgo using the riparian zone and of everyone else as having a willingness to pay in order to receive the benefits from forested riparian buffers.  In order to determine this WTA and WTP we need to use nonmarket valuation techniques.  There are two basic approaches for measuring the demand for nonmarket goods and services: revealed preference (RP) and stated preference (SP).

 

4.1 Revealed Preference Techniques

          In revealed preference, we observe a real choice in some market and we infer information on the trade-off between money and an environmental good [6].  The revealed preference technique offers us two options: the travel cost method and the hedonic method. 

          The travel cost method is the oldest of the nonmarket valuation techniques and values natural and environmental resources by looking at the actual travel expenditures people incur to visit a destination [3].  Based on the cost of travel, it is inferred that the resource in question is worth at least as much as the expenditures to the individual.

          With the hedonic method, the goal is to see how the price of a conventional good varies as the amount of a related environmental good changes [6].  For example, if we look at two identical houses, one with an unobstructed ocean view and another with an oil platform in the viewscape, we can infer the value of an ocean view based on the price difference between the two homes.[1] 

     

4.2 Stated Preference Techniques

          The stated preference techniques basically involve asking people how much an environmental good is worth [6].  For example, I might ask someone in Rockbridge County, Virginia how much they would be willing to pay for improved water quality or more trees along Woods Creek.  Their response will give me an idea of how they value these nonmarket amenities.  A procedure like the one just described is known as the contingent valuation method[2].

          The other option is called Conjoint Analysis or Choice Modelling.  Choice Modelling asks the individual to choose from different states of the world with multiple attributes.  For example, the same resident of Rockbridge County, Virginia could be shown two pictures of Woods Creek.  The first picture might look like figure 11, below, and the other picture might be of the creek with no trees.  In addition to viewing the two pictures the individual would be asked to pay a certain amount for each state of the world.  Then with the use of regression analysis, we can determine the marginal worth of the forested riparian zone vs. the non-forested[3].          

 

 

Figure 11. Riparian Forest Buffer Woods Creek

 

 

 

5.0 The Benefits of Riparian Forest Buffers[4]

          Having established the economic framework for analyzing the costs and benefits of RFB, what are the costs and benefits?  Let’s start with the ecological benefits.  Riparian forest buffers are integral to the health of the Chesapeake Bay and its rivers for many reasons [16].

  1. Filtering Runoff: Rain that runs off the land can be slowed and infiltrated in the forest, which helps settle out sediment, nutrients, and pesticides before they reach streams. Infiltration rates of forests are 10 to15 times higher than those of grass turf areas and 40 times higher than those of a plowed field. Studies have shown 30 to 98 percent reductions of nutrients (nitrogen and phosphorus), sediment, pesticides, and other pollutants in surface and groundwater after passing through a riparian forest. In addition, trees provide deep root systems which hold soil in place, thereby stabilizing streambanks and reducing erosion [16].
  2. Nutrient Uptake: Fertilizers and other pollutants that originate on the land are taken up by tree roots. Nutrients are stored in leaves, limbs and roots instead of reaching the stream. Through a process called "denitrification," bacteria in the forest riparian floor convert harmful nitrate to nitrogen gas, which is then harmlessly released into the air [16].
  3. Canopy and Shade: Cool stream temperatures maintained by riparian vegetation are essential to the health of aquatic species. Shading moderates water temperatures and protects against rapid fluctuations that can harm stream health and reduce fish spawning and survival. Tree canopy also protects against elevated water temperatures that accelerate algae growth and reduce dissolved oxygen, further degrading water quality. In a small stream, temperatures may rise 1.5 degrees in just 100 feet of exposure without trees. The leaf canopy also improves air quality by filtering dust from wind erosion, construction or farm machinery [16].
  4. Leaf Food: Leaves from the riparian forest fall into streams and are trapped on woody debris (fallen trees and limbs) and rocks where they provide food and habitat for small bottom-dwelling creatures (i.e. crustaceans, amphibians, insects and small fish), which are critical to the aquatic food chain [16].
  5. Habitat: Riparian forests offer a tremendous diversity of habitat. The layers of habitat provided by trees, shrubs, and grasses and the transition of habitats from aquatic to upland areas make these areas critical in the life stages of over one-half of all native Bay species. Forest corridors provide crucial migratory habitat for neotropical songbirds, some of which are now threatened due to loss of habitat. Also, many ecologically important species such as herons, wood ducks, black ducks, as well as amphibians, turtles, foxes and eagles utilize the riparian forest. Streams that travel through woodlands provide more habitat for migratory fish by providing suitable spawning habitat for shad, herring, alewife, perch, and striped bass. Trees and woody debris provide valuable cover for crabs, small fish and other aquatic organisms along the Bay's shoreline as well. Degradation of any portion of a stream can have profound effects on living resources downstream. While the overall impact of these riparian forest corridors may be greatest in headwaters and smaller order streams, there is a clear linkage all the way to the Bay [16].

6.     Bank stabilization: Many streams in agricultural and urban areas have unstable banks, a result of high stream velocities and prior flooding events. Where erosion is moderate, forest buffers of 25 to 55 feet wide are recommended to stabilize and maintain streambanks (O'Laughlin and Belt 1995, Palone and Todd 1997). However, the buffer should be wide enough to accommodate natural shifts in the stream channel that will occur as the stream stabilizes [16].

7.     Recreation and aesthetic: In recreational areas, buffers should be large enough to accommodate the desired activity. Measures should be taken to protect the area from overuse [16]. 

8.     Forest products: Landowners who wish to harvest a marketable product from the buffer must consider the appropriate species for planting, spacing, and cultural practices required. The area in production must be large enough for the operation to be economically viable [16].

 

            As we stated before, many of the benefits of riparian forest buffers are nonmarket benefits.  If the farmer decides to keep an area forested rather than plant crops, he can not charge the public for improving water quality, keeping the trout happy, or stabilizing the bank.  Table 1, below, categorizes the benefits in terms of whether they are market, nonmarket, or maybe a little of both.

 

Table 1. Categorization of benefits

Non-Market

Market

Both

Filtration of sediment, nutrients, pollutants

soil conservation/agricultural productivity

recreation

Maintain water quality

Forest products

aesthetics

Maintain water temperature

Habitat

 

 

 

            Although we have listed and described the ecological services provided by RFB.  And we have categorized them into their appropriate market or nonmarket benefit category.  We have still not quantified these benefits.  Table 2, below, summarizes the results of numerous nonmarket valuation studies.

 

Table 2. Benefit Estimates

Area

Benefit

Dollar Value

Source

Georgia

Safer drinking water

$5.49 to $7.38 per month

http://www.ext.vt.edu/pubs/forestry/420-153/420-153.html

 

Jordan and Elnagheeb 1993.

Georgia

protect groundwater supplies

$641 per household annually

Sun and others 1992.

USA

improve water quality to a "swimmable" level

 

$275 to $366 per household per year

Carson and Mitchell 1993.

N.H

groundwater protection plan

$40 per household annually

Schultz and Lindsay 1990.

 

USA

(crp)

annual water quality benefits

$3.5

to $4.5 billion,

http://www.riparianbuffers.umd.edu/PDFs/FS774.pdf

 

Tennessee

Complete restoration of riparian zone

$89.50/ft

Holmes et al. 2004.

Indiana, Nebraska, Pennsylvania, and Washington

remove all nitrates from their water supplies

$55 per month

Crutchfield and others 1997.

 

 

 

 

 

5.0 The Costs of Riparian Restoration

          Unlike the benefits, the costs of riparian restoration are more straight-forward.  There are three types of costs to the landowner; (1) establishment, (2) maintenance, and (3) opportunity.  The establishment cost is a one time cost which includes things like purchasing seedlings, prepping the site, and the labor to plant the seedlings.  Maintenance costs are incurred annually and may include mowing, weeding and other forest maintenance depending on the landowner’s objectives.  The last cost is perhaps the greatest; the opportunity cost.  If the farmer decides to restore the riparian zone, he must give up planting in the zone and forego the income generated from harvesting those crops.  Again, the landowners objectives will influence these costs.  For example, he may stop planting corn and allow the riparian zone to “go wild.” Or, he may decide to plant fast growing, merchantable hardwoods.  Table 3, below, provides a summary of several cost estimates from different areas of the United States.  Unfortunately, there are very few opportunity cost estimates.

 

Table 3. Cost Estimates

Location/Costs

Establishment

Maintenance

Opportunity

Source

Neuse River, NC

$70/acre

 

$2/acre

Piedmont: $53-172 Upper and middle coastal plain: $70-630

http://www2.ncsu.edu/unity/lockers/users/g/gawossin

/Conference.PDF

 

Virginia

$160/acre

$8/acre

No estimate

VA Co-Ext.

Tennessee

$0.98-$3.13/ft: establishment and maintenance

 

No estimate

Holmes et al. 2004

Ohio

$378 per acre.

 

 

$25/acre

No Estimate

http://aede.osu.edu/people/sohngen.1/bmp/lowtim.pdf

 

Maryland

$218–$729/acre: establishment and maintenance

 

No estimate

http://www.riparianbuffers.umd.edu/PDFs/FS774.pdf

 

Maryland

$575/acre: establishment and maintenance

 

No estimate

Lynch and Brown 2000

 

 

7.0 Public Policy

            There is now the issue of moving from economic theory to public policy.  If the economic framework suggests a divergence between social and private costs and benefits and this is not socially optimal, then what types of policy are needed to equate the marginal private and social costs and benefits?  There are basically three policy options; (1) taxes, (2) subsidies, and (3) direct production.

          Commonly, public institutions such as local, state, and federal governments use taxes to increase the marginal private costs and move them closer to the marginal social costs. An example of this is taxing pesticides.  If the price of pesticides increases, due to the tax, then the farmer will use less of it and less will end up in the water. 

          When the issue is equating marginal private benefits with marginal social benefits the public policy usually takes the form of a subsidy. For example, if we want more riparian forests then we need to pay farmers to increase the amount of forest.  This is exactly what the conservation reserve programs do throughout the watershed.   

          The third option is for public institutions to simply restore riparian buffers on their own.  An example of this is happening in Rockbridge County, VA with the Woods Creek Restoration Project.  The city of Lexington is funding the restoration of the riparian zone along Woods Creek.  Figure 12 below shows one of the signs that have been placed along the greenway.  This program does not rely on taxing negative externalities or subsidizing the private sector to provide public goods, but rather directly provides the public good (the RFB).

 

 

 

 

 

 

 

Figure 12. Woods Creek Restoration Project

 

 

 

8.0 Conclusion

         

          The social science of economics provides us with an invaluable set of tools for helping policy formation.  The objective of this paper has been to clearly set forth a framework for thinking about the socially optimal level of riparian forest buffers in the Chesapeake Bay Watershed.  Certainly there are other considerations that need to enter the public policy debate, but the framework of costs and benefits, markets and market failure, nonmarket valuation and economic value can help us to think more clearly about the role of the public sector in preserving and restoring riparian forest buffers in the Chesapeake Bay Watershed.

 

9.0 References

 

1. Bishop, Blair, Mou, Paul, and Anne Hershey.  Urban Riparian Zones: Mitigation and Retention of Three Nutrient Species Known to Affect Water Quality.  Department of Biology, UNC-Greensboro.

 

2. Casey, James F.  2004.  Choice Modelling as an alternative to Contingent Valuation for valuing multi-attribute systems: A case study of farmer preferences for agroforestry in Mexico.  The Handbook of Contingent Valuation.  Eds. Alberini, Bjornstad, and Kahn.  Edward Elgar Publishing

 

3. Field, Barry C., and Martha K. Field.  2002.  Environmental Economics: An Introduction.  3rd Ed. McGraw-Hill Irwin.

 

4. Holmes, Thomas P., Bergstrom, John, Huscar, Eric, Kask, Susan, and Fritz Orr III.  2004.  Contingent Valuation, net marginal benefits, and the scale of riparian ecosystem restoration.  Ecological Economics (49) 19-30.

 

5. Klapproth, Julia C.  2002.  Understanding the Science Behind Riparian Forest Buffers: Resources for Virginia.  http://www.ext.vt.edu/pubs/forestry/420-156/table1.html

 

6. Kolstad, Charles D.  2000.  Environmental Economics.  Oxford University Press, New York.

 

7. Lynch, Lori and Cheryl Brown.  2000.  Landowner Decision Making about Riparian Buffers.  Journal of Agricultural and Applied Economics, 32,3: 585-596.

 

8. Miller, Kevin, Christian, Robert, Meyer, Gregory, Brinson, Mark, and Richard Rheinhardt.  Hydrology and Water Quality of coastal plain headwater streams: Effects of stream channel, riparian condition and land use.  North Carolina Wetlands Restoration Program, Raleigh, NC.

 

9. Morgan, Cynthia and Nicole Owens.  2001.  Benefits of water quality policies: the Chesapeake Bay.  Ecological Economics (39), 271-284.

 

10. Palone, Roxane S., and Albert H. Todd.  1998.  Chesapeake Bay Riparian Handbook: A Guide for Establishing and Maintaining Riparian Forest Buffers.  Chesapeake Bay Program. Available at: http://www.chesapeakebay.net/pubs/subcommittee/nsc/forest/handbook.htm

 

11. Prato, Tony. 1998. Natural Resource and Environmental Economics. Ames, Iowa The Iowa State University Press.

12. Tjaden, R.L. and G.M. Weber. 1997. An Introduction to the Riparian Forest Buffer. Maryland Cooperative Extension Fact Sheet 724. College ParkMD. 2 pages. http://www.riparianbuffers.umd.edu/PDFs/FS724.pdf.

13. Tjaden, R.L. and G.M. Weber. 1997. Riparian Buffer Systems. Maryland Cooperative Extension Fact Sheet 733. College Park, MD. 2 pages. http://www.riparianbuffers.umd.edu/PDFs/FS733.pdf.

14. Wafer, Carrie and Deanna Osmond.  Effectiveness of Shrub Buffers on Nitrate-N Removal.  Department of Soil Science, North Carolina State University, Raleigh, NC.

 

15. What’s new with forests in the Chesapeake Bay region in 2000.  Chesapeake Bay Program.  http://www.chesapeakebay.net/forest.html

 

16. http://www.chesapeakebay.net/forestbuff.htm

10.0 More Resources

Books and Articles

 

Aitchison, S.W., S.W. Carothers, and R.R. Johnson. 1977. Some ecological considerations associated with river recreation management. Pages 222-225. In: River Recreation Management and Research. Proceedings of a Symposium. Jan. 24-27, 1977 Minneapolis, Minn. US Department of Agriculture Forest Service Publication GTR-NC-28. St. Paul, Minn. 455 pages.

Blakesley, J.A. and K.P. Reese. 1988. Avian use of campground and noncampground sites in riparian zones. Journal of Wildlife Management 52:399-402.

Brown, T.C. and T.C. Daniel. 1991. Landscape aesthetics of riparian environments: relationship of flow quantity to scenic quality along a wild and scenic river. Water Resources Research 27:1787-1795.

Carson, R.T. and R.C. Mitchell. 1993. The value of clean water: the public's willingness to pay for boatable, fishable, and swimmable water quality. Water Resources Research 29:2445-2454.

Clark, E.H. II. 1985. The off-site costs of soil erosion. Journal of Soil & Water Conservation 40:19-22.

Clark, E.H., II, J.A. Haverkamp, and W. Chapman. 1985. Eroding soils: the off-farm impacts. The Conservation Foundation, Washington, D.C. 252 pages.

Clark, R.N., D.R. Gibbons, and G.B. Pauley. 1985b. Influence of forest and rangeland management on anadromous fish habitat in Western North America: Influences of recreation. U.S. Department of Agriculture Forest Service Publication GTR-PNW-178.

Clonts, H.A. and J.W. Malone. 1990. Preservation attitudes and consumer surplus in free-flowing rivers. Pages 301-315. In: Vining, J. (editor) Social Science and Natural Resource Recreation Management. Westview Press. Boulder, Colo. 330 pages.

Crutchfield, S.R., J.C. Cooper, and D.R. Hellerstein. 1997. Benefits of safer drinking water: the value of nitrate reduction. U.S. Department of Agriculture Economic Research Service Publication AER-752. Washington, D.C. 15 pages.

Dronen, S.L. 1988. Layout and design criteria for livestock windbreaks. Agriculture, Ecosystems, and Environment 22/23:231-240.

Eisel, M.C. 1988. Deciduous woody plants for the florist trade. Pages 57-64. In: Commercial Field Production of Cut and Dried Flowers. Proceedings of a symposium December 6-8, 1988. University of Minnesota Center for Alternative Crops and Products and The American Society of Horticultural Science. 207 pages.

Emerson, P.M. 1996. Cultural values in riparian areas. Pages 36-39 In: Laursen, S.B. (editor) At the Water's Edge: The Science of Riparian Forestry. Proceedings of a conference held June 19-20, 1995, Duluth Minn. University of Minnesota Publication BU-6637-S. 160 pages.

Gitelson, R.J. and A. Graefe. 1990. Economic impacts associated with whitewater boating on the Upper Youghiogheny River. Pages 65-69. In: Proceedings of the 1990 Northeastern Recreation Research Symposium Feb. 25-28, 1990. Saratoga Springs, N.Y. U.S. Department of Agriculture Forest Service Publication GTR-NE-145. 207 pages.

Gregory, S.V., F.J. Swanson, W.A. McKee, and K.W. Cummins. 1991. An ecosystem perspective of riparian zones. Bioscience 41:540-551.

Guldin, R.W. 1989. An analysis of the water situation in the United States: 1989-2040. U.S. Department of Agriculture Forest Service Publication GTR-RM-177. 178 pages.

Hagan, P.T. 1996. Evaluating determinants of participation in voluntary riparian buffer programs: a case study of Maryland's Buffer Incentive Program. University of Maryland Master's Thesis. Marine, Estuarine, and Environmental Sciences Program. 169 pages.

Harris, C.C., W.J. McLaughlin, and D.K. Rawhouser. 1990. Comprehensive evaluation of information/education programs to reduce recreational impacts on the Lower Salmon River. Journal of Environmental Management 31:19-28.

Higgins, D.A. 1996. Forest management in riparian areas. Pages 118-122. In: Laursen, S.B. (editor) At the Water's Edge: The Science of Riparian Forestry. Proceedings of a conference June 19-20, 1995. Duluth, Minn. University of Minnesota Pub. BU-6637-S. St. Paul, Minn. 160 pages.

Holmes, T.P. 1988. The offsite impact of soil erosion on the water treatment industry. Land Economics 64:356-367.

Hoover, S.L., D.A. King, and W.J. Matter. 1985. A wilderness riparian environment: visitor satisfaction, perceptions, reality, and management. Pages 223-226. In: Johnson, R.R., C.D. Ziebell, D.R. Patton, P.F. Folliott, and R.H. Hamre. (editors) Riparian Ecosystems and their Management: Reconciling Conflicting Uses. Proceedings of the first North American riparian conference. April 16-18, 1985. Tuscon, Ariz. U.S. Department of Agriculture Forest Service Publication GTR-RM-120. 445 pages.

Jenkins, D.F. 1991. Woody plants as cut flowers. Pages 68-74. In: From a grower's perspective: the business of growing specialty cut flowers. Proceedings of the 4th National Conference on Specialty Cut Flowers. November 1-4, 1991. Cleveland, Ohio. Association of Specialty Cut Flower Growers, Inc. 144 pages.

Johnson, J.L., D. Grotelueschen, and M. Knott. 1994. Evaluation of bovine perinatal nitrate accumulation in western Nebraska. Veterinary and Human Toxicology 36:467-471.

Jordan, J.L. and A.H. Elnagheeb. 1993. Willingness to pay for improvements in drinking water quality. Water Resources Research 29:237-245.

Kasi, V. and B. Botter. 1994. Streambank fencing for the remediation of agricultural nonpoint source pollution. Pages 301-305. In: Riparian Ecosystems in the Humid U.S.: Functions, Values, and Management. Proceedings of a conference March 15-18, 1993. Atlanta Ga. National Association of Conservation Districts. 445 pages.

Kelly, J.W. 1991. Field production of cut flowers. HortScience 26:1136-1138.

Kort, J. 1995. Economics of Agroforestry. Pages 227-230. In: W.J. Rietveld (editor) Agroforestry and Sustainable Systems. Proceedings of a Symposium. U.S. Department of Agriculture Forest Service Publication GTR-RM-261. 276 pages.

Kuska, J.J. 1977. Biological approach to river planning and management. Pages 296-304. In: River Recreation Management and Research. Proceedings of a symposium. U.S. Department of Agriculture Forest Service Publication GTR-NC-28. St. Paul, Minn. 455 pages.

Leopold, L.B. 1969. Landscape esthetics: How to quantify the scenics of a river valley. Natural History 78 (8):36-45.

Licht, L.A. 1992. Salicaceae family trees in sustainable agroecosystems. Forest Chronicles 68:214-217.

Litton, R.B. 1977. River landscape quality and its assessment. Pages 46-54. In: River recreation management and research. Proceedings of a symposium. U.S. Department of Agriculture Forest Service Publication GTR-NC-28. St. Paul, Minn. 455 pages.

Lowrance, R., R. Leonard, and J. Sheridan. 1985. Managing riparian ecosystems to control nonpoint pollution. Journal of Soil & Water Conservation 40:87-91.

Lynch, L. 1997. Closed geese season brings economic chill to eastern shore's winter. Economics Viewpoints 2(1):9-11. University of Maryland Cooperative Extension Service, College Park, Md.

Meyer, M.H. 1988. Everlasting ornamental grasses. Pages 69-73. In: Commercial Field Production of Cut and Dried Flowers. Proceedings of a symposium December 6-8, 1988. University of Minnesota Center for Alternative Crops and Products and The American Society of Horticultural Science. 207 pages.

Miller, B.K., B.C. Moser, K.D. Johnson, and R.K. Swihart. 1994. Designs for windbreaks and vegetative filterstrips that increase wildlife habitat and provide income. Pages 567-574. In: Campbell, K.L., W.D. Graham, and A.B. Bottcher (editors) Environmentally Sound Agriculture. Proceedings of the Second Conference April 20-22, 1994, Orlando, Fla. American Society of Agricultural Engineers. St. Joseph, Mich. 578 pages.

Overcash, M.R., F.J. Humenik, J.R. Miner. 1983. Livestock waste management: Volume I. CRC Press, Inc. Boca Raton, Fla.

Palmateer, G.A. 1992. Transport of biological pollutants from agricultural sources through aquatic sediment systems in Ontario. Pages 59-77. In: Miller, M.H., J.E. Fitzgibbon, G.C. Fox, R.W. Gillham, and H.R. Whiteley (editors) Agriculture and Water Quality. Proceedings of an Interdisciplinary Symposium. April 23-24, 1991. Centre for Soil and Water Conservation, Guelph, Ontario, Canada. 213 pages.

Palone, R.S. and A.H. Todd (editors) 1997. Chesapeake Bay riparian handbook: a guide for establishing and maintaining riparian forest buffers. U.S. Department of Agriculture Forest Service, Northeastern Area State and Private Forestry. Publication NA-TP-02-97. Radnor, Penn.

Park, W.M and E.B. Dyer. 1986. Off-site damages from soil erosion in West Tennessee. Pages 113-123. In: Waddell, T.E. (editor). The off-site costs of soil erosion. Proceedings of a symposium held May 1985. Conservation Foundation, Washington, D.C. 284 pages.

Pawelko, K.A., E.B. Drogin, A.R. Graefe, and D.P. Huden. 1995. Examining the nature of river recreation visitors and their recreational experiences on the Delaware River. Pages 43-49. In: Dawson, C.P. (editor) Proceedings of the 1995 Northeastern Recreation Research Symposium. U.S. Department of Agriculture Forest Service Publication GTR-NE-218. 286 pages.

Pigram, J. 1983. Outdoor Recreation and Resource Management. St. Martin's Press, N.Y. 262 pages.

Ribaudo, M.O. 1986. Regional estimates of off-site damages from soil erosion. Pages 29-46. In: Waddell, T.E. (editor). The Off-Site Costs of Soil Erosion. Proceedings of a symposium held May 1985. Conservation Foundation, Washington, D.C. 284 pages.

Schultz, R.C., J.P. Colletti, W.W. Simpkins, C.W. Mize, and M.L. Thompson. 1994. Developing a multispecies riparian buffer strip agroforestry system. Pages 203-211. In: Riparian Ecosystems in the Humid U.S. Functions, Values, and Management. Proceedings of a conference March 15-18, 1993. Atlanta, Ga. National Association of Conservation Districts. 445 pages.

Schultz, S.D. and B.E. Lindsay. 1990. The willingness to pay for groundwater protection. Water Resources Research 26:1869-1875.

Sun, H., J.C. Bergstrom, and J.R. Dorfman. 1992. Estimating the benefits of groundwater contamination control. Southern Journal of Agricultural Economics 19:63-71.

U.S. Environmental Protection Agency. 1995. National water quality inventory: 1994 report to Congress. U.S. Environmental Protection Agency Office of Water. EPA841-R-95-005. Washington, D.C.

U.S. Fish and Wildlife Service and U.S. Bureau of the Census. 1996. National survey of fishing, hunting, and wildlife-associated recreation. U.S. Fish and Wildlife Service FHW/96 NAT. 115 pages.

USA Today. March 24, 1998. Across the USA: news from every state - Virginia. USA Today. Section A Page 10.

Veenhuizen, M.F. and G.C. Shurson. 1992. Effects of sulfate in drinking water for livestock. Journal of the American Veterinary Medical Association 201:487-492.

Virginia Departments of Environmental Quality and Conservation and Recreation. 1998. Virginia Water Quality Assessment 1998. 305(b) Report to the Environmental Protection Agency Administrator and Congress. Virginia Departments of Environmental Quality and Conservation and Recreation. Richmond, Va.

Walbridge, M.R. and J.P. Struthers. 1993. Phosphorus retention in non-tidal palustrine forested wetlands of the mid-Atlantic region. Wetlands 13(2):84-94.

Wall, G. and C. Wright. 1977. The environmental impact of outdoor recreation. University of Waterloo Department of Geography Publication 11. Waterloo, Ontario, Canada. 69 pages.

Websites

http://www.chesapeakebay.net/

http://www.chesapeakebay.net/pubs/subcommittee/nsc/forest/handbook.htm

http://www.fsa.usda.gov/pas/publications/facts/html/crepva00.htm

http://www.leopold.iastate.edu/

http://www.riparianbuffers.umd.edu/manual.html

http://www.unl.edu/nac/riparian.html

http://www.potomac.org/pwp/conference.html

http://www.riparianbuffers.umd.edu/

http://www.buffer.forestry.iastate.edu/

http://www.ext.vt.edu/pubs/forestry/420-154/420-154.html#L3

http://aede.osu.edu/people/sohngen.1/bmp/filter.htm#filter%20strip

 



[1] For an in-depth discussion of revealed preference methods see Kolstad chapters 15-17.

[2] For an in-depth discussion of contingent valuation see Kolstad chapters 15 and 18.

[3] For a detailed explanation of choice modelling see Casey 2004.

[4] The list of benefits and the explanations in this section of the paper are entirely from http://www.chesapeakebay.net/forestbuff.htm