What are the goods produced by conservation worth?

Biodiversity. Clean water. Restored ecosystems. Flood reduction. These are all good things, and we can measure increases in them with physical units – number of different species, concentration of pollutants, acres restored, number of floods each year. So, then, why have economists written thousands of papers putting dollar values on environmental goods which are not traded in any marketplace?

Valuation of environmental goods has many uses, but it is particularly important for two specific kinds of decision making. First, major federal regulations have to pass a cost-benefit test; that helps us be sure that actions taken by the government help society more than they hurt. Companies are ready to tell regulators how much regulations will cost them. If the benefits include environmental improvements and we cannot place a value on those improvements, then we effectively place a value of zero on those environmental benefits in the cost-benefit analysis and bias the process against approving regulations that might yield great value through increasing environmental quality, bolstering species, and restoring habitat. Second, the Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation, and Liability Act (aka CERCLA, passed in 1980 and commonly known as the Superfund Act) allow polluters to be held liable for monetary damages associated with oil spills and toxic pollution. The threat of that liability gives firms efficient incentives to take precautions to avoid oil and chemical contamination. However, the only way to estimate those damages is by calculating the dollar value of reductions in non-market goods like recreation losses from oiled beaches, society’s harm from the birds, turtles, and other animals killed by oil spills, and human health effects from toxic contamination. When the damages can be in the billions of dollars, both the government and the responsible party have a stake in generating accurate estimates of the value.

Non-market good valuation is not my primary area of research, but I have teamed up on some studies to estimate values of goods in my primary area of research: species and habitat conservation and restoration.

Environmental improvements from stormwater management: Most research on conservation and restoration in economics focuses on terrestrial habitat. However, inshore aquatic habitats also provide important homes for species and vital services for people who live near them. A publication from the National Research Council highlighted how stormwater runoff patterns in urban areas degrade rivers and streams nearby, and how using green stormwater management infrastructure (rain gardens, cisterns, pervious concrete, etc.) instead of just conventional concrete storm sewers could improve stream quality and aquatic habitat quality in urban areas. Catalina Cadavid and I estimated the values people place on improvements that could result from deploying a more diverse mixture of stormwater management approaches in an urban area (Cadavid and Ando 2013). We found that households were willing to pay almost $40 every year to make streams clean enough to fish in and $35 every year to have improvements in stream flow and aquatic habitat, and households with basements would pay $35 every year to cut basement flooding in half. Even in a small urban area with 50,000 homes, these values imply that a green infrastructure initiative that curbed flooding and improved both water quality and stream flows could be valued at $3 million each year.

Grassland restoration: Back on land, grasslands are endangered ecosystems in the U.S. due to widespread conversion. Private and public wildlife groups and agencies have responded by restoring millions of acres of grasslands in the U.S., but we had no estimates of the value to society of those restorations. To fill that knowledge gap, Sahan Dissanayake and I used a choice experiment survey to estimate the value people place on grassland restoration and how that value depends on features of the area restored (Dissanayake and Ando 2014). We found that a single household could be willing to pay between $75 and $150 a year to have a 100-acre grassland restored near them. That value increases with bird biodiversity, bird population density, the number of endangered species present, and the prevalence of wildflowers, and decreases with the frequency of controlled burns used to manage the grassland and how far the area is from the household itself.

Biodiversity: Economists struggle to estimate the value of biodiversity because it can be difficult for people to grasp what is meant when they are asked what they would pay to increase an abstract measure of biodiversity. I worked with two teams of ecologists and economists on research to estimate the values of particular services that biodiversity provides.

First, in Hungate et al. (2017) we show that grasslands store more carbon if they have a more diverse array of plant species in them, helping to reduce one of the greenhouse gases that is contributing to climate change. We estimated the value of having an additional species in a grassland through its contribution to increased carbon storage. Adding a single additional plant species to a grassland with only one kind of grass increases carbon storage on one hectare by 9 metric tons, and reduces damages to society from carbon emissions by over $800. To extrapolate to a policy scale, we found that adding a species to the 12 million hectares of grasslands currently in the Conservation Reserve Program would have $700 million of benefits.

Second, Letourneau et al. (2015) study the value of increased biodiversity in crop lands when diversity alters the effectiveness of biological pest control. We used data on cucumber and squash crops in the Southeastern U.S. we found that some losses in the diversity of natural enemies to crop pests could cost between $1.5 and $12 million in social surplus every year. Note that our study area produced less than a quarter of those two crops, and those two vegetables are only about 4% of the value of fresh vegetable production in the U.S., so the value of natural enemy diversity as an asset for vegetable production as a whole could be many times larger. However, we found some cases in which adding species actually reduced the effectiveness of pest control and generates costs instead of benefits; sometimes the value of an additional species depends on exactly how the resulting community interacts.

Ongoing research here in Mumford Hall is estimating more elements of the value of nature: beaches in a major city, a national park, and fish diversity in a river affected by agricultural pollution. The process of understanding how humans benefit from the environment (and how much those benefits are worth) is a long path with many steps in it. Tune in for updates on the next steps.


Cadavid, C. and A.W. Ando. 2013. “Valuing Preferences over Stormwater Management Outcomes Given State-Dependent Preferences and Heterogeneous Status Quo.” Water Resources Research 49(7): 4114–4125. DOI: 10.1002/wrcr.20317.

Dissanayake, S.T.M. and A.W. Ando. 2014. “Valuing Grassland Restoration: Proximity to Substitutes and Tradeoffs among Conservation Attributes.” Land Economics 90: 237-259.

Hungate, Bruce A., Edward B. Barbier, Amy W. Ando, Samuel P. Marks, Peter B. Reich, Natasja van Gestel, G. David Tilman, Johannes M.H. Knops, David U. Hooper, Bradley J. Butterfield, Bradley J. Cardinale. 2017. “The economic value of grassland species for carbon storage.” Science Advances 3(4): e1601880. DOI: 10.1126/sciadv.1601880.

Letourneau, D., A.W. Ando, A. Narwani, J. Jedlicka, and E. Barbier. 2015. “Simple-but-Sound Methods for Estimating the Value of Changes in Biodiversity for Biological Pest Control in Agriculture.” Ecological Economics 120: 215-225. DOI: 10.1016/j.ecolecon.2015.10.015.

Teaching environmental economics: A simplified tradable permit game

I taught a large introductory environmental economics course for many years. This class had 180 students. Many of those students had never had an economics class and many of them did not love math. We would have two large lectures every week, and then break the class into 30-person sections in which we would do games, solve problems, have discussions, and generally get more engaged with the material.

One year, the graduate student teaching assistant for the course, Donna Ramirez Harrington, and I decided we needed a game to help students really understand tradable permits that was easy to run with our population of students in a 50-minute section. We devised the game and published a paper about it. Over the years, various people have asked me for the files to help use the game in their own classes. I am happy to share those files, and now this website makes it easier.

The journal article: Ando, A.W. and D.R. Harrington. 2006. “Tradable Discharge Permits: A Student-Friendly Game.” Journal of Economic Education 37(4): 187-201.

Directions for the game: MSWord    pdf

Worksheets for students to use in class: MSWord   pdf

Excel spreadsheet with all the calculations relevant for the game (for instructor reference)

Excel spreadsheet to use to tally the trades in class during the game

PDF Presentation to give in class when the game is over

Worksheet to give to students who missed the game in class: MSWord pdf

A talk on conservation in the face of climate change

I talked today to a woman who will be joining our graduate program next year. She explained she had already gotten to know me by watching a video of a talk I gave at the University of Tennessee about using portfolio to reduce uncertainty in conservation outcomes from planned conservation networks. It was a surprise to me to learn that the talk was publicly available, but here it is. Next week I’ll try to have a blog post about all the research I’m doing related to this talk.

The endangered Endangered Species Act

The Endangered Species Act (ESA) was signed into law by President Richard Nixon in 1973. Since then, over a thousand species have been protected by the law including well known success stories like the bald eagle, the sea otter, and the green sea turtle. But now more than ever, the ESA seems embattled. The House has stepped-up a multi-pronged approach to gutting ESA protections in the last year, and the new President signed an order that halted the addition of the rusty-patched bumblebee to the protected list. In this moment, we remind ourselves why we need this law in the first place and reflect on modifications that could make the ESA more effective and less endangered itself.

Several foundations of environmental and resource economics spell bad news for nature (Ando 2011). The theory of negative externalities predicts that when something done by one actor has negative effects on others, the actor won’t take those negative effects into account and will tend to do more of the thing than is best from society’s point of view. The theory of the common pool resources like fisheries that are open to everyone predicts that such resources will be over-exploited. The theory of public goods – things like lighthouses and national defense that benefit everyone – predicts that they will be under-provided. So species like the red cockaded woodpecker and the Gulf sturgeon were endangered by too much logging and water use, species like the bison were almost hunted to extinction, and donations to conservation groups aren’t large enough to do as much conservation as would be best for society as a whole.

All species on the ESA’s endangered species list are protected from direct harm and from many forms of indirect harm through limits on habitat destruction. Some listed species are even the beneficiaries of active recovery plans including occasional captive breeding programs. Administrative innovations have allowed multi-species protection plans and tried to improve incentives for private landowners to make habitat suitable for endangered species on their own lands. Conservation groups view the ESA as a crown jewel in U.S. environmental laws.

However, the ESA is a very blunt tool. A species can’t be protected under the ESA unless it is in dire danger of extinction, and protections must stop once the species population recovers. But extinction threat is just a symptom of a problem with how people are using nature – developing too much land, taking too much water out of streams, and so forth. It would make more sense to control actions like land conversion and water use before problems get so bad that a species is on the brink of disappearance, and it would make sense to keep controlling those actions that degrade habitat even if a bad situation has been corrected so that a previously threatened species is now more numerous.

The ESA also explicitly forbids explicit triage in deciding which species to protect, but it might make sense to focus the ESA on species that are threatened because of factors we can actually do something about. For example, sometimes a species is technically threatened by hybridization – cross breeding with another closely-related species. In some cases that is caused by human actions that could be curbed, but in other cases it’s just evolution at work. The current Act gives the administrating agencies no official leeway to decide which cases are the most important targets for protection under the Act. Instead, costs and benefits are imperfectly and unofficially balanced as public pressure in the listing process influences how long it takes for species to make it to the list (Ando 1999).

The ESA has faced opposition nearly since its inception. That opposition surely stems from the fact that conservation isn’t free and the costs of conservation are borne by the people who live and do business near the species while the benefits of saving a species are enjoyed by the whole country. It cost the natural gas industry and ranchers real money, for example, to make enough changes to avoid broad ESA restrictions associated with listing the sage grouse. Further, the ESA is not well served by inevitable stories about how major economic activity is held up by a single silly species; e.g. farming in California limited by water conservation for the the delta smelt. In many cases like the delta smelt, spotted owl, and sage grouse, protecting that one endangered species saves an entire ecosystem and all the species and services that go with it. The benefits to society of that protection are enormous, and that full story is not told well by the single-species ESA narrative.

Nature surely needs more protection than would be provided without legal intervention. The ESA could be improved by including some principles of economics (Shogren et al. 1999), by improving incentives for conservation on private land, and possibly by implementing compensation for land users who bear the costs of conservation. The current political environment is not fertile ground for thoughtful revision of environmental law, so for now the best we can do is to hold on to the law as it currently exists. But the ferocity of the battle should motivate conservation scholars to think more seriously about revisions that would make the ESA more effective and less endangered.

Further reading:

  1. Shogren, J., J. Tschirhart, A. Ando, T. Anderson, S. Beissinger, D. Brookshire, G. Brown, Jr., D. Cash, D. Coursey, B. Gibbons, R. Innes, S. Meyer, and S. Polasky. 1999. “Why Economics Matters for Endangered Species Protection,” Conservation Biology 13(6): 1257 1261.
  2. Ando, A.W. 2003. “Do Interest Groups Compete? An Application to Endangered Species.” Public Choice 114(1-2): 137-159.
  3. Ando, A.W. 2001. “Economies of Scope in Endangered-Species Protection: Evidence from Interest-Group Behavior.” Journal of Environmental Economics and Management 4(3)1: 312-332.
  4. Ando, A.W. 1999. “Waiting to be Protected under the Endangered Species Act: The Political Economy of Regulatory Delay.” Journal of Law and Economics 42(1): 29-60.
  5. Ando, A.W. 2011. “Environmental and Resource Economics,” Chapter 8 in Sustainability: A Comprehensive Introduction. Eds. U. of I. Open Source Textbook Initiative. University of Illinois Board of Trustees. http://cnx.org/contents/F0Hv_Zza@43.5:HdWd2hN5@2/Foreword

Welcome to Dean Kidwell

On November 1, 2016, the College of ACES at UIUC made history by welcoming the first woman to serve as Dean of the College, Kimberlee Kidwell.

Land grant colleges and the land grant mission were created by the Morrill Acts that established these universities in 1876 and 1890 and the Smith-Lever Act of 1914 that started funding cooperative extension. Society still benefits from the applied research and the public outreach that are the hallmarks of land grant universities, and we still worry about food production and rural livelihoods in the U.S. However, production systems have radically changed, our population has shifted from rural to urban areas, and now we also worry about environmental quality, resource stewardship, and extending quality of life and food security improvements from our now-wealthy nation to those which are still developing. State funding for universities has shrunk, as has funding for formal cooperative extension programs; programs like ours cannot rest on their laurels, but must find new reasons for people to invest in what we do.

Thus, Dean Kidwell is well positioned to lead the College of ACES at this time of change. She grew up in Danville, Illinois, earned her B.S. from UIUC itself, and had a successful career as a professor of Crop Science. Dean Kidwell understands production agriculture in Illinois and the land grant mission. However, she has also contributed to the scholarship of leadership, and thus understands how to make strategic plans that look forward rather than into the past. Additionally, she spent years working at Washington State University, gaining valuable perspective from a different part of the country on concerns about agriculture, natural resources, and human well being. These habits of thought and diverse perspectives can help us to think critically about how our College can serve the spirit of the land grant mission in this era.

Welcome, Dean Kidwell. The faculty of ACES look forward to working with you.

A New Chancellor for UIUC

Robert Jones became Chancellor of the University of Illinois at Urbana-Champaign at the end of September. We owe gratitude to the Interim Chancellor before him, Barbara Wilson, who led our campus well through some challenging times. It is good, though, now to have stable leadership at the top. I am personally very excited about the directions in which we might go with his voice in our conversations. He is an outstanding scientist. He cares deeply about students (his comments at the first Faculty Senate meeting he attended were effusive tales of the students and alumni with whom he had met in his first weeks.) And he is the son of a sharecropper, bringing a new perspective and urgency to our discussion and efforts surrounding issues of diversity.

I’ll let Dr. Jones own words speak for him (these are excerpts from an October 3 email he sent to campus after two weeks on the job):

“It has everything to do with one day in a field in southwest Georgia when I was 9 years old. I was supposed to be picking cotton. Instead, I was distracted thinking how in the world this green plant could create this fluffy white ball. That was the day I started on the path to becoming an agronomist. … We need to find ways to make that story possible for everyone – no matter where they start, what their parents do … when questions around social equity and social justice are forcing fundamental reevaluations of everything from our admission policies to our investment strategies, we have an opportunity to demonstrate different paths forward.”

Yes, Dr. Jones. Yes, we do.

BIOECON ho! Conservation of what, and for whom?

Photo courtesy of Brooks Kaiser

Photo courtesy of Brooks Kaiser

I had the great good fortune to attend the 18th Annual BIOECON Conference in Cambridge England last month. The presenters represented a stellar sampling of the best researchers the economics of conservation and resource management worldwide. My keynote talk, “Uncertainty in and distribution of the benefits of conservation,” gave me an opportunity to make the case to our community that we should work more on understanding how the benefits of conservation are distributed among groups of people in our societies, and how we can modify conservation planning to reduce the chances of conservation catastrophe resulting from climate change. I welcome the international conversation we can have about those issues, given the diverse nature of both social inequities and climate change impacts across countries.

Hope to see those folks and many others at BIOECON next year in Tilburg.

A new agenda

After three years of being my department’s Director of Graduate Studies and Associate Head, I’m stepping back entirely into research and teaching to dig into my new agenda. I’ve studied and taught environmental and natural resource economics for 20 years, but always with the standard economic goals of efficiency and cost effectiveness in mind. Now I’m interested in bringing my work to bear on problems of inequality. For now that means:

  1. New research estimating how preferences over environmental goods vary among racial and socio-economics groups. Bluntly put, does conservation (the way we do it now) disproportionately benefit white people?
  2. Developing a new undergraduate class, working title of “Economics of Race and Food in America.

Exciting times ahead.