Environmental Economics

An Integrated Modeling Framework for Analyzing Wetlands Policies: Balancing Economic Factors and Ecosystem Services

  • Abstract
    The purpose of this project is to create and operationalize a modeling framework that incorporates both the potential environmental benefits and the expected economic costs of various wetlands management strategies for purposes of comparative policy analysis. Three classes of wetland ecosystem services will be incorporated into the framework: water quality enhancement, habitat for wildlife, and flood management benefits. The framework will be specifically designed to assess the cumulative impacts of multiple management decisions on various environmental objectives at the landscape scale. The methods will be applied to the San Francisco Bay-Delta region and associated watersheds in California's Central Valley. This research is motivated by two general working hypotheses. First, wetlands are often cited as being able to provide a veritable laundry list of environmental benefits ? surface water quality enhancement, flood management benefits, habitat for wildlife, recreational opportunities, aesthetic values and more. However, these benefits will be only somewhat complimentary, depending on the site-specific attributes of the wetland system in question, as well as the landscape context in which it is located. Not all wetlands will provide all of these possible ecosystem services equally. Therefore, making wetland management decisions based on one or a subset of these environmental benefits may lead to significantly different results than a strategy based on another subset of these environmental benefits. Second, these ecosystem services will be influenced by their landscape context, e.g., which other land use types a given wetland is adjacent to, its distance from other surface water bodies and other wetlands, and the degree of fragmentation of different land use types. Since management decisions at other sites will change the landscape context for a given wetland patch, the benefits of managing at any given site will depend on management decisions elsewhere in the landscape. Thus, a management strategy that considers the entire landscape simultaneously likely will be more effective than a strategy that considers potential management sites on a case-by-case basis. The objectives of the project are to investigate these hypotheses, with an empirical application to the San Francisco Bay-Delta and Central Valley regions of California. First, we will determine just how important landscape considerations are for the ecosystem services in question. Then, based on these estimated relationships, we will investigate the management or policy significance of these landscape-level interdependencies, as well as the complexities in decision-making that arise when the multi-objective nature of these wetlands management scenarios are explicitly accounted for. To date, most research in this area has focused exclusively on one aspect of the general wetlands policy problem described here. Much research by ecologists and other natural scientists has shed light on the functions and processes within wetlands and across landscapes that lead to the provision of valuable ecosystem services from wetlands. Recent research by economists and others has begun to elucidate the complexities that arise from spatial interdependencies when making decisions on a landscape scale. However, the former area of research stops well short of investigating the full policy implications of the potential environmental benefits from wetlands. Also, the latter area of research is in its formative stages, and has generally only been applied at very course spatial scales (i.e. county-level resolution), and certainly has not been applied to questions regarding wetlands policy. Approach: The project will proceed in two phases. In the first phase we will utilize statistical and numerical process modeling techniques to estimate the relationships between wetlands and other land use types and the provision of three classes of ecosystem services: water quality enhancement, habitat for certain species of wildlife, and flood management benefits. The water quality and habitat functions will be estimated by statistically associating land-use data derived from a GIS to data on indicators of each of these two ecosystem services ? measures of the concentration of nutrients and pollutants in surface waters, and measures of occurrence and abundance of wetland bird species in the study area, respectively. The flood management benefits will be estimated using a large-scale hydrologic process model integrated with a GIS. This will allow us to estimate the expected changes in flood-stage at various points in the watershed likely to result from changes in land use, especially conversion and restoration of wetlands in the floodplain. Meta-modeling of process model output will be performed as necessary to summarize the relationships between wetland extent and location on the propensity of flooding in the study area. The second phase of the project will incorporate the functions estimated in the first phase into a spatial optimization model that will allow comparisons of the expected environmental impacts and economic costs of various wetland management strategies. Numerical optimization models will simulate a hypothetical decision-maker who is interested in maximizing the environmental benefits of wetland management projects, subject to a budget constraint. By varying the form of the objective function and the specification of the constraints, the model will result in different configurations of "optimal" wetlands conservation and restoration decisions. Expected Results: This project is specifically designed to assess the cost effectiveness of various wetlands management strategies. In addition to simulating optimal management decisions, which will provide informative bounds on wetlands policy benefits and costs, the methods developed here will also be useful for estimating the cost effectiveness of current or proposed management actions. When compared to the simulated optimal management strategies, decision makers can assess the performance of actual current, recent, or proposed management decisions. Therefore, this framework can be used to improve the ability of EPA, and other agencies involved in wetlands policy, to protect the environment and ensure such enhanced protection is achieved at the lowest possible costs. The results of this project will also provide insights into the potentially conflicting nature of wetlands policy-making. Since wetlands management decisions, at least in aggregate, are driven by multiple environmental objectives, there will necessarily be unavoidable tradeoffs associated with these decisions (environment-environment tradeoffs as well as environment-economy tradeoffs). This research will illustrate precisely how conflicting or complimentary these different objectives--water quality, habitat, and flood management--are likely to be, based on various characteristics of the management proposals and the ecological context of the proposed actions. The suite of results from the model runs will allow us to explicitly characterize the various interrelated ecological and economic aspects of wetlands policy-making. Finally, various government and state agencies are involved in wetlands management, but from somewhat different perspectives. In terms of the framework developed here, EPA might be most interested in the water quality benefits that wetlands can provide, the Army Corps of Engineers might focus on the potential flood management benefits of wetlands, and the U.S. Fish and Wildlife Service might emphasize the habitat values of wetlands. Each of these federal agencies has a role in wetlands policy-making and management, and there may be gains to be had by increasing the degree to which these agencies coordinate their wetlands management efforts. The framework developed in this project will allow us to estimate these potential gains from enhanced coordination between agencies. The methods are applied here to the environmentally-sensitive and high-profile San Francisco Bay/Delta watershed, and thus should provide valuable information and tools for managing this important policy problem. More generally, the methods and results will be informative for national-level wetlands policy as well. Our results will be disseminated to professional audiences via publication in relevant scientific journals. We foresee articles from this research being submitted to top-quality, peer-reviewed scientific journals in both the social science and the natural science realms. Prospective publication outlets range from the Journal of Environmental Economics and Management and Ecological Economics, to Science, Nature, and Biological Conservation, to more policy-oriented journals such as the Journal of Policy Analysis and Management. In addition, we plan to pursue outlets more accessible to policy makers and stakeholders, including (but not limited to) the Information Center for the Environment (ICE) web page (http:/ice.ucdavis.edu), which is one of the most active university-based sources of environmental information in the country, regularly receiving 20,000 hits per week, and is already devoted to providing decision support information for EPA Region 9.
  • Metadata
    Principal Investigators:
    Weinberg, Marca
    Quinn, James F.
    Technical Liaison:
    Research Organization:
    California at Davis, University of
    Funding Agency/Program:
    Grant Year:
    Project Period:
    October 01, 1999 to September 30, 2002
    Cost to Funding Agency:
  • Project Reports

    The objective of this research was to create and operationalize a framework for analyzing alternative wetlands conservation strategies. The framework consists of a set of functions describing the expected environmental benefits and economic costs of wetlands restoration activities integrated into a spatial optimization model that can determine the configuration of restoration that maximizes some (weighted combination of) environmental benefits subject to a budget constraint. The model was developed and applied specifically to wetlands restoration in the Central Valley of California, but the methods, and to some degree the models themselves, could be transferred to different areas and policy contexts.

    The research was designed to: (1) investigate the feasibility and utility of applying numerical optimization techniques to the problem of prioritizing sites for wetlands restoration; (2) investigate the importance of spatial effects on the provision of ecosystem services from wetlands; and (3) assess tradeoffs between different categories of environmental benefits from wetlands.


    Optimizing Conservation Activities

    Decisionmakers could address the problem of prioritizing sites for conservation activities (for preservation, enhancement, or restoration) by characterizing the expected benefits and costs of each conservation option, and then prioritizing the options in decreasing order of their benefit-cost ratio. However, in the case of wetlands conservation (and likely many other environmental land use policies), the benefits will be a function of the level of ecosystem services expected from the managed systems, which are partly a function of where wetlands are located; with respect to other wetlands and other land use types. Thus, the benefits of restoring a particular wetland can depend on whether or not other wetlands are restored nearby. Taking account of the spatial relationships that affect the provision of ecosystem services from wetlands requires more sophisticated optimization techniques, and for many real-world problems it may be impossible to guarantee a globally optimal solution when spatial effects are important.

    To address the potential importance of spatial effects for optimal wetlands conservation, a numerical optimization model was developed based on a stylized description of a landscape with urban, agriculture, and wetland land use types. The hypothetical landscape consisted of a grid of 625 square cells (25 x 25), and was generated randomly, though subject to constraints that resulted in clumpy urban areas in a matrix of agriculture, with some remnant wetlands scattered throughout. Using two standard models of ecosystem processes from the literature-one describing nonpoint source runoff, and one describing habitat quality for a species that exhibits random radial dispersal-the results of three site selection algorithms were compared. The objective was to maximize the provision of ecosystem services (nonpoint source pollution reduction, provision of habitat, or some weighted combination of the two), subject to a budget constraint. The first was a simple heuristic based on maximizing the area of restored wetlands; the second was a greedy algorithm, which chose sites in an iterative fashion, selecting the best remaining site at each iteration; and the third was an optimizing algorithm, which checked all feasible combinations of sites. The results demonstrated that when spatial effects are strong enough, the simple heuristic based on maximizing wetland area will perform significantly worse than methods that account explicitly for the spatial relationships that affect the provision of ecosystem services. The results also demonstrated that while iterative heuristics may perform worse than optimizing algorithms, they may nevertheless perform nearly as well. This has important implications because many real-world problems will be too large to apply optimizing algorithms when spatial effects are important, which means that heuristics will have to be employed. The results of this and other research in the field suggest that appropriate heuristics are sufficient for the task.

    Spatial Effects and Wetland Ecosystem Services

    This research focused on two wetland ecosystem services: the provision of habitat for birds (with a focus on mallards), and the attenuation of nutrients in nonpoint source runoff from agriculture. Standard count regression techniques were used to relate the abundance of mallards in the Central Valley (as recorded in the North American Breeding Bird Survey) to a suite of landscape variables, including the percent of nine different land use types within 400 meters of each survey location. The regression models explained between 30 and 60 percent of the variation in mallard abundances, and the results indicated that mallards prefer a mix of wet and dry land use types in the breeding season. This means that wetlands restoration efforts could be targeted spatially to take advantage of these habitat preferences. An optimization analysis based on the regression results suggested that the potential gains from a spatially targeted approach, over a non-targeted approach, could be substantial.

    A spatially distributed hydrologic simulation model was developed and applied to the Central Valley to estimate the amount of nutrients in nonpoint source runoff that could be attenuated in wetlands before reaching downstream water bodies. The model is based on a set of water and mass balance equations, which are applied to each of 1.4 million square cells (200 meters on each side) that make up the study area. Each cell is characterized by its land use type and soil type, which determine the amount of irrigation water and nutrients applied (for agriculture cells) or stormwater runoff and nutrient concentrations therein (for urban cells). Runoff from each cell flows in the direction of the shortest distance to the nearest surface water body, and along the way runoff may be intercepted by wetland cells, in which case nutrients are attenuated according to a first-order removal rate equation (using standard parameter values from the literature). The model can estimate the portion of nitrogen and phosphorus applied to agriculture that is taken up by crops, infiltrates to the groundwater, is attenuated in wetlands, or flows in runoff to surface waters. The baseline results indicated that of approximately 350 million kg/yr of nitrogen inputs to the Central Valley, about 90 percent is taken up by crops for growth, 8.5 percent leaches to the groundwater, and 1.5 percent enters rivers by way of nonpoint source pollution in surface runoff. The amount of nitrogen attenuated in existing wetlands is approximately 9.1 percent of the total load to rivers and streams from surface runoff. The model also can calculate the expected nutrient attenuation rates in restored wetlands, and was used in this capacity, along with the mallard model described above, as part of a numerical optimization model to investigate tradeoffs between habitat and water quality benefits from wetlands restoration activities in the region.

    Tradeoffs Between Different Environmental Objectives

    The mallard habitat model and the hydrologic simulation model, along with estimates of land values and wetlands restoration costs in the region, were integrated into a numerical spatial optimization model. The integrated optimization model was designed to investigate the potential tradeoffs between habitat and water quality benefits from wetlands restoration activities in the Central Valley. First, the model was used to trace out a "production possibilities frontier" (PPF) for the two ecosystem services in four small watersheds in the Central Valley. The PPF is a curve (or collection of points) that indicates the maximum possible levels of ecosystem services (either habitat quality or water quality or some weighted combination of the two) attainable given the restoration budget. Each point on the PPF is defined by a different level of habitat improvement (expected increase in breeding mallard population size) and water quality improvement (expected decrease in mass of nitrogen delivered to rivers and streams), and is associated with a different spatial configuration of restoration activities. The results of this analysis indicated that tradeoffs between habitat and water quality benefits could be severe. The set of restoration activities that maximized habitat improvement yielded very little water quality improvement, and vice versa. This result came about because of the different spatial relationships embodied in the production functions for the two ecosystem services. Habitat benefits were maximized by wetlands interspersed with uplands, while water quality benefits were maximized by wetlands along the rivers' edges and downstream of drainage areas dominated by agriculture.

    The integrated optimization model also was used in a simulated Wetlands Reserve Program (WRP) decision scenario, based on data for landowner offerings to the program for the year 2000 in California. In that year, 84 parcels of land were offered for enrollment in the WRP in the Central Valley. Precise information on the location of the parcels was not available, but their sizes and the number offered in each county were known. This information served as the basis for simulating a set of offered sites: contiguous cells of agriculture were selected randomly, such that their sizes fell within the range of sizes of parcels offered, and the number of simulated sites matched the number of offered parcels in each county. The integrated optimization model was then applied to the set of simulated sites, choosing the subset that maximized habitat quality and then water quality, subject to a budget constraint of $10 million, which is approximately equal to the California WRP budget in an average year. The exercise was repeated multiple times, each time based on a different set of randomly generated sites, to produce a distribution intended to span the range of likely outcomes from the WRP in California in an average year. The results of this analysis showed that tradeoffs between habitat and water quality improvements could be substantial, but they were less severe than in the watersheds case described above. This was because the hypothetical manager in the WRP case was limited to selecting sites from those offered; in the watersheds case the manager could select any set of cells for restoration. Nevertheless, in the WRP case, the water quality benefits resulting from selecting sites to maximize habitat benefits were less than one-third of the maximum water quality benefits, and the habitat benefits resulting from selecting sites to maximize water quality benefits were less than one-half of the maximum habitat benefits. The results of this analysis also showed that a simple heuristic based on maximizing restored wetland area could deliver nearly two-thirds of both maximum habitat and water quality benefits.

    In this project, an integrated optimization model was developed that can provide a useful framework for analyzing and prioritizing wetlands restoration activities. This research demonstrated the utility of an optimization approach to prioritizing wetlands conservation activities, as well as the difficulties involved in accounting explicitly for ecosystem services when analyzing environmental policy options. Only two ecosystem services were modeled here-the provision of habitat for mallards in the breeding season, and the attenuation of nutrients in nonpoint source runoff-but others also may be important. For example, another often cited category of ecosystem services from wetlands is the potential flood control benefits they can provide. Future work stemming from this research will include an extension of the hydrologic simulation model to allow estimates of the expected reductions in downstream flooding from restored wetlands.

    The results of this research showed that merely maximizing wetland area likely will lead to suboptimal provision of ecosystem services from wetlands. This is because a wetland's size is only one of the factors that determines the level of ecosystem services it provides; the wetland's location-with respect to other wetlands, other land use types, and downstream water bodies-also is important. This research also showed that as a result of these spatial effects, the tradeoffs between different ecosystem services from wetlands restoration could be substantial.

    Direct extensions of this research should focus on improving our capacity to: (1) predict the environmental impacts of alternative wetlands conservation options; and (2) apply numerical optimization techniques to real-world problems, which will include substantial nonlinearities and many discrete decision variables. Advances along these lines will allow decisionmakers to identify more cost-effective wetlands management options, thereby increasing the level of environmental benefits delivered per dollar spent towards meeting the nation's stated goal of "no net loss" of wetlands.

    Publications and Presentations: Total Count: 2

    TypeCitationJournal Searches
    Dissertation/ThesisNewbold SC. Targeting conservation activities: cost-effective wetlands restoration in the Central Valley of California. Ph.D. Dissertation, University of California, Davis, CA, 2002. not available
    Journal ArticleNewbold SC. Integrated modeling for watershed management: multiple objectives and spatial effects. Journal of the American Water Resources Association 2002;38(2):341-353. not available
  • Project Status Reports

    For the Year 2000

    Objective: The goal of this project is to create a framework for analyzing potential environmental and economic impacts of alternative wetlands management strategies. The research will culminate in a spatial optimization model that will be used to assess tradeoffs between several important ecosystem services that wetlands can support in the Central Valley of California in the context of a fixed management budget. The project consists of two stages: (1) estimating relationships between landscape configuration and the provision of key ecosystem services from wetlands?habitat for key species of concern, water quality enhancement, and flood management benefits; and (2) incorporating these functions, along with functions describing the economic costs of management, into a spatial optimization model that will allow an analyst to determine the optimal configuration of management decisions in a study area.

    Progress Summary: In the first year of research, we have developed a spatial optimization model and applied it to a stylized landscape representative of watersheds in the Central Valley of California. We have applied the model to the hypothetical landscapes in a number of simulation exercises, and we have made important progress towards determining the ultimate applicability of the framework.

    Results of the simulation exercises demonstrate several important points regarding multi-objective decision-making in a spatially interdependent landscape. First, the only way to guarantee cost-effective management is with a strategy that takes into account all of the spatial interdependencies that affect the provision of ecosystem services, and considers how management decisions in each location affect the benefits of management at all other locations. Heuristics based on loose indicators of overall levels of ecosystem functions usually will result in suboptimal levels of ecosystem services, even if total wetland area is maximized.

    Second, the performance of suboptimal heuristics, which may be the only feasible means of approaching large problems in the real world, depends in part upon the initial configuration of the landscape. Furthermore, sensitivity analyses demonstrate the importance of the magnitude of the spatial effects on the provision of ecosystem services. For example, a negative effect of wetland edges may be biologically significant for a particular species of concern in the region, but, if they are not sufficiently large, then optimum habitat conditions may be provided by restoring several, inexpensive unconnected wetland patches as opposed to fewer, more costly contiguous patches.

    Third, effective management depends not only upon the nature of the processes that determine the level of ecosystem services, but also upon the degree to which the costs of conservation depend on the location and configuration of managed patches. The cost structure is an ingredient that often is lacking in site selection models. An integrated analysis that combines both the relevant ecology and economics is required here, and the framework we are developing will provide this capability.

    We currently are near completion of our first set of models of ecosystem services?those that relate to habitat quality for several bird species in the study area. These results will provide the foundation for specifying the production function for habitat quality necessary for the spatial optimization model in the final phase of the project.

    We are using regression models to explain the variation in the abundance of birds counted at survey sites throughout the region by the landscape characteristics around each survey location. One of the notable features of the statistical models?and one that is essential for subsequent analyses of the impacts of wetlands management decisions?is the inclusion of measures of landscape configuration. For decisionmaking purposes, we need to know how the total area of wetlands and other land use types affect habitat quality, and how the configuration of wetland patches?in relation to each other and to other types of land?affects overall habitat quality. For many of the modeled species, measures of fit for the Poisson regression models are promising, and parameter estimates generally are in accord with what is known about the species' habitat preferences on a qualitative level.

    We also are attempting to determine the scale at which measures of landscape characteristics best predict bird abundances. These results will be of ecological interest in their own right, and they will help to determine the robustness of the habitat preference models. Furthermore, there is substantial variance in the effects of landscape configuration across species, which supports the notion that a one-size-fits-all approach to modeling habitat quality would be inappropriate. It is still an open question, however, and one that is central to the overall project, how this variability in habitat preferences across species will translate into variability in management recommendations.

    Future Activities: In the remainder of this second year of the project, we are completing the habitat quality modeling and estimating relationships between landscape configuration and water quality and expected flooding damages. Whereas our models of habitat quality are based on statistical analyses of species and land use distributions, models of the hydrologic functions will be based on appropriately condensed versions of one or more readily available process models calibrated to conditions in the study area. The challenge in this phase of the project is to translate the complex nonlinear relationships embodied in the process models into a form that can be utilized by our spatial optimization model. Tradeoffs between the mathematical integrity of the original models and the solvability of the final optimization model will be paramount here.

    In the final year of the project, we will complete the hydrologic (meta) models and estimate management costs. The costs of purchasing parcels for wetlands restoration will be estimated by assessed land values, and restoration costs will be estimated with data from state and federal agencies that have supported and led restoration efforts in the region. Finally, the models of ecosystem services and management costs will be incorporated into the spatial optimization framework that we already have developed, and a number of management scenarios will be analyzed.

    Publications and Presentations: Total Count: 1
    TypeCitationJournal Searches
    PresentationNewbold S. Integrated watershed management: multiple objectives and spatial effects. Presented at the Symposium on Integrated Decision Making for Watershed Management, Virginia Polytechnic Institute, Blacksburg, VA, January 2001.