Chesapeake’s value worth more than the sum of its parts
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Two seemingly unrelated events are scheduled for October. One of them will be the completion of the Blue Ribbon Finance Panel’s Final Report on how to fund the cleanup of the Chesapeake Bay. The other is a national conference on “Valuation of Ecological Benefits” which will take place in Washington, D.C. The convergence of the two events has me thinking about costs and values.
The Blue Ribbon Panel has been working for months on how to assess the costs of restoring the Bay’s water quality and the even more daunting task of figuring out how to pay for that effort.
Just trying to determine the costs of the various cleanup strategies has been quite a task. For example, streamside forest buffers are relatively cheap to install and extremely effective at soaking up excess nutrients and sediment. Should the costs of the trees be counted as a capital investment and amortized over the life of the buffer, say 50 years, or should all of those costs be counted in the first year?
The Blue Ribbon Panel has done an extraordinary job of sorting through all of the numbers, and its recommendations on how to finance the restoration of water quality in the Chesapeake Bay are certain to be impressive. The costs will be huge, and the recommendations are certain to spark a vigorous and much-needed discussion about how we finance the Bay’s restoration.
But all this talk of costs immediately raises the question: What is the value of a clean Bay? It is a simple question without a simple answer.
Even in its currently stressed condition, the Bay is a powerful economic engine. For example, in a 1997 book, David Kerstetter and James Kirkley estimated that Virginia’s recreational saltwater anglers spent $303 million and generated $477.2 million for the commonwealth’s economy in 1994.
The numbers from Pennsylvania are equally impressive. Fishing activities statewide generate $4.7 billion a year in revenue, resulting in 43,000 jobs outfitting, feeding, lodging and guiding anglers.
The booming recreational boating industry continues to skyrocket in value.
Birders flock to the wetlands and forests of the Bay watershed throughout the year, spending millions of dollars on equipment, meals and tours. In fact, nature-related recreation is the fastest growing part of the tourism industry nationally.
The real estate value of properties that border the Chesapeake Bay and its tributaries is astonishing, as anyone who has dreamed of buying a retirement home along the water can attest.
When the old Baltimore Chromium Works was cleaned up, the formerly polluted site went from being an economic sore on Baltimore’s Middle Harbor to a magnet for a multimillion dollar office-technology-retail redevelopment project that is expected to create 36,700 permanent jobs and include 11 acres of open space and a waterfront park.
Similarly, District of Columbia Mayor Anthony Williams’ ambitious Anacostia Waterfront Initiative envisions more than 100 acres of new parks, 20,000 residential housing units, 1 million square feet of retail development and 20 million square feet of commercial office space. Over the next 25 years, the plan could generate $4 billion in private investment for the district. And all of it is contingent on the accelerated restoration of the Anacostia.
The only comprehensive look at the economic value of the Bay that I’m aware of was conducted by University of Maryland economists 15 years ago. Their best estimate of the value of the Bay was $678 billion.
Some analysts today suggest that inflation alone would push the cumulative value of the Bay to more than a trillion dollars.
As impressive as those numbers are, they still don’t fully capture the economic value of the Bay.
In the last several years, economists have begun to look at the monetary value that society gains from the ecological functions of healthy ecosystems. For example, we now realize that wetlands provide many benefits to society, including filtering sediments and capturing nutrients from adjacent lands, blocking those pollutants from fouling the Bay’s open waters.
What would it cost to build conventional treatment plants, flood control systems and aquaculture nurseries to provide the same benefits that our natural wetlands provide for free?
On Oct. 26–27, the EPA’s National Center for Environmental Economics and National Center for Environmental Research will be presenting a symposium on “Valuation of Ecological Benefits.” Ecologists and economists will find common cause as they struggle to improve our understanding of the economic value of healthy ecosystems.
This important conference will help us better answer the question: What is the economic value of a clean Chesapeake Bay?
Economists have already answered a similar question about the value of clean air. A peer-reviewed study calculated the health and ecological benefits of air quality improvements that could be quantified and converted them into dollar values. The authors concluded that in 2010, the benefits of the Clean Air Act programs will total about $110 billion, more than four times the estimated costs associated with the law.
And, the report noted that there are a number of health and environmental benefits that scientists and economists cannot yet quantify.
As we look at the studies already conducted, we can say with some confidence that the economic value of the Chesapeake Bay will dwarf the costs of restoration, just as the economic benefits of the Clean Air Act have greatly outstripped its costs.
But I believe that a strict look at the balance sheet would still greatly undervalue the Bay. The Chesapeake has rightly been called a “national treasure” and an “ecological resource of international significance.” Those lofty terms can’t be defined by dollars alone.
The historic and cultural value of the Chesapeake Bay watershed would be difficult to overstate. It was home to some of the most ancient Native American settlements in North America and such historical figures as Powhatan and Pocohantas.
The names and places from American history are equally evocative. From the Colonial Era: John Smith and Lord Baltimore, Jamestown and Annapolis. The Revolutionary Years: George Washington and Thomas Jefferson, Mount Vernon and Yorktown. The Civil War: Harriet Tubman, Gettysburg and Harper’s Ferry. Popular Culture: Baseball’s Hall of Fame in Cooperstown, NY, and the new National Air and Space Museum at Dulles Airport in the District of Columbia. The world’s largest naval station and the city that rightly calls itself the Capital of the Free World sit alongside the waters of the Bay and its tidal rivers.
As part of our history and culture, the Chesapeake Bay is one of those rare jewels that really does qualify as priceless. Equally priceless is the aesthetic and emotional value of this magnificent resource.
Certainly we should continue to work assiduously to make sure that we fully understand the costs of the Bay’s cleanup and the real economic benefits associated with that effort. I am certain that the numbers will prove that the cleanup is a smart economic investment.
I am reminded of Oscar Wilde’s famous observation that we must be careful not to be the person “who knows the cost of everything but the value of nothing.” Because the ultimate value of a restored Chesapeake will not be found by looking at a spreadsheet, but rather through our senses as we experience the Bay’s bounty, our minds as we remember our shared history, and our hearts as we appreciate its wonder.
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