Title: Dam Removal: Economic Perspectives
1Dam Removal Economic Perspectives
- Mark Smith
- Economics Business Department
- Colorado College
2The Fundamental Economic Question
- Are the economic benefits of removing the dam
greater than the economic costs?
3Benefits of dam removal
- Benefits
- Restoration of ecosystem function.
- Native species (possibly endangered)
- Game fish (possibly native)
- Riparian habitat (vegetation, sediment resources)
- Recreation Aesthetic Values
- Removal of dam hazard catastrophic failure,
recreation.
4Costs of dam removal
- Engineering Costs of dam removal itself.
- Loss of dam function for
- Water supply
- Hydropower
- Flood control
- Recreation (lake downstream)
- Riparian property values?
- Dam as tourist site?
5Problems with measuring economic benefits and
costs
- Both market non-market benefits and costs
- Benefits and costs distributed over time choice
of discount rate - Public goods character of some benefits and
costs. - Externalities
- Scope of analysis
6Market Non-Market Benefits Costs
- Market Benefits irrigation and M I uses of
water, hydropower, recreational expenditures,
commercial fishing, etc. - Non-Market Benefits Ecosystem values, aesthetic
values, recreation, cultural values, flood
control, etc.
7Public Goods
- If the good is produced for one person, it is
necessary to produce it for everyone. - Non-rival and Non-excludable
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9Externalities or Spillover Effects
- A positive or negative effect of one firm or
individuals actions on other firms or
individuals who are not parties in those actions.
10Scope
- What perspective are we taking when we count up
the cost and benefits - Local? State? Regional? National? Global?
11Measuring the economic value of non-market goods
the Total Value Concept
- Active Use
- Use value
- Market
- Non-market
- Option Value (future use)
- Passive Use
- Existence value
- Bequest Value
12Estimating Non-Market Values
- Revealed Preference Approaches
- Travel Cost
- Hedonic Pricing
- Stated Preference Approaches
- Contingent Valuation Method (CVM)
13Revealed Preference Approaches
- Pro Observed behavioral and actual dollar
expenditures. - Con Applications limited to situations where
actions are observed and measured.
14Stated Preference Approaches(The Contingent
Valuation Method)
- Pro Can be used to estimate active or passive
use only means of estimating passive use. - Con Reliability of values are results derived
from CVM studies meaningful?
15Removing/Modifying the Price-Stubb Dam the
Economic Questions
- What is the construction cost of the proposed
alternatives? - What is the loss of river regulation benefit?
- What is the value of recreational benefits?
- What is the value of restoring this reach of the
Colorado River?
16Removing Glen Canyon Dam The Economic Questions
- What is the total cost of dam removal or bypass
including remediation of Glen Canyon? - What are the losses associated with water
storage, hydropower and river regulation? - What is the economic value of a restored Glen
Canyon? - What are the downstream benefits associated with
dam removal? - When will these benefits occur?
17Sources of Conflict Between Engineers and
Economists
- Financial Analysis vs. Economic Analysis
economists should be accountants - Hard cost numbers from engineering studies and
revenue projects versus soft estimates of
non-market values - Appreciation of behavioral responses in policy
design. - Regulating quantities vs. creating incentives.
18Sources of Conflict Between Economists and
Ecologists
- Monetarization of natural systems
- Economic value vs. intrinsic values
- Part vs. whole marginal analysis versus
interconnectedness of ecosystems
19The Salmon vs. The Lamprey Eel
20Economics is about Happiness!
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22The End.