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Economic Benefits of
Preserving Natural Areas
Bonnie G. Colby1
ABSTRACT
The focus of this paper is on values that can be quantified in
dollar terms. It is important to acknowledge that natural
preserves-such as grasslands and riparian areas-have
psychological, cultural, and spiritual values that may be just as, or
more, important than the values which economists are able to
quantify. While economists have developed methods to quantify
natural resource values beyond the direct use of resources for
commercial purposes and recreation, even these modern economic
methods cannot capture the full range of benefits that natural areas
provide.
QUANTIFYING THE ECONOMIC VALUE OF NATURAL AREAS
The notion of measuring the value of nature in dollar terms may seem distasteful. Money is a
cold unit by which to characterize grasslands, clean air, scenic views, open space, endangered
species and other amenities which are important to our quality of life. Nevertheless, there are some
valid reasons to cast the value of nature in monetary terms.
In times of tight government budgets, public policies require closer scrutiny of how taxpayers
dollars are spent. Consequently, when an agency is considering spending money to acquire or to
manage land for a natural preserve it typically must document the benefits anticipated from the
preserve, as well as the costs of leaving the land in a natural state (including the foregone benefits
of more intensive land uses). Over the last five years, popular concern regarding the potential
impact of government activities on private property values has swelled. This has led to more use of
economic analysis by public agencies because they are subject to added scrutiny of the impact of
their proposed regulations, land acquisitions, and land management plans on private property. For
instance, Arizona statutes now require review of proposed state agency rules by the Governor's
Regulatory Review Council and the agency must submit an economic impact statement on the
proposed action to the Council for their consideration. Other states have passed stronger measures
to prevent takings (the diminishment of private property values caused by government action).
Congress has considered such legislation as well. These policies, which seek to protect private
property, have the effect of increasing the pressure on agencies to document the costs and
benefits of their activities, including acquisition and management of lands as nature preserves.
Private firms and environmental organizations also must weigh economic costs and benefits
associated with natural areas. For instance, to obtain a final certificate of a water right for instream
flow purposes in Arizona, the holder of the right (a federal agency or the Nature Conservancy, for
example) must document the benefits of preserving streamflows. Even in instances where
examination of economic values is not required, it still is a useful exercise for an environmental
1
Agricultural and Resource Economics, University of Arizona, Tucson AZ.
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organization or a public agency to weigh the economic costs and benefits of setting aside a natural
area for wildlife and recreation.
This paper briefly reviews the different types of economic values associated with natural
preserves. Strong economic arguments can be made for preserving natural areas for recreation and
wildlife habitat and for maintaining the aesthetic appeal that wide open spaces have in the
American West.
TYPES OF ECONOMIC VALUES GENERATED BY NATURAL AREAS
Direct Benefits to Recreationists
Many natural areas in the West are heavily used for recreation and generate increased
economic benefits as population and demand for outdoor recreation grows. Urban westerners
demand outdoor recreation opportunities and place a high value on them. A comprehensive survey
of economic benefits to recreationists at outdoor recreation sites in the western United States
indicates recreation benefits of $18 to $27 per visitor day for general hiking and wildlife viewing
(Walsh et al, 1992). Data collected for southern and central Arizona riparian areas indicates values
per visitor (in a one-time contribution) of $65 to $102 to maintain the quality of the Hassayampa
River Preserve, and $65 to $97 to protect the riparian ecosystems of the San Pedro Riparian
National Conservation Area and the Nature Conservancy's Ramsey Canyon Preserve (Kirchoff,
1994, Crandall, Colby and Rait, 1992). These values lie far above the nominal fees charged to
enter federal and state parks and recreation areas.
ContributiQn to Local Economies
In addition to economic benefits to the recreationists themselves, small businesses and
outlying communities depend on spending by outdoor recreationists. Outdoor recreation brings
millions of dollars each year into the Arizona economy. Restaurants, retail stores, motels, bed and
breakfasts, gas stations and other businesses benefit from preservation of attractive outdoor
recreation sites.
Tourism linked to outdoor recreation is a particularly important component of the economy of
rural Arizona, including Arizona's tribes and their reservation economies, many of which contain
Arizona's last unspoiled natural areas.
Bird-watching opportunities in Cave Creek, Madera Canyon, Ramsey Canyon, and other sites
are known worldwide and bring relatively high-income visitors to these parts of Arizona. In the Sierra
Vista area alone, expenditures by visitors to prime bird-watching areas stimulate $3 million per year
in local economic activity (Crandall, Leones and Colby, 1992). The San Pedro Riparian National
Conservation Area and the Nature Conservancy's Ramsey Canyon have annual visitation of
approximately 12,000 and 26,000 visitor days, respectively.
Several factors affect the extent to which natural areas contribute to the economy of nearby
communities. Local economic stimulation is increased as the percentage of nature preserve visitors
that are non-local increases and as visitors stay overnight in the area (instead of just making a day
visit) and thus spend more on lodging and meals. As the local economy diversifies, dollars spent by
tourists circulate more times within the local area and further stimulate local business activity,
before "leaking" out of the local economy as payments for goods and services produced elsewhere
(Crandall, Leones, and Colby, 1992).
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Habitat Preservation
Natural areas preserve wildlife habitat and can help avert a species becoming listed as
threatened or endangered, thus averting the complex and costly formal Endangered Species Act
processes for designating critical habitat and developing species recovery plans. These averted
costs and conflicts are a notable benefit of nature preserves, a benefit that can be appreciated by
examining the enormous costs incurred in the Pacific Northwest over salmon and spotted owl
issues. Indeed, the threat of a species becoming listed as threatened or endangered and of
triggering the formal Endangered Species Act (ESA) process has proved a powerful incentive for
setting aside habitat for species.
···.···
Water Protection
Natural preserves that maintain the ecological integrity of watersheds can protect water quality
and stream flow levels. Preserving the quality and volumes of flows reduces the costs of complying
with surface water quality standards for downstream towns and industries which discharge into
rivers. High quality stream flows from protected natural areas provide economic benefits to these
dischargers by averting or postponing the costs of providing more sophisticated sewage treatment
(and the huge capital costs of upgrading treatment facilities) to remain in compliance with surface
water standards. If streams become degraded, downstream pollutant loads become more
concentrated and the probability of surface water quality standard violations increases, as do costs
and fines for non-compliance (Colby, 1994).
Private Property Values
The value of private property located adjacent to or near natural open space preserves is
enhanced when water quality, open space and wildlife habitat are protected. Studies elsewhere in
the U.S. indicate a twenty percent increase in private property values due to water quality protection
in nearby water bodies (Young, 1984). In the Tucson area, economic studies document an increase
in property values associated with proximity to wildlife habitat, such as washes and riparian areas
(King, White and Shaw, 1991). Southern Arizona homes and resorts that are located adjacent to
open spaces (such as national forests and monuments) enjoy a property value premium associated
with the natural areas. The growth of residential construction in the Sonoita/Patagonia area, and the
accompanying rise in property values, is an example of the positive influence of attractive open
space on private property values.
Values Unrelated to Direct Use
People who don't actually visit natural areas still benefit from them and are willing to contribute
to their preservation. Economists divide these nonuse values into three categories, based on the
underlying motivations. Existence value stems from knowing a particular species will continue to
exist in a natural state. Option value is based on a collective desire to keep options open for the
future. Option value emerges when faced with an irreversible decision-do we develop a natural
area for agricultural or urban use-altering the area forever, or do we leave it as it is for now,
knowing it can always be developed in the future? Policy choices to preserve a species rather than
let it become extinct (irreversibly lost), also exemplify the option value concept. Bequest value
stems from wanting to preserve natural areas and wildlife for the future, for our own heirs or for
future generations in general.
These nonuse values represent substantial economic benefits associated with preserving
endangered species, wildlife habitat, and unique natural sites. These preservation values (also
termed "nonuse or passive use" values) have been affirmed by the courts as a valid component of
economic costs and benefits (State of Ohio v U.S. Department of Interior, 880 F.2d 432 (D.C. Circ.
1989)), and are incorporated into assessments of proposed federal regulatory actions as well as in
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assessing liability for environmental damages under CERCLA. These values are expressed through
donations of time and money to wildlife and environmental organizations, and through political
support for species recovery programs and for laws and policies that preserve habitat and prevent
environmental degradation.
Examples of the application of nonuse values to examine environmental policies in Arizona
include the Federal Bureau of Reclamation's Environmental Impact Statement for Operations of
Glen Canyon Dam (1995) and an earlier federal study on changes in air quality and visibility in the
Four Corners region.
Recent studies of preservation values associated with nature preserves in the western United
States indicate economic benefits of $15 to $80 annually per household located in the general
region of the site (Sanders, Walsh and Loomis, 1990 and Brown, 1991). Studies in Colorado,
Canada, Wyoming and Alaska indicate $40 to $80 per non-user household in cities located within
a few hours of nature preserves. These nonuse values may seem esoteric (less tangible than
spending by recreationists, for instance), but they are real values and economic studies on natural
areas around the West suggest these values are even larger than the direct values people place on
their recreational use of such areas.
IF NATURAL AREAS ARE SO VALUABLE,
WHY DON'T THEY RECEIVE MORE PROTECTION?
Despite the numerous economic benefits provided by natural areas, they are not .. supplied" by
market forces to an extent commensurate with the benefits they provide. This .. market failure"
occurs for several reasons. First, benefits provided are real, but often not readily "collectible." There
is no easy voluntary way to collect money for acquiring open space and wildlife habitat. Only
nominal fees are charged to enter parks and recreation areas. Recreationists' "true" values, their
willingness to pay, are not collected by anyone. Of all the types of economic benefits described, the
only money actually going into someone's pockets is dollars spent by recreationists. However, these
expenditures are not a complete measure of the value of a natural area. Part of the .. collectibility"
problem is the absence of a clear, well-defined constituency to collect money from. It requires a
tremendous effort to raise money from a dispersed constituency through voluntary donations, as
environmental groups do. Recreationists and environmental advocates are dispersed among the
general population. They do not tend to be as identifiable and tightly organized as commercial users
of land and water. Developers, farmers, ranchers, loggers, and mining interests have effective
lobbies to promote their access to land and water. Another reason for the "collectibility" problem is
free-rider tendencies. Once a preserve is established, many can benefit from its existence even
though they made no donations to help establish the preserve.
There also is a lack of information that handicaps protection of natural areas. In contrast to the
benefits provided by nature preserves, the values of other land uses (industry, agriculture,
subdivisions) are easier to measure, "collect," and recognize as an economic investment. There is
plenty of information from the real estate market on the value of land in growing crops, houses, and
golf courses, but very little documentation on the value of wildlife habitat and recreation areas.
In response to the inability of the free market to supply nature areas to the degree justified by the
benefits provided, two broad approaches are taken to acquiring land for recreational and
environmental needs. First, private organizations such as the Nature Conservancy and Trout
Unlimited buy land and water, using money they have raised from donors and investments. Second,
public agencies acquire land and water. However, new public agency acquisitions have become
difficult in times of tight budgets. Funds are tight for managing natural areas already held by
federal, state, and local governments.
A two-pronged approach involving both the private and public sector is necessary for improved
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protection of natural areas. Private groups, such as the Nature Conservancy, can't do it all on their
own due to the "collectibility" problem. State, local and federal agencies use tax dollars and need
not rely on voluntary donations alone. Private-sector participation can be facilitated through
favorable tax policies that encourage contributions of money, water rights, and land to non-profit
wildlife and environmental organizations. Enhanced public-sector participation requires continued
authorization and funding for federal, state and local agencies to acquire and manage natural
areas.
Cooperative strategies involving public-private partnerships are a hopeful approach that combines
the strengths offered by public agencies with those of the non-profit sector. Examples include the
Nature Conservancy's acquisition of land when it becomes available at the right price, at times
when a public agency is not able to secure funds quickly enough to make a timely purchase. In
many cases, the Nature Conservancy later turns the land over to a public agency, such as the BLM,
for long term management, with the Conservancy eventually reimbursed for some or all of their
acquisition expenses.
SUMMARY
To summarize, many (though not all) of the benefits provided by natural areas can be quantified
in dollar terms. It is increasingly necessary to quantify these values in order to respond to increased
scrutiny of public agency spending in times of tight budgets and to concerns over takings. The
market forces of supply and demand do not provide adequate protection of natural areas, so
continued involvement by public agencies and the non-profit sector is essential.
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