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Can Economics Enhance Ecological Restoration?

By Sayed Iftekhar

Economics has a lot to offer ecological restoration. A greater engagement with economics would enhance the likelihood of success for many restoration efforts.

What would an economist know about ecological restoration? Well, while he or she may not be up on the taxonomy or ecology of the plants and animals being targeted in a restoration effort, an economist brings considerable expertise when it comes to evaluating the costs of a project – expertise that historically has been lacking in some of the solutions proposed by conservation scientists. Accurately evaluating likely costs is an important dimension of effective ecological restoration, however, the discipline of economics has so much more to offer.

Up front it needs to be said that ecological restoration is a complex process with many ecological, technical, social and economic challenges. Many of these can be addressed by applying sound economic principles and techniques. Here are four key aspects of restoration where economics can provide valuable assistance: estimation of restoration benefits; estimation of the costs of restoration; selection and prioritisation of projects; and securing long-term financial resources to support restoration.

In many cases, practitioners fail to demonstrate the links between the ecological restoration and society. In so doing they undersell the social benefits of restoration. Consideration of the broader social and economic benefits of restoration may help practitioners tailor their programs to promote better engagement.

Several economic methods are available for benefit assessment. The method applied depends on the type of value likely to be produced by the project. Market-based methods are generally not applicable because most of the values generated through the restoration are not traded in formal markets (i.e. they are non-market values). Non-market values have either a use value (e.g. recreation) or a non-use value (e.g. preserving a threatened species for future generations). Revealed-preference approaches are applied to measure use values, and stated-preference approaches are applied to measure non-use values. Benefit-transfer methods could be applied when it is too expensive to conduct primary studies.

Cost information is also important for ecological restoration planning because it informs decisions on whether to conserve or restore, which projects to pursue, and which methods to use. The four main costs involved are acquisition, establishment, maintenance and transaction. Acquisition costs are the costs of acquiring the property rights to the land to be restored. Establishment costs are upfront capital investments involved. Maintenance costs include ongoing management, administration and monitoring. Transaction costs may include searching for suitable sites, organising programs, and negotiating and signing contracts.

Different economic tools are used to estimate different types of costs. Establishment and maintenance costs are often most easy to estimate because market prices are available for most items in these costs categories. Acquisition costs and opportunity costs are estimated using capitalised gross revenue or gross margin of the productive use of land, or using methods based on property or sales prices, such as hedonic pricing. Transaction costs can be estimated by conducting surveys among the participating landholders or agencies, and reviewing documents.

Once the costs and benefits have been appropriately measured, the choice among projects requires an index or metric to help guide which projects are chosen (and which are not). A metric is a formula or a model that “translates” the various parameters of a project (such as cost, effectiveness and area) into a single score that can be compared to the score of other projects. The use of a rigorously designed metric is even more important when combining multiple benefits (which could be complex and conflicting).

Even when restoration benefits and costs have been correctly assessed (and an appropriate prioritisation procedure has been employed), failure is possible without adequate financial support. This is particularly so for long-term (decades) projects. While there are examples of long-running environmental programs, in most cases environmental programs have short funding time-frames. Given this, it might be useful for agencies to consider innovative solutions to securing long-term funding, an issue considered by some as one of the greatest hurdles to restoration.

The science and practice of ecosystem restoration has for many years been based primarily on ecological considerations. Only recently have restoration scientists and practitioners begun to include economic aspects in the design of restoration projects. At the end of the day, if we fail to capture the full suite of benefits and costs involved in a restoration process, we risk undervaluing restoration and making poor investment decisions.

Sayed Iftekhar is a member of the ARC Centre of Excellence for Environmental Decisions, and is based at the University of Western Australia.