Valuing Eco-services to Improve Benefit-Cost Analysis of Highway and Transportation Investments

Focus Area

Environmental Considerations in Planning








1-2 years

Research Idea Scope

This study will assess how advances in non-market
economic valuation methods of ecoservices from natural systems can be
incorporated into current approaches to EIS analysis and Benefit-Cost Analysis
of proposed Highway and transportation Investments. Such economic valuation
methods can help overcome the some of the environmental evaluation issues
involved in traditional EIS methods and the limitation of physical impact
measures. More importantly, valuation of ecoservices provided by natural system
can assist in providing an accounting framework for assessing baseline
environmental conditions associated with ecosystems that are impacted by
transportation and development. Valuing such benefits allows planners and
analysts to better compare the impacts of proposed developments across various
environmental factors that are usually measured only in physical terms. In
addition, ecoservices can contribute to risk mitigation for transportation
infrastructure from natural disasters.

There is an increasingly sophisticated effort among some
environmental organizations and economists to quantify risks arising from
natural hazards and human impacts on ecological systems and to examine
non-market and alternative measures of the value of ecoservices. These efforts
go beyond traditional work on externalities.

Ecosystem services are typically characterized as one of
four types:

1) Provisioning, e.g. food, fiber, water, fuel, genetic
and medicinal resource and materials;

2) Natural regulating services, e.g. water quality, flood
and erosion control, biological propagation and control, climate, gas
regulation, soil formation and   
retention, nutrient cycles, and disturbance mitigation and resilience;

3) Habitat formation and stability;

4) Cultural services, e.g. recreation, aesthetic,
spiritual, scientific, and educational value derived from nature.


The services that humans normally recognize and value
through market prices include the provisioning of food, fiber, fuel, etc.
Natural regulatory services are not usually valued through markets but can be
valued economically (see below). These natural regulatory services ensure very
important and tangible services such as water quality, flood and erosion
control, storm surge mitigation, etc. Habitat formation and stability are not
valued through markets but can be estimated economically through a variety of
techniques. Finally, cultural services are sometimes valued through market
prices or can be through economic valuation techniques.   An array of techniques has been developed to
help economically value some of these services. These include:


Consumer behavior studies can be used to measure
valuation of ecoservices indirectly, for instance:

1) Avoidance behavior may be valued by how much one would
be willing to spend to avoid health effects;

2) Hedonic quality-pricing methods might be used to
determine how an improved quality might alter one’s buying behavior;

3) Travel-time studies offer a tool to determine how far
one would be willing to travel to enjoy defined environmental amenities.


In addition there are other techniques, including:

• Production function studies where natural systems are
examined as inputs in a production process to determine how changes in the
quality of environmental goods and services might affect ecosystem service
outputs; • Stated-preference methods are based on surveys of peoples’ stated
valuation of a given change or set of attributes to ascertain whether a change
affects • Replacement costs for services/restoration.

• Benefit transfers between winners/losers.


The foregoing approach is much richer than traditional
EIS methods.

Environmental Impact Statements are based on mixed
methodologies from physical and social sciences and involve incommensurate
methods and measures that usually lack any valuation of services arising from
natural systems. Moreover, traditional economic valuation usually restricted to
compensation of affected parties and cost changes.


A short primer on the ecosystems/services approach can be
found in: National Research Council, Valuing Ecosystem Services: Toward Better
Environmental Decision-Making, 2005.

A literature review is available on request.

Urgency and Payoff

An ecosystems/services approach to valuation of impacts
of large-scale highway and transportation investments could improve economic
benefit-cost and EIS analysis and enhance risk mitigation for transportation
infrastructure due to natural disasters. In particular, this framework could
improve estimates of watershed and flood control impacts; recreational impacts;
habitat impacts; and overall economic development impacts.

Moreover, this effort could help integrate disparate
approaches being undertaken by several other TRB standing committees.

Suggested By

Greg Bischak ADD10 Transportation and Economic Development 202-653-0315

[email protected]