How much is river restoration worth?

Ecosystems are undervalued. In practice this means that ecosystems provide us with valuable services that we rarely pay for. As a result, these ecosystems are degraded or destroyed. Once the ecosystem stops providing a service we depended on, then we might realize that our bank account is being degraded too.

Water purification is a good example of an ecosystem service. Undisturbed hydrological systems, those without the impacts of urbanization, are more likely to provide cleaner water for human consumption. The idea is that nature does part of the purification for us. That is, bio-geochemical processes assist us in our objective of obtaining clean water. Therefore it is in our interest to maintain healthy hydrological systems in order to protect these processes and reduce water purification costs. But what exactly is the relationship between "healthy hydrological systems" and reduced water treatment costs? Who has defined the marginal savings attributed to marginal improvements in biogeochemical processes? Does it make economic sense to protect lands and restore rivers? Does it make economic sense to protect biodiversity? These are hot questions, and within the academic community there is a race to figure out how to define the relationship between ecosystem protection and the economic benefits it brings.

New leaders in this effort include Gretchen Daily, Peter Kareiva, and Taylor Ricketts from the Natural Capital Project. Spearheaded by Stanford University, they are working with World Wildife Fund (WWF) and The Nature Conservancy (TNC) to create practical tools to assess the value of ecosystem services and incorporate that information into the policy world. They have a lot of money and an amazing team so chances are good that something important will come out of this project.

But here is my question for them: Can we be sure that ecosystem services really provide economic benefits, or are they avoided costs? Economists make a clear distinction between the two, and the inclusion of avoided costs in the benefits column breaks the rules in a Cost-Benefit analysis. I posed this question to Robert Stavins, my environmental economics professor at Harvard, who agreed that the valuation of ecosystem services, as presently conducted in the mainstream literature, is in fact an avoided cost. This might be a minor glitch, and it is possible that someone has already responded to this problem. I would be interested in hearing who has.

I would also be interested in connecting with people who have studied the relationship between land conservation, river restoration and water treatment costs.