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Economic Analysis for Public Land Management
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Alternative Methods of Considering Non-Market Costs and Benefits?
Finally, some ecosystem services cannot be or are very difficult to quantify and monetize
Quantify, but don't monetize?
Ecosystem Services
Other ecosystem services are quantifiable, but lack well-functioning markets
Qualitative?
Goods and services provided by nature
How do we weigh tradeoffs?
CBA in Public Land Management
Less frequently applied due to:
Some ecosystem services are straightforward to measure and value (i.e., traded in markets), such as timber.
Demands of policymakers
Technically straight-forward, but data constraints limit credibility
But, arguably more relevant to decision-making
Can "create" destructive or unproductive jobs
Failure to incorporate non-market values into CBA can lead to bad estimates (and therefore, bad decisions)
Governments are interested in improving social welfare
However, incorporating them poorly can do the same and undermine the credibility of agency economists
Criticism
SCC uses global costs, typically government CBA only addresses domestic costs and benefits
Criticism
Therefore, CBA may suggest we should not invest in projects that have net domestic benefits
SCC may conflict with international obligations to reach emissions targets
High level of uncertainty in SCC estimates - many critics claim it either wildly underestimates or overestimates true cost
May be preferable to use marginal abatement cost
Role of Economic Analysis
Which emissions "count"?
Carbon pollution from consumers burning the coal?
SCC Court Ruling
Carbon pollution associated with mining, transporting, and processing the coal?
Both? Neither? Why?
Case Study: The Social Cost of Carbon
Questions agency economists are asked:
Marginal cost of global damage from climate change
How many jobs will this project create or cost?
Climate change may negatively affect health, property, agriculture, provision of ecosystem services
Should we invest $XX in this project?
Types of Analysis
Economic Impact Analysis
Is this project sustainable?
Impacts are changes in economic activity associated with an event or policy
Characterizes financial linkages in a regional economy
Cost-Benefit Analysis
Group Exercise
Benefits are increases in social welfare
Includes market and non-market values
What do you include in CBA?