Ecosystems, Ecological Restoration and Economics: Does Habitat and Resource Equivalency Analysis Mean Other Economic Valuation Methods Are Not Needed?

Abstract

Coastal and other area resources such as tidal wetlands, seagrasses, coral reefs, wetlands, and other ecosystems are often harmed by environmental damage that might be inflicted by human actions, or could occur from natural hazards such as hurricanes. Society may wish to restore resources to offset the harm, or receive compensation if this is not possible, but faces difficult choices among potential compensation projects. The optimal amount of restoration efforts can be determined by non-market valuation methods, service-to-service, or resource-to resource approaches such as Habitat Equivalency Analysis (HEA). HEA scales injured resources and lost services on a one-to-one trade-off basis. Here we present the main differences between the HEA approach and other non-market valuation approaches. Particular focus is on the role of the social discount rate, which appears in the HEA equation and underlies calculations of the present value of future damages. We argue that while HEA involves elements of economic analysis, the assumption of a one-to-one trade-off between lost and restored services sometimes does not hold, and then other nonmarket economic valuation approaches may help in restoration scaling or in damage determination.