Valuing Nature’s Benefits ©Richard Hamilton Smith
An Ecological Economics Assessment Nature is valuable. It supplies essential ecosystem goods and services like clean air and water, flood reduction and recreational opportunities. These goods and services provide communities with economic benefits. This brochure highlights the ecosystem services provided by the natural capital in Iowa’s Middle Cedar River Watershed. This study was developed to support flood-risk management in the basin and the work of the Iowa-Cedar Watershed Interagency Coordination Team that was created following the 2008 flood. This team includes federal, state, and local agencies, NGOs, and universities committed to creating a sustainable Iowa-Cedar River Basin. Several ecosystems, such as wetlands, naturally manage floodwater, which generates economic benefits in the form of reduced flood damages. This analysis is a first step towards understanding how the Middle Cedar’s floodplains, wetlands, and other ecosystems contribute towards the economic wellbeing of the region.
The Middle Cedar River Watershed The Middle Cedar Watershed has a diverse economy that supports farming, fishing, and other local businesses. Features such as surface and groundwater supplies, soils, wildlife, and recreational areas all enhance the quality of life for local residents. As of 1980, 89% of Iowa’s wetlands had been lost due to changes in land use. The Middle Cedar River Watershed was once characterized by grass prairies, streamside vegetation and extensive wetland networks. Humans have significantly altered it during the past 200 years. The land is now dominated by row crop agriculture with 73% of the watershed producing corn and soybeans. Urban development covers another 11% of the watershed. The loss of wetlands has led to a decline in water quality and has contributed to the frequency and severity of floods.
Opportunities for Natural Flood Mitigation
The Costs of Flooding Over the past century, many floods have occurred along the Cedar River, becoming more disastrous and costly over time. The 2008 flood was the worst so far: FEMA declared 80 of Iowa’s 99 counties – including every county in the Middle Cedar watershed – as federal disaster areas. Estimated costs of the 2008 flood damages in Iowa, for September alone, were roughly $3.5 billion. These costs include damages to agriculture and both private and public infrastructure. The city of Cedar Rapids’ location within the watershed, changes in land use, and sloping topography all make it increasingly susceptible to future flooding. Our current scientific knowledge about climate change suggests the severity and frequency of storms and flooding will likely increase in the years to come.
September 2008 Iowa Flood Damage Costs Amount in Category Billions Housing and Business Structures Infrastructure Educational Facilities Cultural and Historical Landmarks Agriculture and the Environment Total
$1.3260 .6610 .2974 .2845 .9294 $3.5 billion
Ecosystem Services in the Middle Cedar River Watershed Earth Economics quantified the economic value of the watershed’s natural capital by putting dollar figures on the ecosystem goods and services – such as flood management, clean water, and recreation – that communities receive from the Middle Cedar Watershed. To calculate ecosystem services, Earth Economics first determined the type and acreage of land cover in the watershed. They then determined the ecosystem services associated with each type of land cover. Finally, they multiplied the values associated with each ecosystem service and land cover type by the acreage. In the Middle Cedar River Watershed, fourteen categories of ecosystem services were valued across eight types of land cover. Earth Economics’ analysis shows that nature generates between $548 million to $1.9 billion in ecosystem goods and services for people in the Middle Cedar River Watershed every year. To assess the economic value of these ecosystem services over the next 100 years, Earth Economics used two discount rates. At a 4 percent discount rate, the asset value of the watershed is between $12 billion and $42 billion. At a zero discount rate – which treats the value these ecosystems will provide to future generations as equal to that of present generation – the asset value of the watershed is estimated at between $27 billion and $97 billion.
Flood-risk management is particularly important in the Middle Cedar River Watershed because it is necessary to examine the flood-risk mitigation services provided by ecosystems in the watershed. While many types of land cover can provide floodrisk management services, adequate economic data has only been developed for two of these classes: wetlands and streamside vegetation (also referred to as riparian buffers). Wetlands and streamside vegetation are able to absorb, filter, and store large amounts of rainwater or runoff during storms. This ability provides a tangible and valuable ecosystem service by reducing the devastating effects of floods, including property damage, lost work time, injury, and loss of life. In the U.S. today, flood damage in areas protected by both built infrastructure and natural ecosystems, like wetlands and streamside vegetation, is significantly reduced compared to areas protected by built infrastructure alone. Wetlands (34,364 acres) and streamside vegetation (8,813 acres) make up a relatively small portion of the Middle Cedar River Watershed. Nonetheless, wetlands (valued at a maximum of $16,800 per acre) and streamside vegetation (valued at a maximum of $7,300 per acre) provide the greatest value per acre . The top service value for both wetlands and streamside vegetation is flood risk mitigation, valued at a maximum of $3,651 and $4,073 per acre, respectively. As the Middle Cedar River Watershed community develops a plan to reduce future flood damages, it should give serious consideration to the role and value of wetlands, streamside vegetation, and other ecosystems in flood-risk management. Investments in maintaining and conserving ecosystem services are as important as investments in maintaining and constructing man-made flood management structures such as levees.
Land Cover Type in the Middle Cedar River Watershed
Land Cover Type Deciduous Forest
Wetlands Streamside Vegetation (Riparian Buffer)
Flood Risk All Ecosystem All Ecosystem Services Management Services (per acre) (Middle Cedar Watershed) Low value High Value Low value High Value Low value High Value $/acre/yr $/acre/yr $/acre/yr $/acre/yr $/yr $/yr 34,364 $2,544 $3,651 $2,629 $16,798 $90,344,944 $577,247,121 8,813 $4,073 $4,073 $4,347 $7,253 $38,312,043 $63,923,522
Urban Green Space
Results The estimated value for ecosystem services within the Middle Cedar River Watershed is between $550 million and $1.9 billion annually. Ecosystem services valued include: biological control, flood-risk reduction, erosion control, natural food production, nutrient cycling, pollination, science and education, soil formation, waste treatment, water regulation, water supply, gas and climate regulation, aesthetic and recreation, and species habitat and nursery. The Earth Economics’ full report (available at www.eartheconomics.org) is the most comprehensive valuation of ecosystem services in Iowa to date. However, it should not be taken as the final determinant for ecosystem services valuation within the watershed, but rather as an economic snapshot for a more complete understanding of the significant contributions that functioning ecosystems provide to the social and economic well-being of the region. This analysis provides a baseline set of values. The results can assist decision makers in restoring and managing existing land cover types and their associated ecosystem services. The natural assets of the Middle Cedar Watershed are at risk of being lost. Their loss threatens both the local economy and quality of life for residents.
Annual Value of Ecosystem Services Produced in the Middle Cedar River Watershed Land Cover Class Forest Riparian Buffer Wetlands Rivers and Lakes
High and Low Values for Wetlands and Streamside Vegetation
Grasslands Agriculture* Pasture Urban Green Space TOTAL
Low Value ($/acre/year)
High Value ($/acre/year)
Low Value ($/year)
High Value ($/year)
*ESV does not include agricultural products, such as corn and soybeans, that are priced on the commodities market. This assessment includes only non-market goods and services.
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Acknowledgments: Funding for this report was provided by the McKnight Foundation. Watersheds provide fresh water for human consumption and agriculture, including surface water and groundwater for large metropolitan areas, wells, industry and irrigation.
Ecosystem features like biological diversity and clean water attract people to engage in recreational activities and can also increase property values or attractiveness for business.
Wetlands, grasslands, riparian buffers and forests all provide protection from flooding and other disturbances. These ecosystems are able to absorb and store large amounts of rainwater or water runoff during storms.
The views expressed in this report are those of American Rivers and Earth Economics and do not necessarily reflect the views of our funders. © 2012 Earth Economics and American Rivers
How to Value Ecosystem Services In 2001, an international coalition of scientists from the World Bank, the United Nations Environmental Program, the World Resources Institute, and other organizations initiated an assessment of the effects of ecosystem change on human wellbeing. They produced the landmark Millennium Ecosystem Assessment, which classifies ecosystem services into four broad categories describing their ecological role: Provisioning services provide basic materials, mostly ecosystem service goods. Forest trees can be used for lumber and paper, berries and mushrooms for food, and other plants for medicinal purposes. Rivers provide fresh water for drinking and fish for food. Provisioning of these goods is a familiar service provided by nature, and is easiest to quantify in monetary terms. Regulating services are benefits obtained from the natural control inherent in ecosystem processes. Intact ecosystems provide regulation of climate, water, soil, and keep disease organisms in check. Degraded systems propagate disease organisms to the detriment of human health. Supporting services include primary productivity (natural plant growth), nutrient cycling and the fixing of CO2 by plants to produce food. These services are the basis of the vast majority of food webs and life on the planet. Cultural services are those that provide humans with meaningful interaction with nature. These services include providing spiritually significant species and natural areas, enjoying natural places for recreation, and learning about the planet through science and education.
The valuation of ecosystem services in the Middle Cedar River Watershed can be divided into three steps: Quantification of Land Cover Classes: Geographic Information Systems data is used to assess the acreage of each land cover class within the watershed. Examples of land cover classes include pasture, agricultural land, grassland and riparian forest. Land cover classes were chosen based on the ability to derive ecosystem valuation data for that type of class. Identification of Ecosystem Services and Valuation of Land Cover Classes: The ecosystem services provided within the watershed are identified. Using a database of peer-reviewed ecosystem service valuation studies, a range of studies for each specific land cover class are selected depending on the geographic and land-cover match to the site; these are similar to comparables used in a house or business appraisal. Each land cover class is assigned a high and low annual per-acre value for each of its ecosystem services. Valuation of the Middle Cedar Watershed: The total high and low annual values of ecosystem services for each land cover class is multiplied by the acreage of that land cover class within the watershed to arrive at total high and low annual value estimates. Land cover class values are summed to arrive at a total annual value for the Middle Cedar Watershed. Net present values are calculated for the watershed over 100 years at two discount rates: zero (no discount) and 4 percent, which applies to all federal agencies and is set by the Federal Reserve. Applying a discount rate is a method of economic valuation for assessing future value.
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Valuing Nature’s Benefits An Ecological Economic Assessment of Iowa’s Middle Cedar River