Fundamentals of estimating the net benefits of ecosystem preservation: The case of the Salton Sea

Abstract

This article, both theoretical and methodological in nature, argues the potential merits of using a net benefits’ framework
as a tool to aid policy makers in their efforts to compare Salton Sea restoration alternatives and inform the public as to
the potential magnitude and distribution of trade-offs associated with each alternative. A net benefits’ approach can provide
a more accurate comparison and evaluation of the potential net returns from public spending on Salton Sea restoration than
what would be provided under the suggested criteria of current legislative mandates. Furthermore, a net benefits’ framework
provides a more lucid and systematic accounting framework by which to enumerate the full array of benefits and costs of each
alternative for policy analysis. Finally, net benefits’ analysis serves to add transparency to the decision-making process
so that the public gains an understanding of how its scarce resources, including both financial and natural capital, are being
appropriated. Additionally, we illustrate and emphasize the importance of estimating the non-market values associated with
many of the ecosystem services provided by the Salton Sea and describe the major techniques that do so.

Full text

SALTON SEA
Fundamentals of estimating the net benefits of ecosystem
preservation: the case of the Salton Sea
Kurt A. Schwabe ÆPeter W. Schuhmann Æ
Kenneth A. Baerenklau ÆNermin Nergis
Springer Science+Business Media B.V. 2008
Abstract This article, both theoretical and method-
ological in nature, argues the potential merits of using
a net benefits’ framework as a tool to aid policy
makers in their efforts to compare Salton Sea
restoration alternatives and inform the public as to
the potential magnitude and distribution of trade-offs
associated with each alternative. A net benefits’
approach can provide a more accurate comparison
and evaluation of the potential net returns from public
spending on Salton Sea restoration than what would
be provided under the suggested criteria of current
legislative mandates. Furthermore, a net benefits’
framework provides a more lucid and systematic
accounting framework by which to enumerate the full
array of benefits and costs of each alternative for
policy analysis. Finally, net benefits’ analysis serves
to add transparency to the decision-making process so
that the public gains an understanding of how its
scarce resources, including both financial and natural
capital, are being appropriated. Additionally, we
illustrate and emphasize the importance of estimating
the non-market values associated with many of the
ecosystem services provided by the Salton Sea and
describe the major techniques that do so.
Keywords Ecosystem services Net benefits 
Non-market valuation Recreation
Introduction
The objectives of this article are two-fold. First, we
emphasize the potential merits of using a net benefits’
framework as a tool to aid policy makers in their
efforts to compare Salton Sea restoration alternatives
and inform the public as to the potential magnitude
and distribution of trade-offs associated with each
alternative. A net benefits’ framework is a framework
that uses the differences between the benefits and
costs of a policy or action as a means of comparison.
Currently, legislation mandates that the Secretary of
the Resources Agency for the State of California
establish ‘‘suggested criteria for selecting and evalu-
ating alternatives’’ (Section 2081.7 of the California
State Fish and Game Code, part (e)). Two explicitly
Guest editor: S. H. Hurlbert
The Salton Sea Centennial Symposium. Proceedings of a
Symposium Celebrating a Century of Symbiosis Among
Agriculture, Wildlife and People, 1905–2005, held in San
Diego, California, USA, March 2005
K. A. Schwabe (&)K. A. Baerenklau
Department of Environmental Sciences, University
of California, Riverside, CA 92521, USA
e-mail: kurt.schwabe@ucr.edu
P. W. Schuhmann
Department of Economics and Finance, University
of North Carolina, Wilmington, NC 27251, USA
N. Nergis
San Diego, CA 92101, USA
123
Hydrobiologia (2008) 604:181–195
DOI 10.1007/s10750-008-9317-0

mentioned criteria include an evaluation of the
construction, operation, and maintenance costs of
each alternative, hereafter referred to as engineering
costs, and the identification of a cost-effective,
technically feasible option. Relative to these sug-
gested criteria, a net benefits’ framework can provide
a more accurate comparison and evaluation of the
potential net returns from public spending on Salton
Sea restoration. Furthermore, a net benefits’ frame-
work provides a more lucid and systematic accounting
framework by which to enumerate the full array of
benefits and costs of each alternative. Finally, net
benefits’ analysis serves to add transparency to the
decision-making process so that the public gains an
understanding of how its scarce resources, includ-
ing both financial and natural capital, are being
appropriated.
Second, we emphasize the importance of estimat-
ing the non-market values associated with many of
the ecosystem services provided by the Salton Sea,
describe the major techniques that do so, and suggest
how these techniques could be applied to the Sea. The
Salton Sea is a natural asset that provides many
services to society, including unpriced non-market
goods and services for bird watching, fishing, boat-
ing, and camping. The Sea is home to the endangered
desert pupfish (Cyprinodon macularius Baird and
Girard), as well as over 400 species of migratory and
resident birds, approximately fifty of which have
garnered special status as threatened, endangered, or
species of concern. These sorts of ecosystem services
have been shown to be highly valued by society in
other regions around the state, nation, and world, and,
accordingly, should be treated as such in any
objective economic analyses concerning their use.
Indeed, as the National Research Council (2004)
argued recently, assigning a dollar figure to non-
market ecosystem services is essential to accurately
weight the trade-offs among environmental policy
options. Overlooking these values often results in an
implicit value of zero being assigned to them in the
economic analyses, which is incorrect and unneces-
sary because numerous analyses exist that have
estimated the monetary value of similar services.
Wilson & Carpenter (1999), for example, provide a
summary of the economic value of freshwater
ecosystem services in the U.S., noting 30 refereed
published articles in the scientific literature from
1971 to 1997. This literature is quite extensive and
includes values derived for all manner of ecosystems,
including wetlands.
We begin with a description of the mandate
imposed upon the California Resources Agency in
its endeavor to identify a preferred alternative.
Shortcomings of the process are identified relative
to what might be provided by a net benefits’
framework in evaluating alternative restoration plans.
A description of how to perform a net benefits’
analysis is then provided. Since many of the benefits
associated with restoring the Salton Sea reside in the
ecosystem services the Sea provides to society, a
description of the main non-market valuation tech-
niques used to estimate the value of these services is
presented. Summaries of previous studies attempting
to value a healthy Salton Sea are provided, including
a recent report developing suggestive estimates of the
recreation and preservation values, using the results
from non-market valuation studies of somewhat
similar California habitats. Finally, we summarize
our findings.
Background and motivation
The California Resources Agency is mandated to
identify a preferred alternative for the restoration of
the Salton Sea. As noted by California State Senator
Ducheny at a recent conference centered on the
Salton Sea, this will be no easy task (Remarks by
State Senator Ducheny at ‘‘The Salton Sea Centennial
Symposium,’’ San Diego, CA, April 1, 2005). First,
the legislature will be required to operate under a set
of preexisting rules and regulations that will limit
how much financial and natural capital (i.e., water) it
can allocate to solving this problem. California has
been mandated to adhere to its Colorado River water
entitlement of 4.4 million acre-feet, down from the
approximately 5.2 million acre-feet it has grown
accustomed to using. Additionally, as part of the
Quantification Settlement Agreement (QSA) signed
in 2003, the Imperial Irrigation District has agreed to
transfer 200,000 acre-feet of water to San Diego
(Cohen & Hyun, 2006).
Second, given the complex set of linkages in the
region, mostly driven by water, the effectiveness of any
particular restoration alternative will be largely depen-
dent on, or place restrictions upon, upstream users of
182 Hydrobiologia (2008) 604:181–195
123

the water, particularly agriculture. Agriculture, whose
drainage flows are responsible for nearly 85% of the
inflow into the Salton Sea, will be largely responsible
for this cutback; as such, less applied irrigation water
will lead to less drainage and thus less inflow to the
Salton Sea. Less inflow will strain the effectiveness of
any particular restoration solution and leave more
Salton Sea lakebed exposed as shorelines recede. As
the area of exposed lakebed increases, so will the
amount of fine windblown dust in this high wind region
which is currently not in compliance with state and
federal air quality standards and is characterized by the
highest rates of hospitalization of children for asthma
in the state (Cohen & Hyun, 2006). Alternatively,
requirements for agriculture to maintain historic inflow
levels will likely affect the economic health of this very
poor region that has nearly 19% of its population
considered living in poverty (United States Depart-
ment of Agriculture, 2004). These impacts may
directly affect the productivity and profitability of
agriculture and, consequently, labor and income asso-
ciated with agriculture and agricultural-related
activities.
Third, across the feasible set of restoration alter-
natives there are significant differences in habitat
configuration, elevation, and both the quantity and
quality of inflow assumed; consequently, each alter-
native will provide a different array of ecosystem
services. Hence, the benefits of restoration are likely
to differ depending on the alternative chosen,
including those benefits associated with recreation
and preservation at the local, state, and national level.
As part of its decision-making process, the
Resources Agency will perform a ‘‘…restoration
study to determine a preferred alternative for the
restoration of the Salton Sea Ecosystem and the
protection of wildlife dependent on that ecosystem’’
and report the findings to the legislators (California
State Fish and Game Code, Section 2930: 93).
Elements of this study are to include:
(a) an evaluation of restoration alternatives includ-
ing consideration of salinity control, habitat
creation and restoration, and different shoreline
elevations and surface area configurations,
(b) consideration of a range of possible inflow
conditions,
(c) suggested criteria for selecting and evaluating
alternatives, including, but not limited to, at
least one most cost-effective, technically feasi-
ble alternative, and
(d) an evaluation of the magnitude and practicality
of costs of construction, operation, and mainte-
nance of each alternative evaluated.
These elements, in addition to providing some
necessary bounds on the problem, identify factors
that can substantially influence the costs and benefits
of any particular alternative. For instance, consider
item (b) related to inflow conditions. The engineering
costs of the final restoration alternatives considered in
the Salton Sea Reclamation Act of 1998 varied
between $320 million and $1.4 billion depending on
the inflow assumption. While none of the alternatives
listed in the 1998 legislation was enacted, the cost
estimation exercise did highlight how the engineering
costs of any particular alternative depend on the
values assigned to possible factor inputs.
Consider the remaining elements listed above.
Similar to the 1998 legislation, engineering costs of
each restoration alternative are to be estimated and
compared (d), yet an explicit call for the identifica-
tion of a cost effective solution is to be included (c).
Cost effectiveness typically refers to the least-cost
approach to achieving a particular level of environ-
mental quality, or, in this case, ecosystem services.
Yet, as emphasized in (a), each restoration alternative
likely will provide a different array of ecosystem
characteristics.
Hence, while the stated intent of the restoration
study is to inform policy makers of the potential
trade-offs associated with each alternative and it is
acknowledged that any particular restoration strategy
can deliver a different stream of benefits to society,
there is no discussion of how to evaluate and quantify
these benefits. Unlike goods that are bought and sold
in the marketplace, the economic benefits of natural
resources are not revealed through market transac-
tions. The benefits derived from these resources are
thus termed ‘‘non-market values.’’ Most of the
benefits from restoring the Salton Sea consist of
these non-market values (e.g., those values we place
on recreation or the preservation of endangered and
threatened species).
Implicit in performing a cost-effectiveness analy-
sis or engineering cost comparison is that the benefits
are assumed constant across restoration alternatives,
in contrast to what is suggested in element (a) above.
Hydrobiologia (2008) 604:181–195 183
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This is clearly not the case with the proposed
alternatives for restoration of the Salton Sea, either
in the alternatives proposed in the 1998 legislation or
the eight alternatives listed in the Salton Sea
Ecosystem Restoration Draft Programmatic Environ-
mental Impact Report (California State Resources
Agency, 2006). Because the California Resources
Agency is not required to consider how the returns to
each investment will differ relative to the costs, their
selection may not allocate resources to their highest
valued uses since achieving such efficiency requires a
comparison of the costs and benefits of each alterna-
tive. The process of itemizing, quantifying, and
comparing the costs and benefits is known as
benefit-cost analysis. Whether formalized or not, this
practice is perhaps the most fundamental tool used in
decision making by individuals, private organizations
(e.g., firms), and public institutions (e.g., state
governments).
Further, as indicated in the 1998 legislation, the
attractiveness of any alternative is inextricably linked
to assumptions about the inputs (e.g., inflows),
outputs (e.g., level of ecosystem services), and scale
of analysis. For instance, what might be considered
the cost-minimizing engineering solution may not be
the cost-effective alternative when the impacts on
regional agricultural production, the regional econ-
omy, or human health from poorer air quality also are
included. Continuing, what might be the regionally
efficient solution may not be the efficient solution
from the state perspective, and so on. Given that the
state government will be involved, it seems reason-
able to assume that the California Resource Agency
would consider the local, regional, and statewide
impacts in their efforts to choose a preferred alter-
native. This does not suggest that broadening the
analysis even further has no value, though. As
Ciriacy-Wantrup (1964) noted, consideration of the
broad impacts of a policy may be a preliminary step
toward broadening the repayment base—a base
which is sometimes rather narrow if confined to
primary benefits. Enumerating and quantifying the
benefits of Salton Sea preservation to a broader
population might be a first step toward justifying
federal assistance.
Finally, it is important to note that while the
popular press has only recently begun extolling the
importance of placing a value on non-market envi-
ronmental goods and services (e.g., The Economist,
2005, April 3rd–29th: 76–78; Business Week, 2004,
December 29th; Infocus Magazine, 2005, 4.3; Out-
side Magazine, March, 2005: 106–123), these values,
and the non-market valuation methods used to
estimate them, have been given standing in legislative
mandates and by state and federal government
agencies for decades, including the Comprehensive
Environmental Response, Liability, and Compensa-
tion Act (CERCLA) of 1980, the Oil Pollution Act
(OPA) of 1990, U.S. Water Resources Council, the
U.S. Department of Interior, and the U.S. Forest
Service. Federal and state agencies also consider non-
market values when making natural resource alloca-
tion decisions. Since 1979, for example, the U.S.
Army Corps of Engineers and Bureau of Reclamation
have been required to assess the value of recreation
benefits in cases where federal projects impact areas
of high visitation (Loomis, 2005). The U.S. Environ-
mental Protection Agency (EPA) is required to
conduct benefit-cost analyses of environmental reg-
ulations and must include estimates of non-market
benefits. CERCLA mandates that lost recreation
values and ‘‘passive use’’ values from toxic waste
sites and hazardous material spills must be assessed
to measure the full value of damaged natural
resources. Many states have funded studies measur-
ing non-market values associated with recreation and
ecosystem preservation, including the State of Cali-
fornia, which sponsored an analysis of the values of
protecting Mono Lake as a bird habitat (Loomis,
2005). Hence, the validity of valuing changes in
environmental or natural resource quality and its
usefulness in guiding resource allocation decisions
has been invoked at state and federal levels.
Net benefits: background and conceptual issues
As noted above, a commonly employed litmus test in
judging whether a project should be undertaken or not
is whether it passes the present value benefit-cost test
(i.e., whether the present value benefits are at least as
great as the present value costs).The formal use of
benefit-cost analysis for large water-related projects
can be traced back to Eckstein (1958) in his
evaluation of federal water-resource programs. In
particular, Eckstein (1958: 2) references the Flood
Control Act of 1936, which suggests that only
projects where ‘‘the benefits, to whomsoever they
184 Hydrobiologia (2008) 604:181–195
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may accrue, are in excess of the estimated costs’’
would be considered. Eckstein described benefit-cost
analysis as a very promising approach for evaluating
the use of scarce natural and financial capital that can
provide a much stronger foundation for policy
decisions than what might otherwise be available.
This is especially true when many agencies with
jurisdictional overlap are involved in the decision-
making process, such as in the case of the Salton Sea.
In response to the problems associated with multi-
agency involvement and overlap, Eckstein stressed
the importance of a general set of standards by which
projects can be appraised and compared. Such
standards, he continued, would also serve a wider
interest in informing the public about the merits of a
project and what they will be asked to forgo in return.
It should be emphasized that just because the
estimated benefits of an alternative are in excess of
the estimated costs do not mean that this alternative is
the economically efficient alternative. Indeed, there
may be more than one alternative that meets this
condition. Of course, the alternative that is in the best
interest of society from an economic efficiency
perspective is that alternative providing the highest
net benefits, which are defined as the difference
between the total benefits and total costs.
Why there has not been greater focus on using
benefit-cost analysis or net benefits’ analysis in the
context of Salton Sea restoration is puzzling, espe-
cially when such an approach has been prominent for
more than 30 years at the federal level in consider-
ation of major environmental, health, and safety
regulations (Morgenstern, 1997). Under President
Clinton’s Executive Order 12866, federal agencies
were allowed to ‘‘include both quantifiable measures
and qualitative measures of costs and benefits’’ and to
‘‘select those approaches that maximize net benefits
(including potential economic, environmental, public
health and safety, and other advantages; distributive
impacts, and equity).’’ Furthermore, numerous real
world examples exist of governments incorporating
the benefits of preserving natural and environmental
resources into their decision making, both in the U.S.
and abroad. Such evaluations cover a wide array of
resources, including the Glen Canyon Dam (Bishop
et al., 1987), Hell’s Canyon (Krutilla & Fischer,
1975), Mono Lake (Loomis, 1987), the spotted owl in
the Pacific Northwest (Hagen et al., 1992), Kootenai
Falls in Montana (Duffield, 1982), and the Kakadu
Conservation Reserve in Australia (Imber et al.,
1991), to name a few. In these and other studies,
the preservation benefits associated with environ-
mental and natural resources were quantified and
given standing in benefit-cost analysis. In each case,
the quantification of such benefits either supported an
action for preservation or modified an existing
development scheme to be more environmentally
friendly. In all cases, a large—if not the largest—
component of the value of preservation was non-
market value.
Before moving on to the various steps involved in
estimating the net benefits, it is useful to clarify what
economists mean by economic value, especially in
the context of environmental and natural resource
goods and services. Economic value is defined by
what one (or a group) would be willing and able to
pay for a good, not by what one has to pay for it—
what one has to pay for a good is what it costs and is
considered an expenditure. In contrast to the benefits
of an action, the costs of achieving a particular
objective can be measured by what is forgone to
achieve that objective, and include both direct
engineering costs as well as opportunity costs. The
former includes both current and discounted future
costs, and the latter represents the value associated
with the opportunity to use the forgone resources in
another activity.
We must also recognize that economic value,
which is meaningful from an anthropocentric per-
spective only, extends beyond the marketplace to
non-market goods such as clean air or water, open
space, and wildlife preservation. Furthermore, the
economic value of these goods comprises both use
and non-use values. The values associated with
catching tilapia for consumption and bird watching
would be examples of use values associated with the
Sea, while the value that people derive from knowing
that the Salton Sea ecosystem exists for current and
future generations would be an example of non-use
value.
Components of net benefits’ estimation
For large projects, efforts to estimate the net benefits
may seem insurmountable; thus it is best to have a
road map as to what might be the necessary steps to
perform a net benefits’ analysis. Borrowing upon
Hydrobiologia (2008) 604:181–195 185
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previous works (Boardman et al., 1996; Morgenstern,
1997), we present a description of the main steps in
performing a net benefits’ analysis and identify how
each step could be applied to the restoration of the
Salton Sea.
Specify the portfolio of alternative projects
Finding the efficient solution requires identifying,
investigating, and comparing numerous alternatives
with the outcome that would occur if no action were
taken, i.e., the baseline. In the Salton Sea Reclama-
tion Act of 1998, over 50 proposals were identified,
of which five were given additional scrutiny, but
eventually deemed ‘‘too costly and too impractical
to implement.’’ (California Department of Water
Resources, 2003: iii). These analyses did prove
valuable in that the CDWR, along with other agencies
(e.g., USBR, USFWS, Salton Sea Authority), could
now focus on a narrower set of feasible alternatives.
Currently there are eight proposals to evaluate
relative to two ‘‘no-action’’ alternatives. These alter-
natives differ in many dimensions including
construction and maintenance costs, strategies for
salinity control, shoreline elevations, water body size,
depth, salinity, and surface area configurations, and
wildlife habitat.
Well-defined objectives and criteria will go far in
narrowing the possible choice set. The Salton Sea
Restoration Act puts forth the following objectives to
be considered when evaluating alternatives: sustain
avian biodiversity at the Salton Sea without main-
taining elevation of the entire Sea, maintain near-
current salinity and elevation, and represent the most
cost effective technical alternative. Regarding this
last objective, care must be taken here not to prejudge
alternatives too quickly based on ex ante costs alone
for risk of defining the choice set too narrowly.
Because the proposed alternatives provide a wide
array of environmental benefits, the most cost-effec-
tive solution may not be that which maximizes net
benefits.
Decide whose benefits and costs have standing
The benefits and costs of a particular regulation or
action can be realized at the local, regional, state,
national, and even international level. As Boardman
et al. (1996) note, national governments typically
consider costs and benefits at the national level. It is
not uncommon, though, for cities, municipalities, or
states to overlook the impacts of their actions on one
another in terms of who counts. Political boundaries
and the level of administrative unit will often drive
who is included in a benefit-cost study.
With respect to the Salton Sea, many different
groups will be directly or indirectly impacted by the
choice of restoration alternative, extending from
recreational users of the Sea, to the localities around
the Sea, to the growers in the Imperial and Coachella
agricultural regions, to state, federal, and tribal
agencies, as well as to those living abroad. A
potential difficulty that arises with so many agencies
and political boundaries is that what might be
efficient at one level of analysis (or political bound-
ary) may not be efficient at another level (or
boundary). For instance, a cost effective restoration
alternative might not be cost effective when the
impacts on agriculture or regional employment and
income are considered, or when the impacts on
human health from dust particles from the exposed
seabed are acknowledged. What might be the
efficient solution for Imperial County and residents
of the Salton Sea might not be efficient for the state of
California. Performing a broad-based net benefits’
analysis to determine the extent of the market would
provide transparency as to the distribution of benefits
and costs among different stakeholders. This will be
useful so that criteria other than efficiency, such as
equity, are part of the decision-making process.
Catalog the impacts and select measurement
indicators
Many types of impacts may result from regulatory
and policy actions. What is necessary for benefit-cost
analysis is to catalog these impacts as either benefits
(positive impacts) or costs (negative impacts) and
decide upon a measurement unit for the impact.
These impacts can be measured in a variety of ways,
including economic, environmental, and health
effects. Economic indicators include jobs, time,
income, and changes in consumer and producer
welfare. Environmental indicators may include quan-
titative assessments of species viability, ecosystem
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productivity, and water and air quality. Indicators of
public health might include the avoidance of health
care costs or benefits associated with changes in
quality or longevity of life.
Such categorization and measurement are certainly
suitable for the Salton Sea restoration alternatives.
Benefits and costs may accrue to landowners, farm-
ers, local businesses (especially those relying on
tourism), recreationists such as bird watchers and
anglers, environmental groups, and local and regional
governments. While the category of measurement for
the engineering costs of restoration will be dollars,
each restoration alternative may affect or be affected
by upstream activities related to agriculture. That is,
the response from agriculture to the reduction in
California’s take of Colorado River water can affect
the inflow volume into the Sea; consequently, addi-
tional mitigation activities will be required to offset
the reduced volume and surface elevation of the Sea.
For instance, as the shoreline recedes due to lower
inflow and in lieu of additional mitigation, increased
dust and particulates will be generated exacerbating
an already exorbitant regional air quality problem.
Alternatively, if the inflow volume is required to
remain constant, then presumably agriculture may
need to engage in additional water conservation
schemes (e.g., reduce applied water rates, more
efficient irrigation measures, land fallowing) to
reduce their applied water rates sufficiently to
provide enough mitigation water to maintain inflow
volume requirements. These activities can and should
be measured in terms of productivity, additional labor
hours, income, and employment. The indirect impacts
from the restoration alternatives may be very impor-
tant and thus, at a minimum, should be acknowledged
via a categorization of this type. Insight into possible
agricultural-related and regional impacts would be
further enhanced by applying a regional agricultural
production model for agricultural activities (e.g.,
Schwabe et al., 2006) and a social accounting matrix
model (multiplier analysis) to account for the
employment and income effects within the region
(e.g., Berck et al., 1991).
Additionally, the impacts of the restoration alter-
natives on ecosystem services should be considered.
These impacts will differ by restoration alternative,
and thus will have varying effects on tourism and
recreation, such as time and income spent on
recreating, and wages and income earned from
tourism. Such impacts may extend beyond the
immediate area, certainly to the state, and perhaps
to the nation in terms of non-use values. Indeed,
perhaps the largest benefit associated with preserving
and restoring the Salton Sea does not necessarily
accrue to current users of the Sea, but rather to people
who care about the Sea regardless of whether they
tangibly use the Sea currently. People have been
observed benefiting from environmental resources,
and willing to pay to protect them, just by knowing
that the resources exist. For example, Sanders et al.
(1990) estimate what people are willing to pay (i.e.,
their value) for preserving free flowing rivers with no
intention of ever visiting them. Alternatively, Olsen
et al. (1991) estimate people’s willingness to pay
(value or benefits) for maintaining salmon migra-
tions, again, without actively engaging in any
recreation activities (e.g., fishing, photography)
involving these salmon. This sort of value is called
a non-use or passive-use value and captures that value
people have for resources for possible future use by
themselves, future use by future generations, current
use by others, or simply because they think it is the
right or moral thing to do.
Predict the impacts quantitatively
over the life of the project
A comprehensive classification of impacts and their
associated costs and benefits is complicated by the
extent to which direct impacts transfer across agents,
markets, and natural systems, and the degree to which
this transfer is measurable. The future time path of
changes to health, the economy, and the environment
must be estimated in some way. This estimation may
rely on an extensive review of existing scientific
knowledge and data or may rely on a new analysis.
As part of the restoration plan, the California
Resources Agency is to prepare a Program Environ-
mental Impact Report (PEIR) that will analyze the
potential environmental impacts of the alternatives
included in the Ecosystem Restoration Plan. For the
restoration of the Salton Sea, a lengthy time horizon
and complex interactions will certainly make the
estimation of cause and effects difficult and costly.
When constructing and evaluating the Draft PEIR,
this cost must be weighed against the importance of
accurate estimation or the cost of making the wrong
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decision. It may indeed be impossible to directly
measure some impacts. When this is the case, a proxy
measurement must be constructed to account for the
impacts.
Monetize (attach dollar values to) all impacts
Once all impacts have been identified, cataloged, and
estimated, their monetary value must be determined.
In this way, benefits and costs can be compared in
dollars. When the impacts occur through markets
(such as costs associated with construction or the
benefits of created jobs), monetization is relatively
straightforward. These values can be derived using
the appropriate demand curve and estimated changes
in market prices and quantities. The estimation of
non-market (and especially non-use) values presents
a challenging problem in measuring the full value of
resources, but is facilitated by well-established val-
uation techniques, the most popular of which are
discussed below.
Discount benefits and costs and obtain present
value
Many projects related to the environment will have
costs and benefits that accrue over time. For resto-
ration projects, it is often the case that costs are borne
‘‘up front,’’ or in the present, while benefits do not
accrue until sometime in the future. Because dollars
or resources consumed today are worth more than the
same dollars or resources consumed in the future (due
to peoples’ preferences to consume now rather than
later), values that occur in different time periods need
to be converted into a common period equivalent by
‘‘discounting’’ future values to their present value via
a social discount rate.
The social discount rate, as noted in Pearce &
Turner (1990), should reflect the rate at which society
is willing to trade current dollars for future dollars
and depends on the degree of risk associated with the
future payoff. Since there are a wide variety of
opinions as to society’s aversion to risk, choice of this
rate is a matter of much debate. Mathematically,
lower discount rates make the present value of future
dollars appear higher and vice versa. Hence, higher
discount rates weaken the case for projects with
benefits that occur over long time horizons relative to
up-front costs. With this in mind, using a predeter-
mined rate removes the temptation to choose a
discount rate to achieve a desired net benefits result.
Indeed, many projects funded by the U.S. govern-
ment use a real (inflation adjusted) discount rate of
7% (Boardman et al., 1996). However, because the
discount rate can affect the outcome substantially, a
range of discount rates and their corresponding net
benefits should be analyzed and presented.
Once future costs and benefits for project or policy
alternatives have been discounted, the present value
of costs should be subtracted from the present value
of benefits to arrive at the net present value (NPV) of
each alternative. When deciding among competing
alternatives, including the baseline, the project or
policy with the highest NPV will yield the highest net
gains to society and, thus, is considered the efficient
choice.
Perform sensitivity analysis and make
a recommendation
Even with the best available scientific information,
most projects will involve some degree of uncertainty
in predicting impacts, deriving their monetary value,
or discounting future values. This uncertainty may be
due to unknown parameters, lack of data, or lack of
information about future environmental or economic
conditions, which are often complex and difficult to
predict. Such uncertainties exist with regard to the
restoration alternatives for the Sea, including future
annual inflows, salinity, habitat and wildlife impacts
from construction, and the amount and nature of dust
that will be created as the Sea’s elevation drops over
time. When some degree of certainty can be assigned,
the most probable or plausible values of the uncertain
parameters should be identified and reported as a
‘‘base case’’ scenario. Examination of a reasonable
range of parameter values and probabilities around
this base case acknowledges the uncertainty of the
estimation and provides a means of examining the
sensitivity of results to underlying assumptions. It is
critical for the analyst to report on the robustness of
the results to underlying assumptions so that policy
makers can be fully informed. If net benefits remain
consistent over a range of possible values, one can be
188 Hydrobiologia (2008) 604:181–195
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more confident in the results. Within a reasonable
range of uncertain parameter values, the alternative
with the highest NPV should be recommended. With
respect to the Salton Sea, a present value net benefits’
approach with sensitivity analysis would seem useful
for evaluating the proposed restoration alternatives
and their trade-offs.
Valuing environmental goods and services
For most goods and services, the starting point for
estimating value is the market price. Yet for many
environmental and natural resource goods and ser-
vices, no such market price exists. For goods such as
clean air, biodiversity, endangered species, and
wildlife habitat, rarely are there market transactions
revealing the price and subsequently the value of
these goods and services to the society. Conse-
quently, the value of these goods and services is not
readily apparent to policy makers in charge of
determining how these scarce and often unique
resources are to be allocated. As an example of this
problem, consider the decision of how to allocate an
acre of land in, say, Sequoia National Forest. There is
value associated with the timber that could be
obtained from these giant trees. Yet, there is also
value in preserving the forest in its present state for
recreation activities such as hiking, camping, and
photography today and in the future. There is value
indirectly in the habitat these forests and trees
provide for other wildlife resources we enjoy. There
is value also in simply knowing that these resources
exist for use by others, and possible future use by
current and future generations. As such, we define the
value of a resource that is not revealed through
market transactions as its non-market value. Without
knowledge of these non-market values, benefit-cost
analysis is limited in its usefulness in aiding policy
makers on how to efficiently and equitably allocate
these resources.
The objective of non-market valuation is to
estimate the economic value of these environmental
and natural resources to society. Quantification of the
benefits gives these goods and services standing in
benefit-cost analysis. In considering the benefits of
preservation, the total value of the resource should be
considered, where total value is defined as:
Total Economic Value ¼Use Value
þNonuse Value:
Use value relates to the tangible use of the resource
presently, and can include both consumptive use
(e.g., catch and keep fishing) and non-consumptive
use (e.g., photography, or catch and release fishing).
Non-use value, as described in Kopp & Smith (1993:
340), is that ‘‘…component of the value of a natural
resource that does not derive from the in situ
consumption of the resource.’’ There are four general
categories for non-use values, including: option
value—the value that people place on a good or
service for future possible use, altruistic value—the
value someone places on the preservation of a
resource for use by others in the current generation,
bequest value—the value someone places on the
preservation of a resource for use by future genera-
tions, and existence value—the value one places on a
resource for its mere existence, possibly for moral or
ethical reasons.
In considering the non-market values associated
with preservation of the Salton Sea, a variety of
stakeholders come to mind. The Sea provides many
non-market benefits to the State of California.
Thousands of visitors frequent the Sea annually for
bird watching, it has been the only tilapia (Oreochr-
omis mossambicus Peters; Chchlidae) sports fishing
area in the state, and other activities such as camping,
boating, and swimming occur throughout the year.
Indeed, the Salton Sea has been considered one of the
most productive fisheries in the world (Cohn, 2000),
especially during the years from 1960 to 2000. In
1987, there were nearly 2.6 million visits by recrea-
tors to the Salton Sea, making it a more popular
destination than Yosemite National Park (CIC
Research, 1989).
The Sea also provides non-market benefits to the
nation as a whole. The Salton Sea is ranked as the
second highest birding area in the nation. Indeed,
90% of the North American population of eared
grebes (Podiceps nigricollis Heermann), more than
80% of the entire western U.S. population of white
pelicans (Pelecanus erythrorhynchos Gmelin), and
nearly half of the U.S. population of Yuma clapper
rails (Rallus longirostris yumanensis Dickey), an
endangered subspecies, utilize this habitat. The Sea is
one of the two nesting areas in the western U.S. for
Hydrobiologia (2008) 604:181–195 189
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gull-billed terns (Gelochelidon nilotica Bancroft), a
bird proposed for listing as a threatened species.
From a fishery perspective, the Sea has supported
eight species of fish, including the federally endan-
gered desert pupfish (C. macularius).
Non-market valuation techniques
Three of the most popular methods for estimating
non-market values for natural resources include the
Travel Cost Method, the Random Utility Model, and
the Contingent Valuation Method. The first two
techniques are revealed preference methods—meth-
ods which examine decisions that individuals make
regarding market goods that are used together with
non-market goods to reveal the value of the non-
market goods. These methods require that a link be
established between changes in the environmental
resource and changes in the observed behavior of
people. For instance, changes in water depth and
salinity in the Salton Sea may result in fewer fish.
Anglers may then move to another part of the Sea,
move to a different fishing location, or take fewer
fishing trips. In establishing this link, it is important
to account for any other factors that may be causing
behavior to change. With this information, a demand
or marginal willingness to pay function can be
estimated, which allows one to estimate the value
of environmental resource changes. While revealed
preference methods allow for estimation of use
values, they cannot be used to estimate non-use
values. To elicit such values, stated preference
methods, which ask people directly about the values
they place on non-market goods, must be used. The
most widely used stated preference method is the
Contingent Valuation Method.
Travel cost method
The travel cost method (TCM), one of the most
widely used revealed preference valuation tech-
niques, uses information on actual behavior to
estimate a trip demand curve from which the value
of the resource can be derived. The demand curve is
estimated using visitation data, including travel costs
and the number of trips taken by each individual to a
particular site. Using distance traveled as a proxy for
the price of a trip and the number of trips as the
quantity, individual or group demand curves can be
estimated for a site. The net benefits of a particular
site or the value of the resources within each site can
then be estimated.
As noted in Loomis & Walsh (1997), the recre-
ational benefits from a well-done TCM analysis
should be fairly accurate, partly as a result of over
45 years of investigating and improving upon this
technique. This method has been used by both state
and federal agencies to value a wide variety of non-
market goods and services. For instance, the TCM
was used by Beal (1995) to estimate the value of
camping at Carnarvon National Park. Results sug-
gested that the annual net present value for camping
at this park alone was nearly $40 million. Other
recent analyses include valuing hiking in National
Forests in Colorado and Montana (Hesseln et al.,
2004), canoeing in Canada (Hellerstein, 1991), hunt-
ing in California (Creel & Loomis, 1990), salmon
sport fishing in Alaska (Layman et al., 1996), and
ecotourism and wildlife viewing in Costa Rica and
Kenya (Navrud & Mungatana, 1994; Menkhaus &
Lober, 1996). This method could similarly be
employed to value the flow of recreation services
from the Salton Sea. Application would require a
survey of recreationists who use the Sea. In addition
to a host of demographic information, survey respon-
dents would be queried about the frequency of their
participation in recreation activities at the Sea.
Random utility model
While application of the TCM would provide useful
information on the value of recreation services from
the Sea in its current state, a variation of this method,
the Random Utility Model (RUM), may be more
applicable to valuing potential changes in the Sea
under the various restoration alternatives. The RUM
has been used in a variety of applications, most
commonly freshwater and saltwater recreational
fishing (Bockstael et al., 1987; Schuhmann & Schw-
abe, 2004). It has also been used to value a wide
assortment of activities at unique recreation areas,
such as hiking in the Grand Canyon or Yellowstone
National Park, rafting in the Middle Fork of the
Salmon River in Idaho, and ecotourism and wildlife
viewing in Italy (Font, 2000). RUMs are commonly
190 Hydrobiologia (2008) 604:181–195
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used to model the choice among a set of qualitatively
different recreation sites. By estimating how the
choice of alternative sites is dependent upon the char-
acteristics of those sites, the RUM allows the
researcher to value changes in the quality or charac-
teristics of those sites.
Given that each restoration alternative is likely to
result in a different level of ecosystem services (e.g.,
expected changes in length of shoreline, elevation,
availability of bird habitat, or fish catch rates), which
in turn will differentially impact the quality or
quantity of recreational activities, the RUM would
be a very appropriate method of estimation. Such an
application would require identification of substitute
sites for each recreation activity at the Sea, a catalog
of current measures of quality at each site, measures
of the expected changes in quality that would result
from the restoration alternatives, and a survey of
recreationists at each site. As the RUM relies on
information gained from actual choice occasions, this
survey could be conducted in person at the alternative
recreation sites. This analysis would provide a
quantitative assessment of the likely impacts on
recreation benefits prior to any restoration action so
that the net benefits of each alternative are more
completely understood.
Contingent Valuation Method
The Contingent Valuation Method (CVM) is a well-
accepted technique for valuing non-market goods,
with far greater than 1600 CVM studies to date
estimating non-market values in over 40 countries
(Carson et al., 1994). The U.S. Department of
Interior (DOI) has adopted CVM to measure non-
market values associated with damages under CER-
CLA 1980; NOAA has endorsed the use of this
method for damage assessment under the Oil Pollu-
tion Act of 1990; and it is recommended by the Water
Resources Council (1979) for use in benefit-cost
analysis.
The goal of CVM is to create a realistic, albeit
hypothetical, market where peoples’ values for a
good are expressed. A CVM survey consists of four
main elements. The first element is a description of
the program the respondent is asked to value or vote
upon. This element often involves a description of the
baseline services with no action, and an improved
level of services with some type of policy action.
Identifying the conditions of the ‘‘no-action’’ alter-
native and other restoration options may require
research by physical and biological scientists. The
second element of the CVM is specifying a mecha-
nism for eliciting value or choice. There are a variety
of options for eliciting value, the most well accepted
being a referendum type question that asks each
respondent to vote ‘‘yes’’ or ‘‘no’’ to a specified price
or prices. A payment vehicle describing the manner
in which the hypothetical payments are collected is
the third element. Such vehicles have included higher
taxes or utility bills, or a payment into a trust fund
(Loomis et al., 2000). The fourth element consists of
collecting information on respondent characteristics
including socioeconomic data and environmental
attitudes.
Because non-use values entail no actual observa-
ble use of a resource, the ability to measure non-use
values reliably has been questioned (Hausman, 1993).
To assess the reliability of CVM in measuring non-
use values, NOAA convened a panel of prominent
social scientists co-chaired by two Nobel Laureate
economists. The panel concluded that if CVM
practitioners follow a certain set of conditions, the
results obtained from CVM are likely to be reliable
(Arrow et al., 1993). Subsequent research has dis-
cussed issues associated with the conclusions of the
NOAA panel and provided additional procedures that
ensure CVM reliability (Hanemann, 1994).
Examples of benefits’ estimation for preserving
the Salton Sea
To date, little has been done in terms of quantifying,
in monetary terms, the benefits of preserving the
Salton Sea. No studies were found that used the
methods discussed above to estimate the possible
benefits from the proposed restoration alternatives.
This is unfortunate since such information can be
extremely useful in informing policy makers of the
relative attractiveness of one option over another and
justifying, ex ante or ex post, a particular decision.
Two studies that have attempted to estimate the value
of the Salton Sea include CIC Research (1989) and
the Inland Empire Economic Databank and Forecast-
ing Center (IEEC, 1998); unfortunately, neither study
estimates the non-market benefits of preservation.
Hydrobiologia (2008) 604:181–195 191
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CIC Research (1989), for instance, focused on
estimating the expenditures of Salton Sea recreation-
ists and, subsequently, the potential impact those
expenditures might have on both the local and
regional economy, often referred to as the secondary
market effect. Based on responses from a telephone
survey of Southern Californian residents and an
intercept survey at the Salton Sea, approximately
154,600 households engaged in recreation at the
Salton Sea in 1987 for a total of 2.6 million
recreation days. Household expenditures that could
be directly related to recreation at the Salton Sea
amounted to $76 million, of which $53 million was
spent directly in counties contiguous with the Salton
Sea. Using regional and local economic multipliers, it
was estimated that the $76 million in direct expen-
ditures generated an additional $221 million in
secondary market impacts. Unfortunately, the ability
to use these impacts to measure the benefits of
preserving the Salton Sea is tenuous since this study
measures expenditures, not benefits. Hence, very
little in terms of the value of preserving the Salton
Sea can be gleaned from the CIC Research study with
expenditure information alone.
Alternatively, the IEEC (1998) focused on the
economic benefits of cleaning up the Salton Sea.
IEEC categorized these benefits into how changes in
Salton Sea water quality would affect (i) privately
held developable property within a one-half mile of
the Salton Sea shore and (ii) public sector revenues
generated from taxes on property values and eco-
nomic activity in the area. In estimating the benefits
to private property owners for changes in water
quality, IEEC considered changes in property values
that would likely accompany an increase in water
quality using retail market values from other tourist
and recreation markets in the Southwest. Added to
these privately held property values, they calculated
the expected change in tax revenue that would
accompany the changes in both property values and
economic activity.
The combined present value benefits of increasing
Sea water quality was estimated to be between $2.6
and $3.2 billion, with slightly over half accruing to
private property owners and the rest generated from
tax revenues. A serious problem with these estimates,
from both a qualitative and quantitative perspective,
is their treatment of tax flows. While they account for
tax dollars earned, they do not account for tax dollars
paid—symmetry should apply. Furthermore, tax
generation is simply a transfer of wealth from one
group to another. If the taxes are paid by agents
outside the region, then local governments in the
Salton Sea vicinity would experience an increase in
tax revenues while governments elsewhere would
experience a decrease. More problematic is their
estimation of the value of preventing further degra-
dation of the Sea. In particular, they assume that the
benefits of prevention can be approximated by the
costs of prevention with the justification that if
society is observed incurring the cost, it must be that
the benefits exceed these costs (IEEC, 1998: 13). Yet,
politicians and government agents may make deci-
sions regarding resources on criteria other than
economic efficiency.
Neither CIC Research (1989) nor IEEC (1998) nor
any other study to date directly estimates the non-
market values from preserving the Salton Sea. In
cases like this where a primary valuation study for the
resource of concern is absent, economists sometimes
rely on existing valuation studies for similar
resources to obtain a somewhat less accurate but still
potentially useful benefits’ estimate. The use of
previous non-market valuation studies to inform
current decisions is known as benefits’transfer
(Freeman, 2003; Rosenberger & Loomis, 2003).
K2 Economics (2007) recently conducted a simple
benefits’ transfer study for the Salton Sea that relied
primarily on estimated values for two similar natural
resources in California: San Joaquin Valley (SJV)
wetlands and the Mono Lake ecosystem. Citing
several analyses of contingent valuation survey data
for SJV wetlands, K2 Economics determined that a
conservative estimate of the current annual value of
1,000 acres of SJV wetlands to the residents of
California is approximately $50 million. Assuming
wetlands at the Salton Sea provide services similar to
those provided by wetlands in the SJV, and assuming
people value these services similarly, K2 Economics
argued that this estimate also can be applied to
wetlands at the Salton Sea. Transferring this value to
the wetland acreage associated with each of the eight
restoration alternatives implies a current state-wide
annual value of at least $600 million, yet more likely
in the range of $1.9–$4.4 billion for preserving the
Sea.
K2 Economics also used results from multiple
contingent valuation surveys for the Mono Lake
192 Hydrobiologia (2008) 604:181–195
123

ecosystem to develop a separate transferable estimate
for the value of preserving the Sea to the residents of
California. Making conservative assumptions about
values expressed for restoration of Mono Lake, K2
Economics determined that the current state-wide
annual value of preserving the Sea is around
$1.5 billion and possibly higher. Again, this estimate
relies on strong assumptions about similarities
between both the services provided by Mono Lake
and the Salton Sea as well as the populations
receiving the benefits. It also involves a relatively
large amount of uncertainty compared to a primary
valuation study of the Sea. Regardless, after consid-
ering both the SJV and Mono Lake benefits transfer
results, K2 Economics concluded that a conservative
order-of-magnitude estimate of the non-market ben-
efits provided to the residents of California from
preserving the Sea would be in the range of $1–
$5 billion annually.
Interestingly, the estimated construction costs of
the eight restoration alternatives range from $2.3 to
$5.9 billion (California Resources Agency, 2006), a
large number indeed. Yet, if one were to take the
results from K2 Economics (2007) as a conservative
order-of-magnitude estimate, the benefits of preserv-
ing the Salton Sea to California residents alone would
seem to pass the benefit-cost test (i.e., positive net
benefits). Furthermore, consider the results of Loomis
(2000) who, in evaluating six different resource
preservation programs, finds that residents within the
states where each resource is located hold only a
fraction of the total national value. This suggests that
from a national perspective, the $1–$5 billion range
is a very conservative estimate of restoration benefits
to residents of the U.S.; consequently, the net benefits
of preserving the Salton Sea are large.
Conclusions
The Salton Sea is a natural asset that provides many
ecosystem services that directly and indirectly impact
the quality of life for people at the local, regional,
state, and national level. Such services include
boating, fishing, hiking, photography, bird watching,
and habitat provision for an abundance of birds,
including migratory and resident as well as endan-
gered and threatened species. The viability of this
ecosystem and its ability to continue to provide such
services will be dependent on the engineering solu-
tions devised for restoration, yet it will also be
influenced by regional agricultural activities, and the
quantity and quality of the associated drainage water.
Any additional impositions on agriculture will likely
impact agricultural-related industries and activities
and, subsequently, affect regional employment and
income.
In consideration of these effects, this article has
argued that a net benefits’ framework would be the
most useful approach in which to evaluate and
compare alternative restoration strategies. Relative to
a cost-effectiveness or cost-minimizing approach, net
benefits’ analysis can provide more accurate informa-
tion regarding potential net returns associated with a
particular restoration alternative and present a clearer
picture of the magnitude and distribution of benefits
and costs at the local, state, and national levels.
Certainly, it would seem useful for the legislature to
have information on both the potential returns that
each restoration alternative provides as well as the
magnitude of the resources society is being asked to
forgo to provide those returns. If such returns and costs
cannot be quantified and monetized, then at the very
least an enumeration of the trade-offs associated with
each restoration alternative should be provided to
inform the discussion. In addition to a description of
how the physical characteristics of the Sea will differ
across the restoration alternatives, qualitative infor-
mation on the differences that each alternative presents
for recreation opportunities, air quality, wildlife pres-
ervation, and other changes that society values should
be provided. This enumeration exercise will help to
identify what is missing, both qualitatively and
quantitatively, in efforts to account for the full array
of impacts of any particular alternative. This frame-
work highlights the trade-offs associated with each
alternative and exposes the limitations, thereby stim-
ulating the need for additional scientific research to
achieve better understanding.
Equally important, we have emphasized the fact
that non-market goods, such as many of the ecosys-
tem services provided by the Salton Sea, have been
and should be part of any sound economic analysis
involving habitat restoration. The recreational and
preservation benefits derived from the natural
resources of the Salton Sea will be directly dependent
upon which restoration alternative is selected. These
types of benefits have been given standing by state
Hydrobiologia (2008) 604:181–195 193
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and federal legislation and regulatory mandates, and
have been shown to be one of the most important
arguments in determining the class and scope of
preservation that should occur.
While no primary non-market valuation studies
have been performed to estimate the value of
preserving the Salton Sea, and thus an accurate
comparison of the alternative restoration strategies is
limited, other research has estimated the value of
somewhat similar ecosystems and their services (e.g.,
Mono Lake or wetlands in the San Joaquin Valley).
The results from these other studies seem to suggest
that the benefits of preserving the Salton Sea far
exceed the costs. This is not surprising considering
the research of Loomis and White (1996), who
perform a meta-analysis of valuation studies for rare,
threatened, and endangered species. The authors find
that even for the most costly endangered species
preservation efforts, the benefits are likely to exceed
the costs. Yet for the particular case at hand, to
accurately compare the trade-offs associated with
different restoration alternatives, a primary valuation
study is necessary and should be couched as one part,
albeit a significant part, of a net benefits’ analysis.
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