Restoration Cost as a Proxy for Ecosystem Value

Early in my fifty-year career as an environmental scientist I realized that the root cause of most environmental problems was flawed economics (Bainbridge 1985). I have always tried to understand the economic pressures and value propositions that shape how we treat the environment and each other (Bainbridge 1983). When external social and environmental costs and benefits are ignored the market fails. Pigou (1932) recognized the importance of the external (or currently uncounted) costs of damage caused by wildfires started by sparks from locomotives. Today equipment failures of utility companies lead to catastrophic wildfires with enormous external costs. In 2018 for example, Pacific Gas and Electric company equipment apparently started the Camp Fire that destroyed the town of Paradise, California, cost 85 lives and led to 17 billion USD in damage (not including most ecosystem damage). If we continue to ignore these “external” costs we face a difficult future (Bainbridge 2021).

The importance of external costs has been addressed by a few economists and policy makers (Gray et al. 1995, Ascher 1999, Antheaume 2004), but most economists have rarely been troubled by external social and environmental costs. As a result, they consider only a tightly bounded incomplete subset of the market (Bainbridge 2008). Even rudimentary calculations of the external costs and benefits are helpful and will lead to change. One of the challenges is trying to value non-market items like ecosystem services and natural capital.

Five primary approaches can be used to estimate the true costs of our actions (Bainbridge 2023). The ‘damage cost approach’ counts all the damage caused by externalities. Major costs may be incurred far into the future, as with sea-level rise. The ‘avoidance cost approach’ estimates external cost by calculating the amount required to eliminate or prevent the damage. It is increasingly clear that nitrogen deposition is adversely affecting ecosystems (Fenn et al. 2003, Clark et al. 2017). The U.S. Environmental Protection Agency suggests the maximum traditional control scenario could reduce national NOx emissions in 2035 by more than a million tons at a marginal cost of more than 10,000 USD per ton (Loughlin 2017). The ‘willingness to pay approach’ can be used to estimate the value of environmental and social factors. How much people will pay for activities or resources that are not traditionally bought and sold? How valuable is a view of snow-kissed mountains behind golden aspen? We can estimate these by examining what people pay today, or asking people what they would be willing to pay. The ‘resource value approach’ considers the Natural Capital costs. These can be estimated by considering the past, current, and projected future value of the resource. For the 1.7 million tons of cod once found along the Grand Banks, the capital value at 3,000 USD per ton would have been billion USD (Bainbridge 2023a). The misuse of the Ogallala groundwater in the American west has been equally foolish. Even today, the remaining groundwater in western Kansas is worth 4 billion USD or more.

The most relevant and important for restoration ecologists is the ‘replacement cost approach’. This value is based on the total costs required to address and repair the adverse impacts with restored ecosystems. This can be very revealing. Desert land selling for 1,000 USD an acre could cost 20,000 USD an acre to restore. This work is further confounded by excess reactive nitrogen pollution (eutrophication). This reduces biodiversity and the dry and wet fall of nitrogen can’t easily be remedied (Bainbridge 1997, Valliere et al. 2020). Invasive species favored by nitrogen deposition can dramatically alter ecosystems. Invasive grasses supported the wildfires that killed 1.3 million Joshua trees (Allen et al. 2009, Olalde 2020). Replacing those trees could easily cost 500 million USD or more. Reducing the impact of reactive nitrogen on nature reserves can be very costly. Ekhoff (2022) estimated the cost of managing invasive species benefitting from nitrogen deposition in restoration projects in California at as much as 40,000 USD per acre every year—with no guarantee of success.

Restoration ecologists and practitioners need to get involved (Bainbridge 2006). Many may feel uncomfortable trying to price repair or maintenance costs, but if no estimates are made impacts are too easily ignored. We need to make an effort to see that these issues are considered. Ecologists should have at least passing familiarity with the Global Reporting Initiative (www.globalreporting.org), the Sustainability Accounting Standards Board (https://www.sasb.org), and the International Financial Reporting Standards Foundation (https://www.ifrs.org).

Restoration ecologists can also play a role in improving ecosystem considerations in True Cost Reporting and Accounting. We can encourage accounting and regulatory bodies to make reporting on these topics more comprehensive. Today many corporate sustainability reports are getting better in listing emissions, but they very rarely cost impacts. Particular attention to the needs of accountants, CEOs and CFOs is needed (Bainbridge 2021, 2022). True cost accounting has to become more user friendly for park and natural reserve managers, farmers, foresters, park managers, designers, sustainability report writers, and database and data mining software developers. Long term funding for mitigation projects will become more feasible as impact fees are added for emitters. A recent European study suggests the environmental cost of nitrogen oxide pollution may be as much as €10,000 ton (de Bryuyn et al., 2018). In 2021 the New Madrid coal-fired power station in Missouri emitted 15,989 tons of nitrogen oxides (Tiseo 2023). The impact fee should have been as high as 159 million USD—more than ten times the current National Science Foundation funding for Long Term Ecological Research.

Estimating and developing more accurate estimates for ecosystem restoration and management can help the move to more comprehensive and improved accounting. This is not a panacea, but true cost accounting can be a powerful tool to help us manage resources and land more wisely (Bainbridge 2023b).