Restoring Wetlands Through Wetlands Mitigation Banks
AbstractThis paper offers the first economic analysis of wetlands mitigation banks. The banks are a new alternative for restoration of wetlands by developers before receiving regulatory approval for future development of wetlands in the same watershed. A stochastic optimal control model is developed which incorporates ecological uncertainty of wetlands restoration. The model helps in examining the decisions of how much to invest in a wetlands mitigation bank. The model is calibrated with data from California bioeconomic parameters. Numerical simulation of the model provides a sensitivity analysis of how model parameters of restoration costs, stochastic biological growth, interest rate, and the market value of credits affect the trajectory of investment and the optimal stopping state of wetlands quality when the investment ends. The analysis reveals that restoration of the whole site will occur when there is a reduction in restoration costs, an increase in biological uncertainty or an increase in the value of wetlands credits. Continued restoration is harder to justify with a higher interest rate. Copyright Kluwer Academic Publishers 1998
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.
Volume (Year): 12 (1998)
Issue (Month): 3 (October)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100263
option value; stochastic control; wetlands mitigation banks;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Geske, Robert, 1979. "The valuation of compound options," Journal of Financial Economics, Elsevier, vol. 7(1), pages 63-81, March.
- Parks P. J. & Kramer R. A., 1995. "A Policy Simulation of the Wetlands Reserve Program," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 223-240, March.
- Pindyck, Robert S, 1991.
"Irreversibility, Uncertainty, and Investment,"
Journal of Economic Literature,
American Economic Association, vol. 29(3), pages 1110-48, September.
- Pindyck, Robert S., 1990. "Irreversibility, uncertainty, and investment," Working papers 3137-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Robert S. Pindyck, 1991. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
- Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
- Stavins, Robert N., 1990. "Alternative renewable resource strategies: A simulation of optimal use," Journal of Environmental Economics and Management, Elsevier, vol. 19(2), pages 143-159, September.
- Randall A. Kramer & Leonard Shabman, 1993. "The Effects of Agricultural and Tax Policy Reform on the Economic Return to Wetland Drainage in the Mississippi Delta Region," Land Economics, University of Wisconsin Press, vol. 69(3), pages 249-262.
- Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
- G. Cornelis van Kooten, 1993. "Bioeconomic Evaluation of Government Agricultural Programs on Wetlands Conversion," Land Economics, University of Wisconsin Press, vol. 69(1), pages 27-38.
- Shabman, Leonard A. & Batie, Sandra S., 1987. "Mitigating Damages From Coastal Wetlands Development: Policy, Economics and Financing," Marine Resource Economics, Marine Resources Foundation, vol. 4(3).
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Stavins, Robert N & Jaffe, Adam B, 1990. "Unintended Impacts of Public Investments on Private Decisions: The Depletion of Forested Wetlands," American Economic Review, American Economic Association, vol. 80(3), pages 337-52, June.
- Paul Hallwood, 2003. "Contractual Difficulties in Environmental Management and the Protection of Biodiversity: The Case of Conservation and Mitigation Banking," Working papers 2003-19, University of Connecticut, Department of Economics.
- Hallwood, Paul, 2007. "Contractual difficulties in environmental management: The case of wetland mitigation banking," Ecological Economics, Elsevier, vol. 63(2-3), pages 446-451, August.
- Gutrich, John J. & Hitzhusen, Fred J., 2004. "Assessing the substitutability of mitigation wetlands for natural sites: estimating restoration lag costs of wetland mitigation," Ecological Economics, Elsevier, vol. 48(4), pages 409-424, April.
- Patrick POINT (GREThA, CNRS, UMR 5113), 2012. "Valuation of wetland ecosystems services. Some methodological principles (In French)," Cahiers du GREThA 2012-19, Groupe de Recherche en Economie Théorique et Appliquée.
- Doyle, Martin W. & Yates, Andrew J., 2010. "Stream ecosystem service markets under no-net-loss regulation," Ecological Economics, Elsevier, vol. 69(4), pages 820-827, February.
- Boyer, Tracy A., 2003. "The Wetland Restoration Site Selection Problem Under Wetland Mitigation Banking (WMB) in Minnesota," 2003 Annual meeting, July 27-30, Montreal, Canada 22189, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.