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Environmental Constraints on Hydropower: An Ex Post Benefit-Cost Analysis of Dam Relicensing in Michigan


  • Matthew J. Kotchen
  • Michael R. Moore
  • Frank Lupi
  • Edward S. Rutherford


We conduct a benefit-cost analysis of a relicensing agreement for two hydroelectric dams in Michigan. The agreement changed daily conditions from peaking to run-of-river flows. We consider three categories of costs and benefits: producer costs of adapting electricity production to the new time profile of hydroelectric output; benefits of reductions in air pollution and greenhouse gas emissions; and benefits of improved recreational fishing. The best estimates suggest that the aggregate benefits are more than twice as large as the producer costs. The conceptual and empirical methods provide a template for investigating the effects of an environmental constraint on hydroelectric dams.

Suggested Citation

  • Matthew J. Kotchen & Michael R. Moore & Frank Lupi & Edward S. Rutherford, 2006. "Environmental Constraints on Hydropower: An Ex Post Benefit-Cost Analysis of Dam Relicensing in Michigan," Land Economics, University of Wisconsin Press, vol. 82(3), pages 384-403.
  • Handle: RePEc:uwp:landec:v:82:y:2006:i:3:p:384-403

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    References listed on IDEAS

    1. Berrens, Robert P. & Bohara, Alok K. & Jenkins-Smith, Hank & Silva, Carol L. & Ganderton, Philip & Brookshire, David, 1998. "A joint investigation of public support and public values: case of instream flows in New Mexico," Ecological Economics, Elsevier, vol. 27(2), pages 189-203, November.
    2. Cameron, Trudy Ann & Shaw, W. Douglass & Ragland, Shannon E. & Callaway, J. Mac & Keefe, Sally, 1996. "Using Actual And Contingent Behavior Data With Differing Levels Of Time Aggregation To Model Recreation Demand," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), July.
    3. Brian K. Edwards & Silvio J. Flaim & Richard E. Howitt, 1999. "Optimal Provision of Hydroelectric Power under Environmental and Regulatory Constraints," Land Economics, University of Wisconsin Press, vol. 75(2), pages 267-283.
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    Cited by:

    1. Pérez-Díaz, Juan I. & Wilhelmi, José R., 2010. "Assessment of the economic impact of environmental constraints on short-term hydropower plant operation," Energy Policy, Elsevier, vol. 38(12), pages 7960-7970, December.
    2. Pérez-Díaz, J.I. & Millán, R. & García, D. & Guisández, I. & Wilhelmi, J.R., 2012. "Contribution of re-regulation reservoirs considering pumping capability to environmentally friendly hydropower operation," Energy, Elsevier, vol. 48(1), pages 144-152.
    3. Guisández, Ignacio & Pérez-Díaz, Juan I. & Wilhelmi, José R., 2013. "Assessment of the economic impact of environmental constraints on annual hydropower plant operation," Energy Policy, Elsevier, vol. 61(C), pages 1332-1343.
    4. Chen, Min & Lupi, Frank, 2013. "Modeling Long Overnight Trips by Chaining Recreation Sites," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150489, Agricultural and Applied Economics Association.
    5. Niu, Shilei & Insley, Margaret, 2013. "On the economics of ramping rate restrictions at hydro power plants: Balancing profitability and environmental costs," Energy Economics, Elsevier, vol. 39(C), pages 39-52.
    6. Kern, Jordan D. & Characklis, Gregory W., 2017. "Low natural gas prices and the financial cost of ramp rate restrictions at hydroelectric dams," Energy Economics, Elsevier, vol. 61(C), pages 340-350.
    7. repec:zwi:journl:y:2009 is not listed on IDEAS
    8. HÃ¥kansson, Cecilia, 2007. "Cost-benefit analysis and valuation uncertainty," Department of Forest Economics publications 1432, Swedish University of Agricultural Sciences, Department of forest economics.
    9. Lee, Yoon & Yoon, Taeyeon & Shah, Farhed A., 2009. "Economics of Integrated Watershed and Reservoir Management," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49478, Agricultural and Applied Economics Association.
    10. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    11. Yu, Bing & Xu, Linyu, 2016. "Review of ecological compensation in hydropower development," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 729-738.
    12. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    13. Matthew J. Kotchen & Laura E. Grant, 2011. "Does Daylight Saving Time Save Energy? Evidence from a Natural Experiment in Indiana," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1172-1185, November.
    14. Lea Kosnik, 2010. "Balancing Environmental Protection and Energy Production in the Federal Hydropower Licensing Process," Land Economics, University of Wisconsin Press, vol. 86(3).
    15. Borisova, Tatiana & Bi, Xiang & Hodges, Alan & Holland, Stephen, 2017. "Is the tide is changing? Assessing costs and benefits of dam removal and river restoration: a case study in Florida," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252833, Southern Agricultural Economics Association.
    16. Knoche, Scott & Lupi, Frank, 2007. "Valuing deer hunting ecosystem services from farm landscapes," Ecological Economics, Elsevier, vol. 64(2), pages 313-320, December.

    More about this item

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics


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