IP08 Habitat Equivalency Analysis for Natural Resource Damage Assessment
B115 & B116
8:00 AM - 12:00 PM, Wednesday
(IP064) Discounting and Uncertainty in Natural Resource Damage Assessments.
Hampton, S.1, Zafonte, M.1, 1 California Department of Fish and Game, Sacramento, CA, 95616
ABSTRACT- Restoration-based scaling methods, such as Habitat or Resource Equivalency Analysis (HEA or REA), quantify lost resource services from an injury and gained resource services from a restoration project into the future. In many cases, the injury and/or the restoration project are projected to last several decades or even into perpetuity. Following economic theory and federal guidelines, resources provided (or lost) in the future are discounted at some specified rate. This poster reviews the role and significance of discounting in restoration scaling. We consider intergenerational equity concerns, time preference, and uncertainty as rationales for discounting, and examine various discounting formulations (e.g. constant and hyperbolic). We present several quantitative examples regarding the effects of uncertainty of restoration project success on the discount rate. We conclude that the specification of the discount rate can have a large effect on restoration scaling calculations in many cases. Furthermore, uncertainty associated with restoration project benefits, if incorporated into the discount rate, can overwhelm the effect of time preference on the discount rate in some cases.
Key words: natural resource valuation, discounting