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What’s a river worth? (Re)valuing natural capital as natural assets

Sunset Choctaw Island

The Mississippi River central delta at Choctaw Island

Earth Economics is a US-based group that “applies new economic tools and principles to meet the challenges of the 21st century: achieving the need for just and equitable communities, healthy ecosystems, and sustainable economies.

They’ve just released a Report, entitled “Gaining Ground. Wetlands, Hurricanes and the Economy: The Value of Restoring the Mississippi River Delta” that adopts – for me at least – what appears to be a refreshingly new approach to the valuation of natural ecosystems.

Earth Economic’s evaluation of the lower Mississippi Delta finds that:

The Mississippi River Delta ecosystems provide at least $12-47 billion in benefits to people every year. If this natural capital were treated as an economic asset, the delta’s minimum asset value would be $330 billion to $1.3 trillion (3.5% discount rate). This study is the most comprehensive measure of the economic value of Mississippi River Delta natural systems to date. Marine waters, wetlands, swamps, agricultural lands and forests provide natural goods and services. The goods and ecosystem services valued in this study include hurricane and flood protection, water supply, water quality, recreation and fisheries. The Mississippi River Delta is a vast natural asset, a basis for national employment and economic productivity. It was built by literally gaining ground: building land with sediment, fresh water and the energy of the Mississippi River.

While the report concentrates on the lower Mississippi delta, this approach may have broader application – particularly in an Australian context where we have a seemingly endless struggle trying to work out how we are going to manage major economic and ecological assets like the Murray/Darling river systems.

I’m on the road and haven’t had time to fully digest this long and complex report yet but at first and second glances it seems to be worth a longer appraisal and may provide some interesting perspectives on how we value similar assets in this country.

One thing that impresses me in this report is the view that nature should be seen as a service provider, rather than what is the apparent dominant paradigm at present – as the source of material to be exploited.

The economics is clear: invest in the Mississippi River rebuilding the delta to gain ground, physically and economically. On the other hand, ground loss results in loss of nature’s services, causing a hurricane-driven disorderly retreat inland and damaging people and businesses. This analysis strengthens ongoing planning by providing the economic justification for large-scale restoration.

A particular emphasis in the report is the value of intact natural assets as protection against the ravages of nature – if you keep these assets intact – or as best to intact as is possible – they can provide bases for future economic and social development. The main points from the Report include the following:

1. Mississippi River Delta ecosystems provide economically valuable services including hurricane storm protection, water supply, climate stability, food, furs, habitat, waste treatment, and other benefits worth at least $12-47 billion/year. These annual benefits provide a vast amount of value to people across time.


3. Wetlands – a product of Mississippi River deltaic processes – which include freshwater, saltwater, estuaries, tidal bays, and cypress swamps account for more than 90% of the estimated total value of ecosystem services provided in the Mississippi Delta.

4. Large-scale physical changes are affecting the Mississippi River Delta. These are known facts: hurricanes have become larger and more frequent in the last 30 years, sea level has risen, atmospheric temperatures have risen, and the delta is subsiding and has lost over 1.2 million acres of land since 1930.

5. Three scenarios show that a “do-nothing” approach will cost at least $41 billion in damages. A “hold the line” scenario avoids the $41 billion, without additional benefits. A third “sustainable restoration” option will avoid $41 billion in losses and secure $21 billion in benefits, providing $62 billion in present value.


8. Restoration of the Mississippi River deltaic processes requires a major investment to maintain or expand the vast value of this natural asset. The movement of water and sediment and the maintenance and expansion of land underlies the production of many economic benefits, including protection against hurricanes. Without this investment, people and economic assets will be forced to retreat from the coast.

I’ll have a closer look at the report when I get back home early next week. In the meantime I look forward to seeing your thoughts over the next few days while I’m out of range somewhere on the Barkly Tablelands in the central Northern Territory- where I may pick up a few thoughts about large-scale cattle production on our northern savannahs.

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  • 1
    paul
    Posted June 17, 2010 at 12:29 pm | Permalink

    Look forward to a more in-depth coverage. In the meantime, I have say the method of estimating something that seems to have little commercial value by imagining it being gone is nothing new. E.g. how do you value the wetlands, imagine it gone, the loss to nearby community in terms of farm produce, tourism or other produce.

    It is somewhat ironic that we have to go back to such drastic measures. I remember my economic lecturer said once that another way to value intangible assets was to survey population to say what they are willing to pay for such asset to be there. e.g. How much are you willing to pay towards keeping the Great Barrier Reef protected. But the trouble is we as humans could never agree on a value because there were simply too much vested interests. Seems that the opposite is true, we all start to listen when we stand to lose something…

  • 2
    syzygium
    Posted June 17, 2010 at 1:40 pm | Permalink

    This is only tangentially related, but here is a modified form of a letter I sent to the NT News last week. They have apparently decided not to run it, so I’ll post it here. In my opinion, while environmental services pricing can be useful, the larger issue is that given what is left in the world, Australia’s north is priceless:

    60,000 barrels of oil every day. It’s anyone’s guess but that’s probably how much is leaking out of BP’s oil well in the Gulf of Mexico. The Boston Globe has put together a stunning online photo essay that conveys what words cannot:

    http://www.boston.com/bigpicture/2010/06/scenes_from_the_gulf_of_mexico.html
    http://www.boston.com/bigpicture/2010/06/caught_in_the_oil.html
    http://www.boston.com/bigpicture/2010/05/oil_reaches_louisiana_shores.html

    The Gulf Region, like the Timor and Arafura Sea, was once a region brimming with biological wonders found nowhere else on Earth. When Christopher Columbus first landed in the New World, just offshore of present day Haiti (on an island now called “Los Tortugas”- the turtles) he found it difficult to navigate ashore due to the sheer number of turtles swimming in the water. Such places are now precious few on this planet – we happen to live in one of them. The Gulf states of the U.S. placed their hopes for economic development on offshore oil, and are now paying the price. Our development boosters, in government, mining, real estate, and this newspaper [the NT News], are putting us on that same path. We’ve already had one blowout in Montaro, and despite assurances to the contrary, further accidents, either at Inpex or offshore, are not a question of whether but when. Reflect on those pictures of the Gulf today, reflect on what is really valuable about living in Darwin, and what price we are willing to pay for oil.

  • 3
    Posted June 18, 2010 at 8:55 am | Permalink

    environmental consultants are currently advising governments on which of australia’s rivers will have to go, in order for others to be ‘saved’. such is the quality of our earth stewardship over the past 200 years.

    in the victorian town of ballarat premier brumby is about to truck in water to fill lake wendouree – real estate prices have fallen there since the lake has dried out.

    the wealthy demand their lake views, such is the colour of anthropocentric idiocy.

  • 4
    iainb
    Posted June 18, 2010 at 2:22 pm | Permalink

    I’ve just discovered your very interesting blog – while surfing on the subject of the Timor Sea oil spill. Reading your posting on the Mississippi Delta, I wondered why there was no mention of the Gulf of Mexico spill – surely, this will tax to the utmost the entire ecology of the delta …. and throw all estimates of the value of the region (whether as a “service provider” or a source of resources) into the bin. By now, the news seems more than catastrophic, not only for the Gulf ecology, but for the Atlantic. Like the Bhopal disaster, it makes me weep.

    have you see the website http://gulftribunal/tmblr.com/ ?

    Many thanks for your blog! iainb

  • 5
    Bob Gosford
    Posted June 19, 2010 at 11:25 am | Permalink

    hello all – thanks for your responses – right now I’m in the carpark of the Barkly Homestead after a few days wandering around with mobs of horses, cows, cowboys and wannabes…looking for some dirt roads to wend my back to Alice Springs – where I’ll be by sometime tomorrow evening.
    I’ll have a closer look at this report and do a longer post for the email version early in the week.
    Keep those comments coming, Bob

  • 6
    glaaassman
    Posted June 20, 2010 at 3:26 pm | Permalink

    Bob, great post and, as others have said, make such sense you wonder why it has taken us so long to realise it! You and other people who have commented might be interested in the book Natural Capitalism (Hawken, Lovins and Lovins), which is basically all about the idea of valuing natural assets in a more sensible and sustainable way.

    I’ve also linked to your blog from mine if that is okay. I’ve only started but I think my (very) small band of readers will like your stuff. Mine is a leadership blog, all about the new styles of leadership we will need to tackle the big issues we are all facing…. http://blog.clarksonread.com

2 Trackbacks

  1. ...] This post was mentioned on Twitter by Bob Gosford, Top End Tweets. Top End Tweets said: The Northern Myth: What’s a river worth? (Re)valuing natural capital as natural assets http://bit.ly/d46v7f #topend [...

  2. ...] it…but boy is it great when you see some of the concepts  being put into action. Check this out….a group called the Earth Economics have re-valued the lower Mississippi Delta in-line with [...

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