Headwater Valuation as a Tool for Economic Development, Healthy Forest Management, and Water Resilience

Abstract

The upper American River watershed (UARW) provides a myriad of valuable benefits for local communities as well as throughout the state, nation, and even globally. These environmental benefits, often called ecosystem goods and services (EGS), include food, water, power, and recreational opportunities, among many others. Current ecological economics frameworks outline over twenty distinct EGS categories. While this information is becoming more widespread, many of these benefits are still undervalued or are not easily applied to policymaking and project-level investment decisions. Conventional EGS valuation focuses narrowly on a few specific EGS categories, ignoring many to the detriment of those seeking information on the economic value of natural infrastructure. This study provides a novel approach to watershed valuation by assessing eighteen EGS categories in a comprehensive watershed valuation by supplementing locally available data with the benefit transfer method. This approach demonstrates that watershed-scale EGS valuation is possible. The resulting valuation shows the natural capital asset in the UAW has a net present value of $731 billion and $1.6 trillion with 2.5% and 0% discount rates (100 years), respectively, and provides over $14.8 billion in annual value. Valuing natural capital in economic terms provides a common metric for comparison and integration with other types of investments in built and social capitals, informing policy and investment decisions for climate adaptation and water resilience. This EGS valuation provides a case study into how benefit transfer can be used to supplement locally available information to provide watershed-scale EGS valuations. The outcome serves as a tool to promote innovation and equity in the design of funding mechanisms and resulting allocation for improving watershed health, the associated EGS productivity, and rural-agricultural community resilience.