Alaska’s Alaska’s Environmental Environmental

AssetsAssets

5 March 2008

OverviewOverview

Economic importance – today – of healthy Economic importance – today – of healthy Alaska ecosystemsAlaska ecosystems

Environmental assets and ecosystem Environmental assets and ecosystem servicesservices

Value and the “twin scissors”Value and the “twin scissors”

Implications of global growthImplications of global growth

Economic Importance:Economic Importance: What is it?What is it?

Economic Significance: Jobs and Economic Significance: Jobs and Income from a specified set of Income from a specified set of economic activities economic activities

Net Economic Value: An attempt to Net Economic Value: An attempt to measure people’s willingness to pay measure people’s willingness to pay for things like fishing, over and above for things like fishing, over and above what they do pay.what they do pay.

Willingness to Pay:Willingness to Pay:What is it?What is it?

An attempt to An attempt to measuremeasure what people what people would actually do if confronted with would actually do if confronted with the choicethe choiceNotNot some economist’s idea of what some economist’s idea of what something “ought” to be worthsomething “ought” to be worth

Example: WTPExample: WTPValue of Alaska Sport FishValue of Alaska Sport Fish

ISER Results (1993):ISER Results (1993):– People actually paid: $550 millionPeople actually paid: $550 million– People were willing to pay an additional $186 People were willing to pay an additional $186

million to fishmillion to fish– $186 million is the net economic value of the $186 million is the net economic value of the

sport fisherysport fishery– This is what the State of AK could, in theory, This is what the State of AK could, in theory,

collect in additional fishing license feescollect in additional fishing license fees

Summary of Findings: JobsSummary of Findings: Jobs (circa 2001) (circa 2001)

DirectDirect TotalTotal

FishingFishing 19,92819,928 33,67033,670

TourismTourism 16,87116,871 25,51225,512

Sport Fish/HuntSport Fish/Hunt 8,8008,800 12,20012,200

Land MgmtLand Mgmt 4,5344,534 10,47510,475

Resident RecreationResident Recreation 7,2007,200 9,8009,800

SubsistenceSubsistence 1,9801,980 1,9801,980Adjust for doublecountAdjust for doublecount (4,356)(4,356) (9,450)(9,450)

TOTALTOTAL 55,00055,000 84,20084,200

Commercial Fishing Commercial Fishing (circa 2001)(circa 2001)

19,928 Direct FTE jobs19,928 Direct FTE jobs14,000 Indirect jobs from economic 14,000 Indirect jobs from economic multiplier effectsmultiplier effects– Indirect jobs: people who make or repair Indirect jobs: people who make or repair

fishing nets or sell gasolinefishing nets or sell gasoline– Induced jobs: people whose jobs depend on Induced jobs: people whose jobs depend on

the fishers’ purchasing powerthe fishers’ purchasing power

1.0 billion total income1.0 billion total incomeNet Value (of fish in the water): $192-360 Net Value (of fish in the water): $192-360 million/yrmillion/yr

Sport Fishing Sport Fishing (circa 2001)(circa 2001)

6,635 Direct Alaska Jobs6,635 Direct Alaska Jobs

2,600 Indirect / Induced2,600 Indirect / Induced

$233 million total income$233 million total income

$632 total expenditure in AK$632 total expenditure in AK

$215 additional willingness to pay (this is $215 additional willingness to pay (this is net economic value of the fish in the net economic value of the fish in the water)water)

Subsistence Subsistence (circa 2001)(circa 2001)

Total cash expenditures on inputs $96.5 million/yrTotal cash expenditures on inputs $96.5 million/yr

These $$ support 1,978 total jobsThese $$ support 1,978 total jobs

$61 million total cash income to providers of $61 million total cash income to providers of commercial inputscommercial inputs

Net WTP for subsistence ranges between:Net WTP for subsistence ranges between:– Zero ($4/lb replacement value less cash and Zero ($4/lb replacement value less cash and

labor input)labor input)

andand– $1.7 Billion /yr (EVOS studies)$1.7 Billion /yr (EVOS studies)

Tourism (nonresidents bringing $$ Tourism (nonresidents bringing $$ into AK economy) into AK economy) (circa 2007)(circa 2007)

$1.6 billion+ of total expenditures $1.6 billion+ of total expenditures generatesgenerates

19,000 direct jobs / 28,000 total jobs 19,000 direct jobs / 28,000 total jobs

$750 million total income$750 million total income

Net WTP for experience = unknownNet WTP for experience = unknown

Summary of Findings: Net Summary of Findings: Net Economic Value Economic Value ($ million)($ million)

Low est.Low est. High est.High est.

Commercial FishingCommercial Fishing 192192 360360

Sport FishingSport Fishing 215215 215215

Sport HuntingSport Hunting 2323 2323

Resident Wildlife Resident Wildlife ViewingViewing

1717 3737

SubsistenceSubsistence 00 1,7001,700

Life SupportLife Support 1,2001,200 1,6281,628

Existence ValueExistence Value 309309 29,65229,652

Environmental Assets and Environmental Assets and Ecosystem ServicesEcosystem Services

Econ 101: What is an Asset?Econ 101: What is an Asset?

Anything that generates a Anything that generates a flow of servicesflow of services– your car provides transportationyour car provides transportation– your house provides shelteryour house provides shelter– your human capital provides a job, income, your human capital provides a job, income,

and a rewarding careerand a rewarding career– your portfolio will (someday!) provide a stream your portfolio will (someday!) provide a stream

of retirement incomeof retirement income

No services provided?No services provided?– No assetNo asset

Why is an undisturbed environment Why is an undisturbed environment an asset?an asset?

It generates a flow of It generates a flow of ecosystem servicesecosystem services- renewable commodities (fish, timber)renewable commodities (fish, timber)- basic life support services (nutrient cycling, basic life support services (nutrient cycling,

climate regulation)climate regulation)- habitathabitat- recreation experiencesrecreation experiences- beauty, solace, inspirationbeauty, solace, inspiration

Remember: no services? Remember: no services? – No asset!No asset!

simulations: http://www.vets.ucar.edu/vg/CCM2T170/precip.shtml

Ecosystem Services...Ecosystem Services...

Are a re-branding and re-packaging Are a re-branding and re-packaging of an old listof an old listAre the brainchild of a smart, savvy Are the brainchild of a smart, savvy Stanford professor named Gretchen Stanford professor named Gretchen DailyDailyHumans should value nature much Humans should value nature much as we value any other economic or as we value any other economic or cultural asset – based on flow of cultural asset – based on flow of future servicesfuture services

So What?So What?First, “Mark Klassen’s Dilemma”First, “Mark Klassen’s Dilemma”

www.valkyradventures.com

Total value depends on:Total value depends on:

Number of people receiving the serviceNumber of people receiving the service

Value received per personValue received per person

There is tension, already, between these twoThere is tension, already, between these two

Value per person depends onValue per person depends on

subjective tastessubjective tastes– ““There is no accounting for taste”There is no accounting for taste”

But also on:But also on:– Circumstances and scarcity (water in the Circumstances and scarcity (water in the

desert vs. water in Ketchikan) desert vs. water in Ketchikan) – Skills and interests (piano, to Beethoven)Skills and interests (piano, to Beethoven)– IncomeIncome

The going price (willingness to The going price (willingness to pay) for nature’s services pay) for nature’s services

depends on the depends on the ““Twin Scissors”Twin Scissors”

of supply of supply andand demand demand(Alfred Marshall)(Alfred Marshall)

D

S

quantity

WT

P

Supply side:Supply side:

Alaska may be “abundant” to us, but Alaska may be “abundant” to us, but increasingly increasingly scarcescarce to everyone else to everyone else

Land: They ain’t makingLand: They ain’t making any more of it any more of it– 50%+ of global population lives in cities50%+ of global population lives in cities

http://www.alaskab4udie.com/

Demand sideDemand side

PopulationPopulation

Average annual growth ratesAverage annual growth rates

Real per capita income, 1960-2000Real per capita income, 1960-2000– World: 2.2%World: 2.2%– Richest billion people: 2.7%Richest billion people: 2.7%– China: 4.3%China: 4.3%

Real total income, 1960-2000Real total income, 1960-2000– World: 4.1%World: 4.1%– Richest billion people: 3.8%Richest billion people: 3.8%– China: 6.0%China: 6.0%

Share of U.S. adults with Share of U.S. adults with some college or more:some college or more:

1984: 39% of adults1984: 39% of adults

2001: 53%2001: 53%

Educational attainmentEducational attainment

Average annual growth ratesAverage annual growth ratesSummer Visitors to AlaskaSummer Visitors to Alaska– 1989 - 2004: 6%1989 - 2004: 6%

Cruise passengers to AlaskaCruise passengers to Alaska– 1989 – 2004: 12%1989 – 2004: 12%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000 air, highway, ferry

Cruise

Recreation visits to AK National Recreation visits to AK National ParksParks

Source: http://www2.nature.nps.gov/stats/

avg annual growth = 7.6%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,00019

79

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Average annual growth ratesAverage annual growth ratesVisitors to all Alaska national parksVisitors to all Alaska national parks– 1980 - 2004: 7.6%1980 - 2004: 7.6%

Visitors to pre-ANILCA parksVisitors to pre-ANILCA parks[1960-62] – [2002-04][1960-62] – [2002-04]– Glacier Bay: 15%Glacier Bay: 15%– Denali: 7%Denali: 7%– Katmai: 12%Katmai: 12%– All three together: 9%All three together: 9%

Recreation visits by parkRecreation visits by park

050,000

100,000150,000

200,000250,000300,000

350,000400,000

450,000500,000

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

Denali

Glacier Bay

Kenai Fjords

Wrangell StElias

Case Study: Seward EconomyCase Study: Seward Economy(ISER 2001)(ISER 2001)

Seward wage and salary employment Seward wage and salary employment grew at 3.7% per yr between 1980 and grew at 3.7% per yr between 1980 and 2000, vs. 2.6% for entire State.2000, vs. 2.6% for entire State.

ImplicationsImplications

Treat the environment as the asset Treat the environment as the asset that it isthat it is

Invest in complements and “green Invest in complements and “green infrastructure”infrastructure”– Double-decker buses for the Denali Park Double-decker buses for the Denali Park

RoadRoad– More bear-viewing locationsMore bear-viewing locations– Tourism zoningTourism zoning

ImplicationsImplications

““Skate to where the puck is going”*:Skate to where the puck is going”*:Make decisions with future growth in Make decisions with future growth in mindmindMaintain the ecosystem services that Maintain the ecosystem services that are most scarce; these have highest are most scarce; these have highest potential future economic valuepotential future economic value

*attributed to Wayne Gretzky aka “The Great One.”

Joni Mitchell theory: preservation Joni Mitchell theory: preservation is easier than restorationis easier than restoration

You don’t know what You don’t know what you’ve got…you’ve got…

‘‘Til it’s goneTil it’s gone

Boston: Reclaiming a “park strip”Boston: Reclaiming a “park strip”

During: During: The Big The Big DigDig

Before: Before: Central Central ArteryArtery

Boston: Reclaiming a “park strip”Boston: Reclaiming a “park strip”

After:After:Rose Rose Kennedy Kennedy GreenwayGreenway

And the And the cost??cost??

$10 billion$10 billion

Alaska’s Alaska’s Environmental Environmental

AssetsAssetswww.iser.uaa.alaska.www.iser.uaa.alaska.eduedu

steve.colt@uaa.alaska.edusteve.colt@uaa.alaska.edu5 March 2008