Social, economic and environmental benefits from the restoration, enhancement and protection of ecosystems

An IndEco project report

Industrialization, with its increasing use of materials and energy, has left a legacy of diminished environmental quality and amenities. Resource industries (extraction and processing) damage rural and remote areas. Manufacturing and urbanization degrade ecosystems in built-up areas. This environmental legacy is often an impediment to the attraction of new information/service-based forms of economic development (green development), which might be more conducive to sustainability. To overcome this impediment, it is necessary to coordinate ecosystem restoration with the establishment of new "green" economic activities.

The following summarizes the experience of IndEco in developing a framework for directing ecosystem restoration toward the attainment of sustainable development potential and other benefits, and the application of this framework in two case studies.

A framework for ecosystem restoration

The conventional perspective, or neoclassical microeconomics approach to evaluating ecosystem restoration considers only the benefits of incremental changes in ecosystem health. Improvements in the quality of the natural environment result in marginal changes in human activity. This perspective of the relationship between the environment and economy is inappropriate, however, when addressing large-scale and open-ended transformations, such as the restoration of severely degraded ecosystems.

A more complete approach must consider the economy as a structurally evolving system, which, coevolves with the environmental system of which it is a part. As such, the protection, restoration or enhancement of an ecosystem changes not merely the quality of the natural environment, but the direction and structure of human economic activity. This alternative approach recognizes that ecosystem restoration is an economic activity that is part of the overall economic development path of an area. Moreover, the potential level and type of economic benefits in an area are related to the direct economic benefits arising from the restoration activity, and other follow-on economic activities arising from ecosystem restoration.

Ecosystem restoration investments and follow-on investments lead to benefits. The planning of initial restoration investments and follow-on investments is an iterative process in which actions can be modified according to the effects that are predicted or realized from these actions.

To realize the full economic development benefits, ecosystem restoration should be integrated into the development and planning activities of an area. For example, in the Great Lakes Basin, watershed restoration is generally associated with watershed enhancement, waterfront development, business promotion and residential intensification.

Benefits of ecosystem restoration

The benefit accounting framework allows the assessment of a wide range of policy options and scenarios in terms of the full range of benefits.

As depicted in the figure, below, five types of benefits of ecosystem restoration are identified:

  • Sustainability - including "preservation benefits" according to the regulatory, carrier, productive and informative functions of an ecosystem.
  • Avoided costs - savings of costs that would otherwise be incurred in the existing area.
  • Utilization - benefits arising from the enhanced uses that are made possible by the restoration.
  • Direct economic development - impacts resulting from expenditures that occur after the initial restoration period including increased capital investments by both private investors and government.
  • Indirect economic development - impacts resulting from the new expenditures of firms that supply the requirements arising as a consequence of direct economic development.

In practice, there are substantial gaps in the current state of knowledge so that reliable quantification of some benefits is not yet possible. The main effort here has been devoted to presenting and demonstrating the complete framework for benefit assessment.

    Case studies

    Hamilton Harbour and the lower Don River Valley watersheds were selected as case studies to show the application of the conceptual framework. The economic, social and environmental benefits attributed to watershed restoration in the two case studies are considered conservative.

    Hamilton Harbour -- The vision for Hamilton Harbour is based on the integration of current and new economic activity with increased recreational opportunities along the waterfront. New economic and recreational opportunities are the result of improvements to the Harbour's natural environment from restoration and enhancement. Sustainability benefits include the restoration of a healthy watershed and the protection of important heritage and habitat areas. The economic benefits include avoided costs for water treatment and utilization benefits resulting from increased access to an improved level and quality of recreational opportunities. Direct economic development benefits result from the new capital and operating expenditures from residential intensification and new business activity. The direct economic development impacts are an estimated $2.2 billion in new capital expenditures, and annual expenditures of about $2.3 billion. Although the timing of these impacts depends on the pace of restoration and follow-on investments, the increase in tax revenue soon repays the $674 million in initial restoration expenditures.

    Lower Don River Valley -- The vision for the lower Don River Valley emphasizes rehabilitation of the watershed and the re-establishment of economic activity along the waterfront. Waterfront activities will focus on new, sustainable industries and commercial sector use. Corresponding residential and recreational facility development is envisioned but at a much smaller scale than in Hamilton Harbour.

    The benefits from rehabilitating the river valley include:

      • sustainability benefits from the restoration of a healthy watershed and the protection of important heritage and habitat areas;
      • avoided costs from preserving greenspace and avoiding "extensive" land development elsewhere;
      • utilization benefits from the re-establishment of a publicly accessible wetland system in the Don River basin; and
      • direct economic benefits from these new uses, and from the development of a renewed business sector of knowledge-based and green/light industries.
    This new industrial base (including industries involved in watershed restoration and protection) will be attracted to the area by the enhanced environmental amenities, and by the establishment of a new industrial park. The direct economic development impacts are an estimated $2.6 billion in new capital expenditures, and annual expenditures of about $4.4 billion. Again, the timing of these impacts depends on the pace of restoration and follow-on investments, but the return in tax revenues soon repays the $784 million in initial restoration expenditures.

    Next steps

    The assessment of ecosystem benefits using this framework can be applied to other watersheds or ecosystems. Currently we are undertaking an assessment of the benefits from Remedial Action Plans for the Cornwall and Thunder Bay Areas of Concern. An assessment is also being proposed for the Humber river watershed restoration project.

    For more information, contact IndEco