Alaska’s Environmental Assets 5 March 2008

Overview Economic importance – today – of healthy Alaska ecosystems Environmental assets and ecosystem services Value and the “twin scissors” Implications of global growth

Economic Importance: What is it? Economic Significance: Jobs and Income from a specified set of economic activities Net Economic Value: An attempt to measure people’s willingness to pay for things like fishing, over and above what they do pay.

Willingness to Pay: What is it? An attempt to measure what people would actually do if confronted with the choice Not some economist’s idea of what something “ought” to be worth

Example: WTP Value of Alaska Sport Fish ISER Results (1993): –People actually paid: $550 million –People were willing to pay an additional $186 million to fish –$186 million is the net economic value of the sport fishery –This is what the State of AK could, in theory, collect in additional fishing license fees

Summary of Findings: Jobs (circa 2001) DirectTotal Fishing19,92833,670 Tourism16,87125,512 Sport Fish/Hunt 8,80012,200 Land Mgmt 4,53410,475 Resident Recreation 7,2009,800 Subsistence1,9801,980 Adjust for doublecount (4,356)(9,450) TOTAL55,00084,200

Commercial Fishing (circa 2001) 19,928 Direct FTE jobs 14,000 Indirect jobs from economic multiplier effects –Indirect jobs: people who make or repair fishing nets or sell gasoline –Induced jobs: people whose jobs depend on the fishers’ purchasing power 1.0 billion total income Net Value (of fish in the water): $ million/yr

Sport Fishing (circa 2001) 6,635 Direct Alaska Jobs 2,600 Indirect / Induced $233 million total income $632 total expenditure in AK $215 additional willingness to pay (this is net economic value of the fish in the water)

Subsistence (circa 2001) Total cash expenditures on inputs $96.5 million/yr These $$ support 1,978 total jobs $61 million total cash income to providers of commercial inputs Net WTP for subsistence ranges between: –Zero ($4/lb replacement value less cash and labor input) and and –$1.7 Billion /yr (EVOS studies)

Tourism (nonresidents bringing $$ into AK economy) (circa 2007) $1.6 billion+ of total expenditures generates 19,000 direct jobs / 28,000 total jobs $750 million total income Net WTP for experience = unknown

Summary of Findings: Net Economic Value ($ million) Low est. High est. Commercial Fishing Sport Fishing Sport Hunting 2323 Resident Wildlife Viewing 1737 Subsistence01,700 Life Support 1,2001,628 Existence Value 30929,652

Environmental Assets and Ecosystem Services

Econ 101: What is an Asset? Anything that generates a flow of services –your car provides transportation –your house provides shelter –your human capital provides a job, income, and a rewarding career –your portfolio will (someday!) provide a stream of retirement income No services provided? –No asset

Why is an undisturbed environment an asset? It generates a flow of ecosystem services -renewable commodities (fish, timber) -basic life support services (nutrient cycling, climate regulation) -habitat -recreation experiences -beauty, solace, inspiration Remember: no services? –No asset! simulations: CM2T170/precip.shtml CM2T170/precip.shtml

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

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

Total value depends on: Number of people receiving the service Value received per person There is tension, already, between these two

Value per person depends on subjective tastes –“There is no accounting for taste” But also on: –Circumstances and scarcity (water in the desert vs. water in Ketchikan) –Skills and interests (piano, to Beethoven) –Income

The going price (willingness to pay) for nature’s services depends on the “Twin Scissors” of supply and demand (Alfred Marshall) D S quantity WTP

Supply side: Alaska may be “abundant” to us, but increasingly scarce to everyone else Land: They ain’t making any more of it – 50%+ of global population lives in cities

Demand side Population

Average annual growth rates Real per capita income, –World: 2.2% –Richest billion people: 2.7% –China: 4.3% Real total income, –World: 4.1% –Richest billion people: 3.8% –China: 6.0%

Share of U.S. adults with some college or more: 1984: 39% of adults 2001: 53% Educational attainment

Average annual growth rates Summer Visitors to Alaska – : 6% Cruise passengers to Alaska –1989 – 2004: 12%

Recreation visits to AK National Parks Source: avg annual growth = 7.6%

Average annual growth rates Visitors to all Alaska national parks – : 7.6% Visitors to pre-ANILCA parks [ ] – [ ] –Glacier Bay: 15% –Denali: 7% –Katmai: 12% –All three together: 9%

Recreation visits by park

Case Study: Seward Economy (ISER 2001) Seward wage and salary employment grew at 3.7% per yr between 1980 and 2000, vs. 2.6% for entire State.

Implications Treat the environment as the asset that it is Invest in complements and “green infrastructure” –Double-decker buses for the Denali Park Road –More bear-viewing locations –Tourism zoning

Implications “Skate to where the puck is going”*: Make decisions with future growth in mind Maintain the ecosystem services that are most scarce; these have highest potential future economic value *attributed to Wayne Gretzky aka “The Great One.”

Joni Mitchell theory: preservation is easier than restoration You don’t know what you’ve got… ‘Til it’s gone

Boston: Reclaiming a “park strip” During: The Big Dig Before: Central Artery

Boston: Reclaiming a “park strip” After: Rose Kennedy Greenway And the cost?? $10 billion

Alaska’s Environmental Assets March 2008