The United States is currently one of the many countries across the globe which continues to work towards implementing mechanisms focused on mitigating anthropogenic carbon emissions. In the U.S., markets and the market-like instruments which are employed within them, known most commonly as carbon offsets and renewable energy certificates (RECs), are the tools which encourage the development of renewable energy and reduce carbon emissions. These market-based incentives have the potential to significantly endorse or impede hydropower, dependent upon the potential interaction of science and politics.

The implications of the voluntary and compliance markets on alternative and renewable energy affect both the future development of power plants, as well as the management of existing facilities. Case studies demonstrating the financial impacts of these markets on hydropower projects are presented, which highlight the regulatory requirements in place for hydropower and other renewable power plants. The paper concludes with a discussion of what the future may hold for the environmental commodities markets and the role of the hydropower industry within them.

We conduct a benefit-cost analysis of a relicensing agreement for two hydroelectric dams in Michigan. The agreement changed daily conditions from peaking to run-of-river flows. We consider three categories of costs and benefits: producer costs of adapting electricity production to the new time profile of hydroelectric output; benefits
of reductions in air pollution and greenhouse gas emissions; and benefits of improved recreational fishing. The best estimates suggest that the aggregate benefits are more than twice as large as the producer costs. The conceptual and empirical methods provide a template for investigating the effects of an environmental constraint on hydroelectric dams. (JEL Q43, Q57)

This report is intended to help Fish and Wildlife Service (FWS) staff become more effective participants in the hydropower relicensing process through a better understanding of the economic analysis used to evaluate hydropower projects. Specifically, the report seeks to accomplish the following goals:

• Explain the Federal Energy Regulatory Commission's (FERC's) current approach to the economic analysis of relicensing alternatives;
• Review potential methodological refinements and why they are important; and
• Introduce a variety of approaches for assessing non-power values, helping FWS staff recognize when more advanced analyses are applicable.

The purpose of this document is not to provide a step-by-step guide for the conduct of primary economic analysis, i.e., the reader is not expected to become an expert in the implementation of the analyses described here. Rather, the document seeks to attune non-experts to the role of economics in relicensing and the diversity of techniques available.

This article presents the results of a hedonic property value analysis for multiple hydropower sites along the Kennebec River in Maine, including the former site of the Edwards Dam in Augusta, Maine. The effect of the removal of the Edwards Dam on the Kennebec River in Maine is examined through consumer's marginal willingness to pay to be close to or distant from the dam site. Data from both before and after the dam was removed are used to estimate changes in marginal prices. A similar data set is also used to look at the effects of the remaining upstream dams on property values.
This article presents one of the first (to our knowledge) ex post analyses on the economic impact of dam removal on property values. As more privately owned dams in the United States come up for relicensing, evaluating the impacts with and without the dam will become increasingly important. This work can help inform those analyses.

This paper uses hedonic analysis to examine the impact of small dam removal on property values in south-central Wisconsin. Data on residential property sales wereobtained for three categories of sites: those where a small dam remains intact, thosewhere a small dam was removed, and those where a river or stream has been free flowing for at least 20 yr. The primary conclusions that emerge from the data arethat shoreline frontage along small impoundments confers no increase in residentialproperty value compared to frontage along free-flowing streams and that nonfrontage residential property located in the vicinity of a free-flowing stream is more valuablethan similar nonfrontage property in the vicinity of a small impoundment.

Theories of agency behavior are tested via the empirical application of hydropower project relicensing by the Federal Energy Regulatory Commission (FERC). In the relicensing of each project, fish and wildlife afencies make formal recommendations to FERC on fish and wildlife protection at the project. FERC then enters a two-stage deliberation process during which it accepts; amends then accepts; or rejects each recommendation. We apply a count data model to explain the number of recommendations made per project and a bivariate probit model to explain FERC's disposition of the recommendations. The analysis covers 933 fish and wildlife recommendations made for 72 projects relicensed during 1980-96. Independent variables for the benefits and costs of the recommendations cannot be constructed because of FERC's deficient generation of economic information. A background section thus details the more serious limitations of FERC's application of economic analysis.
In explaining outcomes, a tension exists between the hierarchical control of Congress or the executive branch (the Progressive Reform model of agency behavior) and an agency's bureaucratic resistance to change (an evolutionary model of agency behavior). Key findings indicate that a new law (the Electric Consumers Protection Act of 1986) substantially altered FERC's fish and wildlife decisions, while a new administration (the Clinton administration, beginning 1993) exerted a mixed effect. Both events influenced the fish and wildlife agencies, as the number of recommendations made, per project, increased significantly at these junctures.

This report has been prepared at the request of EPA to provide an economic analysis of: 1) the costs to Tacoma of the mitigation measures I have been asked by EP to analyze (the "EPA straw man" mitigation measures), 2) how those costs would affect the total cost of Cushman Project generation and any required replacement generation, and 3) the consequences for TCL and its ratepayers of those costs. This report does not address either the environmental or economic benefits of the proposed mitigation measures, such as fishery and recreation benefits, which FERC will be obligated to consider in any Cushman licensing decision.
The proposed mitigation package would increase the cost of electricity produced at Cushman and reduce the amount of electricity generated at Cushman, without substantial rate increases and without jeopardizing Tacoma's competitive position in a deregulated market.

The United States Department of Energy's Hydropower Program has recently completed a study of fish passage and protection mitigation practices at conventional hydroelectric projects. The study used 16 projects as case studies to provide detailed illustrations of mitigation practices, allowing a better understanding of the resource and economic requirements, and the ramifications of mitigation choices. The study also surveyed fish passage and protection mitigation practices at 1,825 hydroelectric plants regulated by FERC to determine the frequencies of occurrence, temporal trends and regional practices based on FERC regions. Facilities with upstream mitigation employed fish ladders (62% of facilities), trapping and hauling (11%), fish lifts (5%), and other methods (35%). Some facilities used multiple forms of mitigation, this accounts for the percentage total greater than 100%. Downstream mitigation is used in some form at 13% of the 1,825 sites studied. Mitigation costs varied greatly, depending on the size of the facility and extent of mitigation. Fish ladder capital costs rang from $1000- $34.6million with an average cost of $7.4million per fish ladder. The costs of fish passage and protection measures can have significant effects on the economics of a project. However, forecasting the need for fish passage mitigation is complicated due to many site-specific concerns. Specific mitigation needs are often met with specific technologies including fish lifts, trapping and hauling systems, or fish ladders. In any case, mitigation determinations should be made with an eye toward biological needs as well as economic feasibility.

This report presents nearly 500 water value estimates for four withdrawal uses (domestic, irrigation, industrial processing, and thermoelectric power generation) and four instream uses (hydropower, recreation/fish and wildlife habitat, navigation, and waste disposal). The first section discusses important caveats for interpreting the data and the relevance of water values for achieving efficient use of the resource. Tables and graphs are used to summarize and help interpret the water-value data that have been converted to constant 1994 dollars. Section 3 presents the data by geographic region to illustrate how the values within a region vary among uses. Section 4 presents the data for individual water uses to illustrate how the values for specific uses vary within each of the 18water resources regions that comprise the conterminous United States. Information such as the location, year, and methodology used to derive each of the values are presented in the appendices along with each of the water value estimates. The data are organized by water resources region in Appendix B and by type of use in Appendix C.

By the close of the December 31, 1991, deadline, the licensees of 158 hydroelectric plants, totaling roughly 2,000 megawatts of installed capacity, had filed applications for relicense with the Commission. Though we on the Commission staff will now need to consider many aspects of each proposal, the most controversial aspect we'll face is how to choose among competing uses of each waterway. In this paper, I'll present both the theories that guide how we select among applicants' proposals and alternative proposals and the methods we use to make these choices. After discussing the theory and methods, I'll give examples from two recent environmental assessments to show how we choose the license option that we think gives the greatest benefit to the public. This way, you'll see how we apply these methods, what aspects are important, and what difficulties we face in making these choices.