The primary economic difficulty that watershed restoration faces is that there are relatively few markets for its products. In economic-speak, this is a market failure in the provision of watershed restoration. Because of this market failure, collective action, often in the form of government intervention, usually occurs in order to pay for restoration activities. Many government programs, and society at large, typically require the benefits of an activity to outweigh its costs. Thus it is important to quantify the economic benefits arising from watershed restoration. Measured by damage caused, willingness to pay, political referenda, averted expenditures, travel costs incurred, and changes in housing values, researchers consistently conclude that watershed restoration has significant economic benefits. Watershed restoration projects have other economic impacts as well, directly and indirectly employing many people, and potentially contributing to the long-term viability and growth of communities. However, restoration advocates face hurdles in justifying restoration on economic grounds due to the vague nature of nonmarket valuation, long timescales required for achieving a positive return on investment in certain restoration projects, and unknown incremental benefits of watershed restoration in increasing the natural amenity qualities of communities.

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)

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.

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 report presents a review of economic studies for the United States and relates them to predicted impacts of climate change. The summary findings are organized by region and identify the key sectors likely affected by climate change, the main impacts to be expected, as well as estimates of costs. The report builds on the 2000 Global Change Research Program National Assessment, using additional regional and local studies, as well as new calculations derived from federal, state and industry data sources. From this review and quantification, five key lessons emerge:

1. Economic impacts of climate change will occurthroughout the country
2. Economic impacts will be unevenly distributedacross regions and within the economy andsociety.
3. Negative climate impacts will outweighbenefits for most sectors that provide essentialgoods and services to society.
4. Climate change impacts will place immensestrains on public sector budgets.
5. Secondary effects of climate impacts caninclude higher prices, reduced income and joblosses.

The contribution of nonmarket valuation studies to decisions about the operation of nonfederal hydroelectric facilities is examined. Hydropower licensing reforms by the Federal Energy Regulatory Commission to better weigh market and nonmarket tradeoffs did not require or use nonmarket valuation. License negotiation processes are interpreted as a substitute for valuation.

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.

Changes in forest overstory lead to changes in runoff. This report estimates what such changes in runoff are worth to society using two sources of information: economicvaluation studies and, most importantly, water market transactions. Evidence from over2,000 transactions that occurred in the western U.S. over the past 14 years (1990 through 003) was examined to learn who is selling to whom and for what purpose, how muchwater is involved, and how much it is selling for. Roughly half of the transactions were sales of water rights; the rest were water leases. The transactions show that the price ofwater is highly variable both within and between western states, reflecting the localized nature of the factors that affect water prices. Ideally, if water market prices or valuationstudies are to be used to help determine the marginal value of water from specific areas, such as national forests, information from local markets or local studies should be used.Lacking site-specific value information, only rough estimates are possible.