costs of reducing nitrogen loadings hansen

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Costs of reducing nitrogen loadings through wetland restoration LeRoy Hansen Economic Research Service Presented to the Soil and Water Conservation Society Louisville, Kentucky July 24 th 27 th , 2016 The views expressed are those of the authors and should not be attributed to the Economic Research Service or USDA

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Page 1: Costs of reducing nitrogen loadings   hansen

Costs of reducing nitrogen loadings through wetland restoration

LeRoy HansenEconomic Research Service

Presented to the Soil and Water Conservation SocietyLouisville, KentuckyJuly 24th‐27th, 2016

The views expressed are those of the authors and should not be attributed to the Economic Research Service or USDA

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Introduction: Impacts of excess reactive nitrogen (N) loadings

• Hypoxia in the Gulf of Mexico• Water treatment costs 

– The water utility in Des Moines, Iowa, is suing three counties, alleging that the farmers’ N runoff increases the city’s water‐treatment costs

• Sometimes affects freshwater ecosystems

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Sources of N loadings

• Roughly 65 percent of the N that reaches the GoM is from agriculture– Primarily from surface and subsurface water movement from fields

– Non‐point sources → Difficult/costly to regulate

• Other sources include municipalities, industries, and atmospheric deposition 

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USDA conservation program incentives reduce N loadings

• EQIP encourages the adoption of on‐field N‐reducing conservation practices

• CRP retires cropland—N no longer leaves fields; can be located to capture N runoff

• WRP has restored and protects wetland ecosystems—some wetlands are effective at N‐removal

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Objective: Assess whether restoring wetlands to reduce N loadings would 

be a cost‐effective policy tool

To be a cost‐effective tool, wetlands must remove N at a ‘competitive price’ (e.g., be as cost‐effective as on‐field practices)

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Wetland costs depend on:1. The cost of the land2. The construction needed to restore wetlands3. The value of the land with a wetland

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The quantity of N removed depends on:1. The size of the wetland and its watershed2. The quantity of water reaching the wetland3. N concentration in incoming waters4. The dynamics of N movement through the 

wetland 5. The wetland ecosystem/temperature

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This analysis: 1. Uses GIS data to identify where wetlands might be 

restored2. Uses historical data to estimate a cost function that 

generates county‐level estimates of the cost of restoring and preserving wetlands

3. Derives spatial estimates of N removal rates4. Overlay spatial estimates of costs and N removal rates 

to generate expected N removal costs ($/lb) across suitable locations

5. Aggregates the GIS data to derive the total quantity of N removed at various levels of costs ($/lb)

6. Compares the estimates of N removal costs of wetlands to costs of on‐field practices

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Locations where effective wetlands might be restored

• Two primary geological characteristics of locations where wetlands are likely to be effective1. Impermeable subsoils2. Hydric soils suitable to wetland 

creation/restoration

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Study area has geologic and climatic conditions to support denitrification

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County‐level wetland cost estimates are generated for the study area

1) Total wetland cost = f(land cost, wetland size (proxy‐determinant of restoration cost), wetland region, urban proximity)

2) Primary data: 3,321 WRP contract records– The model’s predictive capability: adj R‐square 

=0.78

3) We generated cost estimates for average‐sized (10‐acre) wetlands

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Annualized costs ($14 to $219/ac) are driven primarily by land values 

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GIS biophysical model predicts N removed by hypothetical wetlands

• Model built on variables that affect wetlands’ effectiveness (e.g., land use, temperature, soils, hydrology) 

• 26‐year simulations capture effects of annual, daily variations in temperature, precip, etc.

• There are 923,000 GIS grid points; each is 1 square km (247 acres)

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N removal rates (11 to 1,817 lbs/ac/yr) tend to be highest in IN, IA, IL, OH

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Laying N removal on cost reveals a cost‐effectiveness range of $0.03 to $8.65/lb N

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Suitable lands? Feasible to restore? Landowners willing to participate?

1. Suitable acreage proxy: ratio of total converted wetland acreage relative to total acres in study area = 0.13 

2. Assumed that 75% of the converted wetland acreage can be restored (restoration limited by roads, development, reservoirs, etc.)

3. Assumed that 50% of eligible landowners will participate

Assumptions suggest that 37.5% (0.75*0.5) of the prior‐existing wetland acres within the region could be restored

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Expected quantity and cost of N removed depends on the probability 

of restoring a wetland1. The probable acreage at grid points is 5.4 acres 

(=0.13*0.75*0.5*247) 2. To calculate totals, GIS estimates are weighted 

by the probability that a 10‐acre wetland can be restored = 0.54 (e.g., wetlands restored at ~1/2 of the GIS points)

Expected quantity of N removed and the cost are derived by 1) sorting the probable values at the grid points by cost‐effectiveness and 2) summing N‐removed based on cost

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842,000 wetland acres remove 424 tons of N at less than $0.15/lb

Removal cost/price($/lb)

Total N removed(1,000 tons)

Wetland acres 

restored(1,000)

Total cost(million $)

Average total cost($/lb)

0.15 424 842 82.9 0.098

0.50 722 2,330 225 0.16

1.00 774 3,390 297 0.19

3.00 793 3,990 347 0.22

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Conclusions: Results suggest that restoring wetlands to reduce N 

loadings is an effective policy toolThe cost is competitive: Petrolia and Gowda (2006) reported on‐field N conservation costs to be $0.78/lb for a 20% reduction in N losses (versus the upper‐bound average‐cost estimate of $0.22/lb reported here. Also results suggest that:1. At $0.78/lb, about 3 million acres would be 

restored and N loadings reduced by 759 tons/yr2. Scale: The WRP has 2.4 million acres

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Thank you.