United States Environmental Protection Agency Environmental Research Laboratory Corvallis OR Research and Development EPA-600/S3-83-016 June 1983 Project Summary A Regional Recreation Demand and Benefits Model Ronald J. Sutherland The U.S. Environmental Protection Agency (EPA) has begun to incorporate economic factors into its evaluation of water (and air) quality improvement programs. Although the Agency has not completed its approach to defining economic efficiency and to performing marginal analyses, there is a clear movement toward including costs and benefits in the decision making process. However, a major difficulty in attempt- ing to use quantitative cost-benefit estimates is that no well developed and tested procedures exist for making these estimates. Specifically, the mar- ginal costs of making incremental improvements in water quality in streams and lakes are difficult to estimate. Similarly, there are no well developed, tested procedures for obtaining estimates of the dollar benefits of improved water quality. Although several uses of water may be enhanced by quality improvements, recreation benefits appear to be the most extensive. Therefore, the research reported here focused on the development of a model to estimate recreation benefits of improved water quality on a regional basis. Specifically, the model estimates dollar benefits with a consistent methodology over a large number of sites, quickly and with reasonable cost. One function of water pollution control agencies is to select, from a large number of potential sites, water quality improvement projects that are to be funded. Single site analyses are time-consuming and expensive, and therefore of limited value. The model presented here combines the gravity model with a travel-cost analysis of recreation behavior to estimate benefits at any site in the Pacific Northwest. This Project Summary was developed by EPA's Environmental Research Laboratory. Corvallis. OR, to announce key findings of the research project that is fully documented in a separate report of the same title (see Project Report ordering information at back). Introduction A regional recreation demand and benefits model is described and used to estimate recreation demand and value (consumers' surplus) of four activities at each of 195 sites in the Pacific Northwest. The recreation activities are camping, fishing, swimming, and boating. The essence of the model is that it generalizes the single-site, travel-cost method of estimating a recreation demand curve on virtually an unlimited number of sites. The major components of the analysis include the theory of recreation benefits, a travel-cost recreation demand curve, and a gravity model of regional recreation travel flows. Recreation benefits of improved water quality in degraded rivers and streams in the Pacific Northwest are estimated on a county basis for Washington, Oregon, and Idaho. The model also illustrates estimates of existing recreation benefits of selected lakes with good water quality. Recreation benefits are defined in terms of willingness to pay, or, alterna- tively, as consumers' surplus, and measured as the area under the recreation site demand curve. An improvement in water quality at one site implies an outward shift in the demand curve for that site and a redistribution of demand from substitute sites. The issue of the proper measurement of benefits at an improved site where there are displaced facilities is analyzed with the ------- conventional utility maximization model for consumer behavior. The analysis shows that benefits measured under a single demand curve are net benefits and automatically account for any displaced facilities. Two major limitations of the travel-cost method of estimating recreation demand are its failure to consider substitute sites and the expense of applying it on a site- by-site basis. A gravity model is used here to overcome each limitation. This model distributes recreation trips to every site in the region on the basis of relative travel costs and relative attractiveness of each site. The output of the gravity model is a trip interchange matrix that is the main input for travel-cost demand curves for each site in the region. The conventional gravity model is a distribution model, which means that it only estimates the distribution of trips between productions and attractions, which are assumed to be exogeneous. Because the model does not estimate total demand at each destination, its applicability is limited for most recreation purposes. The gravity model is extended here by estimating it iteratively with an attractions model. As a result, the desirable properties of the gravity model that determine the distribution of trips also influence total demand at each site. After a demand curve and consumers' surplus are estimated for each of 195 sites in the region, a simulation analysis is used to determine the sensitivity of the results to three computational and specification choices that must be made in the analysis. Conclusions A model has been presented which can be used to estimate recreation benefits for four water-based activities within a three and one-half state region. Benefits can be estimated for any single site or for several sites simultaneously. Benefits also can be estimated for preserving existing water quality as well as improving degraded water. The main conclusion is that, with respect to the three Northwestern states, the largest potential recreation benefits exist near the population centers. In contrast, improving water quality in sparsely populated agricultural areas probably will not stimulate a substantial increase in recreation demand. The derived recreation benefit estimates may appear discouraging in terms of the economic viability of meeting the national goal of "fishable and swimmable" water. Indeed, improving water quality in some agricultural areas may not be cost-effective. However, potential recreation benefits at several sites exceeds $1 million per year. Also certain non-recreation benefits such a; property values, aesthetic values, optior demand, and perhaps drinking water an< health benefits, are likely to display tht same geographic pattern as recreatior benefits. That is, these potential benefit! may also correlate with populatior densities. A more comprehensive analysis of benefits, focusing particularly on those listed above, could conclude tha total water quality benefits are substan tially larger than those presented foi recreation. For example, in a valuatior study of the Flathead Lake and Rivei system in Western Montana using this model, recreation values are estimated tc be $6.3 million per year. However, in tht same study, non-user values (option existence, and bequest) are estimated tc be $97.3 million per year for the same region. Ronald J. Sutherland is currently with the Los Alamos National Laboratory, Los Alamos, NM 97545. Jack H. Gakstatter is the EPA Project Officer (see below). The complete report, entitled "A Regional Recreation Demand and Benefits Model." (Order No. PB 83-182 279; Cost: $16.00, subject to change) will be available only from: National Technical Information Service 5285 Port Royal Road Springfield, VA 22161 Telephone: 703-487-4650 The EPA Project Officer can be contacted at: Environmental Research Laboratory U.S. Environmental Protection Agency 200S.W. 35th Street Corvallis, OR 97333 United States Environmental Protection Agency Center for Environmental Research Information Cincinnati OH 45268 Postage and Fees Paid Environmental Protection Agency EPA 335 Official Business Penalty for Private Use $300 PS 0000329 U S ENV1R PROTECTION AGENCY REGION 5 LIBRARY 230 S DEAR6QRN STREET CHICAGO IL 60604 ------- |