NATURAL RESOURCE ACCOUNTING
AND
SUSTAINABLE WATERSHED MANAGEMENT:
. with Illustrations for
The Upper Mississippi River Watershed
1 1 9
Dennis M. King , Curtis C. Bohlen , and Pierre R. Crosson
February, 1995
Prepared for:
THE PRESIDENT'S COUNCIL ON SUSTAINABLE DEVELOPMENT
Prepared under: . ;
EPA Cooperative Agreement CR 818-227 '-02
'.. • between
The EPA, Office of Policy Analysis, Washington, D.C.
The University of Maryland, Center for Environmental and Estuarine Studies
. • :' Chesapeake Biological Laboratory,. Solomons, MD 20688
with funding from
EPA, Region 7, Kansas City
EPA 230-R-96-005
1 University of Maryland, Center for Environmental and Estuarine Studies,
Chesapeake Biological Laboratory, P.O. Box 38, Solomons, MD 20688
2 Resources For the Future, 1616 P Street NW, Suite 600, Washington, D.C. 20036
UMD Ref. No. UMCEES CBL-95-037
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EXECUTIVE SUMMARY
, PRESIDENT'S COUNCIL ON SUSTAINABLE DEVELOPMENT
UPPER MISSISSIPPI NATURAL RESOURCE ACCOUNTING PROJECT
General. Description - source accounts for the UMR watershed, and
• : • . . then illustrated linkages between them. We
This report summarizes the preliminary then interpreted results in ways that show
results of research that illustrates how're- how activities by specific sectors are affect-
cently developed methods of natural re- ing stocks of natural and built (man-made)
source accounting can be used with conven- capital.
tional economic accounts as a tool to facili-
tate sustainable watef shed management. We Our economic accounts were set up to
used the Upper Mississippi (UMR) water- measure both the income received by specific
shed for purposes of illustration, and the agricultural sectors—how much they receive
report examines specific'.economic and natu- from all sources, including subsidies—and
ral resource accounts for that region. " income 'generated—the difference between the
. value of the goods they produce and the cost
_ For accounting purposes, we adopted a of the goods they use up in production. Data
definition of sustainable development from for the year 1991 show-signifieant differences
the 1994 Economic Report of the President, between the two with some -sectors being
which requires "that the present generation supported in that year primarily by subsi-
leave future generations with the where- dies. Although these subsidies may be so-
withal—the 'social capital/ consisting of hu- daily worthwhile, they represent income geri-
man, natural, and physical^ (man-made), erated by other sectors of the economy and
' capital—to create our kind of life or a life of transferred to regional agricultural sectors
at least equal quality to ours." This defini- and for our accounting purposes, needed to
tion emphasizes questions about changes in be separated from measures of sector con-
the quantity and quality of assets, about how- tributions to income. *
assets should be measured and compared, ' .--.".•
and about which assets may be substitutes Our natural resource accounts were .set-
fo'r one another and whicl) are complements, up in a hierarchical structure- (e.g., trees
The definition presumes that investments in within forests within watersheds) that in-
one form of capital, to some extent, can off- eludes high ofder resources .(timber, fish),
set losses of other forms of capital and leave intermediate order resources (wetlands, ri-
the overall stock of "social capital" intact, parian areas), and low order resources (inr
Using this definition, many important issues . vertebrates, pollinators). Natural resource
related to sustainability can be viewed as accounts were selected on the basis of mar-
questions about how individual stocks of ket and non-market values and ecological
capital and the overall mix of capital stocks importance. No attempt was made to assign
are changing. -,.'.,•-' dollar values to them. Instead conditions
i .and contributions of -assets were character-
We developed preliminary economic ac- ized in biophysical terms that can be linked
counts for agricultural sectors in the UMR directly and indirectly with changes in eco-
watershed and .a general set of natural re- nomic value. •
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Since natural resource accounts and the
biophysical linkages between them and eco-
nomic accounts have not been estimated yet,
we developed a simple "means test" to pro-
vide some preliminary information about
whether agricultural activities in the UMR
watershed are making positive or negative
contributions to sustainability as we defined
it. Based on the available scientific informa-
tion, we began by making the "rebuttable
presumption" that because of the sediments,.
nutrients, and contaminants they release
into water bodies, agricultural sectors in the
UMR watershed have a net negative effect
on stocks of natural capital. Given this sup-
portable presumption of negative net im-
pacts on natural capital, we applied criteria
that illustrate how the sustainability of each
sector can be judged on the basis of (a) its
capacity to invest in other offsetting forms
of capital and (b) whether such offsetting
investments are actually being made. We
used a three-stage .test of sector-level
sustainability. , „
STAGE 1 CRITERION
Sectors that generate zero or negative net
income are not contributing to overall eco-
nomic or environmental sustainability, be-
cause they are not producing income that
could be invested in other forms of capital
to offset the losses in natural capital they are
causing. If these sectors are being supported
by subsidies, whether this is. socially worth-
while or not, they are draining income away
from other sectors of the economy that could
use it to contribute to private or public
wealth.
STAGE 2 CRITERION
Sectors that generate only enough net in-
come to cover the consumption outlays of
income recipients (e.g., farm workers and
farm owners) are not contributing to overall
economic or environmental sustainability,
because there is no surplus income that
• i could be invested in other forms of capital
• to compensate for the losses of natural capi-
tal: they cause. . '-•
i . , .
STAGE 3 CRITERION
Sectors that generate enough net income to
provide a surplus over the consumption re-
quirements of income earners may or may
not be contributing to overall economic and
environmental sustainability depending on:
(a) whether the surplus is sufficient to fi-
nance investments that could compensate
for losses of natural capital; and (b) whether ,
the surplus, if sufficient, is, in fact, used for
that purpose. . •
We developed economic accounts for 21.
regional agricultural sectors using data for
the year 1991. Based on Stage 1 criteria, nine
of the 21 sectors in:the UMR watershed and
eight of those in the UMR flood plain are
not sustainable without subsidies at levels '
of income generated in 1991. We are not yet
in a position to apply criteria 2 and 3.
Our purpose in developing and using
sector-level economic accounts in this way
is to illustrate how an integrated system of
regional economic and natural'resource ac-
counts might be used to address questions
about: sustainability, rather than.to answer
questions about the sustainability of agricul-
ture in. the UMR watershed. There are sig-
nificant year-to-year fluctuations in agricul-
- rural approaches (e.g., crop rotation), in ag-
ricultural productivity, (e.g., droughts and
floods), and in market conditions (e.g., trade
patteirns and trade policies). This means that
for purposes of answering questions about
sustainability, trends and patterns in ac-
counts are more important than accounts for
a .single year. With this in mind, our empiri-
calsresults, which because of time and bud-
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get limitations were developed only for the
year 1991, should be used primarily to iden-
tify important research and policy questions
and should not be used without collabora-
tion to support policy recommendations.
General Conclusions
Developing accounts to help address
questions about sustainability is difficult
because it requires making assumptions and
testing hypotheses about a future that will
be affected- by environmental, economic,
and technical changes that may not be re-
flected in the accounts. Questions about
.sustainability, however, can only be ad-
dressed by considering what the needs of
future generations will be and what re-
sources they will require to meet them. Since
human generations overlap, there is always
some continuity across generations in hu-
man preferences and basic demands for
food, shelter, safety, environmental quality,
recreation, spiritual fulfillment, and so on.
It is possible, therefore, to develop a well-
founded, accounting system to deal with
sustainability on the basis of what we know
' about human preferences today. Because of
technological and cultural change, however,
the opportunities that future generations
will have and the mix of natural, built, and
human assets they'will require to satisfy
their preferences is certain to change. As a
. result, any accounting system that deals with
sustainability will need to cope with signifi-
cant uncertainty. ,
Accounting for sustainability requires
that income be measured with overall
wealth (built, natural, and human capital)1
held constant. This requires careful defini-
tions and measurements of privately owned,
publicly owned, and perhaps unowned
wealth. It also requires accounting conven-
tions that distinguish clearly between the
creation of new wealth, the transferring of
wealth frombne sector or region to another,
and the conversion of wealth from one-form
to another. For purposes of accounting for
sustainability, therefore, it is more important
'. for economic accounts to measure income
generated—the economic value pfgoods and
services produced less the economic.value
of the goods.and services used up in pro-
duttion—than income received—income gen-
'erated plus direct and indirect transfer pay-
ments received.
Where economic sectors are known to be
adversely affecting stocks of natural capital,
it is useful ,tb'begin judging their contribu-
tion to overall economic, and environmen-
tal sustainability with "means tests"—tests •
that ask whether income generated is suffi-
cient to potentially invest in offsetting forms :
of capital—rather than relying on "ways
tests"—tests that ask whether it is possible
to replace or restore the forms of natural
capital that are being lost. . -
Accounting For Sustainability in a
Watershed Context
(1) Environmental accounts,,when used'in
conjunction with conventional economic
accounts, can be developed into effective
tools for evaluating the sustainability of :
watershed management and of specific
watershed uses..
(2) Whatever the goal of watershed manage-
. ment, sustainability should be defined
(at least for accounting purposes) in
, terms, of the stock of wealth or "social
capital" we bequeath to future genera-
tions. • . ,
(3) For accounting purposes, wealth or "so-
, cial capital" should be defined as a mix
of natural, built, and human capital that
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includes both conventional economic as-
sets and environmental and other assets
with more "roundabout" links to human
welfare.
(4) For purposes of evaluating movements
toward or away from sustainability, in-
tegrated environmental and economic
accounts should facilitate the evaluation
of long-term trends or patterns, not year-
to-year fluctuations in economic and en-
vironmental conditions.
(5) For purposes of evaluating sustainability,
accounts are important primarily as in-
dicators of future income and wealth. For
this purpose, changes in accounts related
to non-marketed, unowned assets that
support long-term biological and eco-
nomic processes may be more important
than accounts related to more easily
monitored, privately owned, market-val-
ued assets.
(6) The characteristics of an accounting sys-
tem—wnich accounts are measured, at
what scale, and with what frequency and
precision—should be problem-driven,
that is, based on what watershed man-
agement goals are being addressed and
which aspects of the watershed one is
concerned about sustaining. .
(7) For guiding watershed management,
accounts should be designed to link cur-
rent activities (e.g., land and water uses
such as agriculture) with the welfare of
the current generation and with changes
in environmental and economic accounts
that can reasonably be expected to affect
the welfare of future generations .
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PRESIDENTS COUNCIL ON SUSTAINABLE DEVELOPMENT
UPPER MISSISSIPPI NATURAL RESOURCE ACCOUNTING PROJECT
I INTRODUCTION
Purpose of the Report
This report summarizes research, that il-
lustrates how recently, developed methods
of natural resource accounting can be used
with conventional economic accounts as a
tool to facilitate sustainable watershed man-
agement. We used the Upper Mississippi
(UMR) watershed for purposes of illustra-
tion, and the report examines specific eco-
nomic and natural resource accounts for that
region. . •
Focus of the Report
Natural resource accounting involves
measuring changes-in stocks and flows of
natural capital (as opposed to built or hu-
man capital) that result from economic ac-
tivity. Such changes are usually measured
at the rational level and are primarily used
to supplement or adjust conventional na-
tional income accounts (e.g., GDP) to reflect
the cost of depleting or degrading natural
capital.1 The combination of conventional
economic accounts with natural resource
accounts provides broad-based information
for addressing questions such as: Are we
really better off this year than last year? Are
stocks of capital changing or just shifting
from one form or region to another? Are we
living off our natural wealth (capital) or only'
using the dividend (income) that it can pro-
vide forever if it is conserved? These are
questions that need to be answered to de- .
termine whether or not patterns and trends
in current economic activity are sustainable.
The application of natural resource ac-
counting described in this paper differs from
more conventional applications in three
ways. First, it involves developing natural
resource'accounts not just as a technique for
tracking changes in natural capital'but as a
tool for watershed management. Second, it
uses changes in natural resource accounts
together with changes in conventional eco-
nomic accounts to address questions about
the long-run sustainability of present pat-
terns and trends in resource use. Third, the
approach taken here attempts to use'eco-
nomic and natural resource accounts to
. evaluate these issues for individual eco-
nomic sectors (industries) within a/partial-"
. lar'watershed.
Two concepts have been central in our
efforts to use accounting tools to examine '
issues related ;;to sustainability. First, any
natural resource accounting system de-
signed for this purpose must be b.ased on a
concept of wealth, or "social capital," that
embodies human, natural, and built (man-
made) assets as the underpinnings of future/
economic opportunities. Second, the ac-
counting system must rely on a definition
of current income, known among econo-
mists as Hicksian income, that reflects the
maximum amount that can be spent on con-
sumption in one period without reducing
the capital, or wealth, available to support
consumption in future periods.2 These in-
terrelated concepts of income and wealth are
Well grounded in economic,and financial
accounting and provide a strong conceptual
link between conventional economic ac-
counts and measures of sustainability. They
also provide a basis for linking economic
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and natural resource accounts to improve
understanding about the sustainability of
current watershed-management decisions.
The following section summarizes some
key concepts and terms that we are using.
Subsequent sections describe the develop-
ment of accounts for a particular region—
the Upper Mississippi River (UMR) water-
shed—and illustrate how they can be used
to gain insights about sustainability by fo-
cusing on a particular economic sector—
agriculture.
II CONCEPTS AND TERMS .
Sustainability
The most widely quoted definition of
sustainable development, the Bruridtland
Commission definition, is development,
"that meets the needs of the present with-
out compromising the ability of future gen-
erations to meet their own needs."3 This
definition is popular, however, hot because
it conveys precisely what sustainable devel-
opment means, but because it can be inter-
preted in so many different ways. Interpre-
tations differ particularly with regard to two
essential factors: what the needs of future
generations will or should be; and how bio-
physical constraints and technological
change will affect the opportunities that fu-
ture generations will have to fulfill their
needs, whatever they might be..
Work done subsequent to the Brundtland
Commission resulted in widely varying defi-
nitions of sustainability.4 So-called "weak
sustainability" emphasizes (1) the creative
potential of mankind to develop the knowl-
edge needed to find substitutes for resources
that become increasingly scarce and (2) the
critical role of free markets in providing in-
centives for people to use their creative po-
tential. At the opposite pole, "strong
sustainability" emphasizes biophysical con-
straints and fundamental laws of thermo-
dynamics, which narrowly limit the range
of resource substitution that is possible and
the overall scale of economic activity.5
j '
For purposes of analysis, we have
adopted a relatively "weak" definition of
sustainable'development, one that in the.
words of the 1994 Economic Report of the Presi-
dent, requires "that =the present generation
leave; future generations with the where-
withal—the "social capital," consisting of
humikn, natural, and physical (man-made)
capital—to create our kind of life or a life of
at least equal'quality to ours."6 This has the
same general meaning as.the Brundtland
definition but reduces many controversies
over what the needs of future generations
will or should be to specific questions about
the mix of assets that we bequeath to them.
In particular, this definition of sustainable
development emphasizes questions about
changes in the quantity and quality of as-
sets, about how assets should, be measured
and compared, and about which assets may
be substitutes for one another and which.are
complements. Within limits that still need
to be specified, this definition allows some
substitution of built or human capital for
natural capital. Although still quite" vague
about what sustainable development actu-
ally means, it provides a conceptual basis
for developing an accounting system to ad-
dress questions about sustainability.7
Income and Wealth
The fundamental difference between
conventional economic accounts and natu-
ral resource accounts is. that the former re-
flect only market transactions/while the lat-
ter include trades and tradeoffs that are in-
adequately reflected in markets, such as
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those that involve the depletion or degra- or "wealth" of capital in a larger region con-
dation of unowned natural resources. An sisting of the two sub regions unchanged;
.integrated accounting system, therefore, arid (3) activities that increase income and
must include two classes of income and wealth at one ownership level (e.g., private
wealth: one associated with marketed assets, earnings from fish or timber harvests) at the
(primarily built capital) and the streams of -expense of losses of capital at another own-
marketed income they generate; and one ership level (e.g., depletion of commonly
associated with unmarketed assets (prima- "owned" forest or fish resources)'may not
•rily natural capital) and the-corresponding be generating real income increases, mdeed/
streams of unmarketed income or benefits overall income and wealth from a regional
they support. In general terms, .achieving or national accounting perspective may ac-
sustainable resource management, as we tually decline as a result of economic activi-
have defined it, requires that intergenerational ties that generate income from the perspec-
transfers of both classes of assets are such that tive of conventional household or business
in combination, they can support streams of accounting. These three points are very im-
income or benefits for future generations portant when considering an accounting
. that.are no less in-quality than the streams system that tracks changes in., total capital
available to us. shocks—the sum of both marketed and
- . unmarketed assets—regardless of whether
. In general,,the owners of marketed as- or not they are owned or who owns them.
sets, whether private or public entities, are Measurements of intragenerational or
readily identifiable, arid the economic val- intergenerational transfers of wealth depend
ues of marketed assets are known. Property on what wealth and -whose wealth is being
rights in unmarketed assets, on the other measured. . '
hand, are difficult, and .sometimes impos- V
sible, to establish, and their ownership can Accounting for,the Future
often be identified only with "society" or the r% ' r • -^.^. ^ r . • i •,'•
, ui- "TO. -i £^ i. • ' * Pealing with the concept of sustainability,
general public. The values of these assets , *?. . , ,. , ^ . L, . . . y>
£. j.£,. , ' . t however it is defined, requires thinking'
are often difficult to measure or even impute u , . ., , . c • .. .,. . °
. . ,• .. . , -.IT- about the future. Sometimes this requires
using conventional economic tools. Figure , ,. u . • ,. L ,_ <•'••>
i•••n <. • ; i.u t, £ ^ i u -ii. j speculating about a more distant future than
1 illustrates the types of natural, built, and r , P .. , • ^' •• i • t
, . ' .. , L,}\_ . , , most professional economists, ecologists,
human capital that are owned or managed u . . i-.-n •> . %.. •
, . . r .r-,_ , businessmen, or political leaders are willing
by various segments of society. • • . . • - - .,• „ r .. , . -,-.,.L°
• . o / , to consider. However, for sustainability
_ i."' it_ . •. ,_ ' . analysis, there is no alternative to taking a
For accounting purposes three important , . . • •' £'.u j •, ,-, . > .
•!,-. °j,-r ,.,.£. ,£,__ long view of the demands that future gen-
points are illustrated by this figure-: (1) trans-. ?• -11 u £ J J •
I . ... y ° y. erations will, have for goods and services,
ferrmg capital among owners and trans- • u' u. i •,. j j i . j j u
, '••••,. * <•_ ° , , both marketed and unmarketed, and the,
forming capital from one class to another . , £U .,, , . • , .. , ,_,_ , .,
.,, . - , , .,' , stocks of built and natural capital that they
within a region does not necessarily change - .-,, ,, ., , ., , • - •, ' /
., , & „ .-.„ • ,_ i .t,_ Jr will need to satisfy those demands.
the value or wealth associated with the . - .
overall stock' of regional capital; (2) transfers ^n. • . £ i • ,-
' c '-,. i u' ,_ - • -it i -- , The existence of overlapping generations
of capital between regions will change the ., , -' c •, ,f r ° ., •. , .
, r « • , i „• e , i • , provides some basis for believing that what
value or wealth represented by capital 5. ' , .. —n j j u' j
!.^,. , . ". , t y , v future generations will.demand can be ad-
wi thin each region, unless the transfers'are , ? ., u . , • . , ,•
.1 rr '^- • i -11 i •• ,.!_•' i ' dressed on the basis of. current demands.
exactly offsetting, but will leave the value . ,
\ • ''-•'. ' • - • •
' ' '.' '. ' •.'-'• '-7. : '.•.-•.'• ' .
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Natural
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Human*
• We made no E
class of capital r
traditions and nc
capital in the ere
Putnam, R.D. M
Characteristics of Capital
Levels of Ownership
Household Business Community Nation Globe
Pets
Gardens
Lands
i ,
House
Car
Tools
Education,
Skills, '
Self-reliance
' of
i Individuals
Private Forests
Agricultural Lands
Real Estate
Mineral Rights
.Factories .
Equipment
Inventories
Knowledgable,
Competent
Managers and
Skilled Workers
Local Parks
Fishinci Holes
Ponds, Lakes
Landscapes
Air Quality
•
Town
Roads,
Fire Equip.,
Schools
i
Honest Officials
Safe Streets,
Effective
Institutions
''• '
•
Flyways,
Migratory
Species,
Habitat
• Diversity
Military, Equip.
Nafl Highways
Communication
Ports and Harbs.
Legal System
Institutions
Technology
Ozone Layer
Climate
Oceans
Biodiversity
Intem'l Canals,
Communication
Networks,
Navigation Aides.
United Nations
Peace Treaties
Trading Rules
Infl Laws
'• Interpol
:>
ittempt in this study to develop accounts or indicators related to human capital and include this
tere only for the sake of completeness. For some purposes the term "social capital", including
irms of acceptible behavior may be a more appropriate focus. See Coleman, J.S. 1 988. Social
ation of human capital. American Journal of Sociology (Supplement) 94;S95-S1 20 and
)93. Malting Democracy Work: CMc Traditions in Modem Italy. Princeton University Press, Princeton. •
Figure 1. Characteristics of Social Capital
Figure 2 depicts schematically how genera-
tions have overlapped from the year 1895,
four generations ago, and how they will
overlap to the year 2095, four generations
hence. The overlapping of several genera-
tions over a substantial number of years,
(three or four generations alive-at any given
time), suggests that there is considerable
continuity in preferences and enduring val-
ues associated with basic needs for food,
shelter, safety, sources of recreation and
spiritual enrichment, a sense of place, and
so on. Dealing with the sustainability issue
on the basis of these future demands is com-
plicated, however, by the fact that the re-
sources (or for accounting purposes, the-
capital stocks) used two or three generations
before us to satisfy such demands are not
the same as those we are using-today; and
those; we are using today will not be the
same as those used two or three generations
after us.
For purposes of analysis, therefore> two
important points can be' drawn from, con-
sidering intergenerational overlaps in pref-
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Figure 2. Intergeneratlonal Overlap
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erences and technology. First, because of the
high likelihood of at least some intergen-
erational stability in basic demand's, the
analysis of sustainability on the basis of what
we understand and believe is important to-
day is -possible. Second, because of
intertemporal variability in the resources
and technologies used to meet these de-
mands, the analysis of what assets will be
useful or essential in the distant future to
meet basic human demands will entail a
relatively high level of uncertainty.
The Nature of Accounting Systems
There are many types of accounting sys-
tems, from national income and product ac-
counts and corporate financial ledgers, to
family budgets and records of team batting
averages. All of them are designed to serve
one of two basic functions—to provide a nu-
merical basis for monitoring performance
(score keeping) or for analyzing and improv-
ing performance (decision-making). Ac-
counts designed to support decision-mak-
ing are generally more demanding than
those designed to support score keeping.
The characteristics of a proper account-
ing system—what is measured, how often,
and with what precision—depend on the
purpose of the system. Accounting systems
to promote sustainable watershed manage-
ment must be forward looking and designed
to support analysis and decision-making
with a long-term focus. Despite the extra
challenges involved, therefore, they need to
be useful for evaluating future conditions
that we know will be shaped by many fac-
tors besides the ones we can monitor with
our accounts.
There are three distinct kinds of chal-
lenges that must be addressed when devel-
oping these kinds of accounts for a water-
shed. First are those associated with deter-
mining how conventional economic ac-
counts (e.g., measures of current income and
production) can be adjusted, reorganized,
and reinterpreted to provide information
useful for estimating economic performance
and opportunities in the future. Second are
those Associated with selecting from a nearly
infinite- list of natural resources1—from
stands of oak or bald eagles to invertebrates
and bacteria, and landscape features such
as rivers and wetlands—those that should
be specified in the accounting system as en-
vironmental assets, those that may be valu-
able as indicators of changes in environmen-
tal assets, and those that should play no role
in a natural resource accounting structure.
Last, and perhaps most difficult, is the chal-
lenge of linking economic and natural re-
source accounts so that the tradeoffs be-
tween current and future economic welfare
and broader questions about sustainability
can be evaluated more clearly. . ,
Selecting Economic Accounts
For purposes of addressing questions
about sustainability, it will be necessary to.
modify perspectives about, and perhaps
ways of defining and measuring, conven-
tional economic accounts. To address long-
• term issues, for example, it will be impor-
tant to determine if an economic Sector that
is known to be destroying or degrading
natural capital is also generating income that
benefits the current generation and may be
used to support investments in other "off-
setting" forms of capital. Conventional rer
gional economic accounts, however, gener-
ally measure the "value added" by a sector
in terms of the wages, profits, rents, and
other payments received by households as-
sociated with the sector and use it as a mea-
sure of the income the sector generates.8 A
more: proper measure of the "value added"
or income generated by a sector is the dif-
10
-------
ference between the market value of what it characteristics of natural resource accounts
produces and the market value of/what it reflect a major difference in emphasis be-'
uses up in production, including the depre- tweeri natural resource accounting to pro.--
ciation of capital.9'The incomes actually re- mote sustainability and more conventional
ceived by households from some economic natural resource accounting being proposed
sectors, including many of the agricultural to modify;pr supplement current economic
sectors of the UMR watershed, include not accounts. • , .'
only the "value added" they generate/but ,
.direct and indirect transfers of income that In general, different types of envlron-
represent "value added" generated else- mentalcapital can be arranged along a con-
where in the economy that is transferred to. tinuum from low order resources to high
them (e.g., through subsidies and federal order resources with differences based pri-
cost-sharing and.price support programs), marily on the "roundaboutness" of their
Whether such transfers are good, or bad for links with human welfare. Higher order re-
the country or the region is a political judg- sources, for example, are resources such as
ment, not an.accounting issue. What is im- trees, minerals, or well-known fishing
portantis that income accounts, for purposes grounds1 that contribute in known ways to
of addressing sustainability issues, should human well-being and that are generally rec-
reveal which sectors generate income, not ognized as having economic valued High
which ones are given the opportunity to order resources are usually exploited di-
spend it. For our purposes, therefore, it is rectly by humans, or provide immediate
important that income accounts distinguish environmental services such as recreational
between income received and income gen- or aesthetic benefits orclean water . Some
erated. . ; high order resources are valued in the mar-
Selecting Natural Resource Accounts ket Pl*ce ^ °*e's are no*' but " ei,fer
. . case, their contributions to human welfare
Accounts require something specific to are obvious (see Figure 3).
measure and monitor, and if the aim is to. « '
measure natural capital with a focus on long- At the other end of the spectrum are re-
term sustainability, it is not always clear sources that play fundamental roles in main'-
what stocks of natural capital and what char- taining ecological processes and supporting
acteristics of those stocks are important, economic life, but are not directly exploited
What is clear, however, is that in accounting by humans; these we are calling 16w order
for sustaihability, the importance of an in- resources. They include a variety of
dividual resource or account is based pri- unglamorous but far from unimportant
marily on its usefulness .as an indicator of small organisms such as ants, decomposers,
• future environmental and economic condi- and pollinators and important large features
tions, which may or may not be reflected in of the, ecological landscape, such as water-
it's current economic value. The criteria for sheds and flyways. Many of them tend to'
selecting what to include in the accounts, be too large or too small to be owned and
called the "asset boundary" in the account- tend to contribute in many different ways
irig literature, should be based not just, on to human welfare. However, the important
the economic importance of resources now characteristic they have in common is that
but also on their likely future importance, access to them or the benefits they provide
, These long-term criteria for determining the can not be made exclusive, which inhibits
• ' ' '• ' ' : . 11, . :" .
-------
RESOURCE ACCOUNTS
r
that provide inputs to
RESOURC
ACCOUNT
HIGH ORDER
NATURAL RESOURCES
(e.g. fish, timber,
topsoil)
LOW ORDER
NATURAL RESOURCES
(e.g. invertebrates,
decomposers,
pollinators)
that returns to nature •
POLLUTION / WASTE / NUTRIENTS
and results in
MARKET & NON-MARKET VALUES
T
that have
GOODS & SERVICES
that generates
• ECONOMIC
SYSTEM
human .capitall
man-made capital5
that result in
ECOLOGICAL PROCESSES
\that allow
ENVIRONMENTAL CONDITIONS
contribute to
Figure 3. Low Order/High Order NR Accounts
12
-------
the development of property rights in them low order resources, a process with its own
and means that low order resources, even if practical and conceptual difficulties,
their economic contributions were generally. . •• '
recognized, would never be traded or have A discussion of valuation problems as-
any market value. Regardless, low order re- sociated with natural resource, accounts is
sources generate economic value in two gen- beyond the scope of this paper. However, in
.eral ways. They contribute to basic life-sup- general, high order.resources can be thought
port functions such as water, chemical, nu- of as resources that directly satisfy socio-eco-
trient and carbon cycling, and they contrib- nomic wants and needs (e.g., timber, fish,
.ute to the biophysical and ecological pro-, minerals), while low order resources are re-
cesses that produce high order resources. As sources that support the 'machinery of na-^
a practical matter, many natural resources ture that provides both high order resources
(wetlands, for example) are intermediate or and-broader life-support functions (e.g., bac-
middle order resources in the sense thatthey teria, plankton, invertebrates). Using a busi-
proyide a mix of direct environmental ben- ness analogy, high order resources represent
efits in their own right, for example, by pro- inventories that can be put to use in the near-
viding flood control, storm surge protection, term (10, 20, or 30. years), while low order
and aesthetic and recreational benefits. At resources represent plant and equipment
the same time, they play their more obscure that produce inventories in the long term
• role supporting, fish and wildlife popula- (beyond 30 years). Because high order re-
tions, clean water, and other high order re- • sources tend to have clear economic sigrufi-
sources' that provide additional rounds of cahce, they have dominated the work done
environmental goods and services. so far to incorporate natural resource ac-.
• . , . . s, counts into economic accounting systems.'
Assigning economic values, to most, low-
order resources/especially specific popula- The further into the .future one focuses,
tions or species,, presents severe technical however,, the. mo re one must examine
and conceptual difficulties. Humans do not changes in the low order resources that have
(by definition) consume or appreciate them more roundabout but.no less important and
directly and in'some cases (for example, in no less certain linkages with economic wel-
the case of ants) may attach negative values fare. For some purposes, for example, the
to them.™ Their long-term economic values, wealth of our forests can be estimated by
therefore, are difficult or impossible to mea- considering the standing stocks of .timber.
sure using either conventional valuation As one's time .horizon increases past one
methods that rely on observing human be- cycle of cutting and regrowth, however, fo-
havior (revealed preferences), or "non-mar- cus needs to shift from the trees themselves
ket" valuation methods that rely on the re- to the rate at which trees grow and the cer-
sults of surveys (expressed preferences), tainty that they will grow, which depend
Using derived values—the values of the upon low order resources such as the soil
higher order resources supported by the microorganisms that recycle nutrients and
lower order resource—is perhaps the most make them available for tree growth. As the
promising approach to imputing values for focus of the natural resource accounting ef-
low order resources. However, this approach fort shifts to issues of sustainability, it is nec-
relies on quantifying the ecological roles of essary.to depart significantly from the. crite-
13
-------
ria being used to determine the "asset bound-
ary" in more conventional natural resource ac-
counts.
In the rest of this report, we apply the
concepts and terms discussed here to dem-
onstrate how an accounting framework that
links economic and environmental accounts
can be used to investigate the sustainability
of current patterns and trends in watershed
management. We begin with a brief discus-
sion of why we selected agriculture in the
UMR watershed to develop our illustrations.
We then develop and interpret economic
accounts for specific agricultural sectors,
describe a system of natural resource ac^
counts for the region, and discuss how the
two sets of accounts are linked through bio-
physical flows (withdrawals of natural re-
sources and emissions of wastes by agricul-
ture) and economic flows (income generated
by agriculture). The final section summa-
rizes the conclusions we have reached so far
as a result of our work. Background infor-
mation and technical details about- the de-
velopment of the economic accounts is pro-
vided in Appendix A and a Chart of Natu-
ral Resource Accounts for the UMR water-
shed (based on an investigation of Pool #13)
is provided in Appendix B.
ill ILLUSTRATION OF REGIONAL
ACCOUNTS .
Selection of the Study Areas/Economic
Sectors
The Mississippi River watershed reaches
from the Rockies to the Appalachian Moun-
tains. For purposes of our analysis, however,
we focused on the watershed of the river
above Cairo, Illinois, (excluding the Missouri
River watershed). Almost all of this water-
shed is in five states; Minnesota, Wisconsin,
Iowa, Illinois, and Missouri. Within this area,
we 'developed and examined economic ac-
counts at different scales, including the over-
all five-state region, the counties within the
region' that, drain into the Mississippi, and
the floodplain along three reaches of the
Mississippi from St.. Paul/Minneapolis
(Lock/Dam #1) south to Cairo, Illinois. We
chose the UMR watershed because the man-
agement of the river and the variety of eco-
nomic; activities that impinge on it present a
wide range of resource issues, some of which
raise questions about the sustainability of
current patterns and trends in resource use
(see Figure 4). ,
We focused on agriculture in the Upper
Mississippi River watershed for four main
reasons: (1) agriculture is an important part
, of the economy of the region, and good eco-
nomic: data are available for individual, ag-
. riculture sectors in the region; (2) there is
sound evidence .that agricultural activities
in the region, through releases of sediments,
nutrients, and agricultural chemicals to re-
gional, water resources, have significant, and
on balance negative, impacts on the natural
resource base of the region; (3) the federal
response to the 1993 floods generated an
extraordinary amount of relevant environ-
mentail data for the region; (4) .agriculture is
not only the dominant land use in the re-
gion b;ut because most cargo shipped on the
Upper Mississippi is agriculture-related,
agriculture also is closely linked with a
dominant use.of the river, namely moving
cargo. / ,
Data Sources
We developed economic accounts for the
year 1991, the most recent year for which
comprehensive regional economic data were
available. With two exceptions that will be
noted, the statistics used to develop the re-
gional economic accounts were taken di-
14
-------
Upper Mississippi Study Area
Watershed, Fibodplain, and Sub-Areas
Reach A
330'Miles
(from Pool # 1 to Pool # 1 3)
Reach B
320 \Miies ' .
(.from Pool # 13 to PQO! #26)
Reach C
200 Miles
(belowPool #26)
Figure 4. Map of the Study Area
15
-------
rectly from published and generally avail- plus a" variety of direct and indirect agricul-
able reports from the U.S. Department of Ag- trural subsidies paid by the federal govern-
riculture (USDA). We relied primarily on ment as summarized in Appendix A. Fig-
statistics provided through a USD A regional ure 5 illustrates in graphical terms the dif-
economic data system known as the ' ference, between income received and in-
IMPLAN (IMp^ct PLANning) system11 and come generated, and Figure 6 illustrates how
used them to develop county- level eco- the two measures of income are estimated.
nomic accounts related to each of 21 agri-
cultural sectors (3-digit Standard Industrial We made this distinction because we be-
Classification or SIC sectors).. We then ag- lieve mcome generated is a .better measure
gregated up to get accounts for the Study of sustainable income than income received.
Area and UMR watershed areas which in- Income received includes, subsidies, which
elude many counties across five states. In the means that the "sustainability" of received
first exception to the direct use of USD A sta-' income depends upon the willingness of the,
tistics, we used township level agricultural federal government (presumably respond-
production data and satellite-generated ing to the sense of the public) to continue to
land-use and land-cover data derived from tax income generated in some sectors of the
LANDSAT satellite images to adjust county economy and transfer it to other sectors.
level agricultural production statistics for Received income, therefore, depends on.
counties adjacent to the UMR down to the political decisions that in an increasingly
(sub-county) level of the UMR flood plain, competitive world economy and under new
In the second exception, we estimated the international trading rules may themselves
amount of agricultural cargo from each sec- be "unsustainable." Income generated, in
tor in each region that was transported along contrast, depends only on the quantity and
the UMR navigation system and then, on a preductivity of .the resources engaged in
pro-rated (per-ton) basis, allocated a share production and the market value of what is
of 1991 federal operating and maintenance used'up in production and what is pro-
costs for the UMR navigation system, net of ducecl. Income generated, therefore, is a
reimbursements and with a few other ad- more reliable measure of the sector'scapac-
justments, to each agricultural sector.12 Esti- ity to support investments that may be nee-
mates of federal direct and indirect transfer essary to offset losses in natural capital.
payments (subsidies) by commodity groups ' . •
and capital depreciation by agricultural re- Figure 7 summarizes our preliminary
gion were taken directly from USDA tables estimates, of income received and income
and were allocated to regional agricultural generated during 1991 by agricultural sec-
sectors as described in Appendix A. tors located in various parts of the UMR
, . .. .. , ; . ..,,.._ watershed. The most noteworthy features in
Agricultural Income Accounts in the UMR „. „ ., ,.,., , .}
w Figure 7 are the differences between mcome
For the economic accounts, we focused received and income generated, and the
our attention primarily on annual flows of number of sectors, where income received is
dollar income associated with regional ag- positive, but income generated is negative.
riculture, and we distinguish between in- From these accounts, livestock production
come received by agricultural sectors and (ranch fed cattle through miscellaneous live-
income generated by them. Income received stock) is by far the dominant source of in-
co'nsists of income generated by agriculture come1 generated in. the region. Dairy farm
16 \ . .'•:'.
-------
INCOME RECEIVED vs. INCOME GENERATED
Income Received:
Income Generated:
• $$
Income
Received
/ apparent value added
includes transfer payments;
does not account for public costs •'
excludes transfer payments; : ,
accourits'for public costs
r-100. : .
direct transfer
payments
value of goods sold
cost of inputs purchased
(private)
Qn
|— oO
-50
0
. value of goods sold <.
real value added >v
>
. public costs (flood protection)
public costs (navigation)
public costs (agriculture)
cost of inputs purchased
(private)
.$$• '
Income
Generated
Figure 5. Income Received vs. Income Generated
production is the major source of negative
net income generated/followed by vegetable
production and oil-bearing crops, mainly
soybeans. There is also a large difference.
between income received and income gen-
erated by feed grain production. Overall, the
'figures for 1991 .indicate that of the $5.4 bil-
lion in income received directly by house-
holds associated with agriculture in the
Study Area (paid out by firms in the form of
wages, salaries,,proprietors'income, rent,
and so on), about $3.0 billion or 57% is .gen-
erated by regional agriculture, and 43% is
generated elsewhere in the national
economy and transferred into the region
through various subsidy programs. Simi-,
larly, income generated as a percentage of
income received' during 1991 was 60% for
agriculture in the UMR watershed and 52%
for the UMR flood plain.
The results presented in Figure 7 are pre-
liminary and are subject to a few important
caveats:
(1) .The estimates of income received and in-
come generated, although based on pub-
lished and generally accepted data, are
first approximations; they rest on gener-
alizations and assumptions made by
USDA and by us that need to be tested
- further;
(2) The estimates are for a single year, 1991,
which may not reflect the income re-
. ceived and generated in other years or
over longer periods—this too requires
more research. .
17
-------
FIGURE 6
INCOME RECEIVED VS. INCOME GENERATED
($ Millions; Year 1991)
i
i • • • . .
INCOME RECEIVED: Net Value Added (Unadjusted) plus Direct Transfer Payments
I ' •
TMCOME GENERATED: Net Value Added (Adjusted)
WHERE:
NET VALUE ADDED: (Unadjusted) is the difference between the value of
goods produced andthe Cost of Goods paid by the private sector only
NET VALUE ADDED;.(Adjusted) is the.difference between the value of
goods produced and the Cost of Goods to both the private and public sectors.
ILLUSTRATION
SECTOR 11: FOOD GRAINS; REGION; UMR WATERSHED
($ Millions)
INCOME RECEIVED: $45.851 INCOME GENERATED: $8.404
GROSS FARM RECEIPTS
Less Direct Transfer Payments (e.g., price/income support)
VALUE OF GOODS SOLD .
Less Cost of Goods Used in Production (private costs only)
GROSS VALUE ADDED
Less Depreciation of Plant and Equipment
Plus increases in Inventories
NET VALUE ADDED (Unadjusted) |
Less Indirect Transfer Payments (e.g., Cost Sharing Programs)
Less Other, Public Costs (e.g., annual flood/nav. O & M Costs)
i ' '
NET VALUE ADDED (Adjusted)
$423.121
-13.596
409.525
-330.243
79.282
-47.027
+ 0.000
32.255
-19.862
-3.989
8.404
Figure 6. Calculation of Income with Illustration
(3) The estimates are presented as aggregates
for specific sectors (roughly three-digit
SIC codes) that do not consist of identi-
cal farm operations—some operations
may generate or receive more or less in-
come than others^
(4)
The estimates'do not include agriculture's
share of federal construction costs (as'op-
posed to operating and maintenance
costs) of navigation and flood control
structures along the Mississippi (with the
18
-------
INCOME RECEIVED VERSES INCOME GENERATED BY SECTOR / BY REGION .
(ST millions; 1991),
R= INCOME RECEIVED, GdNCOME GENERATED
INDUSTRIAL SECTORS
Sector
#•'
Title
. AGRICULTURAL .
1
2
31
4
5
6
7
8
9 :
10
1 1
1i2
1 3
1 4
16
1 6
17
1 8
1 9
20
21. '
Dairy Farm Products
Poultry And Eggs
Ranch Fed Cattle
Range Fed Cattle
Cattle Feedlots
Sheep, Lambs, & Goats
Hogs, Pigs, And Swine
Other Meat Animal Prod
Misc. Livestock . .
Cotton '
Food Grains
Feed Grains '
Hay And Pasture
Grass Seeds
Tobacco '
Fruits-
Tree Nuts
Vegetables
Sugar Crops
Miscellaneous Crops
Oil Bearing Crops
Incom
Type
R
,'Q
. R
G
R
G
. R
G
R
G
R"
G
, R
G
R
G
R
G
R-
^G .
. R
G
•R
G
, R
G
R
G
R
G
R ;
G
,.R
G
R
G-
R
G
R
G
R
G
GEOGRAPHIC REGIONS '
Study
Area
131.61
-335.60
-16.91
• -69.254
1,242.723
1,118.203
85,910
71.076
948.617
853.619
199.806
179.318
1,253.038
1,147.864
5.524
5.524
4.930
-1:643
r5.279
-20.165
112.280
39.276
875.637
170.948
229.644
179.468
3.682
3.682
0.073
-1.156
4.866
-7.228
-0.156
-1.375
38.664
-129.790
23.117
18.742
•8.893
8.893
220.226
-179.719
' UMR
Watershed
142.03
-222.83
5.. 5 4
-29.62
937.97
856.004
63.04
54.906
749;902
. 677.508
. 167.656
151;.396
1,073.034
988.036
0.000
0.000
4.590
-0.551
-0.227
-0.663
45.851
8.404
732.716
180.421
178.976
145.404
0.932
0.932
0.378
-0.314
4.428
-3.907
-0.016
-0.080
:34.790
-106.870
4.297
3.204
6.043
6.043
201.196
-81.989
UMR Floodplain
Total
2.56
-10.10
-0.10
-0.38
28.568
25.778
2.107
1.823
24.281
21.574
2.708
2.402
33.227
29.927
0.000
0.000
0.047
-0.007
0.790
: 0.682
2.1 1 1
-1.016
17.635
0.167
5.348
4.199
0.038
0.038
0.030
-0.015
0.288
-0.396
0.030
0.025
0.524
-2.379
0.000
.0.000
0.057
0.057
3.709
:-8.044
"Reach A
3.74
-5.54
0.02
-0.09
16.94
15.64
1.47
1.310
.13.764
12.514
0.776
0.702
; 12.141
11.299
0.000
0.000
0.060
0.043
0.000
0.000
. 0.160
-0.023
7.226
3.032
3.865
.3.217
0.000
0.000
0.030
-0.015
0.185
• 0.009
0.000
0.000
0.769
•1.140
.0.000
0.000
0.030
0.030
0.402
0.035
Reach B
-0.21
-1.33
-0,03
-0.'1 3
8.73
7.7-1
. 0.50
0.422
8.799
7.656
1.826
1.620
16.045
•14.224
» .. 0.000
0.000
0.006
-0.013
0.000
0.000
0.459
-0.507
7.355
-1.176
0.796
0.554
0.007
0.007
0.000
0.000
0.028
-0.120
0.000
'o.'ooo
-0.002
-0.283
;o.ooo
0:000
0.012
0.012
1.604
-4.416
Reach C
-0-.966
-3.226
-0.090
-0.155
2.889
2.424
0.122
0.091
1.718
' 1.404
0.106
• 0.080
. 5.0,41
4.404
0.000
0.000
-0.019
-0.037
•0.790
0.682
1.492
-0.486
3.054
-1.689
0.657
0.428
0.031
•0.031
0.000
0.000
0.075
-0.285
0.030
0.025
-0.243
-0.956
' 0.000
0.000
• 0.015
0.015
•'1.703
-3.663
Total Income Received
Total Income Generated
5.366.894
3,050.677
'4,353.148
2,625.432
123.956
64.321
61.595
41.022
45.926
24.212
16.435
-0.913
Note: Negative income generated for a sector means that the payments to households by firms in the sector-
were supported by subsidy payments received or by consuming'(not replacing) private capital or;both.
Statistics provided in Appendix A, Section A-l cari be used to determine how much of each. > .-"
Figure 7. Table of Income Received and Income Generated
19
-------
exception of a portion of recent renova-
tion costs at Lock/Dam #26).
(5) The estimates do not reflect changes in
current or future net income associated
with the impacts of agricultural produc-
tion on stocks of natural capital' nor on
unmarketed income flows generated by
those stocks. We have much to say about
this last important point in the next sec-
tion.
A "Means" Test for Sustainability
With full recognition of the preliminary
nature of the estimates in Figure 7, we ad-
dressed the sustainability question in the
following way. We began by making a "re-
buttable presumption" that in the absence
of information to the contrary, the agricul-
tural sectors listed in Figure 7 have at least
some negative net effect on stocks of natu-
ral capital. This presumption is based on a
substantial body of information about agri-
cultural discharges and their effects on
aquatic systems, specific empirical studies
in the UMR watershed, and a preliminary
assessment of biophysical linkages between
agricultural production in the region and
some specific forms of natural capital.^
Given the presumption of negative net
impacts on stocks of natural capital, we fol-
lowed the flow of analysis outlined in Fig-
ure 8 and applied three criteria to judge
whether each sector is contributing in a posi-,
tive or negative way to overall sustainabil-
ity on the basis of net income generated.
STAGE 1 CRITERION
Sectors that generate zero or negative net
income are not contributing to overall eco-
nomic or environmental sustainability be-
cause they are not producing income that
could be invested in other forms of capital
to offset the losses in natural capital they are
causing. If these sectors are being supported
by subsidies, whether this is socially worth-
while or not, they are drawing income away
from other sectors of the economy that could
use it to contribute to private or public
wealth.
STAGE 2 CRITERION
Sectors that generate only enough net in-
come to cover the consumption outlays of
income recipients (e.g., farm workers and
farm owners) are not contributing to overall
economic or environmental sustainability
because there is no surplus income that
could be invested in other forms of capital
to compensate for the losses of natural capi-
tal they cause. . ,
'( • . " ' •
STAGE 3 CRITERION
Sectors that generate enough net income to
provide a surplus over the consumption re- •
quirements of income" earners may or may
not be'contributing to overall economic and
environmental sustainability depending on:
(a) whether the surplus is sufficient to fi-
nance investments that could compensate .
for losses of natural capital; and (b) whether
the surplus, if sufficient, is, in fact, used for
that purpose.
Based on Stage 1 criteria, nine of the 21
sectors in the UMR watershed and eight of
those in the UMR flood plain are not; sus-
tainable without subsidies at levels of in-
come generated in 1991. We did not attempt
to apply criteria 2 and 3 to the income esti-
mates shown in Figure 7.
It is important to note that failure to meet
even the Stage 1 criteria for sustainability in
any cine year or even over several years is
not sufficient, by itself, to judge a sector to
be unsustainable over the long-term. Over
a period of one or a few years, unexpected
natural events, (e.g., prolonged droughts'or
disastrous floods, or market upheavals, or
20
-------
Flow of Analysis
Economic Sector
Generates
I
Biophysical Flows
"'•••. i
£^~~
Economic Flows
1
Withdrawals
Emmissions
Current Income
Processes
jntai
and
es
Investments
1
Current
Consumption
i
1
I
Natural
Capital
, Built (man-made)
Capital
1
Humai
Capita
Sustainability
"Ability of Future Generations To Meet Their Own Needs"
Figure 8. Flow of Analysis Showing Biophysical Linkages
abrupt shifts in domestic or international generated over a period of many years may
government policies) can reduce the income be consistent with long-term sustainability.
generated by a sector below that necessary ft follows, therefore/that our estimates de-
to offset the natural capital losses it causes, veloped for 1991 and presented in Figure 6
Given time to recover or an industrial reor- should be used, to raise policy and research
ganization, however, the level of income questions, but should not be used without
21
-------
calibration to draw conclusions or provide those'losses to the specific agricultural see-
the basis for policy recommendations'.14 tors responsible for them. ,
• •
It is also important to note that the three For resource accounting purposes> the
sustainability criteria described above are valuation problem presently is insoluble, not
based on testing means, not ways, for offset- just in the UMR watershed but generally.
ting natural capital losses. There are many Economists have developed non-market
unresolved questions about whether invest- techniques for valuing unmarketed goods1
ments in man-made capital can ever substi- and services and-the assets that generate
tute for some' forms of natural capital loss/ them, but these techniques are controversial
and whether some forms of natural capital and are likely to remain so.16 In any case,
can be restored or replaced with any level, the techniques have not been applied widely
of investment. These questions are impor- enough in the UMR watershed or anywhere
tant, and are the topic of other research by the else to provide .values of the unmarketed
authors, but they are not addressed here.15 goods and services provided by natural
_ . _ .. . capital. For reasons discussed earlier, these
Linkages Between Economic and toques, even if they become widely ac-
Natural Resource Accounts cepted for valuing non-marketed high or-
As noted above, we made an informed der resources, may never be useful for as-
presumption that the agricultural activities signing economic values to low order re-
listed in Figure 7 result in damage to natu- sources. .
ral resources of the UMR, and that this dam- -
age causes losses of social value that should Recognizing that a solution of the valu-
be represented in a complete accounting of ation problem, if there is one, lies in the fu-
the performance of the agricultural sector in hire, many analysts working in the field of
the region. Such a complete.accounting sys- natural resource accounting have settled on
tern would show linkages between the eco- describing, and where, possible, measuring
nomic accounts for agriculture and UMR changes in biophysical characteristics of
natural resource accounts and would record ''unmarketed flows of goods and services and
the consequences of agricultural activities on of changes in stocks of natural capital result
the natural resource base as well, as on eco- ing from marketed and unmarketed flows.
nomic income and conventional measures For example, where farmers drain wetlands
of wealth. to plaint crops, there is likely to be a Ipss of
: wildlife habitat. Although it might be im-
A completely satisfactory matching of possible to value the loss, the number of
economic accounts with natural resource ac- acres can be counted, and the kinds and
counts for the UMR region would require numbers of wildlife lost perhaps can be es-
the solution of two key problems: (1) how timated. However, there are conceptual and
to properly "value" 'changes in stocks of analytical difficulties when inferring
natural resource capital associated with ag- changes in value from observed changes in
ricultural activities (e.g., economic losses biophysical characteristics. Hypothetically,
associated with changes in surface water the only social value of the wetland, for in-
characteristics caused by sedimentation stance, might be as wildlife habitat. If the
from agriculture); and (2) how to assign wildlife could find equally satisfactory habi-
22
-------
tat elsewhere, however, the social costs of;
draining the wetland would be zerof;and a
complete accounting system would appro- •
priately charge no wetland drainage costs
to the. agricultural'sector. A system that as-
signed costs'(foregone wildlife values) on
"the basis of- we_tland acreage or some other
biophysical measure, on'the other hand,
probably would assign additional costs to
the agricultural activity.
As the wetlands example illustrates,
changes in ecological systems may not be,
reflected in simple direct ways 'through
changes in ecosystem function or through
associated benefits to humans.-In particu-
lar, ecological systems sometimes show com-
pensato'ry or other responses that may, re-
duce or magnify the overall impact of hu-
man activities on ecological processes and
the flows of Unmarketed goods and services
produced. Sediment impacts on the Missis-
sippi, for example, had limited—and often
beneficial—effects on flows of environmen-
tal services (e.g., support of recreational and
commercial fisheries) for several decades
after .the construction of the modern navi-
gation channel in the 1930s. That neutral ox-
favorable result no longer holds, however,
and is expected to change for the worse in
the near future. Changes in the Illinois River
•in response-to similar sedimentation re-
sulted in sudden, near catastrophic changes'
in the -environmental goods and services
provided by many backwater areas (see Side
Bar 1). The Upper Mississippi River Envi- ,
rqnmental Management Program currently
invests tens of millions of dollars annually
to slow, resist, or reverse the ecological
changes triggered by intensive management
of the river as a navigation channel.17
' • • /
Xinking sources and impacts is particu-
larly difficult in situations where the people
who consume or benefit from unmarketed
Side Bar 1; Effects of Changes On
Environmental Assets
Initially, the changes in the river wrought by
navigational and other improvements were a boon
to certain wildlife and fish species, including some
waterfowl, largemouth bass, and bluegili, .for
whom the still-water habitats were more hospi-
table than the flowing-water systems they re-
placed. Extensive areas of the floodplain were in-
undated, increasing the .area',of still-water aquatic
habitats and leading to increases in the area of
emergent wetlands. These, increases came prima-
rily at the expense of upland- habitats- within the
floodplain, especially floodplain'forests, but over-
all, habitat diversity, suitability for a variety of
desirable wildlife species, and recreational oppor-
tunities all increased. ' ' •'. • "
The high-quality habitats present immediately
after construction of the Locks and Dams, how-
ever, were not and are not stable. Sediment inputs
now exceed the river's reduced sediment trans-
port capacity. Backwaters and other still-water
habitats are gradually filling. Islands in the pools
above each dam have eroded, lessening habitat di-
versity, and increasing the distance over which
wind-driven waves can build, further increasing
erpsion and resuspehsion of bottom sedirrtents.
Habitat for aquatic plants has deteriorated, wors-
ening conditions in turn for a variety of waterfowl
and fish species/Habitat quality and aesthetics are
deteriorating, lessening the river's value for many
recreational uses. Within 50 years or so, habitat
conditions are likely to be poor throughout much
of-the Upper Mississippi River.2^
On the Illinois river, sedimentation in back-
water areas has already resulted in the nearly cata-
strophic transformation of large areas into biologi-
cally depauperate and recreationally inferior mud
flats or near mud flats. Habitat conditions are poor,
and few aquatic plants, fish, or waterfowl make
use of these degraded ecosystems. 22 Many Missis-
sippi River scientists suspect that without changes
in river management, a similar fate will befall large
parts of the UMR, as sediments gradually fill the
still water areas of the.impounded river. • ;
23
-------
goods and services are separated in time or,
space from the resources or features of the
ecological landscape that produce, them. In
these situations/there are no face-to-face
transactions between users and producers
as there are in the case of marketed goods
and services, and the two may not even be~
aware of their relationship. For example,
recreational fishermen (consumers) may
benefit from a reduction of sediment deliv-
ered to a stream by difficult-to-identify farm-
ers (producers) hundreds of miles above the
fishing site. Since urban and industrial ac-
tivities may also contribute sediment load-
ings to the stream, assigning benefits of sedi-
ment reduction—even when it is possible to
value them—poses a difficult accounting
problem. The assignment of benefits (and
costs) may be made even more difficult by
the cumulative and interactive effects of eco-
nomic activities on environmental assets.
The effects of sediment on the Mississippi,.
for example, are strongly influenced not only
by agricultural practices, but by changes in
river dynamics associated with river man-
agement decisions. It may be ambiguous
whether, and to what extent, the impacts of
sedimentation should be assigned to 'agri-
culture, navigation, or some other sector (see
Side Bar 2), and the cost of analysis required
to sort things out may be prohibitive. In such
a setting, cumulative and cascading sets of.
impacts may make it impossible.to identify
sources or allocate responsibility in an ob-
jective way.
At the present time no system of ac-
counts can deal satisfactorily with either
valuation (what non-marketed natural re-
sources are worth) or the assignment of costs
(foregone values) to specific human activi-
ties, and our effort here for the UMR water-
shed is no exception. Indeed, given the prac-
tical difficulties of addressing changes in
natural capital that are clearly important and
Side Bar 2; Sediment Dynamics in
the Mississippi
I , \
The Upper Mississippi is an aggrading river.
Even before European settlement of the UMR wa-
tershed, the Mississippi was accumulating sedi-
ment, adjusting to flow conditions very different
from those that shaped the river during the.most
recent glaciation of North America." Changes in
land use, especially the establishment of wide-
spread agriculture, greatly increased the rate at
which sediment was introduced into the river. As
a consequence, turbidity in the river increased, and
the rate of accumulation of sediments in the river
went up.2? Loading of phosphorous and nitrogen
also increased.24
But agriculture was and is only a small part of
what affects sediment dynamics in the river. Be-
ginning in the 1830s, a variety of modifications to
the Mississippi were made to enhance the river for
navigation. Initially, channels were blasted through
rapids. During the 19th and early 20th centuries,
four-foot, four and one-half-foot and six-foot deep
channels were constructed or authorized.25 For
construction of these channels, secondary channels
and sloughs were blocked with closing structures,
and wing walls were constructed to concentrate
flows iihd increase the depth of the main channel.
Many miles of shoreline were armored to reduce
erosion. At about the same time, extensive areas
within the floodplain were protected from flood-
ing by the construction of levees. These changes
essentially confined the river to its existing chan-
nel. Erosive processes that once fueled ecologically
important disturbance of floodplain ecosystems
and generation of new river channels, backwaters
and sloughs were arrested. Concurrently, water
flow in secondary channels slowed and backwa-
ters became increasingly isolated from river flows.
• '
In the 1930s, with the construction of a series
of locks and dams from above Minneapolis to Saint
Louis, the six-foot flowing water channel was re-
placed with a nine-foot slack water navigation sys-
tem.26 By 1940, the river had become a series of
pools interspersed with short segments of'flow-
ing water. The processes that once distributed sedi-
ments within the river had been fundamentally al-
tered. Sediment accumulation, "already augmented
by increased agricultural runoff, increased to many
times |ts previous rates, especially within the slack
water areas produced by the new, deeper channel.
24-
-------
may be irreversible, but can be associated
on-ly with'unmarketed goodsrand services/
a totally satisfactory solution is unlikely in
the foreseeable future.
••• These analytical problems can be illus-
trated by describing some-specific difficul-
ties we encountered in evaluating the
sustainability of current and past manage-
ment of the Upper Mississippi River (see
Side Bar 3)/ First/ the effects-of river man-
^agement on the environmental characteris-
tics^ the river is uncertain. This is partly
because our knowledge of the.system is lim-
ited, but more fundamentally because the
' fiver is a stochastic system whose charac-
teristics are strongly influenced by infre-
quent events like the 1993 flood. Second, ef-
fects on the flows of marketed and
unmarketed environmental goods and ser-
vices are also difficult to predict., The pro-
cesses by which ecosystems, landscapes,
watersheds, and floodplains form produc-
tive river systems are beginning to be un-
derstood, but this ecological understanding
is difficult to capture in ways that reflect how
humans extract value from a healthy river
system. Third, although we can be reason-
ably confident that future generations will
continue to value environmental assets in
general, (e.g., for recreation), the specific
forms of recreation that those generations
will value is less certain. :
Natural Resource Accounts for the UMR:
A First Approximation
•As noted above, much of the existing re-
'search in natural resource accounting has
focused.on identifying and tracking bio-
,physical.flows that link economic activity
with its impacts on the natural resource base:
That is the approach we followed here in
developing natural resource accounts for the
UMR. We began, however, with the under-
Side Bar 3:
Sustainability and the
Upper Mississippi River
To what extent can we characterize changes in
;the Mississippi as sustainable or unsustainable?
Current navigation and land management practices
are changing the river in a variety of ways that re-
sult in the degradation, depletion, or loss of envi-
ronmental assets from, backwater lakes and paddle-
fish unionid mussels. Without changes in manage-
ment, readily predictable changes in the structure
of the river and its associated environmental as-
sets are likely to reduce the availability of several
environmental goods and services tp the people of
UMR Watershed. ;
Yet when-assessing the extent to which spe-
cific environmental changes can be considered
"unsustainable,'' one needs to consider what the
future may bring. The 1993 flood scoured out some
Mississippi backwaters, possibly pushing back the
day of environmental reckoning by decades.27.
Equally important, what will the policy re-
sponses to degrading river conditions.be? The
Army Corps of Engineers, under the auspices of
the Upper Mississippi River Environmental Man-
agement Program, have 66 environmental restora-
tion and enhancement projects already constructed,
under construction, or planned.28 These projects
are intended, in large part, to prevent, resist, or re-
verse declines in river habitats triggered rby river
impoundment and the continued input of sediment
from upstream sources. Total design and construc-
tion costs of these habitat projects will total about
$150 million between Fiscal Year 1986 and Fiscal
Year 2002, an average of about $10 million per year.
Annual operations and maintenance expenditures
for those restoration projects are likely to exceed
500;000 annually. •
Presumably, with sufficient investment in. en-
vironmental restoration and management, the con-
flicts between agriculture, navigation, and river re-
sources could be successfully mediated. The extent
to which such action will be taken," however, re-
mains unknown. Moreover, the magnitude of cur-
rent expenditures on the river for navigation and
environmental restoration suggest that any such
efforts at mediation will be expensive.
25'
-------
standing that the natural world cannot be
divided up.into Separable sectors and com-
modities in'the same way the economy can
be divided into industries and products.
Moreover, there is no generally accepted
numeraire, such as dollars, to tell us what
natural resources are most important to
measure. A wide variety of potentially in-
compatible natural resource accounting sys-
tems are possible, therefore, based on dif-
ferent geophysical taxonomies and other
objective and subjective decisions about how
to describe the natural world. Should we
measure forests or trees? Should we track
the abundance and species composition of
insects that pollinate plants or the size or
diversity of the plants themselves? Should
we track species or the size and characteris-
tics of the habitats they depend upon?
For traditional accounting purposes, we
would like to describe values of natural re-
sources on the basis of observed or imputed
market prices, but we do not now know how
to do this. As a second best solution, then,
can we develop indicators of (a) the impor-
tance of specific resources to the productiv-
ity, resilience, integrity, or health of natural
assets likely to be important in the future,
or (b) the ability of those resources to pro-
vide marketed and non-marketed benefits
to humans? We believe the answer, to .this
question is yes, and we developed our natu-
ral resource accounting system for the Up-
per Mississippi watershed to show how such
indicators might evolve.
Most natural resource accounting efforts
are aimed at adjusting or supplementing
current economic accounts, such as GDP, for
depletion or (less often) degradation of en-
vironmental assets, not to explore issues of
sustainability.18 As a result they focus on
extractable natural resources, such as tim-
ber, minerals, and fish for which market val-
ues exist, and a few other natural assets, such
as soils and wetlands, for which estimates
of values can to some extent be imputed.
An analysis of sustainability requires a.'
much broader view of environmental assets
than has been used in more conventional
natural resource accounting studies. If one
is interested in the quality and quantity of
environmental resources being left for future
generations, current depletion of renewable
resources often will be less important than
effects on the productivity of natural assets.
Within-broad limits, in other words, the re-
newal rate of renewable resources may be
mo re; important fpr determining the re-
sources available to future generations than
current stocks. As the time.scale of interest . "
lengthens, natural'wealth is measured less
in terms of standing stocks of timber, .fish,
or wildlife, and increasingly in terms of
those characteristics of the ecological land-
scape that reflect,nature's ability to support
and produce those assets. Long-term re-
newal properties of ecological systems are
controlled to a significant degree by low or-
der and intermediate order resources.
Hie prototype Natural Resources Ac-
counting system for the UMR region in-
cludes high, intermediate, and low order'
resources. Because of practical limitations on
the ability to collect and manage environ-
mental information, it is impossible to track
all low order resources directly. Thus, it
makes practical sense to track many low
order resources indirectly by monitoring the
condition of the wetlands, riparian areas,
and other (intermediate order) ecological
systems in which they are found. Since these
ecolojgical systems are dependent on the ser-
vices provided by the low order resources,
monitoring the health, integrity, or quality
of the: ecological systems often can provide
ample warning of underlying problems in .
26
-------
low order resources. Note that this type of, depends on trees/is also a natural asset/This
accounting may require monitoring-charac- .means (literally, not metaphorically) thatif
terisrics of high order resources '(e.g., hum- we account for components of natural
her of lesions or tumors per fish) that are sig- wealth at the scale of trees, we will fail to
nificantly different than those-measured in see the contribution of the forest. It is equally
more conventional natural resource account- true, however, that if we account for natu-
ing (e.g., ex-vessel value of harvested and ralassets at the scale of the forest/we may
unharvested fish). , miss the contribution of individual trees.
--....•. This problem of rrieasuring "values" at dif-
This indirect tracking of low order re- ferent scales within a hierarchy has no 'di-
sources by'monitoring characteristics of high rect parallel in economic systems because
order resources is made possible by the hi- contributions at different industrial scales '
erarchical organization of environmental are valued in .the same numeraire, dollars,
systems. Landscapes, watersheds, and large and the contributions of various component
ecosystems are built up of smaller ecosys- sectors at each scale (e.g., sales by farmers
terns, which are in turn constructed of ecd- or food processors) and across scales (e.'g,>.
system components like populations, of total agricultural sales-and GDP) are com-
plants, Animals, and other organisms; poo Is mensurate and generally additive (e.g.,
of nutrients; and other chemicals. 19 This hi- value added).
erarchical structure is at the foundation of . .. . • . '.'
natural systems and of the system of natu- The prototype accounting system -dis-
ral resource accounts we developed for the cussed here is based on biophysical charac-
UMR watershed. teristics organized within a hierarchical sys-
• tern that reflect how natural systems create
There are also many practical reasons or support the production of goods and ser-
why an environmental resource accounting vices that have value to humans. This allows
system designed to examine issues of natural assets, for which estimates of mar-
sustainability should take account of hier- ket value are difficult to derive, to be tracked,
archical relationships found in nature. A at various .scales, along with resources for.
decision, to account for resources at one scale, which such estimates are readily available.
besides using up. funds that could be spent We believe that for the foreseeable future,
to collect information at other scales, will any accounting system intended to provide
most certainly not produce all of the infor- information for assessing sustainabUity will
mation that is important for understanding need to use primarily biophysical rather
how .those resources contribute to the pro- than economic measures because many of
duction of. environmental goods and ser- the natural assets likely to be most impor-
vices that develop at different scales. Trees tant for sustainability are never traded in
grow and reproduce and therefore, tree markets and may never even be perceived
populations are productive natural assets, as valuable by the general population. The
But the forest in which the trees grow sup- hierarchical structure is necessary to at least
ports tree growth and other environmental draw attention to the pathways by which
values by providing a variety of biodiversity, natural assets generate values and to help
hydrological, and water .quality functions, identify particularly important ecological
Thus the forest, which is made up of-and relationships.
27
-------
Biophysical accounts such as those de-
veloped by ecologists to express ecological
integrity are often criticized because the link
between them and human welfare is ob-
scure. To ensure that the natural resource
accounts we are developing are expressed
in ways that make their relevance to humans
explicit, we have proposed a system that re-
lies on sets of environmental indicators that
monitor-the importance of specific assets to
socioeconomic values. For our purposes, the
links between biophysical accounts and.
socio-economic values include both.direct
contributions to marketed and unmarketed
values and less direct contributions associ-
ated with ecological processes that support
future flows of marketed and unmarketed
goods and services.
Accounts for the UMR Watershed
Figure 9 is a highly aggregated summary
of the proposed natural resource accounts.
for the Upper Mississippi (Appendix B pro-
vides a more complete version and identi-
fies relevant data likely to be incorporated
in environmental indicators). In Figure 9
specific high order and Ipw order environ-
mental asset accounts are listed along the
rows, and related "values," including both
socio-economic and ecological values, are
listed along the columns. Each frame char-
acterizes how or how much each account
(row) contributes to each type of value (col-
umn). In a fully developed set of accounts,
one or more indicators would be used within
each frame to express in a quantitative or
semi-quantitative manner, the extent to
which the specific asset contributes to the
specific value.
In principle, the accounts for built assets
and for most high order natural assets can
be measured and valued in the conventional
ways (e.g., using market prices and non-
market valuation methods). Such high or-
der assets may also play important ecologi-
cal roles, or provide valuable information on
the status of other (typically larger-scale)
environmental assets. In order to capture
both direct and indirect contributions of the
natural world .to wealth, and to. begin ac-
counting for low order resources, however,
the accounting structure for natural assets
is being developed with the following gen-
eral characteristics:
(1) Accounts are physical or biophysical in
nature. '
(2) Accounts are constructed in terms of
both quantity and quality of environ-
• mental assets using appropriate indica-
tors or indexes. , •
(3) All quality measures (of which near-term
market value is one) are explicitly linked
with a specific category of human inter-
est'or concern. That is, all indexes and
quality measures are intended as mea-
..sures of the significance of a particular
resource for the satisfaction of specific
human wants or needs.
(4) Accounts and construction of indicators
of environmental qualities are based on
a hierarchy of resources.
Many environmental quality measures
(indicators or indexes) are being constructed
with explicit consideration of the hierarchi-
cal relationships among environmental as-
sets. Figure 10 illustrates how information
about: natural assets may:be used to charac-
terize the quality of resources at larger hier-
archical levels. Account information may be
used directly, as when resource managers
are interested in the population size of
recreationally important fish species (shown
as an arrow straight across to the right hand
side of Figure 10), or indirectly, to provide
28
-------
I
CD
O
I
O)
8
w
I
a
I
s
s
II
5
-
:, • • i :
1...I...1.1J...J..
Figure 9. Chart of Accounts
29
-------
Information Flow Within Biophysical Accounting Scheme
Information Gathering
(Raw data)
Abundance
Species Diversity
Guild Structure
Land Use
Cover Type
Productivity
Hydrology
Habitat Diversity
Connectedness
-
-
-
Information Row
(How data is used)
Species and Species _
Groups
?\
Quality Indicators/
J\
Lands
.1
7\ /
Quality Indicators
^
Ecological Systems -
\
V J>
• Quality Indicators
Information Use
(Why collect data)
Integrated Pest Man.
• Species Diversity.
Resource Manag.
. Wetland Manag.
Agriculture, Forestry
Watershed Managmement
. Rood Hazard Assess
Ecosystem Manag.
Figure 10. Information Flow with Biophysical Accounting Scheme
information about the quality of assets at
larger hierarchical levels (downward arrows
in the center of Figure 10).
y
Brook trout in the eastern United States/
for example, are both a major recreational
resource in their own right, and also sensi-
tive 'indicators of changes in conditions in
the watershed in which they are found.
Brook trout population status, therefore, not
only provides information with respect to
the (high order) trout population itself, but
also provides information on the (interme-
diate order) watershed of which it is a part,
and also tells us something useful about the
condition of the (low.order) stream inverte-
brates on which both stream ecology and
trout populations depend. It is likely, how-
ever, that information on trout populations
would provide only some of the informa-
tion necessary to assess changes in the con-
dition of a watershed and that the relevant
information about trout resources would not
be reflected in conventional market or rec-
reational fishing statistics.. Other relevant
data might include information on land use,
wetland abundance and distribution, stream
hydrology, and so on. This approach to the
development of quality indicators to supple-
ment economic value estimates for environ-
mental assets parallels a variety of ap-
proaches being developed for purposes of
environmental assessment in other con-
texts^
Once natural capital accounts are estab-
lished, we expect that it will be most useful
to monitor changes in select sets of them at
different levels within the hierarchy that all
relate to a particular economic or environ-
mental concern. Coincidental changes in a
number of relatively weak leading or lag-
30
-------
ging indicators suggesting the same phe- tional economic accounts are based ondata
nomena will yield more robust information collected by businesses and households for
if they can be interpreted together. We ex- other purposes, which are reported to gov-
. pect that this will put a premium on devel- eminent agencies at very little additional
oping new graphical tools for the rapid pre- cost. The data required to establish natural
sentation of multi-dimensional data. ' resource accounts, on the other hand, in
• ' most.cases will need to be collected ex-
Conclusions , , pressly for that.purpose. Developing spe-
cific, problem-oriented natural resource ac-
Our research so far suggests that, al- counts may be the only practical way to adr
though there is no near-term solution to the dress questions about the sustainability pf
problem of valuing the natural resource im- current human activities and may be the
pacts of agriculture in the UMR watershed only practical way to focus policy-related
(or anywhere else), a natural resource ac- scientific research.
counting system of the sort described here: ', . . . '
can provide useful information about those Acknowledgments
impacts. Where environmental problems
have been identified, presumably because This scoping project addressed, many
some mix of human activities is having; sub- complex conceptual and practical issues that
stantial negative impacts on environmental exist in the gray area between economics and
assets considered to be valuable or indis- ecology. Like any complex undertaking of
pensable to humans, biophysical linkages this kind, it would not have been possible
can be.spelled out. Often, this can be done without the help of many formal and:infor-
mbst effectively, working upstream from a mal collaborators from both disciplines. In
recognized environmental problem to the particular, we wish to express our thanks to
economic sectors that contribute to the prob- our official collaborators, Leonard Shabman
lem. Such an approach involves starting of Virginia Polytechnic Institute, Frank
with something specific '(a problem, issue, Arnold of the Environmental Law Institute,
or goal), and designing economic and natii- Jay Shogren and Phillip Boumal of Iowa
ral resource accounts to deal with it, rather State University, Peter Kuch and Ken Adler.
than attempting to build a generic set of ac- of the EPA, Office of Policy Analysis; Jack
counts to deal with all.problems that may Cumberland^ of the University of-
arise. Maryland's International Institute for Ecb-
• logical Economics; and our unofficial col-
It is important to note that there are two laborators, Ted Heinz of the U.S. Depart-
reasons why natural resource accounts, es-" ment of Interior and Michael LeBlanc and
pecially those developed at a regional level, James Hrubovchack of the U.S. Department
may never be as thorough as economic ac- ' of Agriculture, the economic staff at the
counts. The mostobvious reason is that the Army Corps of Engineers offices in St. Paul
complexity of natural systems which are and at Ft. Belvoir, and John O'Connpr of the
composed of organisms and processes too World Bank. We also owe a special note of
numerous to measure and trace exceeds the gratitude: .to Barry Drazkowski, Ken
complexity of industrial production pro- Lubinski, and the rest of the staff of the Long
cesses and market transactions.-The second Term Resource Monitoring Program of the
and often overlooked reason is that conven- National Biological Service's Enyironmen-
' . : 31 • ' .'•'." . -. .' . -' ' "
-------
tal Management Technical Center in
Onalaska, Wisconsin who gave generously
of their time and expertise. Thanks also to
research assistants Chad Medcroft and Amal
Srivastava and to Sandy Koskoff here at CBL
for working overtime to meet tight report-
ing deadlines. • '. '
Notes
1 Several excellent collections of papers dealing with
natural resource accounting have been published
recently, including Lutz, Ernst (Ed.), 1993. Toward
Improved Accounting for the Environment, Proceed-
ings of a UNSTAT-World Bank Symposium, World
Bank, Washington, DC.; Environmental Accounting
for Sustainable Development: Selected papers from
joint UNEP/World Bank workshops, World Bank,
Washington, DC, 1993.; Yusuf J. Ahmad, Salah El
Serafy, Ernst Lutz (Eds.), 1992. Handbook of National
Accounting: Integrated Environmental and Economic
Accounting—Interim Version, United Nations Envi-
ronment Program (UNEP). Reports on specific ap-
plications include P. Bartelmus, E. Lutz, S.
Schweinfest, 1992. Integrated Environmental and Eco-
nomic Accounting: A Case Study for Papua New
Guinea. World Bank Environment working paper
#54. World Bank; Jan Van Tongeren 1991. Integrated
Environmental and Economic Accounting: A Case
Study for Mexico. World Bank Environment work-
ing paper #50. World Bank; J. Theys, J., 1989. Envi-
ronmental Accounting in Development Policy: The
French Experience.;R. Repetto, 1989. Wasting Assets:
National Resources in National Income Accounts (for
Indonesia) World Resources Institute, Washington,
DC. ' ,
: The term "Hicksian income" originated with John
R. Hicks, who denned income as "The maximum
amount that can be spent on consumption in one
period without reducing real consumption expen-
ditures in future periods." John R. Hicks. 1946.
Value and Capital. Oxford University Press, Oxford.
5 World Commission on Environment and Devel-
opment 1987. Our Common Future. Oxford Univer-
sity Press.
4 Competing and often conflicting concepts of sus-
tainability were catalogued by Pearce, Markandya,
and Barbier in Blueprint for a Green Economy,
Earthscan Publications Ltd., London, 1989 and
were synthesized and interpreted more recently by
Michael Toman in "Economics and 'Sustainability':
Balancing Tradeoffs and Imperatives" in Land Eco-
nomics, 70(4); 399-413.
5 Supporters of the concept of "weak sustainability"
include such prominent economists as Nobel Lau-
reate Robert Solow of MIT, who observes that, "We
have actually done quite well at the hands of our
ancestors. Given how poor they were and how rich
we are, they might properly have saved less and
consumed more." (Solow,, R.M. Intergenerational
Equity and Exhaustible Resources in Review of Eco-
nomic Studies, Symposium on the Economics of
Exha.ustible Resources; Edinburg, Scotland, 1974).
Costanza and Daly present a typical view of
. "strong sustainability" as follows: "A minimum
necessary condition for sustainability is the main-
tenance of the total natural capital stock at or above
the "current level. While a lower stock of natural
capital may be sustainable, society can allow no
. further decline in natural capital given the large
uncertainty and the dire consequences 'of guessing
wrong" Costanza,' R. and H. Daly. 1992. Natural
capital and sustainable development. Conservation
Biology 6:37-46. •
6 Economic Report of the President. Transmitted to the
Congress February 1994. U.S. Government Print-
ing Office, Washington, DC.
7 Our treatment emphasizes managing resources so
that future generations do not have a diminished
quality of life compared with ours. We do not deal
explicitly with.some important issues related to
population growth and the practice of "discount-
ing" used in economic analysis. Some broader con-
cepts of sustainability may require identifying
threshold levels of certain accounts beyond which
a catastrophic ecological and economic-collapse
may occur. We deal with this indirectly later by
referring to thejunformation value pf specific natu-
ral resource accounts.
8 In practice, value added is often estimated at the
sectoral or regional level from published income
statistics by adding all "Payments to Households."
The USDA's IMPLAN regional modeling system,
for example, estimates value added as the sum of
" wages, salaries, and proprietors income plus in-
direct business taxes."
9 Nemmers defines value added as " the difference be-
tween the purchase price of raw materials or fin-
ished parts and the sale price of the product. If
depreciation and indirect business taxes are.de-
32
-------
-ducted from this difference the value added for all
output is national income" p. 507, E.E. Nemmers.
1979,. Dictionary, of Economics and Business*
, Littlefield, Adams, .& Co., New Jersey, 1979. ' .
10 Approximately 10% of terrestrial animal biomass
• consists of ants, and ants provide a variety of eco-
logical services, from seed'dispersal and the aera-
. tion of soils, to consumption of a variety of detri-
tus and other organic matter. (See The Ants by Bert
Holldobler and E.O. Wilson, Harvard University
Press, Cambridge, 1990). However/consumer
spending on ant sprays and traps, hundreds of mil-
lions of dollars in the United States alone, would
reveal negative human values attached to ants by
most households, and one would expect that un-
der most circumstances respondents in "willing-
ness to pay" surveys would express negative val-
. ues'as well. '
11 Information about IMPLAN is available from the
USD A, U.S. Forest Service, Implan Center at Fort
Collins> Colorado or from a private vendor, the
. , Minnesota IMPLAN Group, Inc. in Stillwater, MN.
The Minnesota Group organized the IMPLAN da-
tabases used in our study.
12 Preliminary estimates of agricultural production at
the sub-county (flood plain) level and the amount
of agricultural cargo snipped on the UMR naviga-
tion system by each sector in each region were
made by collaborating researchers at the Iowa State
University, Department of Economics. •
13 Recent summaries of facts and figures supporting
this presumption include: Soil and' Water Quality:
An Agenda for Agriculture by the National Research
Council's Committee on Long range Soil and Wa-
ter Conservation, National Academy Press, Wash-
ington, D.C.; 1993 and The National Water Quality
Inventory: 1992-Report to Congress, EPA Office of
Water, Washington, D.C.; March, 1994'
u This is especially true since time and budget limi-
tations prevented us from conducting sensitivity
tests or examining some questions raised by unex-
pected empirical results. In particular, the low in-
come generated by oil-bearing crop production and
the relative productivity of different reaches of the
• UMR flood plain raised concerns that warrant fur-
,. ther investigation. The effects of different sector
aggregation on the development and interpretation
of results also needs more research before the re-
sults presented here can be fully evaluated.
, ls See "The Econornks of Ecological Restoration by
, Dennis King" in Natural Resource Damage Assess-
'.' ment: Law and Economics, edited by Duffield and
' Ward, John Wiley Publishers, New York; 1992 and
. Making Sense of Wetland Restoration Costs by Den-.
nis_M. King and Curtis C Bohlen; A Report pre-
pared for the EPA, Office of Policy Analysis and
the Department'of Energy, GEES Contribution #
UMCEES-CBL-94-045, January, 1994.
16 A general reference dealing with non-market valu-
ation methods is" Valuing Natural Assets ed. by
Raymond J. Kopp and V. Kerry Smith; Resources
for the Future, Washington, D.C., 1993; for a criti-
cal review of the contingent valuation method, the
most controversial method and the one most often
cited as being relevant to issues involving'
sustainability, see Contingent Valuation: n Critical
.Assessment by Cambridge Economics, Inc., Proceed-
ings of a Symposium held in Washington, D.C. on
April 2-3,1992 • '
17 U.S. Army Corps of Engineers. 1991. Sixth Annual
•Addendum: Upper Mississippi River System En-
vironmental Management Program. U.S. Army
Corps of Engineers North Central Division, Chi-
cago. U.S. Army Corps of. Engineers 1992. Upper
Mississippi River System Environmental Manage-
ment Program: Midterm Evaluation Report. U.S.
Army Corps of Engineers North Central Division.
Chicago. ; . ,
18 See footnote 1. '
19 O'Neill, R, V, and D. L. DeAngelis and J. B. Waide
and T. F. H. Allen. 1986.' A Hierarchical Concept of
Ecosystems. Monographs in Population Biology 23.
Princeton University Press. Princeton, New Jersey.
20 Adamus, P.R., E,J. Clairain, R.D. Smith, and R.E.
, Young. Wetland Evaluation Technique (WET) Vol-
ume IT: Methodology. Costanza, R., B.G. Norton,
and B.D. Haskell. 199-2. Ecosystem Health: New Goals
forEnvironmental'Management. Island Press. Wash-
ington D.C., Woodley, S., J. Kay, G. Francis. Ecologi-
cal Integrity and the Management of Ecosystems. 1993.
St. Lucie Press. Canada. ,
21 Lubinski, K., R. Gaugush, S. Gutreuter, T. Owens,
S. Rogers, P. Thiel/and j. Wlosinski. 1993.,Current
• Ecological Conditions. U.S. Fish and Wildlife Ser-
vice Environmental Management Technical Cen-
ter. Onalaska, Wisconsin.
22 Bellrqse, F.C., S.P: Havera, F.L. Paveglio, Jr., and
33
-------
D.W. Steffeck. 1983. The Fate of Lakes in the Illi-
nois River Valley. Biological Notes No. 119. Illinois
Natural History Survey. Champaign, Illinois.
a Lubinski, et al., 1993. Op. Cit.
:4 For example, Turner, R.E., and N.N. Rabalais. 1991.
Changes in Mississippi River water quality this
century: Implications for coastal foodwebs. Bio-.
scieHce"41(3):140-14'7.
a O'Brien, W.P., M.Y. Rathbun, and P.O. Bannon.
1992. Gateways To Commerce. National Park Service,
Rocky Mountain Region.
* Ibid.
- Gaugush. R. 1994. Interview on Nov. ,15, 1994 at
the Environmental Management Technical Center,
Onalaska, Wisconsin.
M U.S. Army Corps of Engineers. 1991. Op. Cit. U.S.
Army Corps of Engineers 1992. Op. Cit.. See Note 9.
34
-------
APPENDIX A
ESTIMATION OF INCOME RECEIVED AND INCOME GENERATED
Background -\ '
The purpose of the project is to illustrate
how methods of natural resource account-
ing can be used with conventional economic
accounts to promote sustainable watershed
management. For reasons described in the
main body of the report, we used accounts
related to agricultural sectors in the Upper
Mississippi River (UMR-) watershed'for pur-
poses of illustration, and based our analysis
on a concept of sustainability that requires
the present generation to "leave'future gen-
erations with, the social capital, consisting
of human, natural, and physical (man-made)
capital, to create our kind of life or a life of
at least equal quality to ours."
Based on information described in the
report, we established a "rebuttable pre-
sumption" that agricultural sectors in the
UMR watershed, because of the nutrients,
sediments and contaminants they release
into surrounding water bodies, have a net
negative effect on natural capital. This al-
lowed us to apply criteria described on page
20 of the report to evaluate the sustainability
of each agricultural sector on the basis of its
capacity to invest in other "offsetting" forms
of capital, and to determine whether such
investments are actually being made.
For each agricultural sector we measured
income received from all sources and income
generated (net of direct and indirect transfer
payments). For reasons described in the re-
port, we decided to use income generated, as
the basis for evaluating a sector's capacity
to invest in "offsetting" forms of capital.
The method we used to estimate income
generated for each sector in each region in-
volved four basic steps: (1) estimate income
received; (2) adjust for direct transfer pay-.
ments (i.e., federal subsidies); (3) adjust for
indirect transfer payments (i.e., federal cost-
sharing programs); and (4) adjust for other
public costs (i.e., operation and maintenance
of navigation and flood control structures).
The method was described in the main body
of the report arid illustrated in Figure.5, a
graphical depiction of income estimating
procedure; Figure 6, a numerical illustration
of the income estimating procedure; and Fig-
ure 7, estimates of income received and gen-
erated by sector/by Region. This Attach-
ment, which has five sections, provides ad-
ditional information about the estimating
procedure and the data sources used. Inter-
ested readers can obtain further technical
details and data from the authors. '
Contents
Section A-1-:
Section A-2:
Section A-3:
Section A-4:
Section A-5:
Section A-6:
Economic Variables used to.
Calculate Income Generated '
Definitions, of. Terms used in.
Describing Estimating Proce-
dure . . .. ' "
Sources of Direct and Indirect
Transfer Payments. •
Estimation of Direct and Indi-
rect. Transfer Payments
Estimation of'Annual Capital
Consumption (structures and
equipment only)
Caveats and'Special Consider-
ations ."'•.'
A-l
-------
SECTION A-l
'UPPER MISSISSfPPt RIVER (U M R)
NATURAL RESOURCE ACCOUNTING STUDY
Section A^l (Sectors 1-4)
SECTOR CONTRIBUTION TO REGIONAL ECONOMIC INCOME ($ millions)
Sector 01 DAIRY FARM PRODUCTS
|(11 GROSS ANNUAL RECEIPTS
ATM
S.914.191
0.000
S.914.191
5.061.779
852.412
720.797
131. SIS
467.221
Watershed
4,613.601
-Z22.831
Totll
138.512
21.857
1 9.296
2.561
Reach A
0.000
0.000
, 0.000
Reach B-
O.OOOJ
0.000
Sector 02 POULTRY AND I-GQS
(1> GROSS ANNUAL RECEIPTS
(3) VALUE OF COOPS SOLD .
(5) GROSS VALUfAppED_
(11) less Feoefil Soenemg on Flood Protection
Study • •
989.582
-16.916
-69.254
748.122
748.122
92.564
ST54T
Total
5.363
0.638
~ 0.282
: -0.385
Reach A
Reach 8
Reach C .
Sector 03 RANCH FED CATTLE
(12) «FT VALUE AOMDHd^edl 1
•3.458.877
1.939.911
1.518.966
• 1 .242.723
124.520
2,276.993
937.976
77.505
43.012
34.493
5.925
R
Reach A
Reach B
Sector 04 RANGE FED CATTLE
(1J GROSS ANNUAL RECEIPTS ..
(3) VALUE OF GOOQS_SOLO __.
412.044
1 26.562
226
226"
142
149
149
771
37BI
Total
7.927
7.927
™ S.11S
iiSTT
1.823
• Reach A
"~ 0382
Reach B
A-2
-------
UPPER -MlSSISSIPPt RIVER (U M S)
NATURAL RESOURCE ACCOUNTING STUDY
Section A-1 (Sectors 5-8)
SECTOR CONTRIBUTION TO REGIONAL ECONOMIC INCOME (S millions)
Setter as CATTLE FEEDL'OTS
(1) GROSS ANNUAL RECEIPTS
(3) VALUE OF GOODS SOLO - .
(5) GROSS VALUE ADDED
. Study
2.638.853
2.638,853
' 1.479.548
1.159.305
948.617
853.619
/ U'M. R
Watershed
~ 2.010.948
' '' 0000
' 2;010.948
1.103.856
~ 907.092
137.189
' 749.902
72.394
677.508"
Total.
. 0.000
44.766
6.137
Retch A
0.000
1 8.4O6
2.551
Reach 8
0.000
20.240
. 2.698
Reacn C .
0.000
6.121
0.888
Sector 06 SHEEP, LAMB, AND GOATS
(11 GROSS ANNUAL RECEIPTS
(5) GROSS VALUE ADDED •
(6) less Net Cantal Decrecaticn
(8) NET VALUE- ADDED (unadjusted) -
569.115
569.115
. 323.275
0.000
Sector 07
1,460.491
•105.174
1 U M R 1
Watershed
0.000
35.400
~ ' 16.260
HOGS. PK3S, AN
2.361.04*
' 1.073.034
Total
8.534
5.129
3.40S
0.696
0.000
0.307
D SWINE
Tot*
O.OOO
. 51.429
' 29.926
Reach A
Reach A
: 9.886
- Reach 3 ' •
Reach B
Reich C
Sector 08 OTHER MEAT ANIMAL PRODUCTS
(11 GROSS ANNUAL RECEIPTS .
(10) less Feoeral Socnaing on Navigation
( 1 2) NET VALUE ADDED (aaiusted)
1.143
O.OOO
Total •
O.OOO
. 0.000
Reacn A
Reach '8
; 0000
0.000
A-3
-------
UPPER MISSISSIPPI RIVER (U M R)
NATURAL RESOURCE ACCOUNTING STUDY
Section A-1 (Sectors 9-12)
SECTOR CONTRIBUTION TO REGIONAL ECONOMIC INCOME ($ millions) •
Sector 09 MISCELLANEOUS LIVESTOCK
(2) ess Direct Transfer Payments
(4) less Cott of Goods Used
(S) w-r« M»t fjrvr.l Oorecation _
(m NFT VAI us ADMD (unadjusted)
Study
182.593
• 0,000
182.593
~ 155.517
U M R
Watershed
142.823
142.823
121.002
4.590
0.000
-0.5S1
Total
1.492
1.492
0,223
0.054
. Reach A
0.482
0.482
0.112
0.017
0.043
Reacn 8
0.515
0.515
0.065
0 000
0.019
-0.013
0.495
0.495
0.046
0 000
0.018
-0.037
Sector 10 COTTON
fIJ GROSS ANNUAL RECEIPTS
(3) VALUE Of GOOOS SOLD
f 7) aus Net Additions to Inventory
(9) (ess indirect Transfer Piyments
Ml) )e*s Federal Soendtna on Rood Protection
6.053
12.737
8.834
5.330
' 0.311
0.259
0.000
Total
0.499
0.072
0.746
0.682
Reach A
O.OOO
O.OOO
/O.OOO
OiOOO
0.000
0.000
Reacn 8
0.000
O.OOO
O.OOO
r • o.ooo
o.ooo
0.000
Reach C •
0.044
0.499
0.072
0.746
0.000
0.682
Sector 11 FOOD GRAINS
(11 GROSS ANNUAL RECHPTS
(3) VALUE OF GOOOS SOLO
(111 ass Federal Spending on Flood Protection
: 857.099
829.558
92.842
40.234
U M ft
' 423.T21
330.243:
1 19.862
. 3.989
1 - O.OOO
Total
28.925
0.350
• -1.016
Reacn A
0.032
0.746
0.000
0.103
Reacn B
7 0.348
9.163
,. .....
0.000
~ 0.109
-0.507
Reacn C
0.748
• 19.016
0.138
-0.486
Sector 12 FEED GRAINS
(11 GROSS ANNUAL RECEIPTS
(?) VALUE Of GOOOS SOLD
(SI GROSS VALUE ADDED
(7) slus Net Additions to Inventory
fill ten Federal Soendim on Flood Protection
Study
7.987.877
7.728.957
~ 1.502.548
886.641
616.717
378.719
U M R
202.628
6.048.6O4
" 1.21 7.456
687.955
0.588
530.088
~~ 296.382
53.286
180.421
Total ~]
1 6.587
-22.465
11.048
1.246
0.167
Reacn A
1.656
38.530
5.340
5.570
0.116
.3.032
Reach 8
3.212
80.967
10.793
4.143
0.621
~' -1.176
Reach C
1.719
, 43.670
6.332
1.335
O.SQ9
-1.639
A-4
-------
UPPER MISSISSIPPI RIVER (U MR)
NATURAL RESOURCE ACCOUNTING STUDY
, Section A-l: (Sectors 13-16)
SECTOR CONTRIBUTION TO REGIONAL" ECONOMIC INCOME (J millions)
-'Sector 13 HAY AND PASTURE
..; '
(2) less Direct Transfer Payments
(3) VALUE OF GOODS SOLD . -
(5) GROSS VALUE ADDED •
(6) tegs Net Capital Deprecation .
(7) , plus Net Additions to inventory
(8) NET VALUE ADDED (Unadjusted)
(10) less Federal Soending on Navigation
(11) less Federal Soendino on Food Protection
Study
Are*
667,821
20.394
647.427
383.563
263.864
54.619
O.OOS
209.250
29.782
0.000
0.000
1 79.468
U M R
Watershed
13:645
433.181
234.466
- 33.388
0.003
165.331
19.926
0.000
0.000
145.404
•' - U M R FtoodBlain .
Total
, . 15.295
14.828
8.732
6.096
1.214
o.ooo
4.882
0.682
0.000
0.000
4.200
Reach -A
.3.625
" 0.263
3.362
4.181
0.579
' . . 0.000
3.602
0.385
0.000
0.000
3.217
Racn 8
3.223
0.098
3.124
2.141
0.984
0.235
,0.000
0.698
0.144
0.000
0.000
- 0.554
Reach. C
0.105
3.342
2.41 1
0.931
0.000.
0.582
0..154
0.000
.-• ' 0.428
Sector 14 GRASS SEEDS
( 1 ) GROSS ANNUAL RECEIPTS
(3) VALUE OF GOODS SOLD .
(5) GROSS VALUE ADDED .
(7) dus Net Additions to Inventory
(8) NET VALUE ADDED (unadiusted)
(9) less indirect Transfer Payments'
Study
Am
25.117
0.000
25.117
18.763
6.354
2.672
0.000
3.682
0.000
o.ooo
o.ooo
3.682
U M R
Watershed
5.883
O.OOO
5.883
. 4.334
, 1 .549
0.617
o.ooo
0.932
0.000
0.000
0.932
• U M R RcodtXam
Total .
0.253
0.000
0.253
0.189
0.06S
0.027.
0.038
0.000
0.000
0.038
. Reach A
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
Reach 8
0.066 1
0.066
0X352
0.014
0.007
Reach C
0.188
0.137
0.051
0.020
0.031
0.000
.,;• 0.031
Sector 15 TOBACCO
(1) GROSS ANNUAL RECEIPTS
(3) VALUE OF GOODS SOLD •
(5) GROSS VALUE ADDED
Study
Aral
' 15.402
0.499
14.902
13.418
T.4SS
1.911
0.001
-0.426
0.730
0.000
o.ooo
-1.156
U M R
Watershed
8.661
0.281
. 8.380
7.251
.' '1.129
1 .033
0.000
0.097
0.000
0.000
-0.314
Tota)
0.553
. ' 0.018
0.535
0.459
• 0.075
0.064
0.012
• 0.026
O.OOO
-0.015
Reach A
0.553
0.018
0.535
• 0.4S9
0.075
0.012
0.026
0.000
Reach 8
0.000
0.000
'0.000
Reach C
0.000
O.OOO
Sector 16 FRUITS
(5) GROSS VALUE ADDED
(6) less Net Caortal Oeoreeation
Study
Area
153.300
148.389
129.943
18.446
18.504
0.012
-0.046
7.182
0.000
0.000
-7.228
U M R
watershed •
105.643
102.259
88.605
13.653
12.617
0.007
1.043
4.949
-3.907
Total
3.689
7.370
1.041
1.038
0.007
0.407
^ -0.397
Reach A
2.237
2.165
1.802
0.363,
0.250
0.000
0.113
* 0.105
0.009
.Reach 8
1.883
' 1.823
1.637
0.185
0.218
0.001
-0.032
0.088
Reach C
' 4.423
3.931
0.492
0.006
0.214
A-5
-------
UPPER MISSISSIPPI RIVER (U H R)
NATURAL RESOURCE ACCOUNTING STUDY
Section A-1 (Sectors 17-20)
SECTOR CONTRIBUTION TO REGIONAL ECONOMIC INCOME (S millions)
Sector 17 TREE NUTS ! . ,
H) GROSS ANNUAL RECEIPTS
(3) VALUE OF GOODS SOLD
(5) GROSS VALUE ADDED
13.666
~ 1.295
0.724
U M R
0.779
0.038
Tot*
0.002
0.017
0.030
0.002
• 0.023
0.000
Reach A
0.000
0.000
0.000
O.OOO
0.000
0.000
0.000
0.000
0.000
o.ooo
Reacn C
.0.002
0.017
0.002
0.02B
0.000
Sector 18 VEGETABLES
(S) GROSS VALUE ADDED
(9) less Indirect Transfer Ptyments
(11) less Fea«nl Soenditxj on Flood Protection
Aral
2.112.622
68.281
2.044.341
227.869
1.179
100.173
1.776.593
1.719.173
193.618
217.239
0.991
34.239
-106.870 1
Tot*'
36.420
1.177
4.404
0.033
-0.652
0.000
-2.379
Reacn A
2.823
•O.OOS
O.OOO
•1.140
0.416
-0.116
0.000
-0.283
1.165
. -0.532
0.000
-0.956
Sector 19 SUGAR CROPS
fl) GROSS ANNUAL RECEIPTS
5) GROSS VALUE ADDED
(11) less Federal Soendinq on Flood Protection
Study
108.498
1.782
74.738
31.978
21.335
. 2.S93
0.000
18.742
27.088
~~ 26.643
19.951
6.693
2.841
3.852
0.000
0.000
oeoo
0.000
! 0.000
R«cn A
0.000
0.000
O.OOO
0.000
0.000
O.OOO
0.000
0.000
0.000
0.000
o.ooo
0.000
• o.ooo
: o.ooo
Sector 20 MISCELLANEOUS CROPS
(11 GROSS ANNUAL RECEIPTS
(31 VALUE OF GOODS SOLD
(9) less indirect Transfer Payments -
(12) NET VALUE ADDED (adiinted)
39.136
39.136
26.473
8.893
U M R
27.042
18.381
0.000
6.043
Total
0.251
0.035
0.057
Reacn A
0.000
5589
0.012
0.030
O.OOO
Reacn 8
0.000
0.051
0.007
: 0.012
0.000
Reach C
0.000
0.111
0.016
0.015
0.000
A-6
-------
• • UPPER MISSISSIPPI RIVER (U M R)
NATURAL RESOURCE ACCOUNTING STUDY , •
• . Section A-1 (Sector 21) .
SECTOR CONTRIBUTION TO REGIONAL ECONOMIC INCOME (J millers)
Sector 21 OIL BEARING CROPS
( 1 ) GROSS ANNUAL RECEIPTS
( 2 ) (ess Direct Transfer Payments
(3) VALUE OF GOODS SOLD
(4) . >ess Cost of Goods Used
(5) GROSS VALUE ADDED .
(6) . . less Net Caoital Oeoreoation
(7) pus Net Additions to Inventory
(8) NET VALUE ADDED (iradiusted)
(9) less indiren Transfer Payments
(10) less Federal Soending on Navigation
1 1 ) less Federal Soendinq on Flood Pratectior
1 2) NET VALUE ADDED (adiusted)
Study
Area
• • 5.121.319
.151.577
4.969.742
4.290.172
679.570
S10.921
0.000
68.649
230.596
17.772
0.000
-179.719
' U M R
Watersned
3.593.420
• 106.3 55
.3.487,065
2.969.384
517.681
422.840
0.000
94.841
161.800
1 5.030
0.000
-31.989
U M R Ftoodoiain
Total
146.022
4.322
141.700
124.972
16.726
17.341
0.000
• -0.613
6.575
0.856
0.000
••-8.044
Reacrr A
' 4.393
0.130
4.263
3.506
, 0:758
0.486
' 0.000
0.272
0.198
0.039
.0.000
0.035
. Reacn 8 i Reacn c
74.9371 ' 66.692
2.218
72.719
64.707
8.012
1.974
64.718
. ' 56.759
7.959
8.6251 8.230
0.000] 0.000
-0.614
-'.374
C.428
-0.271
' 3.003
0.339
0.0001 , 0.000
-4.4161 -3.663
.A-7
-------
SECTION A-2
DEFINITIONS OF TERMS
(1) GROSS ANNUAL RECEIPTS. Total
^revenues received from all sources includ-
ing sales of products and services, rents,
royalties, and other property income, and
direct transfer payments from the federal
government.
(2) DIRECT TRANSFER PAYMENTS.
Transfers of income, from taxpayers inside
or outside the region to this sector. This
excludes payments that reflect the fair
market value of goods or services re-
ceived, e.g., sales to the federal govern-
ment, and includes payments associated
with direct farm subsidies and' other in-
come support programs.
(3) VALUE OF GOODS SOLD. The mar- ,
ket value of goods and services produced
and sold, (Row (1) less Row (2)).
(4) COST OF GOODS USED. Purchases
from other sectors of intermediate goods
and services used in production.
(5) GROSS VALUE ADDED. The differ-
ence between the VALUE OF GOODS
SOLD and the VALUE OF GOODS USED,
(Row (3) less Row (4)). Includes payments
to households in .the form of employee
compensation, proprietary and other
property income, indirect business taxes,
' and capital depreciation allowances.
(6) CAPITAL DEPRECIATION. Spending
required to restore or replace used plant
and equipment.
(7) ADDITIONS TO INVENTORY. Net
change in the value of goods produced
or purchased, but not used or sold.
(8) NET VALUE ADDED (Unadjusted).
Gross Value Added less Capital Depre-
ciation plug Additions to Inventory, (Row
'(5) less. Row (6) plus Row (7)). ,
i - - .- -. .-
(9) INDIRECT TRANSFER PAYMENTS.
Dollar value of federal assistance pro-
• vided in the form of commodity loans,
land improvements, farm storage assis-
tcince, and the provision of other goods
and services used to produce, distribute,
or market products, excluding annual
federal spending to.operate and maintain
. river transportation and flood protection
structures. .
! • " " '
(10) ANNUALIZED PUBLIC COSTS—
Navigation. Average annual non-reim-
•bursed federal expenditures necessary to
' construct, operate, maintain, and restore
navigation control structures (locks,
dams, and channels) in order to facilitate
flows of agricultural inputs and products.
! ' ' '
(11) ANNUALIZED PUBLIC COSTS —
Hood Protection. Average annual non-
reimbursed federal expenditures to plari>
design, build, maintain, and repair flood
protection devices (levees arid reservoirs.)
to protect agricultural property.
(12) NET VALUE ADDED (Adjusted). Unad-
justed Net Value Added (line 8) minus In-
direct Transfer Payments (Line 9) and other
Public Costs (Lines 10 and 11). NOTE: This
intermediate measure of the net economic
income is 'not adjusted to reflect non-mar-.
ket environmental costs or benefits or as-
sociated changes in natural capital. ;
A-8
-------
SECTION A-3
SOURCES OF DIRECT AND INDIRECT TRANSFER PAYMENTS
BACKGROUND
For purposes of supporting international
trade negotiations and trade agreements
(e.g., NAFTA, GATT) the U.S. .Department
of Agriculture estimates direct and indirect
transfer payments, for twenty varieties of
crops and nine varieties of livestock. These
are released as Producer Subsidy Equivalen-
cies (PSE's) which are presented as "A Per-
cent of Total Value of Production" by com-
modity type. We obtained PSE's for years
1982 through 1993 and estimated sector level
subsidies on the basis of PSE's for the year
1991. ' ,
Thefollowing'secrions are taken directly
from: Estimates of Producer and Consumer
Subsidy Equivalents. U.S. Department of
Agriculture, Economic Research Service.
Statistical Bulletin No. 803. Washington,
D.C.;1990 •• ••'-..
Direct Transfer Payments
f '
Policies in this group are financial out-
lays or cash transfers between .the govern-
ment and producers for the purpose of aug-
menting incomes of the targeted group:
Most direct transfer payments take the form
of Income'support. They include:
1. Crop Insurance—Income support. The
FDIG has provided insurance against
production losses due to weather and
other unavoidable natural events .since
1980. . • • . ' '
2. Deficiency Payments—Income sup-
port. Producers participating in acreage
. reduction programs receive the differ-
ence between target prices and the higher
of market prices or loan rates on eligible
production.
3. Disaster—Income support. Disaster
payments compensate participating
producers for prevented plantings or low
yields due to natural conditions. '
4, Diversion—Income support. Participat-
ing producers receive payments for pro-'
• duction foregone on part of the reduced
. 'acreage. ' -
5. Loan Forfeit Benefits—Income Sup-
port. When a "CCC non recourse com-
modity loans" matures, producers may
chopse to. forfeit the commodity rather
than pay back the loan with interest and.
receive the prevailing market price. Pro-
ducers receive income benefits when
they forfeit grain if the loan rate is above
prevailing market prices.
6. PIK Entitlements—Income Support.
Payments can be made either in cash or
• through commodities.
7. Dairy Diversion Payments—Income
Support. Producers willing to p a r t i c i -
pate are paid a certain price for forego-
ing marketing's on 5%-30% of their
base milk marketing's. • "
8. Dairy Assessments—Income Support.
Producers are assessed $0.50 -$1.00 /
CWT on all milk marketed commercially
to offset costs of the dairy program.
9. Marketing Loans—Income Support. A
marketing loan allows repayment of
commodity loans at levels below the loan
. rate. '•,".'•
A-9
-------
Indirect Transfer Payments
In general, .the result of programs that do
not involve direct payment to farmers but
do involve spending that provide financial
benefits to farmers. They include:
1. Price Enhancing Policies—Price inter-
vention. Acreage reduction programs,
CCC, inventory action, import tariffs,
and export programs provide support to
. the extent that they cause domestic prices
to be above prices received in world mar-
kets. Although many commodities re-
ceive price support, support can be mea-
sured only if price gaps are observed.
2. Beef Purchases—Price intervention. To
minimize the effect of the dairy herd
buyout program on red meat prices, the
CCC is mandated to purchase 400 mil-
lion pounds of red meat as part of the
dairy program. -
3. Tariffs—Price intervention. Tariffs raise
the price protection to domestic produc-
ers.
4. Fluid Milk Premiums—Price interven-
tion.' Prices of beverage milk tend to be
higher, than for milk used to produce
manufactured dairy products. Some of
this price gap may be due to federal milk
marketing orders, which regulate milk-
flow.
5. Price Support/Quotas—Price interven-
tion. Domestic price support quotas
coupled with quotas/tariffs support do-
mestic prices above world prices.
6. Commodity Loans—Input assistance.
Participating producers may take out
non recourse loans by pledging crops as
collateral. Producers with loans have the
option of repaying loans with interest or
forfeiting their crops to the CCC..
7. Farm Credit—Input assistance. The
Farmers Home Administration offered-
loans to producers at lower than market
rates of interest.
1 •
8. Fuel Excise Tax—Inputs assistance. All
off-highway uses of diesel fuel and gaso-
line including agriculture are exempt
from federal excise taxes. .
9. Pest and Disease Control—Input assis-
tance. Activities of the Animal and Plant
Health Inspection are included.
10.'Grazing Fees—Inputs assistance, the
Forest Service and Bureau of Land Man-
agement charge below market fees for
livestock grazing on public range land.
11. Emergency Feed—Input assistance.
Producers may be reimbursed by the.
CCC for up to 50% of the cost of feed pur-
chased during periods of emergency
when livestock feed losses due natural
disasters occur.
12. Advisory—Marketing assistance. Ac-
- tivities of the Extension Service and the
Agricultural Cooperative services are in-
cluded.
13. Inspection—Marketing assistance. In-
spection services! provided by the Fed-
eral Grain Inspection Service, the Food
Safety Inspection Service, and the Pack-
ers and Stockyards Administration are
included in these estimates.
14. Processing and Marketing—Marketing
assistance. Activities of the Agricultural
Marketing Service, Office of Transporta-
tion, and the Foreign Agricultural Service
are included.
15. Storage—Marketing assistance. Partici-
pating producers may place their grain
in a long term loan program. Producers
receive annual storage payments to help
, defer costs of storing grain.
A-10
-------
16. Farm Storage Facility—Infrastructure
, Support. The Farm Storage Facility Loan
Program provides funds to construction
of on'farm .storage facilities at below
market, rates of interest.
17. Land Improvements—Infrastructure
support. SCS, and ASCS, conservation
• programs are included.
18. Research—Infrastructure Support. Ac-
tivities of the ASCS, ARS, ERS, and NASS
•are included. ' ; ,-
19. State Programs—Regional Support.
State governments provide support to
agriculture through expenditure of-funds
for research, extension, information ser-
• vices, and marketing and inspection ser-
, vices.
20. Taxation—Economy wide policy. Sub-
sidy provided by special provisions of
Federal income tax laws allowing cash
accounting, current, deduction of cost
incurred in developing assets, and gains
from certain assets, in a more lenient way.
' A-ll
-------
g
IU
l/>
I
£
en
01
•a
o
g
s
•8
-££*-*
to to 10 vo u;
N^ •<*• ro ro.fiO co vo * O
CO CO CO r- CO
1111 a 11 s.s a £
t- (\» co
10
4^
-8
V
5
7>
I
£-
1
f
.§
tJ
-------
SECTION A-4
ESTIMATION OF DIRECT AND INDIRECT TRANSFER PAYMENTS
Estimating Procedure:
j '' • • - • '•''',.-
Step 1. Calculate Total Subsidies (direct and "
indirect) for each agricultural sector " ported in U.S. Cencus of Agriculture
as shown in Table A-3 using infor- - . by the results of Step 5 to get Row 2,
mation from ERS-Producer Subsidy Direct Transfer Payments f.-w Sec-
: Equivalencies, Table 2 ,which in- tionA-1 of this Appendix). .
eludes aggregate producer subsidy . . .
. equivalencies for twelve commodity Step 8. Multiply Value of Goods Sold as re-
groupings for years 1982^-1992. ported in U.S. Cencus of Agriculture
'-•'-.'' by the results of Step 5 to get Row 9
Step 2. Calculate Value of Direct Transfers Indirect Transfer Paympnf-s I^PP Sec-
For each commodity/sector aggre- tion A-l of this Attachment),
gate all policy transfers categorized
as "income support payments."
Data Sources:
.Step 3. Calculate Indirect Transfer Pay- Estimates of Producer & Consumer Subsidy
"tents. For each sector aggregate all Equivalents: Government Intervention in Ag-
applicab'le transfer payments for riculture 1982-1987',A.Webb,M.Lopez&R.
each commodity/sector, excluding Penn.USD A, ERS,
those categorized as "Income Sup- •
port Payments." . Producer Subsidy Equivalencies for U.S. Agri-
culture, (Tables provided by USD A, ERS,
Step 4. Calculate Indirect Transfer Pay- July, 1994).
ments as a percentage of Total Trans- Background
fer Payments for crops and livestock ,
(for crops = 74%, for livestock = . . • "
100%). . ' : '
Step 5. Calculate Direct Transfer Payments "''•.. '
received as a percentage of total
value of agricultural production for
each commodity/sector.. :
(Data from ERS, Table 1) -
Step 6, Calculate Indirect Transfer Pay- -
ments received as a percentage of to-
* cj- _ , ,
tal value of agricultural production .
for each commodity/sector. - ;' \
(Data from ERS, Table 1)
-- ' - ' , - ' ^^-
Step 7. Multiply Value of Goods Sold as re- : .
• • ' • . " .• A-13 • . .''.,.:"- '•-'"'
-------
SECTION A-5
CAPITAL CONSUMPTION ALLOWANCE
State economic data reported in the Cen-
sus of Business, Census of Manufacturing,
and Census of Agriculture and correspond-
ing county data contain estimates of gross
capital formation by sector, but do not re-
port what portion of this spending repre-
sents net capital formation (new invest-
ments) and what portion reflects spending
to replace worn out or obsolete capital. In
order to estimate net capital formation and
the annual cost of capital depletion for built
capital (structures and equipment), we used
the rate of capital depreciation for U.S. ag-
riculture as reported by USDA.
Calculation of Capital Depreciation by
Flood Plain Reach
Step 1. Using state financial summaries
from Farm Economic Indicators,
1982-1992, Table 4, add capital de-
preciation in agriculture for all states
within each reach.
Step 2. Using the same financial summaries,
subtract Contract and Hired Labor
Expenses from Total Production Ex-
penses for agriculture to determine
Cost of Goods Used in agricultural
production for each state.
Step 3. Sum Cost of Goods Used in agricul-
tural production for all states within
each reach.
Step 4. Divide total capital consumption for
each reach (Step 1) by Cost of Goods
Used for each reach (Step 3) to esti-
mate capital consumption as a per-
centage of Cost of Goods Used.
Step 5. Multiply Row 4, Cost of Goods of
i Used by sector, by region, by the re-
. I suits of Step 4 to estimate Row 6 Net
' Capital Depreciation for each sector
1 in each reach.
. | • .
Calculation of Capital Depreciation by
Study Area and UMR Watershed,
Step 1. Using state financial summaries'
I from Farm Economic Indicators,
I 198E2-1992. Table 4. add Capital De-
preciation in agriculture for all.states
within the region.
Step 2,
Step 3
Using the same financial summaries,
subtract Contract and Hired Labor
Expenses from Total Production Ex-
penses to determine Cost of Goods
Used in production for each region.
Sum Cost of Goods Used in agri-
culture for all states within each re-
gion. •
Step 4. Divide total capital consumption for
each region (Step 1) by Cost of
Goods Used for each region (Step 3)
to estimate capital consumption as
a percentage of Cost of Goods Used.
Step !5. Multiply Row 4, Cost of Goods of
Used, by the results of Step 4 to es-
timate Row 6
ciation for each sector in each region.
Data Source: Economic Indicators of the
Farm Sectors State Financial Summary,
1992. USDA. ERS.
A-14
-------
SECTION A-6
SPECIAL CONSIDERATIONS
General Limitations
(1) Estimates of income received and income
generated, although based on published
and generally accepted data, are affected
by the level of sector aggregation used
in the analysis and in some cases rest oh
generalizations and assumptions that re-
1 quire further research. • •
(2) Estimates of income are provided for a
single year, 1991, which may not reflect
typical income received and generated
over longer time periods,
.(3)" Estimates are provided for sectors that
do not consist of identical farm opera-
tions—some operating units within a
sector may generate or receive more or
less income than others.
(4) Income estimates are not adjusted to re-
flect federal,construction costs for navi-
gation and flood control structures along
the Mississippi (with the exception of
some portion of costs at the recently com-
. pleted renovations of Lock/Dam #26).
This understates costs and overstates
income generated for some sectors.
(5) Income estimates do not reflect the net
economic costs associated with the ad-
verse impacts of agricultural production
on stocks of natural capital inside and
outside the region. This .understates costs
and overstates income generated for
some sectors.
Sub-County Economic Data
We worked primarily with county-level
economic accounts'. .These were sufficient for
analyses at the Watershed level thatrequired
addition across many counties in the five
state Study Area, The UMR flood plain ar-
eas, however, consist of parts of 54 counties
located adjacent to the UMR. As the study
progressed, refinements to county level data
to distinguish between agricultural activi-
ties inside and outside the flood plain took
place in three stages. First, we used the over-
all level of economic activity for agricultural
sectors in counties adjacent 'to the UMR to
reflect the level of economic activity within
the flood plain; since not all agricultural ac-
tivity in each county is located in the flood
plain, this clearly over-stated the economic
importance of flood plain agriculture.; We
then tried to refine our estimates using
EARTHSAT data to characterize bip-physi-.
cal features and land-use patterns within
each county. This allowed us to determine
the percentage; of the total agricultural area
within each county that was inside and out-.
side the natural flood plain; but could not
provide adequate information for us to dis-
tinguish between different types of agricul-
ture. As a result, EARTHSAT data could be
used to adjust accounts only by making the
assumption that for each agricultural sector'
' within each county the percentage distribu-
tion of production and income generated in-
side and outside the flood plain was the
same. Finally, we contracted researchers at
Iowa State University to analyze state,
county, and sub-county agricultural records ;
to determine what percentage of agricultural
production by each sector in each county
was located on and off the flood plain.-In
the final analysis, we used these estimates
to generate economic accounts for flood
plain agriculture.-(Interested readers can
contact the authors for technical details.) ,
A-15
-------
Navigation Costs
Annual operating and maintenance costs
for the UMR navigation system were esti-
mated for 1991 and used to develop a dollar
cost per ton of cargo shipped. Costs were
then allocated by sector and by region based
on estimated tonnage of agricultural inputs
and products shipped on the UMR river. Al-
locations were made by researchers at the
University of Iowa using agricultural data-
bases for each region. (Interested readers can
contact the authors for technical details.)
Flood Protection Costs
Despite the significant federal inter-
agency effort to evaluate flood control efforts
in the UMR region in the aftermath of the
1993 floods, we were unable to obtain even
basic economic data on federal flood pro-
tection costs in the region. As a result, we
were forced to ignore this aspect of federal
spending. (Interested readers can contact the
authors for details about contacts made, in-
formation received, and our conclusions
about what might be done to improve in-
formation in this area.)
A.-16
-------
APPENDIX B
ENVIRONMENTAL RESOURCE ACCOUNTS
The attached tables present the structure We are currently collecting and organiz-
of the environmental resource accounting 'ing data,to "fill in the blanks" of this proto-
framework in summary form. Table Bl type natural resource accounting system.
shows the socio-economic values and eco- Full implementation of the accounting
logical functions that"we use to examine the .scheme will involve development of data
significance of environmental assets. Table management tools allowing examination of
B2 shows a preliminary list of assets, based geographical and functional relationships
on data available for pool 13, near Clinton, among assets. We will pursue full imple-
lowa. Table Bl therefore represents the col- mentation of this accounting scheme as,
umns of the accounting scheme, while table funding becomes available. Only with sig-
B2 represents the asset accounts, or rows., nificantly more advanced data management
Table B2 also includes brief indications of tools, includingGIS capabilities, are environ-
the type of data that are likely to be most mental accounting procedures likely to be-
valuable for constructing the final biophysi- come fully operational.
cal accounts. , , . ; - . .
We have focused this accounting effort " •
on Pool 13 because it is the location of an
ongoing research and monitoring effort un- t ; •
der the auspices of the Upper Mississippi
River System Environmental Management . .
Program's Long Term Resource Monitoring ' . ' , . ,
Program. Thus the pool is well character-
ized, and a variety of relevant ecological data ' '
already exist. .
To reduce the length of the tables, we -...'• ' ., .
have, in some cases listed categories of as- J ...
.sets, rather than.individual assets. For ex- .
ample, we have not listed every example ,
• within pool 3.3 of a secondary river channel
or every example of a forested wetland. In- ,
stead, we have shown accounts for types of ; . . . .
"Secondary River Channels."In a fully ' ._ ' . \
implemented environmental accounting
system, such a simple approach to aggrega-
tion may be inappropriate for some assets. " •
B-l
-------
Figure B1
Examples
Market
Value of
mussel
shells
Socio-Economic Values
Use '
Non-Market
Recreation, transport,
water supply
' | No
\.
Exist.
Sejise of
plaice
nuse
Bequest
Wish to instill
in kids a sense
of the river
Ecological Functions
Physiochemical
Conditions
Water quality
Water, nutrient
and sediment
transport
Nutrient,
sediment, carbon
transport
Trophic Base
1° and 2°
production
Growth and
transport of
detritus,
plankton
Organic matter
transport to
estuarine food
webs
Habitat Struct.
Shelter for small
fish
Corridor
function,
remnant habitats
Migration route
Temporal
Variation
Annual and
diurnal cycles,
disturbance
Timing, •
severity of
floods, erosion,
disturbance
Variation flow
of nutrients to
Guilf
Divers.
Genetic
and
species
diversity
Species
and
habitat
diversity
Habitat
diversity
Scale
Pool or
Habitat
UMR
Continent
or Globe
B-2
-------
Figure B2
Account
Categories
Accounts
Data Examples
rtign uraer or Direct Environmental Assets
Subsoil Assets
Minerals
Gravel and'Sand
Market prices, remaining reserves
Harvested (Wild) Plants
' , Timber •
Pulpwood
Medicinal/Other
Acres, board feet, stand index
Abundance, distribution . •
Animals
Game Animals
Deer
Rabbit ,
Squirrel
Fur Bearers
Raccoon
Muskrat
Beaver'
Mink
Waterfowl ,
Mallards
Wood Duck
Gadwall
Green wing Teal
Blue Wing Teal
Widgeon
Canada Geese
. Ringneck Duck
Scaup
Black Duck
Read Head .
Canyasbacks
Game Birds
Pheasant
Woodcock
Quail
Turkey
Populations, health, distribution
Breeding, migrating populations,
harvests, distributions
Populations, health
B-3
-------
Fiqure B2 cont.
Fish
Bluegill
Largemouth Bass
Black Crappie
Channel Catfish
White Crappie
Sauger
Fresh Water Drum
Walleye
White Bass
Yellow Bullhead
Carp
Black Bullhead
Paddiefish
Bigmouth Buffalo
Carp Sucker
Other Harvests
Unionid Mussels .
. "Watchable" Wildlife
. ' . '
Blue Herons
Hawks
Other Migratory Birds
etc.
Intermediate and Low Order Assets
Species
Endangered/Threatened Species (1)
Bald Eagle
Higgins Eye Pearly Mussel
Other Mussels?
Iowa Pleistocene Snail
Indiana Bat
Eastern Prairie Fringed Orchid
Western Prairie Fringed
• Orchid
Northern Monkshood
Prairie Bush CJover
Endemic Species
Higgins Eye Pearly Mussel
Iowa Pleistocene Snail
Populations, harvests, health . •
.
Area of beds, harvest
Populations, distributions, co-
distribution with recreation sites
Populations, viability assessments
. • • . •
•
Distribution, vulnerability of habitat
:' •
B-4
-------
Figure 82 cont.
Species of Ecological Significance
Fingernail Clam
Water Celery (Valisineria)
Mayflies (Hexageniasp.)
Small Forage Fish
Forest Interior Birds
- Native Pollenators
Stream Insect Communities,
Natural Enemies of Pests
Micorhizal fungi
Terrestrial Decomposers
etc. •
Abundance, Distribution, Trends
Exotic Species of Concern
Zebra Mussel
Carp
Purple Loosestrife
Water'millefoil
Abundance, costs of control
Specific Habitat Requirements For Desired Species (1
Terrestrial
Eagle Roost Sites
(Cottonwood)
Heron Rookery Sites
(Sycamore)
etc.
Number, location, distance to water
Mixed Terrestrial/Aquatic
Wood Duck Recruitment.
Canada Goose Recruitment
etc.
Shallow water, larger trees
Aquatic
Centrarchid Overwintering
Diving Duck Fall Migration
Mussels
Walleye and Sauger,
Recruitment
Walleye and Sauger, Adults
etc.
Deep aquatic, low flow, high dxygen
B-5
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Figure B2 cont.
Habitats/Lands/Waters
Terrestrial
Developed
Industrial Lands
Commercial Lands
Low Density Residential
Medium Density Residential
High Density Residential
Other Developed Lands
Forest
, ,
Upland Forest
Silver Maple Forest
Cottonwood Forest
Green Ash Forest
Agriculture
Dairy
Beef Cattle
Hogs
Other Livestock
Food Grain
Feed Grains
Oil Bearing Crops
Other Crops
Property values, percent impervious
surfaces
Local pollutant problems
Percent on sewer vs septic
Area, species composition, proximity
to river, patch size
Productivity, soil type, slope, soil
quality, nutrient application rates
Wetlands (2)
Floodplain
Forested
Scrub/Shrub
Emergent
Area, percent supporting designated
uses, level of wetland functions
Other
Forested
Scrub/Shrub
Emergent
B-6
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Figure B2 cont.
Aquatic (3)
.Main Channel :
Navigation Channel
Sandbar
/ Tail waters
' *' . ' Channel Borders /
Secondary Channel
Navigation Channel
Sandbar ' - . .. '
Channel Borders
Tailwaters
Other Channels
Tertiary Chanels
Tributary Channel
Backwaters
Contiguous Floodplain Lakes
Contiguous Shallow Aquatic
Areas
Contiguous Impounded
Isolated Floodplain Lakes
Isolated Shallow Aquatic
Areas
Outside Floodplain
Tributary streams and rivers
Natural Ponds and Lakes
Artificialponds
Reservoirs
Area, percent of flpodplain, cliem.
and bio!, water quality ,
Ecological Systems
Landscapes
Wetland-Dominated
In UMR Floodplain .
Outside of Floodplain
Forested
In UMR Floodplain
Outside of Floodplain
Agricultural
In UMR Floodplain
Outside of Floodplain
Developed
Sabulia, Iowa
Savanah, Illinois
Savanah Depot Mil. Res.
Percent wetland, degree of
interconnection among habitats,
successions characteristics
Average patch size, degree of
connectedness, proportion of edge
versus interior habitat
Extent and connectedness of non-
agricultural lands, Diversity of crops,
percent monoculture
Human population, percent
forestland, percent parkland,*
abundance of .suburban birds
, --.B-7
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Figure B2 cont.
Bellevue, Iowa .
• Thompson, Illinois :
. Watersheds .
UMR Above Pool 13
Illinois .
Apple River Watershed
Rush Creek Watershed
Plum River Watershed
Iowa
Mill Creek Watershed
Duck Creek Watershed
Pleasant Creek Watershed
Maquoketa River Watershed
Smith Creek Watershed
. Beaver Creek Watershed
Elk River Watershed
Silver Creek Watershed
Deer Creek Watershed
Aggregate land use data, chemical
water quality, biotic integrity and
biodiversity of pools 12 and 13
Biotic integrity, chemical water quality,
landscape metrics
Floodplain and Aquatic/Terrestrial Transition Zone
Flyways Mississippi Flyway
Migratory bird abundance, continuity
of habitat, availability of nesting,
bverwinterinq habitat
(1) Includes Federally listed endangered and threatened species only.
(2) Based on Cowardin, L.M.. V. Carter, F.C. Golet, and E.T. LaRoe. 1979. Classification
of Wetlands and Deepwater Habitats of the United States. FWS/OBS-79/31 U.S. Fish
And 'Wildlife Service, Washington, D.C. Alternative classifications based on
geomorphic criteria are possible (e.g., Brinson, M.M. 1993. A Hydrogeomorphic
Classification for Wetlands. U.S. Army Coirps of Engineers Wetlands Research
Program Technical Report WRP-DE-4.U.S. Army Corps of Engineers, Washington,
D.C.). . . _•';.._
(3) Aquatic habitat classification based on Wilcox, D. 1993. An Aquatic Habitat
Classification System For the Upper Mississippi River System. U.S. Fish and Wildlife
Service, Environmental Management Technical Center, Onalaska, Wisconsin.
B-8
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