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C. Håkansson & B. Kriström P.O. Johansson
Department of Forest Economics, SE-901 83 Umeå, Sweden Stockholm School of Economics, SE-113 83 Stockholm, Sweden
K. Leonardsson & H. Lundqvist
Department of Aquaculture, SE-901 83 Umeå, Sweden
ABSTRACT: We present a cost-benefit framework to analyze the interaction between hydropower and salmon in a dynamic context. The framework is used to derive cost-benefit rules for projects that affect wild salmon survival. Our approach is illustrated with data from an ongoing project regarding a potential salmon passage-hydropower conflict in the northern Swedish river Umeälven and its largest salmon producing tributary Vindelälven. Daily water flow data are combined with daily data on the number of salmon that pass the hydropower plant Stornorrfors. The data is used to study the opportunity costs of releasing more water to the potential benefit of salmon upstream migrants, ie. adult spawners. Results from a pilot-study on the value Swedes place on preserving wild salmon in this river are also presented. No firm empirical conclusions can be presented at this stage. 1 INTRODUCTION Natural resource conflicts present a challenging task for cost-benefit analysis, mainly because of the intricate dynamic issues such resources raise. We will present a framework for dynamic cost-benefit analysis of hydropower – fish passage conflicts. The approach is illustrated with data from an ongoing project regarding the salmon – hydropower conflict in a river in northern Sweden (Umeälven/Vindelälven). Daily water flow data is combined with daily data on the number of salmon that pass the hydropower plant Stornorrfors in the lower parts of Umeälven. The data is used to study the opportunity costs of releasing more water to the potential benefit of salmon migration (at the cost of electricity production). 2 COST-BENEFIT ANALYSIS Let us consider a society that values both its consumption of a numeraire good and its consumption of salmon. In addition society attributes a value to the stock of salmon. Abstracting from distributional concerns, the society under consideration aims at maximizing the present value utility of a representative individual:
where u(.) is an instantaneous utility function, c(t) denotes consumption of the numeraire good at time t, cL(t) denotes consumption of salmon at time t, sL(t) denotes the stock of salmon at time t, and δ is a discount rate, for simplicity assumed to be constant across time. For simplicity, we assume that the numeraire commodity is produced using electricity as the sole input. In turn, the amount of electricity is a function of the flow of water through the power station. Thus we have: c( t ) = f ( s w ( t ))
where s w (t ) is the time t flow of water through the power station (a dot refers to a time derivative). This flow is determined by natural conditions (precipitation, etc.), and the amount of water diverted from electricity production in order to promote the possibility of salmon to pass the power station and reach their spawning-grounds: s w (t ) = k (t ) − A( t )
u (c( t ), cL (t ), sL (t )) e− δt dt
where k(t) refers to the flow of water as determined by natural conditions, and A(t) denotes the amount of water diverted from electricity production. The policy variable of our model is A(t), because it directly controls the production of goods from water/
these problems arise in larger rivers where fish spawn in upriver areas while critical migration passages such as bypass channels and fish ladders are situated in the downriver areas. 4 MEASURING PREFERENCES A pilot-study was carried out in May 2003 to obtain more information about Swede's sentiments towards the wild salmon in Vindelälven.) is a generic growth function. The survey was structured in a conventional manner. For simplicity.e. even if the costs and the increase of wild salmon were the same for all methods. i. The comments given by the yes-respondents indicate that it is of significance to this group whether or not the method increases the number of salmon in a natural way. 9 percent answered 'do not know' and 29 percent of the respondents answered that it did matter for them which method that was used. Rivinoja et al.e. However. A( t )) − c L ( t ) • (4) where g(. the amount of water diverted from electricity production. Daily and weekly control of the water flow through the power station and over the dam in Norrfors have given rise to a concern that the salmon migration is hindered by low daily flow regimes during the spawning migration. 2003). there is an immediate impact on production of the numeraire good such that c(t) is reduced. Thus we can use a change in A(t) to generate the principal terms in a cost-benefit analysis of the salmon-hydropower "conflict". In Sweden. Equation 4 shows that the change of the salmon stock at time t is equal to the natural growth of the stock at time t less the catch of salmon at time t. generates detailed information on the hatchery (adipose fin cut) . (2001) show that about 75 % of the salmon do not pass upriver through the flow controlled area around the Stornorrfors power station. The amount of water in each pathway depends on electricity generation (i. Equations 3 and 4 make it clear that diversion of water from electricity production has two effects. as long as the costs and the increase of wild salmon was the same for all methods. The salmon enters an area in which the water from the turbines and the bypass channel come together. Another method is to increase the water flow in the bypass channel (Ferguson et al. An example of a non-natural increase would be 3 SALMON AND HYDROPOWER Fish-passage problems related to migrations through flow controlled areas in regulated rivers are global. 62 percent of the respondents did not care which method that was used. and indirectly controls the amount of salmon. Wild salmon undertake its spawning migration in the lower Umeälven in early summer and migrate upstream till early October (McKinnell et al 1994). Rivinoja & Lundqvist (1998) and Rivinoja et al. The change of the stock of salmon is determined as follows: s L ( t ) = g ( sL ( t ). The respondents were made aware of the fact that increasing the number of wild salmon typically comes at an opportunity cost. . electricity demand) and stipulated flow in the bypass channel. affects the number of salmon that makes it upstream through the power station. and its natural largest tributary Vindelälven. About 70 % of all fish observed in the fish ladder is of wild origin (McKinnell et al. (2001) for detailed discussions about this issue. the respondents were asked to state their willingness-topay (WTP) for increasing the migration of wild salmon with the help of a new fish ladder. First. The costbenefit analysis looks at these benefits and costs. there is an indirect impact on the growth of salmon such that the stock of salmon will be larger in the future (given the catch of salmon). See Perä & Karlström (1996). Different methods can be used to improve fish passage associated with the Stornorrfors power station.electricity. Questionnaires were mailed to 250 randomly selected Swedes and 200 mailed to randomly selected Swedish anglers. 1994). it is assumed that the catch of salmon at time t is equal to consumption of salmon at time t. We assume that migration is increased due to increased flow in the bypass channel. One method is to build a fish ladder leading from the turbine discharge tunnel outlet over to the bypass area so fish can migrate upstream and find the existing ladder leading the returning fish to approach the spawning areas in Vindelälven. In the completely flow-controlled Umeälven. This formulation is based on the idea that A(t). in our questionnaire. Thus the natural growth of the stock of salmon is a function of A(t) and the size of the stock itself at time t. A salmon ladder. Because WTP might vary across the methods proposed to increase migration the respondents were asked if it did matter which method that was used to increase the amount of salmon. Second. located 32 km from the estuary. The main purpose of the pilot study was to identify problems that can be of importance when designing the survey for the main study.and wild (adipose fin intact) salmon and sea trout stocks reaching the Vindelälven.
We have measures of the total water flow that passes the turbines and the water diverted to the salmon passage. This issue has several dimensions.2 Interpretations of the results The question that we wanted survey participants to answer is how much their gross WTP is for increasing the amount of wild salmon that reach their spawning places in the river Vindelälven. To explore the relationship further. 4. it is useful to display the underlying data. In the survey. These people might then state their WTP above what they believe that the state (municipality) will charge them anyhow.1 Willingness to pay over time In recent years. because measures carried out ''today'' will have an impact on the number of salmon ''tomorrow''. We will continue to explore preferences over different approaches in the main survey. Yet. via the growth function (see equation 4). another WTP-question was asked. including but not limited to. they might also perceive a risk for having to carry the costs anyway -. some respondents might actually carry out their own cost-benefit analysis of the project. little. It takes on average four weeks from where the salmon enters the confluence area. implying that there is more water diverted to the salmon on weekends. the dynamics enter in a natural way. 50 percent of the respondents were asked to reveal their WTP (lump sum) for an increase of salmon from 3000 to 4000 this year. Some respondents might then conclude that this cost would be passed on to them through an increase of the electricity price or through the tax bill. This raises questions about interpretation. Due to the small sample size. and between getting more wild salmon today and getting more wild salmon tomorrow. until they reach the fish ladder. For example. can reliably be said about WTP for an increase of wild salmon over time. 29 percent of those with a positive WTP answered that they had the same WTP in both WTPquestions. This is important. a number of papers have inquired into WTP over time. The interpretation of the relationship between the total water flow and the amount of salmon in the fish ladder is therefore not obvious. given the discussion about insensitivity to scope that has taken place in the literature on valuation (Carson & Mitchell 1995). In other words. In the Exxon Valdez case (Carson 2003). In other words. some people might believe that since the hydropower station has caused the passage problems. the respondents are told that the hydropower station is partly owned by the state and partly owned by the Umeå municipality. To make sure that the respondents distinguished between the different quantities of wild salmon. 5 MEASURING OPPORTUNITY COSTS Our model postulates that there is an opportunity cost of releasing water to the salmon.to catch all salmon below the power station and then transport them to their spawning places above the power station. We also know that there is a regulation. since the state/municipality owns the hydropower station. however. the low respondent rate and the unsatisfactory answers to the second WTP question. the difference between using lump-sum or by-period payments (see Johansson 1987). The results suggest that people are willing to pay more for a larger increase of salmon then for a smaller. The relationship between flow and salmon passage is. pending further investigation that includes telemetry data on individuals. We will therefore modify our approach in the main study. We will assume that a cost-benefit analysis can be carried out for all natural methods for increasing the number of wild salmon in the river Vindelälven. We began our analysis of this issue by examining if respondents were sensitive to different profiles of salmon development over time. In our case. An increased total flow of water implies more salmon in the ladder. 4. respondents might well be willing to pay for reducing the risk of future disasters. . Observe that this problem arises quite generally. such that it may not be clear which variables are to be kept constant from the individual's point of view. notwithstanding the fact that we asked only about one of a number of possible approaches. A new fish ladder and an increase of water flow in the old river basin are examples of methods that would increase the number of wild salmon in the river Vindelälven in a natural way. The other 50 percent were asked to state their WTP (lump sum) for an increase of salmon from 3000 to 9000 this year.quite a correct assessment! In some ways. implied discount rates (see Harrison et al. the owners of the station must also pay for the ladder. people seem to perceive the difference between quantities and do express an opinion about them. We have no explanation of this finding at this point. 2001) and the credibility of the payment vehicle. this is an issue of scenario misspecification. an empirical question. if anything.
Estimating Individual Discount Rates in Denmark: A Field Experiment. Recommendations For Improving Fish Passage at the Stornorrfors Power Station on the Umeälven Umeå. et al. G. 1995 Sequencing and nesting in Contingent valuation Surveys. we first need to estimate the value of production at the plant. 2002. R. Environmental and Resource Economics.umea. Aquaculture and Fisheries Management 25 Suppl. 2001. 1998. (Umeå Kommun 2003) These data provide an idea of the economic values generated at the Stornorrfors plant. and 50 m3/s must be diverted from electricity production during weekends. 1994. 2: 46-63. . et al. The approach has wider applicability than suggested here and should be useful in similar contexts as well. American Economic Review 5. 257-286. In 2001.W. 155-73. Laxens lekvandring i nedre Umeälven: Redovisning av telemetriförsök år 1997. et al. Sweden. We know that the municipality owns 26 % of the revenues from the plant. We do not claim to provide any exactness in these estimates. Regulated rivers: Research and Management 17: 101-115. 1987. R. The current regulation of a larger diversion in the weekends translates to a loss of roughly 5% of daily production. & Karlström. they can give us some idea of the values involved. Mimeo. Carson. The current regulation at Stornorrfors during the salmon's migration season is that 20 m3/s must be diverted from electricity production during weekdays. Umeå Kommun 2003. Given the data over Stornorrfors revenues from year 2001 we assume that the daily production of electricity generates a value of approximately 1 MSEK per day. Suppose there are 30 days of loss in production in this way (i. Harrison. P. Again.5. Sweden.T. Hindrances to upstream migration of Atlantic Salmon (Salmo salar) in a northern Swedish river caused by a hydroelectric power station. Perä. or roughly the salmon season). Biological characteristics of the upstream migration of naturally and hatchery-reared Baltic salmon (Salmo salar). Hence. A change in current regulation to a larger diversion of water from electricity production would make this number even bigger. Ö. Vattenbruksinstitutionen 199801-25. & Williams. Johansson. Journal of Environmental Economics and Management 28(2). the larger diversion in the weekends translates to about 0. R. The Economic Theory and Measurement of Environmental Benefits. this was reported to be 118 MSEK. Rivinoja. 15 weekends. J. J. 1996. 6 CONCLUSIONS This paper presents a framework for dynamic costbenefit analysis and applies it to a salmon passageelectricity production conflict. Fiskeriverket Utredningskont.5 MSEK. the yearly loss is 1. 2003 Contingent Valuation and lost Passive Use: Damages from the Exxon Valdez Oil Spill. but suggest the scale of the values involved in regulations of the water flow through the power station. Rapport 1996-12-23. H. Luleå.O. With a discount rate of 5 percent and an infinite time horizon this gives a present value of 30 MSEK.05 MSEK loss per day. 2001.C. Report submitted to the Vindel River Fishery Advisory Board Umeå. In Swedish. Undersökning av laxuppvandringen till Ume-Vindelälven vid Stornorrfors kraftverk 1996. suggesting that the total revenue from the plant was about 453 MSEK.1 Opportunity costs estimates In order to estimate the opportunity costs of diverting water from electricity production. 1606-1617. I. P. 25(3). A first pass at the data is sufficient to excite further interest into the complex natural resource dynamics of the wild salmon and its intricate link with electricity production. Further. In Swedish. McKinnell. Ferguson. these numbers are based on rudimentary calculations. REFERENCES Carson.e. Cambridge: Cambridge University Press. & Lundqvist. Rivinoja. et al. SLU. S.T. P. Yet.se/net/Ume%e5+ Kommuninnehe5llsmeny/Fakta+om+Ume%e5/Ekonomi/Re dovisning/Bokslut+2001. http://www. & Mitchell. given that the average flow is about 600 m3/s during June to September.
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