Natural Resource Damage Assessment Methods: Lessons in Simplicity from State Trustees

In: Contemporary economic policy: a journal of Western Economic Association International, Volume 22, Issue 4, p. 504-519

Abstract

When natural resource damages are caused by releases of hazardous materials into the environment, government trustees must conduct Natural Resource Damage Assessments (NRDAs) to support claims to recover the value of lost or damaged resources. This article sets forth theoretical arguments that support efforts to develop unbiased simplified NRDA methods for use by government trustees and proposes a set of criteria that can be used to evaluate the quality of any such simplified method. The authors then describe the simplified methods being used by five states across the country, affording academic economists a rare view of the kinds of methods state agencies use in‐house. The article evaluates those methods against the criteria set forth and discusses the potential of other nonstate‐specific simplified NRDA methods (benefit transfer and Type A models) to do the job better. The new framework established can guide future research to design simplified methods that are less biased than the simplified methods currently in use by some states without compromising ease of implementation. (JEL Q5, K32)