Essays on Economic Valuation of Water Resources

Increased potential of flooding caused by heavy precipitation events and sea level rise, as well as growing risk of drought that are likely changes in the frequency and spatial distribution of climatic conditions, pose particular challenges to water management in coastal areas. Extreme events are expected to increase the complexity of managing scarce water resources for competing water users. South Florida, which is characterized by a mosaic of urban settlements, agricultural areas and natural areas, is served by a highly human-engineered water management system grappling to meet multiple objectives, including urban and agricultural water supply, flood control, and environmental restoration. Climate-induced water shortage or excess often tests the limits of the water management engineering system. While the Everglades suffers a lack of freshwater inflows, heavy precipitation and flooding events in the U.S. and worldwide in recent years have greatly damaged crop production. If model projections of increased weather extremes are realized, the cost of crop losses could increase drastically. These costs may be borne directly by the farmers impacted or transferred to private insurers or governmental disaster relief programs. The present research quantifies monetary values of lost recreational fishery ecosystem services due to reduced freshwater flow in the Everglades using a survey-based discrete choice methodology, estimated at over $25 million annually. Examining survey respondents’ willingness to pay for ecosystem services in light of their perceptions and preferences regarding the risks posed by climate change and sea level rise, when willingness to pay values were adjusted for risk perception the annual overall ecosystem service valuation (benefit) of users was 40.03% higher than the annual benefits estimated using non-adjusted willingness to pay. The economic value of crop flooding indemnity claims is also be estimated at a county level using a Stackelberg game-theoretic model, finding that in many years total indemnity far exceeds premiums, which are set at levels below farmers’ maximum willingness to pay.