Connectivity at a cost : The economic dynamics of connectivity restoration

• The ecological literature shows that there is a species-area relationship between habitat size and the equilibrium number of species that will thrive in a habitat. There is also a literature on habitat fragmentation showing that, if a larger habitat is broken up into smaller fragments, the long run equilibrium species number will decline in each of the remaining fragments according to the same relationship. Both in the United States and in Europe there is ongoing work on reversing habitat fragmentation in river systems, with fish ladders and other measures being introduced to restore connectivity in river systems that have previously been subdivided into smaller habitats by hydropower and other developments. However, even if connectivity is restored, the new and higher equilibrium species number will be reached only after extended periods of time. This means that measures to restore connectivity entail incurring one-time investment costs (and possibly continuous long run increases in maintenance costs as well) in order to gain habitat improvements that will generate increasing value over time upto the point where the new, better equilibrium is reached. In this paper, we set up a theoretical model to investigate what the conditions are for such an investment to be socially profitable, and link the model to empirical data from measures to restore river system connectivity which show how quickly this recovery tends to occur in practice. We find that even in cases where it would have been socially preferable not to build a hydropower installation in the first place, connectivity-restoring measures affecting the installation are not necessarily socially profitable. Under a wide range of plausible assumptions about discount rates, investment costs and productivity losses, decommissioning the hydropower plant once its economic lifespan is past is a better option, from the social planner’s perspective, than carrying out measures while the plant is still economically viable.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

environmental policy

water policy

connectivity

hydropower

Publication and Content Type

ref (subject category)

kon (subject category)