Hydropower Licensing and the FERC Experience
WASHINGTON, DC—Putting a dollar figure on costs and some benefits of public investments, such as dams or the issuing of a permit, has been common practice for decades. However, not all benefits or costs have been reported in monetary terms. A new paper posted today by Resources for the Future (RFF) examines the use of ecosystem valuation methods by the Federal Energy Regulatory Commission (FERC) when permitting the operation of existing nonfederal hydropower dams in the United States.
The researchers, RFF Senior Fellow Dr. Leonard Shabman and Dr. Kurt Stephenson of Virginia Tech, note that in recent decades economists have refined “non-market valuation” for placing a monetary value on ecosystem services. In the paper, Ecosystem Valuation and Hydropower Licensing Decisions: Lessons from the FERC Experience, the authors explain that when FERC responded to criticisms of its hydropower licensing process, it did not require use of such monetary valuation methods for representing the value of ecosystem services.
Instead, FERC instituted a stakeholder deliberative process that expected the license applicant to reach agreement terms of the final license with groups concerned about the effort of hydropower operations on recreational and aquatic resources. The decision on whether to consult non-market valuation information during the deliberative process was left to the negotiating parties. The researchers report on 17 settled licensing cases. There was no evidence that non-market valuation estimates were consulted in reaching agreement on license terms. In each case, hydropower benefits were reported in monetary terms and recreational and aquatic effects were reported using non-monetary metrics.
The authors offer suggestions for effective engagement of economists in deliberative decision processes, providing sound analyses that will help decision participants form their preferences and that enrich the collective understanding about acceptable tradeoffs.
Read the full study: Ecosystem Valuation and Hydropower Licensing Decisions: Lessons from the FERC Experience.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
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