How Much Money is Environmental Protection Worth?

Randall Kramer and His Students Calculate the Tab, Whether in Indonesia or North Carolina

By Lisa M. Dellwo

Americans would be willing to pay a onetime fee of $24 per household to protect tropical rain forests. A national park in Indonesia increases household incomes of nearby farmers by up to 10 percent annually. Taxpayers in North and South Carolina think it’s worth $139 apiece to maintain the water quality of the Catawba River.

These figures, calculated by environmental economist Randall Kramer and his research team, confirm what many environmentalists believe but few have been able to document: that environmental protection can be assigned a specific economic value. It is a concept that is increasingly important as governments in both developed and developing countries allocate spending for environmental projects.

Take the example of Ruteng Park on the small island of Flores, Indonesia. During a 1996 sabbatical in Indonesia, the Nicholas School professor worked with Indonesian counterparts and Duke doctoral student Subhrendu Pattanayak to determine how the establishment of this national park affected nearby villagers’ access to forest products and how the protected forest might affect the flow of irrigation water for domestic agriculture. Fieldworkers conducted household surveys that asked about income changes, and the team developed statistical models that estimated the effects of agricultural income based on increased irrigation flow.

They found that the ecosystem services provided by the new park, in the form of drought mitigation, augmented nearby farmers’ income by $3.50 to $30 annually, up to a 10 percent increase. “We were able to document the values that people talk about anecdotally when they discuss protecting an upstream watershed,” says Kramer. “This is really important to governments,” he says, especially governments in developing countries who are deciding whether to get involved in conservation activities.

Kramer has been active in Indonesia since the 1996 sabbatical, during which he also investigated how indigenous people in a small island off the coast of Sumatra would be affected by a new national park and the increased tourism it would produce. His most recent project, a collaboration with Sahat Simanjuntak of Bogor Agricultural University near Jakarta, involved fishing communities in Sulawesi, Indonesia. Field workers recruited from the student body of a nearby university fanned out over a three-week period, interviewing 600 householders in 18 villages about their fishing catches. Survey questions helped determine the impact of fishing boats and gear on catches (better gear equaled higher yields) and of migration of fisherman from other areas (a negative factor).

Although Kramer speaks and understands some of the Indonesian national language, he doesn’t participate in the household interviews because “My presence as a foreigner can be a distraction.” Typically, he is an observer in early focus groups conducted to ensure that the survey design is adequate, and he takes those opportunities to meet and interact with members of the target group. His Indonesian co-investigator then works with local academics to recruit interviewers, who receive several days of training before being sent into the field. Kramer or a member of the research team debriefs the interviewers each evening to discuss and solve problems that can range from a village leader wanting to sit in on interviews (and perhaps influence results) to a variation in local dialect obscuring the meaning of a question.

Working in the island nation of Indonesia, Kramer has had to troubleshoot some unusual problems: washed-out roads preventing his survey team from reaching target villages and an interviewer contracting malaria, for instance. But never a tsunami.

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