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THE PATH TOWARD COST-EFFECTIVENESS 



A Working Paper Analyzing the Cost-Effectiveness 



of Major Salmon Recovery Alternatives 



Executive Summary 



The economic soundness of salmon recovery alternatives will be given much closer scrutiny, 

 as the National Marine Fisheries Service (NMFS) salmon recovery team, other federal and 

 state agencies, and utility interests introduce their recovery plans to the region. These plans 

 are being prepared in response to Idaho sockeye, fall chinook, and spring and summer 

 Chinook being listed as "threatened or endangered" under the Endangered Species Act 

 (ESA). 



The primary contribution of resource economics toward an evaluation of Scilmon recovery 

 alternatives is to determine action priorities or rank through cost-effectiveness analysis. This 

 approach will ensure that the highest level of biological effectiveness is achieved for each 

 recovery dollar spent. The cosi-effeaiveness analysis approach is directly applicable to 

 actions like ESA salmon recovery measures, where the costs of various measures need to 

 be compared, but the economic value of fisheries benefits is not being considered as pan 

 of the decision criteria; fish production is the benefit yardstick, not dollars. Cost- 

 effectiveness analysis is not benefit-cost analysis. 



Methodologicai Approach 



Estimates of fish benefit numbers, stemming from different recovery actions, are derived 

 from life-cycle models. The models are composed of survival rate calculations for different 

 life stages and physical passage points during fish out-migration and return migration, within 

 the river-to-ocean-to-river system. They incorporate fundamental system features, such as 

 stages of high or low fish abundance or survival rates, and reveal the points of "large and 

 small" fish numbers. 



The recovery alternatives' economic costs include estimates of the direct net costs to all 

 economic seaors affected by alternative implementation. To be consistent in making 

 economic costs comparisons, a national, direa net economic cost method is appropriate and 

 recommended by the National Marine Fisheries Service (NMFS) Economics Technical 

 Committee. 



Figure 1 portrays a "quadrant level" approach to cost-effectiveness analysis (low-water year 

 alternatives are noted in italics). By using this approach, the range of uncertainty underlying 

 fish benefits or economic costs, for cost-effectiveness ranking, can be substantially 

 minimized. An alternative's fish benefits and economic costs fall within one of the four 

 "quadrants" or cost-effectiveness ranks. Quadrant 1 holds the most cost-effective 

 alternatives, while quadrant 4 depicts the least cost-effective alternatives. The alternatives 

 that fall within quadrants 2 and 3 are within a comparable-through broad-cost-effectiveness 

 range (dollars per fish), but quadrant 2 measures have a lower total cost. The Figiu-e 1 

 analysis funher limits the uncertainty of biological benefit estimates by focusing on the first- 

 return cycle, instead of attempting to "forecast" multiple return cycles. 



