Headwater Valuation as a Tool for Economic Development, Healthy Forest Management, and Water Resilience

Abstract

The upper American River watershed (UARW) provides a myriad of valuable benefits for local communities as well as throughout the state, nation, and even globally. These environmental benefits, often called ecosystem goods and services (EGS), include food, water, power, and recreational opportunities, among many others. Current ecological economics frameworks outline over twenty distinct EGS categories. While this information is becoming more widespread, many of these benefits are still undervalued or are not easily applied to policymaking and project-level investment decisions. Conventional EGS valuation focuses narrowly on a few specific EGS categories, ignoring many to the detriment of those seeking information on the economic value of natural infrastructure. This study provides a novel approach to watershed valuation by assessing eighteen EGS categories in a comprehensive watershed valuation by supplementing locally available data with the benefit transfer method. This approach demonstrates that watershed-scale EGS valuation is possible. The resulting valuation shows the natural capital asset in the UAW has a net present value of $731 billion and $1.6 trillion with 2.5% and 0% discount rates (100 years), respectively, and provides over $14.8 billion in annual value. Valuing natural capital in economic terms provides a common metric for comparison and integration with other types of investments in built and social capitals, informing policy and investment decisions for climate adaptation and water resilience. This EGS valuation provides a case study into how benefit transfer can be used to supplement locally available information to provide watershed-scale EGS valuations. The outcome serves as a tool to promote innovation and equity in the design of funding mechanisms and resulting allocation for improving watershed health, the associated EGS productivity, and rural-agricultural community resilience.

1. Introduction

In recent years, residents in California have faced severe drought, catastrophic wildfires, record-breaking heatwaves, and life-threatening rainfall and flooding events. These events, exacerbated by climate change [1], decrease the social and economic security of the state, and put landscapes, economies, and people at risk. California needs new tools to evaluate and guide investment in water resource management to sustain the economy, improve community resilience, and adapt to a hotter and drier climate.

The California Department of Water Resources (DWR) is the primary water resource planning agency in the state. Part of this management includes strategic planning in the form of the California Water Plan, which is updated every five years [2]. The most recent update was finalized in April 2024. The California Water Plan identifies and emphasizes the importance of source watersheds as “natural backbone infrastructure,” which includes natural and working lands (e.g., forests, wetlands, agricultural lands) that comprise the watershed. DWR sets out Recommendation 7.1 (Provide Funding for Watershed Resilience Programs) and Action 7.1.6 (Develop Framework for Quantifying Investment in Source Watersheds).

The upper American River watershed (UARW) is one of twenty source watersheds that contribute to the state’s major water systems. Following the recommendations and actions outlined in the California Water Plan can facilitate investment in source watersheds that are necessary for supporting California’s economy. EGS valuation is a useful tool to support these objectives.

Managing California’s source watersheds involves coordination among federal, state, and local agencies based on a complex setup of ownership, jurisdictions, and authorities. Local jurisdictions are the most critical partners in this setting because federal and state agencies often serve roles as regulators or sources of opportunistic financial assistance. However, this is not sustainable for responsible resource management. Local jurisdictions in source watersheds are generally rural-agricultural areas with small foothill communities. They are often economically and socially disadvantaged in their ability to secure available funding and political support for funding water resource management and building community resilience to environmental risks and hazards. At the same time, federal and state agencies also struggle to provide meaningful assistance if local agencies in these source watersheds cannot provide insights on measures that suit their unique conditions due to resource limitations. This complex dichotomy presents a serious impediment to adequate and equitable investments.

Figure 1 highlights the complex nature of California’s water system. The UARW provides critical water resources for downstream communities. After local water consumption by plants, animals, and residents, as well as recharge to the underlying fractured rock formation, water from the UARW flows into Folsom Reservoir, which is owned and operated by the U.S. Department of the Interior, Bureau of Reclamation (Reclamation) as part of the Central Valley Project (CVP). Reclamation operates Folsom Reservoir for flood control, water supply power generation, fish and wildlife, recreation, and other authorized purposes. The operation of Folsom Reservoir is in coordination with other CVP facilities in the Sacramento River system and the Delta. Reclamation’s CVP operation is coordinated with the operation of the State Water Project (SWP), which is owned and operated by DWR, for jointly meeting in-basin use and their respective obligations of contract water supply delivery.

One major reason for the above-mentioned challenge is that source watersheds are undervalued and lack a healthy recognition of the benefits enjoyed well beyond the watershed boundaries. The UARW provides water throughout the state and as far south as Southern California through operations of major water projects managed by DWR and Reclamation. In addition, the watershed provides a suite of ecosystem goods and services (EGS), including recreation, flood risk reduction, food, and power. These are examples of public, private, market, and non-market EGS benefits provided by the landscapes of these source watersheds.

For local managers to adjudicate between different management strategies and budgetary priorities around different types of natural and built capital, EGS values offer a useful tool to compare built and natural infrastructure solutions with common measurements (dollars and cents) for more balanced and sustainable solutions.

Watersheds provide a wide range of valuable benefits. One of the challenges of managing watersheds is identifying, quantifying, and monetizing those benefits to better inform watershed investment. Recent efforts have been made to build a framework for better integrating environmental considerations into local, state, federal, and multinational policies. This includes the development of the System of Environmental-Economic Accounting (SEEA), which is a multi-decade effort by the United Nations (UN) to integrate economic and environmental data. EGS valuation is a critical aspect of SEEA and allows for the evaluation and management of stocks and flows using both economic and environmental information. The EGS valuation in this study aligns with the traditional System of National Accounts used by the UN and the U.S. Bureau of Economic Analysis.

The managing agencies in other regions in the U.S. have used EGS valuation to inform policymaking. The Santa Clara Valley Open Space Authority commissioned a natural capital valuation in 2014 [3] and leveraged the findings to support two voter-approved measures, Measure Q and Measure T, to raise property taxes to support open space acquisition and associated long-term implementation and maintenance functions of the authority [4]. Similarly, Metro Parks Tacoma estimated the public benefits of Tacoma’s park system [5], which was used to support one of the largest per capita park district bonds in U.S. history. Highlighting the value of the natural landscape at local and regional scales can increase investment in open space conservation and working landscapes. The State of Louisiana utilized EGS valuation [6] over a typical benefit-cost approach in a socioeconomic analysis of large sediment and water diversions in the Mississippi River to restore wetlands and services, including fisheries and hurricane buffering. Based on the information, they approved over $2.2 billion for the construction of two large diversions. The Federal Emergency Management Agency recently adopted a policy of allowing the use of EGS in benefit-cost analyses for disaster recovery projects; however, applications in other major project decisions and major public investments are still lacking due to incomplete value information and inconsistent policy framework for supporting this usage.

Integrating natural, built, and social capital is critical to securing water supplies and building more resilient communities and economies. This analysis is part of a multi-year process with the El Dorado Water Agency (Agency). The Agency provides long-term countywide water resource planning and management for El Dorado County, which covers the majority of the UARW, with a mission to ensure that El Dorado County has adequate and reliable water today and in the future. In 2022, the Agency convened the Upper American River Watershed Working Group (UARWG), which brought together local, state, and federal agencies, Tribes, businesses, academics, and other interested parties and stakeholders to complete a Programmatic Watershed Plan in 2023. This 2023 plan identifies Resource Management Strategies (RMS) to be implemented by partners to create sustainable management for watershed health and community resilience. The Programmatic Watershed Plan emphasizes the integration of actions that improve the natural, built, and social capacities with integrated and mutually supportive actions. Recognizing the importance of a foundational understanding of the true value of the UARW, the relevant RMS identified in the Programmatic Watershed Plan include RMS 9.1b: Develop and synthesize the potential economic values of ecosystem goods and services in the upper American River watershed to help properly characterize the value of the watershed, and RMS 13d: Explore potential alternative funding mechanisms based on the findings from the ecosystem good and service valuation (RMS 9.1b) to support long-term sustainable RMS implementation. Both RMS speak to the benefit of valuing EGS to inform long-term investment in water management in California.

This case study builds on the efforts of the Agency, in coordination with the UARWG, to estimate the UARW’s EGS value on a watershed scale to provide basic information for additional investment and policy considerations. The purpose is to inform investment decisions and spark collaboration with downstream beneficiaries to invest in this source watershed. Downstream communities include all those below Folsom Dam. Upstream communities are those within the UARW study area above Folsom Dam. Proper management of the landscape in these upstream communities and the watershed as a whole can ensure reliable drinking water supplies for downstream communities. Proper management requires sustainable investments and actions. To inform long-term investment using EGS, the Agency collaborated with Batker Consulting, Sunzi Consulting, Dynamic Geospatial Solutions, and Radbridge Incorporated to produce a comprehensive EGS valuation of the UARW and a site-specific analysis of outdoor recreation in the UARW.

2. Methodology

Economic value is derived on a per-acre basis in EGS valuation. First, the land cover and acreage are identified. Second, the ecosystem services present are identified. Of those identified as present, a subset can be quantified, and, of these, a subset can be valued. A literature review of relevant academic studies, reports, and datasets containing valuation studies of EGS allows for an appraisal approach to establishing the value of ecosystem services within the study area. This provides a total annual value per acre for each EGS provided by each land cover type within a working landscape.

EGS valuation is most succinctly described using the following form:

$$UARW EGS Value=\sum _{j=1}^k\left[A_j\ast \sum _{i=1}^n{EGS}_{ij}\right]$$

where $A_j$ is the number of acres for each land cover type (denoted with the subscript $j$), ${EGS}_{ij}$ is the dollar-per-acre value for each EGS (denoted with the subscript $i$) and each land cover type, $k$ is the number of land cover types, and $n$ is the number of EGS categories.

EGS values represent an estimate of the “yearly income”, or the annual flow of benefits, provided both to private landowners and the public at large. This is like a business entity’s yearly income. Considering this value across time allows one to appraise the full value of an asset (like the appraised value of a business entity based on annual income records).

This study uses a broad approach to estimate the value of EGS. This analysis conducted an extensive literature review using the Valuation of Ecosystem Goods and Services (VEGS) [7] database to identify a subset of relevant values that could be applied to the UARW. Building from experience and past work, Batker Consulting maintains the VEGS database that contains curated ecosystem service values for different land cover types across the world. It identifies the unique features of each ecosystem service value, such as the size of the ecosystem that provides it; proximity to population centers, landmarks, or geographical features; valuation methods employed; value types; and dozens of other features to characterize and value the production of ecosystem services. The VEGS is a live database that is constantly growing as it incorporates new studies as they become available; as of 2022, it contained over 4000 values corresponding to 24 ecosystem services across more than a dozen land cover types.

Like real estate appraisals, which use comparable properties to assign value, studies of similar watersheds can be used to estimate the value of ecosystem services provided in a watershed or across a large landscape. These benefits can be added together to estimate the value of landscapes. Details on the valuation of EGS are provided in Section 2.3 and Appendix A.

To support this valuation and calibrate to local unique conditions, locally available studies and data were identified that could supplement the VEGS database outputs. Local economic development studies conducted by the county and other sources that provide information specific to the watershed will be introduced where applicable. Furthermore, the UARWG recognizes that the UARW is rich in high-quality recreation and open space in the Sierra Nevada and contains certain world-famous recreation features such as the Rubicon Trail and the Desolation Wilderness. To that end, concurrent to this study, EDWA engaged with Radbridge Inc. to conduct a watershed-specific economic impact analysis of outdoor recreation by combining visitation derived from cell phone data and machine learning with travel cost and consumer expenditure data [8]. The location-specific data, analysis, and studies are of high quality and are incorporated into this study. Combined, these efforts produced a watershed-scale valuation that can be used to inform investment decisions, allowing for comparison in economic decision making including benefit-cost analysis, return on investment, and scenario analysis.

This study offers a case study as to how policymakers can use benefit transfer and watershed-specific data to generate EGS values to inform investment decisions. This comprehensive valuation reviewed 24 EGS categories, identified 20 categories present in the UARW, and monetized 18 EGS categories across seven distinct ecosystems to demonstrate the economic value of the environmental benefits generated by these natural landscapes. The following provides additional information on the methodology and supporting information.

2.1. Ecosystem Services Valuation Methodology

The valuation methodology for this analysis is based on the Millennium Ecosystem Assessment (MEA) natural capital framework [9], and The Economics of Ecosystems and Biodiversity (TEEB) ecosystem services typology [10]. This framework classifies EGS into broad categories that reflect specific benefits to people [11]. The MEA’s four major categories are provisioning services, regulating services, supporting services, and cultural services, as shown in

Table 1. Categories of UARW EGS.

Ecosystem Good or Service	Service Type	Economic Benefit to People
Food	Provisioning	Producing crops, fish, game, and fruits
Medicinal resources	Provisioning	Providing traditional medicines, pharmaceuticals, and assay organisms
Ornamental resources	Provisioning	Providing resources for clothing, jewelry, handicrafts, worship, and decoration
Energy and raw materials	Provisioning	Providing fuel, fiber, fertilizer, minerals, and energy
Water supply	Provisioning	Providing drinking water supply and water supply for municipal, agricultural, industrial, and other uses.
Water storage	Provisioning	The quantity of water held by a water body (surface or groundwater) and its capacity to provide a reliable water supply
Air quality	Regulating	Providing clean, breathable air
Biological control	Regulating	Providing pest and disease control
Climate stability	Regulating	Supporting a stable climate at global and local levels through carbon sequestration and other processes
Disaster protection: drought, wildfire, and landslide	Regulating	Reducing the damage from, and severity of, drought, wildfire, and landslides
Disaster protection: riverine and rainfall flooding	Regulating	Reducing riverine and rainfall flood damages
Pollination and seed dispersal	Regulating	Pollinating wild and domestic plant species
Soil formation	Regulating	Creating soils for agricultural and ecosystem integrity, among other uses, and maintaining soil fertility. For example: forests provide biomass to topsoil which builds and improves soil quality.
Erosion control	Regulating	Retaining arable land and slope stability. Vegetation can help retain soil that would otherwise be picked up in rainfall or flood events.
Soil quality	Regulating	Improving soil quality by decomposing human and animal waste and removing pollutants
Water quality	Regulating	Improving water quality by decomposing human and animal waste and removing pollutants
Water capture and conveyance	Regulating	Providing natural watershed water capture, irrigation, drainage, groundwater recharge, and river flows supporting water supply for residential, agricultural, and industrial uses.
Habitat and nursery	Supporting	Maintaining genetic and biological diversity, the basis for most other ecosystem functions; promoting the growth of commercially harvested species
Nutrient cycling	Supporting	Supporting nitrogen, phosphorus, carbon, and other nutrient cycles.
Beauty/aesthetic value	Cultural	Enjoying and appreciating the presence, scenery, sounds, and smells of nature
Cultural value	Cultural	Using nature as motifs in art, film, folklore, books, cultural symbols, architecture, media, history, and for religious and spiritual purposes
Future value: bequest	Cultural	Ensuring natural capital for future generations
Recreation and tourism	Cultural	Experiencing the natural world and enjoying outdoor activities
Science and education	Cultural	Using natural systems for education and scientific research

.

Table 1 shows the EGS identified for the UARW, including the service type (i.e., provisioning, regulating, supporting, or cultural) and a general description of its economic benefit to people. This natural capital framework was first initiated by de Groot et al. [12] and subsequently improved through the works of the MEA and Pascual et al. [9,13] and has been additionally improved and adapted for the UARW by filtering for relevant EGS present in the UARW.

There are many ways to value the benefits of these 24 EGS categories.

Table 2. Common EGS valuation methods.

Method	Category	Description
Market pricing	Direct market	The current market value for goods and services produced by an ecosystem set by prices established in competitive markets. Examples: food, timber, fish.
Replacement cost	Cost-based approach	The cost of replacing the goods or services provided by functional natural systems with built infrastructure. Example: cost of replacing forest water filtration with a filtration plant.
Avoided cost	Cost-based approach	The cost of damages that would be incurred by communities in the absence of ecosystem services. Example: avoided cost of increased flooding if wetland and riparian buffers did not exist, the same analysis conducted to justify levee construction.
Production function approach	Cost-based approach	The value of increased output resulting from ecosystem services. Example: increased crop productivity from forest-source, rain-fed irrigation.
Mitigation and/or restoration cost	Cost-based approach	The costs of preventing or recovering from damage due to ecosystem degradation. Example: pre- and post-wildfire restoration and recovery practices.
Travel cost	Revealed preferences	The cost of travel and opportunity cost of time for a large sample of people is collected and used to build a demand curve to infer the implicit price of an ecosystem service. Example: spending for travel and time spent at a lake for fishing provides a minimum value of recreational fishing at that lake.
Hedonic pricing	Revealed preferences	Estimating the added value of a market good derived from an environmental good or quality level. Example: property sales price differences between homes with waterfrontage and without or in proximity to natural environments, i.e., the amenity value from proximity to natural spaces.
Contingent valuation	Stated preference	Hypothetical spending on specific ecosystem goods or services based on survey results. Example: a survey asking the willingness to pay for an increase in water quality enhancement for a river, lake, reservoir, etc.
Choice experiments or conjoint analysis	Stated preference	Surveys isolate levels of the environmental good or service to build a valuation function based on multiple data points collected in different contexts presented in the survey. Example: like contingent valuation, but with more options of water quality presented in different bundles within the survey.
Unit value transfer	Benefit transfer method	The value estimated from another study or region and directly transferred to the area or landscape under evaluation. This is often done with the two regions or locations that have similar characteristics. Example: valuing fishing recreation expenditures in El Dorado County is based on findings from a statewide recreational study.
Function transfer	Benefit transfer	Function transfer uses a set of findings from another study or region and uses local data to adjust the estimate to better correspond to the area or landscape being analyzed. Example: valuing fishing recreation expenditures in El Dorado County based on findings from a statewide recreational study and adjusting the estimate based on local data, such as visitation rates, incomes, and other economic and ecological factors.

shows common and well-accepted EGS valuation methods adapted and expanded on from Daly and Farley [14]). These EGS valuation methods have been used in a wide range of studies and applied in many contexts [15]. These methodologies are also widely accepted and have been used for many decades in the field of economics [16]. Since the 1980s and early 1990s, they have been broadly recognized as a distinct area of economic research [15,17].

The applicability of the above methods in literature can be case-specific or sometimes, EGS-specific. In general, they are applied to assess EGS values based on different land covers, such as agricultural lands, wetlands, urban areas, forests, or grazing lands. Understanding the basis of the valuation in each of the literature cited is important to assess their applicability to the UARW.

The valuation process for the UARW is summarized below using the benefit transfer approach with supplemental watershed-specific information such as the results from Radbridge, El Dorado and Alpine counties, and Guo et al. [8,18,19]. The watershed valuation process involves the following steps:

• Identify land cover types present in the UARW.
• Estimate the total acreage of each identified land cover category.
• Evaluate the existing literature for relevant information on EGS benefits associated with each land cover.
• Where possible, monetize EGS benefits using the methods described in Table 2.
• Regularize EGS values into dollar-per-acre per year ($/acre/year) units so the benefits can be applied across the landscape.
• Multiply the $/acre/year benefits by the total acres of each land cover type to establish an annual flow of EGS benefits.
• Estimate the value of natural capital stocks. In this case, the analysis estimates the stock of capital stored in the identified land cover types (e.g., the forest carbon stock).
• Estimate the net present value (NPV) of the annual flow of EGS benefits to obtain a natural capital value.

Further details of the valuation process are discussed in Section 2.2, Section 2.3 and Section 2.4. Appendix A provides additional details on the literature cited for each EGS category.

The UARW provides an annual flow of EGS. Ecosystems provide many different and distinct benefits. To establish a value for each land cover and ecosystem service combination, a valuation study was referenced, or a specific analysis in the UARW was conducted. The first step in EGS valuation is to evaluate the study area and estimate the areas of distinct ecosystems present.

2.2. Study Area and Land Cover Categories

EGS values are dependent on the landscape. This case study uses the U.S. Geological Survey (USGS) National Land Cover Database (NLCD) to identify ecosystems within the study area [20]. At the time of analysis, the 2019 data release was the most recent data available. The landscape has shifted dramatically since then. The Mosquito and Caldor Fires exemplify this; over 285,000 acres were burned in these two fires in 2021 and 2022 alone. These wildfire impacts are not present in the 2019 NLCD maps, which was the most up-to-date data at the time of the analysis. These wildfires, impacting nearly 20% of the land in the UARW, have a significant impact on EGS values because many of the landscapes valued have been degraded or altered by the fires. Future research can incorporate damages from fires into the EGS valuation.

For simplicity, this study condenses the NLCD categories into seven broad land cover categories:

• Forests;
• Shrublands;
• Grasslands;
• Agriculture;
• Wetlands;
• Water; and
• Developed, open space.

Figure 2 shows the distribution of the seven land cover categories within the UARW. Though wetlands and open water are lumped together in Figure 2, these land covers and their respective acreages were separated for the valuation because of their different contributions to EGS. In addition, only developed open space was valued, not all developed lands, due to the latter’s limited EGS potential. Some land cover types have a greater depth of research associated with them, such as forests, which have been heavily researched in the field of EGS valuation. Lack of research and data means that some land cover types cannot be adequately valued. Because of this, values associated with perennial ice/snow, developed (low, medium, and high intensity), and barren land are not included in this analysis.

Table 3. Land cover classifications and categorization for valuation.

Land Cover Classification	Categorization for Use in Valuation
Open water	Water
Perennial ice/snow	Not included
Developed, open space	Developed, open space
Developed, low intensity	Not included
Developed, medium intensity	Not included
Developed, high intensity	Not included
Barren land (rock/sand/clay)	Not included
Deciduous forest	Forest
Evergreen forest	Forest
Mixed forest	Forest
Shrub/scrub	Shrubland
Grassland/herbaceous	Grassland
Pasture/hay	Agriculture
Cultivated crops	Agriculture
Woody wetlands	Wetland
Emergent herbaceous wetlands	Wetland

shows the NLCD land cover classification and the categorization used in this valuation.

Adjustments to the land cover data were made based on local data. Agricultural lands represent a larger area than what is shown in the NLCD data. For example, NLCD data only shows 34 acres of cultivated crops and 27 acres of hay/pasture, which is lower than what is reported from local sources for existing agricultural lands. Therefore, the NLCD data was augmented with the Agricultural Crop and Livestock Reports, prepared annually by El Dorado and Alpine counties, which provide acreage for all agricultural products produced in the County [18].

Table 4. Acreage by land cover.

Land Cover Classification	Categorization for Use in Valuation
Forest	1,078,366
Shrublands	272,237
Grasslands	60,798
Agriculture	5994
Wetlands	2498
Water	17,013
Developed, open space	47,468
Total	1,484,374 1

Note: ¹ The UARW has a total area of 1,516,138 acres. The total acres presented in this table are a subset based on the categorization process shown in Table 3.

shows the corresponding acreage of the seven categories of land cover with the adjustment discussed above.

Once the ecosystems present in the study area have been identified, the relevant literature on EGS values is reviewed to monetize EGS benefits specific to the landscape.

2.3. VEGS and Value Selection

EGS values are selected based on reviews of the literature and databases for applicable references. This analysis primarily relies on a proprietary VEGS database maintained by Batker Consulting. The VEGS database includes 1000 academic publications, studies, and reports referencing over 4000 separate values of EGS throughout the United States and around the world. This database catalogs the relevant information necessary to inform EGS value and provides outputs in dollars per acre that can be readily applied to ecosystems and reflects the land cover types classified in the NLCD. This database provides a wide range of valuations using the methods described above.

To estimate the value of ecosystem services for the UARW, this study utilizes the values from VEGS and selected values from existing academic articles. It also incorporates local data, where appropriate, to refine estimates of EGS to account for site-specific considerations.

The first step in reviewing VEGS was filtering out values that did not apply to this watershed. This filtered for values developed for North America and values associated with urban or coastal areas, leaving a subset of 530 distinct EGS values from over 140 separate sources. These results provided a baseline of EGS values to consider for the watershed valuation. The analysis also considered the value of carbon stock based on existing literature.

In some cases, a single value from a study is valid because the correspondence between the area studied and the current context overlap. For example, agricultural food production data was transcribed from El Dorado County’s annual Agricultural Crop and Livestock Report to estimate the food value of agricultural lands. This improves watershed-specific values for food produced by agricultural lands in the UARW.

In some cases, per acre values were not transferred from an existing study; rather, the analysis uses biophysical data such as rainfall patterns and runoff rates to estimate the value of EGS. Guo et al. estimated the water supply and hydropower benefits per acre-foot of water on the North Fork American River [19]. Data from Bales et al. provided critical information on the water-holding capacity of forest soils in Sierra Nevada mixed conifer forests [21]. This information was combined with precipitation estimates from Guo et al. [19] to estimate the water supply (i.e., yield) from forests and the amount stored in soils and slowly released in the summer months. Local water prices, including agricultural and municipal water prices, were used to assign monetary value based on the water yields estimated. This information was used to estimate the water supply and storage values of forests. Appendix A provides supplemental materials that list the EGS categories, the authors cited, and the associated value for each land cover.

Combining benefit transfer with local data can provide a cost-effective means for EGS valuation. The appraisal method for EGS valuation requires judgment on the part of the researcher or practitioner who applies these values to a particular policy question or geographic area of interest. While a primary study for each new policy question would be ideal, the costs associated with site-specific data collection and analysis can often be insurmountable. Secondary valuation, in the form of an appraisal of the existing literature, can provide an effective way of evaluating EGS values. A multi-disciplinary evaluation of the literature and relevant local conditions can provide a reasonable appraisal of the EGS value for a watershed and inform decision-making.

2.4. Incorporating Watershed-Specific Recreation Values

Consistent with the valuation method for all other benefits, recreation benefits were initially estimated based on regional recreation and tourism studies on seven land cover types using the benefit transfer method. However, the benefit transfer method underestimates the value of outdoor recreation in the UARW for two reasons. First, some recreational activities have no corresponding studies, such as off-road vehicle use, and so these recreational values are omitted. However, opportunities for off-road vehicle use are significant in the UARW, including the world-famous Rubicon Trail for off-road adventuring, for which the Jeep Wrangler Rubicon model was named. Second, utilizing studies from watersheds with far less intensive recreational usage per acre due to the type of recreation and associated quality will underestimate the recreational value in the UARW.

Radbridge, conducted concurrently with this study, is a watershed-specific outdoor recreation economic impact assessment using 2022 cell phone data to quantify visitation and differentiate resident visitors and tourist visitors, who have different spending patterns [8]. Although not yet peer-reviewed, the findings were reviewed by local stakeholders and documented in the report, Outdoor Recreation in the Upper American River Watershed: An Analysis of Economic Impact and Value [8]. The study found that consumer spending on outdoor recreation in the UARW generated an economic output of $607 million, encompassing both direct and secondary spending, and supported 3100 jobs in the region. Additionally, the study found that the UARW generated additional economic benefits, or a “consumer surplus”, of $660 million. This estimates the additional economic value residents and visitors gain from recreating in the UARW. Combined, these values indicate that the UARW generated over $1.2 billion in outdoor recreation-related benefits in 2022. The watershed-specific estimate of $1.2 billion in recreational benefits in 2022 shows that the watershed’s recreational value is very significant and far exceeds what the referenced literature may suggest. It is about 2.3 times higher than the amount estimated using the benefit transfer method, showing the importance of incorporating watershed-specific valuation where possible.

Radbridge provides an assessment of a single year and thus cannot be viewed as a trend without additional studies [8]. The assessment may underestimate visitation and, therefore, the overall value of outdoor recreation for various reasons: for one, the cell phone data and coverage may be incomplete; additionally, although it is likely generally consistent, the number of cell phone units may not be the same as the number of visitors. Overall, this watershed-specific study is recognized to be more accurate and applicable than that of the benefit transfer method. Therefore, it was adopted in EGS valuation for the UARW.

2.5. Natural Capital Valuation

An asset (like a factory or house) provides economic value over time. The UARW is a natural capital asset and can be valued like other economic assets. The asset value for a capital asset can be estimated by calculating the stream of income that it provides over the lifetime of the asset plus stock values (like inventory or carbon stock). This is considered the income approach in the traditional valuation and appraisal literature [22,23,24]. EGS value estimates are annual values (i.e., flows or income) provided by the UARW working landscape. By examining these benefits into the future (100 years) and applying two discount rates (0% and 2.5%), the value of the UARW as a natural capital asset can be estimated.

A 2.5 percent discount rate is typically used by the U.S. Army Corps of Engineers and other federal agencies for water resource projects, such as dams, and conservation projects, such as restoration projects [25]. There has been significant discussion among academics and the government regarding the importance of a zero discount rate for communicating the full value of EGS through time [26]. Zero discount rates are used by city, county, state, and federal governments in budgeting to calculate future budget revenues, costs, and expenditures. A zero-discount rate means costs and benefits to people in the future are measured equally to people in the present. A high discount rate reduces value in the future more quickly than low discount rates, which gives greater value to benefits and costs in the future. High discount rates bias valuations toward short-term benefits. Lower discount rates favor projects that provide benefits for a longer period in the future. This analysis uses this income approach to estimate the natural capital asset value of the UARW.

3. Results

This section describes the EGS valuation results, the carbon stock values, the estimate of NPV, and shows selective provisioning and beneficiary maps for EGS where data is available.

3.1. Estimated EGS Values

Five research and analysis components are added together under the methodology described, delivering results to help understand the value of UARW natural capital. First, site-specific recreation values are compared to the appraisal approach recreation values. Second, the per-acre values for each EGS and land cover combination are provided. Third, the values of the UARW carbon stock are shown. Fourth, these estimates are combined using NPV to estimate the natural capital asset value of the UARW. Fifth, maps are prepared for the potential areas where the benefits from the EGS are provided by the UARW. The results below were originally published in the report Working Landscapes: The Natural Capital of the Upper American River Watershed [27].

Table 5. Comparison of recreation and tourism values per acre using the benefit transfer method and Radbridge [8].

Valuation Source/Method	Forest	Shrubland	Grassland	Agriculture	Wetland	Open Water	Developed, Open Space
Benefit transfer method	$398	$57	$16	$89	$475	$3097	$659
Radbridge [8]	$949	$136	$38	$212	$1133	$7384	$1571

compares the recreation and tourism values estimated using benefit transfer and by Radbridge [8]. The significantly higher values from this watershed-specific study confirmed the general impression of the UARWG partners that the near-pristine environment provides a higher quality of recreation opportunities that are also abundant in the watershed. The results further suggest that the UARW provides a higher quality of EGS related to recreation. Additional watershed-specific studies on other EGS would be required to verify if the observation can be extended to other EGS.

Table 6. Annual EGS values per acre by land cover category.

EGS Category	Forest	Shrubland	Grassland	Agriculture	Wetland	Open Water	Developed, Open Space
Provisioning
Food	<$1	<$1	○	$7470	$29	$457	○
Medicinal resources	○	○	○	○	N/A	N/A	○
Ornamental resources	○	○	○	○	○	N/A	○
Energy and raw materials	$540	$41	○	$40	$29	$86	○
Water supply	$642	○	○	○	$561	$47	○
Water storage	$58	○	○		$752	$651	○
Regulating
Air quality	$47	$7	○	$6	○	N/A	○
Biological control	$9	$47	$7	$340	○	○	$1
Climate stability	$664	$478	$452	$458	$341	○	<$1
Disaster risk reduction: drought, fire, landslides	○	○	○	○	○	○	○
Disaster risk reduction: riverine and rainfall flooding	$1897	○	$3	○	$535	N/A	$3
Pollination and seed dispersal	$461	$532	$532	$401	○	N/A	$384
Soil formation	○	$3	○	$5	○	N/A	○
Erosion Control	$379	$3	$7	$41	$1	N/A	<$1
Soil quality	○	○	<$1	$64	N/A	N/A	<$1
Water quality	$4903	○	$7	○	$521	$128	<$1
Water capture and conveyance	○	○	○	○	○	○	○
Supporting
Habitat and nursery	$18	$515	$44	$51	$537	$901	$44
Nutrient cycling	○	○	○	○	○	○	○
Cultural
Beauty	$1103	○	$71	$56	$450	$1259	$71
Cultural value	$1288	○	○	$272	$883	$107	○
Future value: bequest	○	○	○	○	○	○	○
Recreation and tourism 1	$949	$136	$38	$212	$1133	$7384	$1571
Science and education	○	<$1	○	○	○	<$1	○
Total annual value ($/acre/year)	$12,958	$1762	$1161	$9416	$5772	$11,020	$2074

Notes: EGS = ecosystem goods and services; ○ = present in the watershed but not valued in this report; N/A = not identified in the watershed. ¹ Watershed-specific values per Radbridge [8] with proportional distribution among different land cover categories.

shows the per-acre EGS values generated by working landscapes in the UARW with land covers such as forest, shrubland, grassland, agriculture, wetland, open water, and developed open space.

Forests have the highest per-acre value of all land cover types. The greatest forest value is the benefit of providing clean drinking water for downstream water users through EGS for water quality, supply, and storage [19,21,28].

Table 7. Total EGS annual value in the UARW by land cover category.

Land Cover	Annual Value ($/acre/year)	Acres in the UARW 1	Estimated Annual Value in the UARW ($/year)
Forest	$12,958	1,078,366	$13,973,000,000
Shrubland	$1762	272,237	$480,000,000
Grassland	$1161	60,798	$71,000,000
Agriculture	$9416	5994 2	$56,000,000
Wetland	$5772	2498	$14,000,000
Water	$11,020	17,013	$187,000,000
Developed, open space	$2074	47,468	$98,000,000
Total		1,484,374 3	$14,879,000,000

Notes: UARW = upper American River watershed. ¹ Acreages based on U.S. Geological Survey’s National Land Cover Database [20], excluding barren lands, and developed areas that are not open space with assumptions that these lands have no contribution to ecosystem services. ² U.S. Geological Survey land cover data was adjusted based on the Agricultural and Livestock Report data provided by the County of El Dorado [18]. ³ The UARW has a total area of 1,516,138 acres.

shows the estimated annual EGS value of the UARW.

As can be seen in Table 7, forests have the highest per acre value and the highest aggregate value across all land cover types. Forests make up over two-thirds of all acres within the UARW. In addition to the annual EGS values, the analysis estimates the carbon stock value within the UARW.

Table 8. Carbon stock estimates per acre by land cover type.

Item	Forest	Shrubland	Grassland	Agriculture	Wetland	Open Water	Developed, Open Space
Carbon stock (metric tons carbon)	200	33	9	8	45	0	5
CO2e (metric tons)	736	121	33	29	165	0	18
Social cost of carbon (2022 USD)	$209	$209	$209	$209	$209	$209	$209
Carbon storage value/acre	$153,500	$25,300	$6900	$6100	$34,500	$0	$3800

Note: Carbon storage value/acre = CO2e/acre × social cost of carbon.

shows the carbon stock estimates and associated monetary benefits with carbon storage in the watershed. The references for each carbon stock estimate and the social cost of carbon value can be found in Appendix A.

Forests provide the greatest carbon storage of any land cover, as well as the greatest total stock and stock value in the UARW.

Table 9. Carbon stock values.

Land Cover	Carbon Stock Value ($/acre)	Acres in the UARW 1	Total Stock Value
Forest	$153,500	1,078,366	$165,529,000,000
Shrubland	$25,300	272,237	$6,888,000,000
Grassland	$6900	60,798	$420,000,000
Agriculture	$6100	5994 2	$37,000,000
Wetland	$34,500	2498	$86,000,000
Water	$0	17,013	$0
Developed, open space	$3800	47,468	$65,000,000
Total		1,484,374 3	$173,024,000,000

Notes: UARW = upper American River watershed. ¹ Acreages based on U.S. Geological Survey’s National Land Cover Database [20], excluding barren lands, and developed areas that are not open space with assumptions that these lands have no contribution to ecosystem services. ² U.S. Geological Survey land cover data was adjusted based on the Agricultural and Livestock Report data provided by the County of El Dorado [18]. ³ The UARW has a total area of 1,516,138 acres.

below shows the carbon stock value per acre and the total carbon UARW stock value.

Using two discount rates (0% and 2.5%), the natural capital assets of the UARW are valued between $558 billion and $1.4 trillion. Adding the carbon stock values to the EGS values previously presented brings the range of natural capital asset value within the UARW to between $731 billion and $1.6 trillion, as shown in

Table 10. Natural capital value.

Discount Rate	Estimated UARW Natural Capital Asset Value
0%	$1,661,000,000,000
2.5%	$731,000,000,000

.

3.2. EGS Mapping

Understanding natural capital value involves identifying the regions and communities that benefit from EGS provision. This case study includes a mapping exercise that identified the downstream communities. It produced a series of provisioning and beneficiary maps that highlight where EGS are produced and where the benefits are realized.

Table 11. Delineation of EGS provisioning and beneficiary areas.

EGS Category	Attribute of Delineated Area	Delineated Area	Method Used for Delineation
Aesthetic Value and Beauty	Provisioning	UARW	The provisioning area for aesthetic value is the entire UARW.
Aesthetic Value and Beauty	Beneficiary	UARW and the broader Sacramento River Hydrologic Region	Aesthetic value and beauty are delineated by selecting locations throughout the watershed and then using elevation and aspect data to estimate the number of notable viewpoints throughout the UARW that are visible from each location. This process was repeated for roads and highways.
Air Quality/Wildfire Risk	Beneficiary	UARW, mostly Central Valley, and statewide influenced by weather conditions and intensity of wildfire	For demonstrational purposes, the area is delineated by using aerial images of smoke from 19 August 2021, and an air quality index map from 23 August 2021 (both resulting from the Caldor Fire) to illustrate the broad impact by wildfire.
Climate Stability	Provisioning	UARW	The value of carbon sequestration (flow) and carbon storage (stock) were estimated using satellite data as suggested by Buotte et al. [29].
Climate Stability	Beneficiary	Global	The impacts of climate stability are global in scope as described in Bratrschovsky [30].
Water Supply	Beneficiary	Sacramento River, San Francisco Bay, Central Coast, San Joaquin River, and Tulare Lake Hydrologic Regions	The UARW water drains into Folsom Lake, which is owned and operated by Reclamation for its CVP purposes. Therefore, the areas are delineated based on the service area locations of downstream CVP contractors.
Water Storage	Provisioning	UARW headwaters and the Sierra Nevada	Snowpack provides the largest storage capacity greater than built structural storage such as dams. These maps show areas of snowpack coverage in wet and dry years, based on data from National Aeronautics and Space Administration’s National Snow and Ice Data Center (NSIDC).
Water Quality	Beneficiary	Sacramento River, San Francisco Bay, Central Coast, San Joaquin River, Tulare Lake, South Lahontan, Colorado River, and South Coast Hydrologic Regions	Reclamation uses the cleaner and colder water from the UARW to provide more efficient and effective means to meet the water quality standards downstream of the Folsom Dam and in the Delta, where the water quality standards are met in conjunction of the SWP owned and operated by DWR. Downstream SWP contractors receive water quality benefits from water from UARW and, therefore, the beneficiary area is delineated using the hydrologic regions where their service areas are located.
Flood Risk Reduction	Beneficiary	Limited areas in the UARW due to steep terrain, and mostly in the lower American River floodplain and the Delta	The area is delineated using the 500-year floodplain within the UARW and downstream of Folsom Dam defined by Federal Emergency Management Agency
Wetlands and Aquatic Habitat	Beneficiary	UARW and the Sacramento River, San Joaquin River, and San Francisco Bay Hydrologic Regions	These beneficiary areas (i.e., wetland and aquatic habitat) are identified using the hydrologic system information and USFWS National Wetland Inventory data and boundaries for USFWS Wildlife Refuges
Energy	Provisioning	UARW	The provisioning area is delineated using a map of all hydropower plants, electric substations, and electric transmission lines in the UARW.
Energy	Beneficiary	California, Nevada, Arizona, Utah, Montana, Wyoming, Colorado, New Mexico, Texas, North Dakota, South Dakota, Minnesota, Nebraska, Iowa, Kansas, and Oklahoma	The beneficiary areas are delineated based on the service areas of power producers and the markets they participate in for power grid management, including SMUD, PG&E, Cal-ISO Territory, and the Western Area Power Administration areas (i.e., California and most of the U.S. western states).
Recreation	Beneficiary	UARW, United States, and Global	The beneficiary areas are delineated using anonymized cell phone data that shows the locations and places of origin of people visiting the UARW.
Agriculture	Beneficiary	California and throughout the United States.	Agriculture produced in the UARW provides significant value to residents and visitors and is distributed throughout the country. Beneficiaries are delineated based on a food flow study [31] showing local counties, the state, and country-wide locations of where food products are distributed from the UARW.

summarizes the EGS maps that were produced. In many cases, this is a first attempt to map out the provisional and beneficial areas for EGS provided by a watershed like UARW. Additional improvements and refinements are necessary; however, it provides policymakers and interested parties with an initial understanding of how far, geographically, certain EGS may extend out from the UARW. Some example maps are shown in later sections.

3.2.1. Water Supply and Water Quality Map

The UARW provides critical water resources for downstream communities. After local water consumption by plants, animals, and residents, as well as recharge to the underlying fractured rock formation, water from the UARW flows into Folsom Reservoir. A portion of the Cosumnes River within the UARW planning area does not naturally flow to Folsom Reservoir; however, diversions are made by El Dorado Irrigation District to meet demands above Folsom Reservoir.

As previously mentioned, Reclamation operates Folsom Reservoir as part of its CVP facilities in the Sacramento River system and the Delta for water supply, fish and wildlife, recreation, power generation, and other authorized purposes. Reclamation’s CVP operation is coordinated with the SWP operation by DWR to meet the in-basin demands and their corresponding contract obligation for water delivery to their contractors. In-basin demands include the needs of local water right holders and instream flow and water quality requirements in the lower American River and the Delta. In this context, Reclamation’s contract delivery goes to CVP contractors in the American River Unit, as well as its South-of-Delta contractors and wildlife refuges through Delta exports.

Based on the above, Figure 3 shows the water supply and water quality beneficiary areas provided by the UARW, including the following:

• Local urban and rural-agricultural water users within the UARW above Folsom Dam, such as City of Placerville and Towns of Georgetown, El Dorado Hills and Grizzly Flats.
• Water users in the lower American River watershed, including Sacramento, and the local water uses along the Sacramento River below the confluence of the American River and in the Delta.
• CVP water contractor service areas and wildlife refuges receiving Delta exports in the Bay Area and the San Joaquin Valley.
• SWP water contractor service areas receiving Delta exports in the Bay Area, San Joaquin Valley, Central Coast, and Southern California. Similarly to the water supply analysis, the exact benefit and quantification of the benefits for each recipient area or beneficiary cannot be discerned at this time.

Figure 3 also shows the groundwater basins in grey for context. The imported water supplements the local surface and groundwater for regional demands.

3.2.2. Water Storage Map

Water storage is an extremely valuable service that the watershed provides. One of the largest contributors to water storage for the region is snowpack in the Sierra Nevada. For comparison, Figure 4 shows the contrast between snowpack as of 1 April 2023, and the snowmelt as of late summer to early fall of the same year. As can be seen in Figure 4, valuable snowpack storage takes place in a significant portion of the watershed. The general trend of snowpack in the UARW is declining due to climate change. Meadows, lakes, and reservoirs are also part of water storage in the UARW; however, it is clear that the loss of snowpack storage volume with declining snowpack is not something that can be replaced by the existing surface storage (built and natural), or by the even more limited groundwater storage in fractured rock formations in the UARW. Figure 5 shows a side-by-side comparison of snowpack distribution during a wet year (1 April 2023) and a dry year (1 April 2012).

4. Discussion

Natural capital has always been critical in providing EGS essential to people and economies within the watershed, as well as those in downstream and more distant communities. Valuation of EGS is a helpful tool for local, state, and federal governments, Tribes, landowners, practitioners, and others to recognize and measure the value that working landscapes provide. Valuation can provide justification for investment in the watershed that ensures the sustainable flow of EGS benefits.

This first-ever valuation of the UARW’s natural capital shows over $14.8 billion in value provided annually. Based on the annual flow of benefits provided, the UARW has an asset value of over $1.6 trillion when projecting benefits over 100 years at a zero-percent discount rate. This is conservative as watersheds provide EGS for millennia, far longer than 100 years, and far longer than built capital assets. In addition, watershed EGS, such as natural water supply, recreation and water quality, generally appreciate in value over time. Understanding this value of the UARW as an asset is of great importance to the Agency’s goal of “[a]chieving water sustainability for future generations through water resource planning” [32].

Upper watershed EGS flow to many communities downstream and traverse across distant watersheds depending on how the benefits are distributed and propagated. The UARW provides electricity through the western power grid as far away as Montana and Texas. Recreation in the UARW benefits people who come from El Dorado County, California, and around the world.

The western slope upper watersheds of the Sierras and Cascades are under threat. While natural fires are healthy for forests, catastrophic wildfires, driven by climate change, including the recent Mosquito and Caldor fires in the UARW, are highly damaging and have degraded the watershed and associated EGS. Historically, natural capital and upper watershed health and performance have been taken for granted. Today, with climate change, investment in adaptation is required to restore and enhance the health and productivity of upper watersheds. This helps ensure more sustainable water supplies and other ecosystem services including habitat and biodiversity while providing for jobs, income, and a high quality of life for local and distant residents.

The presentation of watershed EGS values provides support for major policy and investment improvement. The benefits to downstream users become transparent and reveal an incentive for downstream beneficiaries to set up formalized funding mechanisms to ensure healthy upper watershed natural capital and the continued and more reliable and resilient production of EGS. Restoration actions that require funding include wildfire preventive actions that discourage destructive wildfires but allow healthy fires. These actions include thinning; management for more diverse stand age and species diversity; preventative fuel-reducing managed low-grade fires; post-fire actions such as rapid pre-rain replanting; slope and soil stabilization; and invasive species removal. Sustainable implementation of these actions could disrupt the disaster cycle of drought, fire, flood, and landslides.

Investment in watershed management and climate adaptation can be denominated in dollars. Showing the annual flow of benefits and asset value of upper watershed EGS in a monetized measure brings natural capital value and investments into alignment with systems and institutions accustomed to build capital investments where monetary benefits drive investment decisions and allocation. This should be coupled with outreach and education.

This valuation study was conducted to support the implementation of the Programmatic Watershed Plan for the UARW [33], which was developed in collaboration with federal, state, and local stakeholders to develop principal resource management strategies for sustaining watershed health and community resilience. Grappling with the challenges in aligning the scale of solutions with the scale of the problem is critical in resource management; however, EGS in a watershed could have very different spatial distributions of beneficiary areas. While the watershed is not a perfect scale for all EGS, it presents a workable scale for many EGS including water supply and flood risk reduction.

Understanding the scale of the productive asset (i.e., UARW) and the beneficiaries, both within outside of the UARW, and the scale of benefits enables funding mechanisms where the beneficiaries may decide to pay for the health of natural capital infrastructure (forests) to ensure more sustainable and productive EGS. Institutions such as the Agency with the capacity to organize research and partnerships at the watershed scale are also important for generating at-scale solutions. The valuation of EGS provides an opportunity to present the value of non-built infrastructure-based solutions in the same measurement as the built infrastructure ones for greater integration to improve efficiency and effectiveness for the overall investments. Without the demonstrated value and beneficiaries, the communities in headwaters like the UARW may carry the burden of maintaining watershed health without proper mechanisms or policies to distribute the burden. Particularly, headwaters often contain rural communities that are less represented politically, resulting in a foundational equity challenge for resource management.

4.1. Limitations and Uncertainty

The analysis has a few limitations that can be addressed in future work. It groups land cover categories into broad overarching ecosystems: forests, shrubland, grassland, agriculture, wetland, and developed open space. However, there are a wide variety of ecosystems within each category that can influence the delivery of EGS benefits. Future work could expand the set of land cover categories considered in the valuation. The land cover data from 2019 represents the best available data when the study was conducted, but it could be updated to the later release of the NLCD and adjusted for impacts from recent wildfires. In addition, the analysis relies on a single representative value selected based on available information. While this representative value makes the results easy to understand for a wider audience, it does not incorporate the potential variation of EGS benefits. Future work could expand the set of land cover categories considered and use a range of EGS benefits based on the relative ecological functions of the specific ecosystems.

4.2. Considerations for Applications in Other Regions

This study may be adopted by watersheds in other regions experiencing these same scale challenges with climate change. The development of water funds in Africa and Latin America have helped generate watershed investments, such as invasive species removal, that improve watershed health and downstream water supply. Cape Town, South Africa has experienced severe water crises and helped fund watershed restoration to improve water supply [34]. Similarly, Quito, Ecuador has a similar water fund that paid for upper watershed conservation actions to help secure a better water supply for Quito [35]. These payments for ecosystem services (PES) systems originated from the conservation community and have successfully set up watershed trust funds securing greater watershed health. These are exciting successes. However, they still rely on more voluntary, annual, and less permanent contributions and funding mechanisms than traditional built water supply infrastructure paid for by utility ratepayers or other permanently established funding mechanisms for long-term management, like Measures Q and T in Santa Clara County. Watersheds that cross national boundaries are some of the most important and present even more difficult challenges for solutions at the scale.

The rivers flowing off the Tibetan Plateau support water supplies and other EGS for over 2 billion people downstream [36]. Controversy concerning dams and other built infrastructure could be better informed with better valuation and mapping of headwater and downstream EGS. Rivers such as the Amazon, Nile, Congo, Rhine, Colorado, and many others present tremendous challenges for management at an appropriate scale for sustainability. A hopeful sign of how EGS valuation can contribute to international river treaty negotiations is the Columbia River Treaty between Canada and the U.S., originally signed in 1961 with the primary goals of dam building, promoting power production, and flood protection. Fifteen tribes in the Columbia River in the Upper Columbia United Tribes set a goal of improving basin-wide ecosystem health and function to the Columbia River treaty and commissioned an EGS valuation that showed that an improvement of 10% in ecosystem function, including increased water supply, flood benefits, salmon productivity, and other EGS, would add $19 billion in EGS value within the Columbia River Basin [37]. Treaty negotiations are still ongoing; however, the U.S. government has now included expert advisors from U.S. tribes and proposed to Canada “...establishing mechanisms for incorporating tribal and indigenous input and taking advantage of opportunities to strengthen Treaty ecosystem provisions...” and there has also been movement for including ecosystem health and salmon restoration [38]. These new applications of valuation for both policy and project advancement of EGS valuation also support other new institutions and funding that better match the watershed scale.

An example of developing solutions to match the scale of the problems with accompanying institutions, funding, and action is the State of Louisiana’s Coastal Protection and Restoration Authority (CPRA). Four months after Hurricane Katrina, the Louisiana Legislature created the CPRA to work on coastal restoration at the scale of the Louisiana Coast. CPRA recognized the natural capital of coastal ecosystems, quoting a valuation study of the Louisiana coastal zone [39] in their master plans and justifying a scaled-up investment in coastal restoration [40,41]. The scale of natural capital value justified the scale of the coastal restoration investment pursued by CPRA at $50 billion; CPRA has so far secured about $20 billion from the 2010 British Petroleum spill settlement and other sources for restoration actions [40]. The critical loss of 1.2 million acres of wetlands in the Mississippi River Delta and the loss of fisheries, hurricane protection, water quality, and other EGS threatens 2 million residents in coastal Louisiana [42]. As a result, the State of Louisiana moved from small restoration projects (700 acres) to large projects, including investing $2.2 billion into two sediment and water diversions based on an EGS valuation study focused on Mississippi River sediment diversions [6]. These diversions cut into the levees of the lower Mississippi River to restore the deltaic processes and spread sediment back into the delta, building and protecting 240,000 acres of wetlands.

4.3. Continued Collaboration in the UARW

Watersheds and other large landscapes are filled with natural and built capital as well as complex physical, economic, cultural, and political aspects. Institutions, such as the El Dorado Water Agency, tasked with coordinating and generating solutions at the scale of the problem are essential to facilitate collaboration and cooperation for securing solutions to the complex and intertwined problems from local invasive species to global climate change. The tools of watershed valuation, coupled with provisioning and beneficiary mapping, provide an objective base from which scaled funding mechanisms and collaborative investment decisions can be made.

Despite challenges and mission differences, citizens, visitors, firms, and agencies are all in the watershed together. The UARW is a large asset that provides many flows of EGS to local and distant communities. Beneficiaries in areas downstream from the watershed in California, beneficiaries tapping into the western energy grid, and people eating food from the watershed or enjoying recreation in the watershed are all together invested in the health of the UARW. The best solutions require broad participation and skilled coordination.

5. Conclusions

The UARW provides 23 categories of valuable ecosystem goods and services. Food, water supply, water quality, climate stability, waste treatment, wildlife habitat, and recreation are some of these EGS. A subset of annual EGS present in the UARW were valued at $14.8 billion each year. Over $12,500/acre/year in value is provided by forest. Open water provides over $11,000/acre/year in value. Agricultural lands provide over $9000/acre/year in value, and wetlands provide over $5500/acre/year.

Many of the benefits, such as water supply, water quality, and flood risk reduction, are garnered outside of the upper watershed (below Folsom Dam). Stakeholders living within the UARW receive benefits from agriculture, water supply, and recreation, among other EGS benefits. These EGS support or provide jobs, income, and tax revenue in El Dorado and Placer counties. These EGS also provide benefits more widely to other areas, including water supply for San Joaquin Valley farms, water quality benefits for coastal cities, and recreation benefits for proximate and distant visitors.

This case study demonstrates that the UARW, as a natural capital asset, can be valued like built asset, with a net present value. The estimated value of the working and natural lands of the UARW is worth $731 billion at a 2.5% discount rate, or $1.6 trillion at a zero discount. That is a vast asset.

The tools of watershed valuation and beneficiary mapping are important to establish a framework to promote mutual understanding of watershed benefits, advance collaboration between stakeholders within the upper watershed and beneficiaries outside the upper watershed, and potentially lead to funding mechanisms enabling investment in ecosystem health at the watershed scale. This will help secure vital EGS, such as water supply, for current and future generations.