Non-market valuation in integrated assessment modeling: The benefits of water right retirement

The impact of resource management on natural capital value depends on processes that affect resource stocks over space and time. We develop an integrated assessment modeling framework that links econometric estimates of non-market benefits from a resource stock to a spatially explicit model of resource dynamics. Results from a dichotomous choice contingent valuation survey are used to estimate a marginal willingness to pay function for groundwater, which has no market. We use the model to measure the economic benefits to agricultural producers of a program that pays for water right retirement. Under the baseline scenario, without water right retirement, the benefits from groundwater stocks in the study region decline in value by $3.6 million over 15 years because of groundwater depletion. Water right retirement leads to groundwater benefits that are $0.55 million higher than in the baseline after 15 years, but benefits vary greatly over space. Comparing this to an explicit program cost of $45 million suggests that other social benefits from groundwater stocks must exist to justify the program from a benefit-cost perspective. Valuing the economic benefits from increasing natural capital stocks can inform policy and provide insight into the value of management in resource and environmental systems. •We estimate a marginal willingness to pay (mWTP) function for groundwater stock.•We link the mWTP function to a groundwater model.•We estimate the value of additional stock from a groundwater conservation program.•The CREP program in Kansas increases stock values by $0.55 million after 15 years.