Oregon Sea Grant

Estimating Option Values and Spillover Damages for Coastal Protection: Evidence from Oregon’s Planning Goal 18. Journal of the Association of Environmental and Resource Economists

Abstract: Estimating nonmarket benefits for erosion protection can help inform better decision making and policies for communities to adapt to climate change. In this paper, researchers estimate private values for a coastal protection option in an empirical setting subject to irreversible loss from coastal erosion and a land-use policy that provides identifying variation in the parcel-level option to invest in protection. Using post matching regressions and accounting for potential spillovers, researchers found evidence that the value of the erosion protection option is between 13% and 22% of the land price for parcels vulnerable to coastal hazards. This implies that owners of oceanfront parcels have a subjective annual probability that they will experience an irreversible loss absent the option to protect between 0.7% and 1.3%. Researchers also found that, because of altered shoreline wave dynamics, a parcel with a private protection option generates a spillover effect on protection in eligible neighbors, lowering the value of neighboring land by 8%.