Coastal natural hazard mitigation: Opportunities for businesses to lead investments in local public goods

Background/Question/Methods

Coastal habitats are important local public goods because they provide natural hazard mitigation services to various members of coastal communities, among other services. Despite increasing evidence of the value of these services, coastal habitats continue to be degraded. Three major factors that may be causing underinvestment in coastal habitats are: 1) poor local information on benefits, 2) large transaction costs, and 3) the high potential for free-riding. We argue that businesses have special advantages that may allow them to overcome these challenges and lead investment in coastal habitats that provide natural hazard mitigation services. Applying the theory of the firm to ecosystem services, we hypothesize that there may be cases where businesses may be able to have better information about ecosystem services and will have lower costs associated with designing and executing payments for ecosystem services than other community members. When benefits from investments in coastal habitats are greater than costs, a business may act alone to mitigate risks from natural hazards. However, when costs are greater than the benefits to the business but there are significant benefits to other community members, businesses may be in a position to coordinate and lead investment with other community members.

Results/Conclusions

We investigated this issue in the area surrounding Freeport, TX, where Dow Chemical Company is an important business leader and there are significant opportunities for extensive coastal marshes to provide natural hazard mitigation to Dow and the surrounding communities in Brazoria County. First, we identified the various tools available to these different stakeholders for estimating coastal natural hazard mitigation benefits based on the information they had available and the decisions they needed to inform. Second, we advanced and applied three analyses focused on how coastal natural hazard mitigation services to Dow and to the public may change in the future, as well as how ecosystem may change. Third, we identified opportunities for investments by Dow as well as opportunities for coordinated investments in coastal habitats. Lastly, we described how payments for ecosystem services may be structured in these different cases. This research makes a technical contribution by highlighting advancements in the use of ecosystem service assessment tools in cases where there are various stakeholders with different needs. It also makes a contribution to conservation policy and theory by identifying opportunities for businesses to lead in payments for ecosystems services, an area that previously was primarily the domain of governments and NGOs.