Framework addresses states with exceptionally complex issues and a large number of ongoing programs, especially those with local, regional or statewide statutes that include crediting programs. 2

Why valuation and crediting ? Understanding how to value environmental conditions to include values in planning Developing credits that reflect values in order to avoid, minimize and compensate for impacts

Planning-level valuation & crediting method These were then incorporated into a valuation framework and a multi-step approach from identifying potential environmental impacts to calculating fiscal equivalencies. We investigated methods in the literature, the environmental analysis and planning approaches used in California by Caltrans and others, and appropriate geographic scales.

Recommended approach 5-step valuation process Two geographic/planning scales – region and corridor Incorporate findings into regional system planning, regional project prioritization, and project alternative analysis Develop capacity within DOTs and clear decision-points to use valuation findings Implement model valuation project with planners in select districts/regions

economic value

valuation scales Each scale may have unique environmental attributes to measure and consider, but the nested scales provide greater efficiencies in valuation analysis. Region corridors projects

Regional scale Appropriate to analyze certain impacts from the transportation system (e.g. regional biodiversity, air quality).

Corridor scale Valuation for corridor of project planning may require higher-resolution analysis of impacts and values.

Approach Valuation framework incorporating environmental impacts of transportation, valuation steps to calculate equivalent values, and potential uses of valuation data in supporting decisions and calculating credits

Proposed changes in Regional Transportation Plans or Corridor Plans Impacts: e.g. air/water pollutants, wetland alteration/loss, collisions with wildlife Impacted systems: e.g. people, wildlife, plants Impacts on human health, human welfare, environmental conditions Identify potential impacts Quantify the impacts Value the impacts Assessing environmental impacts Screen and categorize the impacts Account for uncertainty Use credits system to calculate total impact, avoidance/minimization strategy, compensatory actions Steps in valuation of environmental impacts Proposed valuation and crediting framework Calculate credits based on valuation-threshold relationships Use credits system to compare project/decision alternatives

DOT guidance handbooks and manuals State Environmental Requirements categories NEPA Other resources (e.g., Victoria Transport Policy Institute; Asian Development Bank) Step 1: Identify the potential impacts

Step 2: Screen and Categorize the Impacts Can the effect be assessed and quantified? Can the effect be quantified and has equivalent fiscal costs/benefits? Is the impact to be mitigated? No action Describe the impact qualitatively Assess the impact quantitatively Can use economic valuation methods (primary or secondary methods) to monetize the impact Mitigation costs (e.g. engineer costs) to be included in the project cost, corridor or regional plans May use cost-based methods (e.g. replacement cost) to calculate credit cost Yes No Assess the impact quantitatively May use other non-economic evaluation approaches Compare impacts to desired and undesired thresholds for each type of environmental component Calculate credits/discredits based on impact magnitude and type Screening and Categorizing Action

Step 3: Quantify the Conditions & Impacts Requires data on potential risks, geographical and temporal extents of the impacts, and severity Express the impacts in the physical units to quantify the magnitude of each impact Also involve assessing the magnitude of the impacts and impacted elements Scientists would need to use models to quantify the impacts Examples: –Dose-response functions – link expected exposure to stressors and impacts on receptors –Human health risk assessment models –Ecological risk assessment models –Ecological models Physical data would also need to be in a form that is suitable for monetization when analysts carry out an economic valuation study.

Step 4: Calculate Values & Credits for Impacts on Environmental Conditions Policy guidance (e.g., no wetland loss, air quality standards) Scientific literature (e.g., habitat fragmentation effects on wildlife) Output is a pair of targets – desired and undesired Describe relationship between credits and change in condition Determine desired and undesired reference conditions/targets Scientific literature (e.g., linear increase in risk to health from changes in air quality parameters) Differentiate between relative impact within a study area and total impact Output is a mathematical relationship defining incremental credits and description of possible uses (e.g., comparison of alternatives, calculating equivalent fiscal cost).

Step 5a: Use credits to calculate relative impacts Comparison of relative impact to a valued ecological attribute between two theoretical settings alongside a highway. In case (A), the impact is to 3 of 30 area-units of wetland. In case (B) the impact is to 3 of 10. The relative impact is greater in case (B) and arguably should require more credits.

Step 5b: Use credits to inform project comparison Example of using credits to compare among alternatives including structural and modal changes. Credits are calculated based on comparison to desired and undesired conditions.

Step 5c: Fiscal Equivalents of the Conditions & Impacts Primary methods Secondary methods Cost-based methods (not necessarily a strict measure of welfare impact as with the primary methods) Revealed preference – hedonic model, travel cost model, market price methods, and averting behavior model Stated preference – contingent valuation, and conjoint analysis Benefit transfer Avoided cost, replacement cost and cost of treatment Credits are calculated as fiscal equivalents, based on one or more of several methods of economic valuation.

Implementation Plan 1) District and HQ system planners, DOT and independent economists and environmental scientists 2) Useful in regional system planning, corridor planning, project alternative selection 3) Develop internal buy-in/capacity, specific guidance for decision-points, use approach in model program 4) Barriers: Broad understanding and acceptance of the approach, capacity, obvious decision-support function 5) Opportunities: Uses existing environmental analysis, can develop regional fiscal equivalencies; model projects available immediately

Possible decision-points for the use of valuation/crediting in planning, programming, and project evaluation Complement benefit-cost analysis (e.g., Caltrans’ Cal-B/C model) at the programming stage

Possible use of valuation/crediting approach Source: SACOG MTP 2035 Brochure. MPO Regional Planning Process

Valuation and crediting information can guide the decision maker in choosing the set of projects to be included in the corridor plan by using values and credits to compare the environmental impacts among the different sets of recommended strategies and projects Can guide the later selection of which strategies will be developed into projects Could lead to selection and prioritization of those strategies that avoid or minimize harm to the environment Use of valuation and crediting in the system planning process

Could be used at the project initiation phase to evaluate the potential environmental impacts associated with each project alternatives, calculate credits/costs among alternatives, and to better estimate the mitigation costs of environmental impacts. Use of valuation/crediting at the project development stage

The California Transportation Commission (CTC) requires each agency and Caltrans to provide a quantitative and/or qualitative evaluation of the RTIP and ITIP before they are submitted to CTC for incorporation into the STIP. Caltrans uses Cal-B/C model to evaluate all State Highway projects prior to project submittal to CTC. Incorporating the values (credits/debits) of the environmental impacts within Cal-B/C at the time of analysis can better account for the benefits and costs that society may have to bear. To complement the Cal-B/C model at the programming stage

Using credits when talking about equity/fairness Capacity building within an institution/agency Resource constraints to implement Philosophical objection to valuation & crediting approach Limitations of the valuation/crediting approach

Implementation Next Steps 1) Clearly identify the needs valuation & crediting would meet 2) Clearly identify roles of DOTs/MPOs and external partners 3) Model the approach within a DOT District or MPO Region 4) Use existing environmental analysis for corridor as source of potential impacts, conduct new valuation study for corridor, examine feasibility of using equivalent values elsewhere in the region

More Ideas Follow-on study – before and after valuation of projects Explore how to incorporate findings into route concept planning Prior to alternatives being proposed, good place to implement valuation System planning guidelines from HQ good place for implementation

Questions? Fraser Shilling Road Ecology Center University of California, Davis (530)