ANALYSIS Contingent valuation, net marginal benefits, and the scale of riparian ecosystem restoration Thomas P. Holmes a, * , John C. Bergstrom b , Eric Huszar c , Susan B. Kask d , Fritz Orr III e a USDA Forest Service, Southern Research Station, P.O. Box 12254, Research Triangle Park, NC 27701, USA b Department of Agricultural and Applied Economics, The University of Georgia, 208 Conner Hall, Athens, GA 30602, USA c USDA Animal and Plant Health Inspection Service, Policy Analysis and Development, 4700 River Road Unit 119, Riverdale, MD 20737-1238, USA d Warren Wilson College, CPO 6125, PO Box 9000, Asheville, NC 28815, USA e Rabun Gap-Nacoochee School, 339 Nacoochee Drive, Rabun Gap, GA 30568, USA Received 17 November 2002; received in revised form 5 September 2003; accepted 20 October 2003 Available online 8 April 2004 Abstract A study was undertaken to estimate the benefits and costs of riparian restoration projects along the Little Tennessee River in western North Carolina. Restoration benefits were described in terms of five indicators of ecosystem services: abundance of game fish, water clarity, wildlife habitat, allowable water uses, and ecosystem naturalness. A sequence of dichotomous choice contingent valuation questions were presented to local residents to assess household willingness to pay increased county sales taxes for differing amounts of riparian restoration. Results showed that the benefits of ecosystem restoration were a non-linear function of restoration scale and the benefits of full restoration were super-additive. We estimated the costs of riparian restoration activities by collecting and analyzing data from 35 projects in the study area. After adjusting our estimated valuation function for socio-economic characteristics of the local population, the benefit/cost ratio for riparian restoration ranged from 4.03 (for 2 miles of restoration) to 15.65 (for 6 miles of restoration). Riparian restoration in this watershed is therefore an economically feasible investment of public funds at all measured spatial scales. D 2004 Elsevier B.V. All rights reserved. Keywords: Riparian restoration; Contingent valuation; Super-additivity; Complements in valuation 1. The need for marginal economic analysis of ecosystem restoration Ecological systems provide an array of benefits to humans that are not generally accounted for in market transactions. Consequently, economic activi- ties can degrade ecological systems and valuable ecosystem services may be underprovided or entirely lost. If ecosystems are resilient to changes caused by degradation, it may be possible to restore ecosystem services either to some pre-existing level or to a level that is commensurate with the demands of the current human population. However, because eco- system restoration is still highly experimental and 0921-8009/$ - see front matter D 2004 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2003.10.015 * Corresponding author. Tel.: +1-919-5494031; fax: +1-919- 549-4047. E-mail address: tholmes@fs.fed.us (T.P. Holmes). www.elsevier.com/locate/ecolecon Ecological Economics 49 (2004) 19 – 30