policies and may be substantially modified at the insistence of the states to conform to these policies.

Chapter three provides an analysis of the National Estuarine Reserve Research System (NERRS). This program was created by Section 315 of the CZMA, and was originally conceived to protect the nation's estuarine areas and forestall the ecological degradation of this valuable natural feature. The NERRS has certainly accomplished this mandate; although legal provisions for the management and protection of estuaries are diverse and often complex, currently 18 reserves protect over 262,000 acres of estuarine acreage.

With the passage of the Reauthorization Act of 1985, education and research became the primary focus of the NERRS. The Reserves serve to protect estuaries as field “laboratories,” and the NERRS encourages their use for long-term scientific research. Today, one of the most important services of the program is to provide information to the public at large, and to the coastal management decision-maker. By fostering a healthy atmosphere for learning now, future managers and planners will be able to act on responsible decisions concerning the protection of our estuarine environment.

It is difficult to assign a cost/benefit value to the NERRS. In the long run, perhaps the most valuable contribution will be to set aside extremely crucial areas that people now tend to take for granted. This, coupled with the NERRS role as educator, may ensure that future generations— both human and animal-will be able to derive the benefits from estuaries in their natural state for years to come.

Chapter four is entitled "An Analysis of the Coastal Energy Impact Program." At the time of its passage in 1976, the Coastal Energy Impact Program (CEIP) enjoyed broad-based support and a varied constituency. The CEIP was a program that appealed to state and local governments, environmentalists, and somewhat surprisingly, the energy industry. Simply stated, the purpose of the CEIP was to provide financial assistance to meet the needs of coastal states and local governments that result from energy activity affecting the coastal zone. The CEIP sought to strike a balance between the national objectives of achieving increased energy self-sufficiency and of protecting and managing the nation's coastal resources.

The CEIP provided financial assistance-loans, bond guarantees, and grants to help coastal states and local communities affected by new or expanded coastal energy activity. The CEIP was unique among federal programs because it allowed considerable discretion by state and local governments in identifying the problems that local communities faced in overcoming Outer Continental Shelf (OCS) oil and energy activities, and establishing the priorities for projects to be funded. The CEIP funded many unusual projects, but in addition to that, the CEIP was a unique program because it involved a high level of state, federal, and local cooperation to complete these projects.

Despite the fact that the CEIP was widely supported and served as a model of how various levels of government can work together to meet local, state, and national objectives, and despite the fact the program was associated with two issues of national importance-energy independence and environmental quality—the CEIP did not become a permanent addition to the federal coastal management program; in fact, a few years after its inception, the program effectively ended.

One reason cited for the CEIP's demise is the lack of demand by states for credit assistance, due in part to the high interest rates charged by the CEIP. As state interest in CEIP funds began to wane, so too did the Carter Administration's support for the program. The 1980 presidential election provided the final component that was needed to end the CEIP; once elected, one of Ronald Reagan's first federal budget cutting targets was the CZM program, specifically the CEIP.

It is hard to assign an exact date as to when the CEIP ended, but for all practical purposes, the program expired in fiscal year 1983.

The CEIP was a short-lived program, and the majority of its existence was spent in start-up time. By the time the appropriations were awarded and the results of the funding became visible, the program had ended. Because the CEIP was young, it did not have time to develop an entrenched bureaucracy or powerful constituency and was, therefore, an easy target for budget cutting. More importantly, the issue that was the central focus of the CEIP, the "energy crisis," had faded from the public psyche. As the gas lines disappeared from the media's scrutiny, so, too, dissolved the nation's concern for energy independence and conservation. Ironically, many of the OCS energy activities that were controversial during the CEIP's existence are still being debated.

The next four chapters of the report describe in detail the state CZM programs. As the chapter introducing the state programs points out, a very difficult problem confronted those designing the national CZM program in the late 1960s and early 1970s. The coastal area has tremendous value and the need for improved management of development in coastal areas to protect this national treasure was clear. Then as now, however, the wide range of issues to be addressed and the diversity of the coast presented a daunting challenge to the design of a national CZM program.

The range of development issues to be addressed in coastal resource management is quite broad. Moreover, the nation's coasts have tremendous physical, economic, political and cultural diversity. This diversity of the nation's coastal area makes the design of a uniform national approach to coastal management issues impossible. The answer to this dilemma that was incorporated into the federal CZMA was to use state coastal management programs to address national concerns about proper management of coastal resources. State programs could incorporate the diversity of the coasts while meeting minimum national standards.

Twenty-nine states and territories have developed individual CZM programs that have been approved by the federal government as meeting the minimum national standards established by the CZMA. Under the CZMA, states and territories are granted considerable latitude on how best to allocate available funds to address priority national interest areas. An examination of how these funds have been allocated and what tasks the states have undertaken provides insight into coastal management priorities of the 1980s. This part of the study focuses on program expenditures in seven major categories, based on the national interest areas specified in the CZMA. The categories used for analysis are: 1) improving governmental decision-making; 2) natural resource protection; 3) improving public access to coastal resources; 4) urban waterfront development; 5) hazards mitigation; 6) natural resource development, and 7) ports and marinas. While there is a national concern with each of the seven subject areas, the incidence of each particular issue is not uniformly distributed around the country.

This study confirms that the CZMA has been successful in one of its key objectivesestablishing a national program that incorporates state diversity. The states and territories are devoting the bulk of their attention to two key subjects, improving government decision-making and protecting the coast's natural resources; but the states and territories have retained the ability to address other national interest areas where they exist and need management attention.

Another striking finding of the study is how much has been done with limited resources. Coastal zone management has not been lavishly funded in the United States. Annual federal expenditures for program implementation in the study period were on the order of $34.75 million. The total federal grants for program implementation for the six year detailed analysis period (1982 through 1987) was $190 million. These funds were spread among 29 participating states and territorial programs and were used to address the wide variety of subjects noted above.

This collection of 29 uniquely designed state and territorial programs does serve important national interests. Through a variety of methods, government decision-making on coastal issues and natural resource protection has been improved in every participating state and territory. Where warranted, careful attention is also being given to other key issues, such as improved public access to the coast, better management of development in natural hazard areas, and development of coastal natural resources. Some programs are undoubtedly more active and more effective than others. Six states are not participating in the CZMA at all. Yet most of the nation's coastline is covered by an approved coastal management program and the aggregate of their efforts will result in a coastal zone that is healthier, more productive, and more attractive for the long-term benefit of the nation.

The final chapter of this report sets forth our findings on the economics of coastal zone management. This section addresses two questions of importance to coastal zone planners and policy-makers: What is the economic value of the coastal zone? and What is the relationship between spending on coastal zone management activities and the economic value of the coastal zone?

Proponents of coastal zone protection legislation typically claim that special action is needed to preserve the "value" of the coastal zone. Yet, only a few researchers have attempted to quantify that "value." That quantification is necessary to establish a baseline for further benefit-cost analysis of coastal protection activities.

We define the coastal zone was defined as the 413 counties in 30 states and 5 territories that are either adjacent to or within 50 miles of the oceans, bays, or Great Lakes, or lie within an estuarine region. The value of the economic activity and natural resources found in the zone has two components: 1) the current market value of all goods and services that are produced directly and indirectly from coastal resources and coast-related activities (which is equivalent to the gross national product (GNP)—originating in the coastal zone, or “coastal GNP”), and 2) the intangible value of recreation and other activities and resources that people enjoy, but for which they do not pay directly (termed "nonmarket values").

Economists have measured coastal value in different ways; by focusing on market and nonmarket values, and by estimating the importance of the coast for the nation as a whole and for specific places and types of activities or coastal resources. These estimates have one common interpretation: regardless of how one measures coastal value, it is sizeable. Looking at current market values of goods and services produced by just three coast-related industrial sectors, the value was $58 billion in 1987. When the list of sectors is expanded to some 60 industries, the estimate of coastal value doubles. When coastal value is measured in terms of the market value of the embodied energy at the coast, rather than in terms of standard transactions, the value is still higher. As high as these figures are, they still may understate the full value of the coast since they exclude the consumer surplus that is created by people's willingness-to-pay for beach access, coastal proximity, and coastal views in excess to what they are actually charged.

We identify three types of economic activity create value in the coastal zone: 1) economic activities, located in the coastal zone, that are locationally dependent on coastal resources— specifically, the ocean, bays, Great Lakes and estuaries, and their contents (coast-dependent activities); 2) economic activities that use the ocean, bays, Great Lakes and estuaries and their contents in the production process, or that produce intermediate inputs for coast-related activities, but are not necessarily in the coastal zone (coast-linked activities); and 3) economic activities, not included in 1), that are located in the coastal zone and provide service to residents and visitors to the coastal zone (coastal service activities). The sum of the value of these three types of activities can be considered to be the economic value of the coastal zone.

Based on payroll and employment, our raw measures of economic activity, our estimates demonstrate that the coastal zone is a key economic sector that contributes more than 30 percent of the national GNP. Most of this value comes from the service sector, but even without that type of economic activity, the coastal zone accounted for some $55 billion in 1985. Our estimates also show that the coastal zone has become more important over time, growing from 30.1 percent of GNP in 1978 to 31.4 percent in 1985. We show, finally, that the coastal zone is critical to the economies of many coastal states and territories.

Our study concludes that a strong relationship exists between program spending on CZMrelated activities, specifically in the seven national interest areas contained in the CZMA and changes in coastal GNP. The existing literature does not address the relationship between CZM spending and coastal GNP directly. However, several studies relate coastal regulatory activities that may be supported by CZM program funds with gains in economic welfare.

Furthermore, we conducted correlations and ordinary least squares (OLS) regressions using absolute and relative changes in coastal GNP, in total and by activity type, and CZM expenditures. We found absolute real output change and CZM spending to be correlated positively for each of the components of coastal GNP. We also found that, for all specifications of the OLS model, a dollar increase of CZM spending is always associated with greater than a dollar increase in coastal output. The magnitude of the association, moreover, is sizable for all definitions of coastal GNP except "coast-linked." Admittedly, our evidence is sketchy and original statistical tests somewhat crude. But, at least circumstantially, we have compelling evidence that CZMA monies have been well spent in a benefit-cost sense. These results suggest that if the level of CZM spending were reduced, the level of coastal (and hence national) GNP would fall, as well.

The uniqueness of the CZMA lies in its voluntary nature, and the degree of flexibility granted to participating states and territories in using federal funds to manage their coastal zones. While not every aspect of the CZMA has had a lasting effect, (specifically, the CEIP), the CZM program has been widely successful. Twenty-nine states and territories have taken the initiative, under federal guidance, to conserve and even enhance the character and intrinsic value of the nation's coastline. The economic benefit in terms of both market and nonmarket activities derived from federal monies spent in the coastal zone has more than paid back the taxpayers' expenditures.