Incorporating Natural Capital Damage from Major Wildfire Events in Headwaters Management and Resource Allocation

Conventional reports on wildfire damage focus on damage to built structures and life loss without capturing the long-term loss of many environmental benefits provided by natural capital. The assessment of the full cost of a wildfire event can be very challenging and time-consuming due to its broad range of impacts traversing decades. Two major wildfires, the 2021 Caldor Fire and 2022 Mosquito Fire, impacted rural communities and burned nearly 30 percent of the approximately 1 million acres of forests and private timber lands in the Upper American River Watershed (UARW) in California’s Sierra Nevada headwaters. The UARW provides a stock of natural capital that provides a flow of environmental benefits, or ecosystem goods and services, including California statewide water supply that was not recognized in the conventional reporting to properly inform decisions and investments for mitigation and recovery. Leveraging new tools available through the recent valuation of the UARW’s ecosystem goods and services, this study provides a first look at the magnitude of damage to the headwaters’ ecosystem from wildfires and, thus, informs proactive, adaptive management actions and post-disaster recovery and restoration. Using burn severity data and per-acre estimates of ecosystem goods and services, we estimate natural capital damage of over USD 14.8 billion across an optimistically estimated period of 20 years. Several recovery time horizons are used to evaluate the sensitivity of the analysis. These findings provide important benchmarks and a viable approach for all levels of government and private entities responsible for allocating resources, mitigating wildfire risks, and improving watershed health.