Journal of Real Estate Finance and Economics, 22:2/3, 163±184, 2001
# 2001 Kluwer Academic Publishers. Manufactured in The Netherlands.
Estimating the Economic Bene®ts of Cleaning Up
Superfund Sites: The Case of Woburn, Massachusetts
Economics Department, College of the Holy Cross, Worcester, MA 01610
Economics Department, Tufts University, Medford, MA 02155
Superfund was established in 1980 to deal with closed and abandoned hazardous waste sites. Given the large
amounts of money being spent on cleanups of Superfund sites, one might hope that the money is being spent in
a cost-effective manner, but there is little evidence that the estimated bene®ts from cleanup affect the cleanup
decision. We apply the hedonic method to house prices to estimate the individual willingness to pay (WTP) to
clean up a Superfund site. We then show how the individual WTP can be used to calculate the total bene®ts
from cleaning up the site so that a cost-bene®t analysis of Superfund cleanup can be undertaken. We apply our
technique to the two Superfund sites in Woburn, Massachusetts. We ®nd that the bene®ts from cleaning up these
sites are in the range of $72 million to $122 million (1992 dollars). It is likely that these bene®ts are greater than
the present value of the estimated costs of cleaning up these sites. Thus it appears that the cleanup of the
Woburn Superfund sites results in positive net bene®ts to society.
Key Words: Superfund, bene®ts from cleanup, house price models
The Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), commonly known as Superfund, was established in 1980. It created a
system for dealing with closed and abandoned hazardous waste sites, established liability
of persons responsible for toxic releases at those sites, and created a trust fund to pay for
cleanup if no responsible parties could be identi®ed. CERCLA was amended in 1986 under
the Superfund Amendments and Reauthorization Act (SARA). As of February 1999, there
were 1,205 Superfund sites (EPA web site), and in 1993 annual federal government
expenditures were approximately $2 billion (Hird, 1993). In addition, as of March 1997,
private parties had spent more than $12 billion on cleanup (U.S. EPA, 1998a). Probst et al.
(1995) report that conservative estimates of the potential number of Superfund sites fall in
the range of 2,000 to 3,000, though others' predictions are as high as 6,000. They estimate
that the average cleanup cost per site is approximately $30 million, and hence the total cost
of cleaning up all Superfund sites could range from $60 billion to $180 billion.
Authorities rely on a system known as the hazardous ranking system (HRS) for a
preliminary evaluation of the impact of a site on the local residents and environment. Any
site that scores above a threshold value is placed on the National Priorities List (NPL),