The restoration economy is the economic activity associated with regenerative land use, such as ecological restoration activities. It stands in contrast to economic activity premised on sprawl, or on the extraction or depletion of natural resources. The term is meant to convey that activities meant to repair past damage to natural and human communities are often economically beneficial at local, regional, and national scales.

The "restoration economy" refers to an economic model based on repurposing, renewing and reconnecting the natural, built and socioeconomic environments. The phrase gained popularity with the publication in 2002 of The Restoration Economy by Storm Cunningham. That book created an eight-sector taxonomy for "restorative development", with a chapter on each. Four professional / technical / scientific sectors primarily focused on the built environment: brownfield remediation, infrastructure renewal, heritage restoration and catastrophe reconstruction. The other four sectors primarily focused on the natural environment: ecological restoration, watershed restoration, fishery restoration and regenerative agriculture. All eight sectors help to revitalize the socioeconomic environment.

On the natural resources side of the equation, the "restoration economy" refers to the employment, capital, resources, and economic activity that emerge from investments in ecological restoration, or "the process of assisting the recovery of an ecosystem that has been degraded, damaged, or destroyed."^[1] Restoration projects can include habitat enhancement, water quality improvement, invasive species removal, forest thinning for canopy diversification, or any other activity that aims to improve the natural function of an ecosystem. While investments in restoration benefit the environment, restoration projects also require workers, materials, and services to implement. The marketplace for these goods and services can create employment, spur business and workforce development, and increase activity in local economies. Activities that use byproducts of restoration work are also sometimes considered as part of the restoration economy; for example, the use of small trees and/or shrubs from forest diversification or thinning projects as biomass to produce heat or energy.

The emergence of the restoration economy as a concept followed closely from historic shifts in natural resource policy in the mid-1990s, when the northern spotted owl and several species of salmon with habitat in the Pacific Northwest of North America were listed as endangered. The listings created a significant shift in forest management policies across the region, leading to drastic decreases in logging and other natural resource extraction activities that would further destroy habitats for these species.^[2][3] The listings also marked a shift toward more sustainable land management through forest and watershed restoration, as policymakers began to realize that environmental restoration work could provide social and economic, in addition to ecological, benefits.^[4]

Federal and state agencies sought to replace some of the economic activity that was lost as extraction activities declined with economic activity from restoration work. The Northwest Forest Plan (1994) initiated several programs intended to transition traditional logging communities and workforces toward livelihoods in restoration work.^[5][6] The Collaborative Forest Landscape Restoration Act (2009), the National Forest Economic Action Plan, and stewardship contracting opportunities also focus on marrying ecological with socioeconomic benefits from national forest management.

In Oregon, decreased timber yields and the potential for additional salmon listings that would further affect traditional land management activities led to the creation of community-based watershed councils under the Oregon Watershed Health Program (1993), and later the Oregon Plan for Salmon and Watersheds (1997). With dedicated state lottery funding, these watershed councils continue to promote voluntary restoration actions that improve salmon habitat by encouraging collaboration at the local level and promoting both socioeconomic and ecological benefits through restoration.^[7][8]

Agencies and nongovernmental organizations that implement restoration work create employment by hiring staff and contracting with businesses that hire employees to perform the actual restoration work. In Oregon, contracting businesses involved in restoration projects tend to be small businesses (as defined by the Small Business Administration), family-owned, and subject to large seasonal fluctuations in available work. Differences among businesses in the state appear to be related to customer base—businesses that work for non-federal customers such as watershed councils tend to perform more equipment-based work close to their home, versus businesses working for federal agencies who tend to travel more often and perform more labor-intensive work.^[9] These findings have important implications, as restoration investments are frequently intended to increase economic activity in rural communities affected by decreased logging activity, and these benefits are lost to local economies if contractors from outside of the area capture the contract. In addition, labor-intensive activities (e.g. planting trees, thinning) tend to pay less than traditional logging jobs, be less reliable, and be dominated by immigrant workers.^[10] In equipment-based and technically intensive restoration activities, working conditions are generally thought to be better.^[11]

Although the potential exists for a win-win situation pairing environmental betterment with socioeconomic benefits, the dual-benefits potential from this kind of work is often overlooked or under-emphasized.^[22][23] Like its emergence from policy with aims to provide socioeconomic benefits in concert with natural resource work, a robust and enduring restoration economy depends on policy that continues to prioritize multiple benefits for both human and natural systems, in addition to initiating investments in restoration activities. Indices of performance and knowledge of the traits associated with successful establishment and persistence in restored vegetation are potentially of great benefit to practitioners and policymakers involved in restoration increased land productivity, enhanced groundwater recharge, woody utilisation and carbon offsets.^[24]

• Restoration ecology
• Northwest Forest Plan
• Ecosystem services
• Green economy