Can Conservation Easements Work in a Can Conservation Easements Work in a Marine Setting? An Economic Analysis Marine Setting? An Economic Analysis

under Four Regulatory Regimesunder Four Regulatory Regimes

Robert DeaconDominic Parker

December 3, 2007

Policies to Manage ‘Bycatch’ in Fisheries

How can regulators reduce ‘bycatch’ and other environmentally damaging actions? Bycatch: “the incidental take of a species that has some value to

some other group” (Boyce 1998). “incidental take” can be interpreted broadly to encompass any

incidental, negative impact on non-commercial stocks. Policies

Fishery-wide TAC for prohibited species taxing incidental catch state-imposed time and area closures state-imposed gear restrictions (e.g.

turtle excluder devise) ITQs for incidental catch

Private Efforts

Research Questions

Can NGOs use ‘marine easements’ to achieve a reduction in damaging actions without incurring excessive costs?

How does the effectiveness of marine easements depend on if/how access to comm. harvest is regulated?

‘Marine easements’ voluntary agreements between fishermen and NGOs fishermen retain the right to harvest as regulated by law restricted from certain methods of fishing, or in the time and

location of harvest

Conservation Easements

Agreements between private landowners and conservation NGOs, known as land trusts

Typically conserve ‘open-space’ scenery and wildlife habitat usually prohibit intense development sometimes also restricts certain farming and logging

practices Restrictions in easements “run with the land” Valued as the difference between encumbered and

unencumbered value of the land

Land Trust Acreage in the U.S.(in millions)

0

3

6

9

12

1984 1994 2003

Source: The Land Trust Alliance and The Nature Conservancy

Easements

Owned Outright

1.2

3.5

10.8

Terms in Western Conservation EasementsLand use % of CEs

Prohibiting% of CEs

Permitting% of CEs

Silent on

Billboards

Mineral exploration

79

71

0

26

21

2

Feed lots 64 0 36

Subdivison

Recreational ORVs

Com. timber harvest

Agricultural use

57

36

28

19

43

36

36

79

0

28

36

2

Source: Parker (2003)

Efficiency Advantages of Conservation Easements

In contrast to land-use regulations easements are incentive-based policies that can be

customized – not one-size fits all selects parcels for conservation with consideration of

private land use values In contrast to outright ownership

Land-based commodities (e.g., soil, timber, or minerals) are better managed by a specialized landowner

Depends on transaction costs

Can Marine Easements Work?

Key difference is the absence of property rights to marine habitats

there is not a owner with whom a NGO can negotiate

However, there may effectively be property rights to use the habitat in various ways

we consider four regulatory regimes (i) open access (ii) limited entry (iii) individual transferable quotas (ITQs) (iv) territorial use rights in fishing (TURFs).

Model: Setup

An NGO wishes to affect the long-run, steady-state level of a non-commercial fish stock (X)

Effect of a on X is negative, effect of b could be positive or negative

A commercial stock, Y, is available for harvest by many identical fishermen

Fisherman i’s profit is

The profit maximizing demands for a and b are:

);,( EbaXX TTTI

i iTI

i i bbaa 11and

),;,( EYbaHH iii

),;,,,,,( RYHpvuba iiii

),;,,,( RYHpvuaa ii ),;,,,( RYHpvubb ii

Model: Setup (cont’d)

NGO offers to buy easements to restrict choice of a so that ai ≤ a NGO can observe a but not b so it cannot enforce easements over b A grantor of an easement maximizes πi s.t. ai ≤ a

NGO wants to minimize the costs of achieving --- this is equivalent to

Four regimes for regulating harvest of Y

R=O (Open access), with equilibrium πO R=L (Limited entry), with equilibrium πL

R=Q (ITQs), with equilibrium πQ

R=T (TURFs), with equilibrium πT

X

I

iiii

aRYpvuba

i 1

),;,,,,(max

XEbaXI

ii

I

ii

);,(s.t.11

and s.t. fishermen choices of bi

Model: Open Access

Fishermen maximal profit πO = π* = 0; profit-maximizing choices are aO and bO

Imagine that the NGO tried to hit its target by buying easements that restrict the firm’s use of action a.

An easement granted by an existing firm will have no effect on the

conservation stock in equilibrium. Any reduction in action a would result in losses, causing the firm to exit. Restoring equilibrium requires entry of a new, identical harvester who

employs the same level of a that the exiting firm used before the easement

Model: Limited Entry Figure shows case where both a and b are detrimental to X, all identical fishermen

under easement, NGO achieves target requiring , anticipating a response of Equilibrium easement price is Easement accomplishes long-run increase in X if easement ‘runs with permit’

b

NGO’s stockconstraint

L

L

a

bL

b

=0

X

Laai bbi

Model: ITQs The implications aren’t qualitatively different from Limited Entry if the NGO can place

all identical fishermen under easement However, implications should be different if NGO can only put a subset of fishermen

under easements

b

Q

bQ

b

H=HQ

=0Q

a

X

Model: TURFs Assume habitats of Y and X coincide, stocks do not interact, and are fully contained

spatially by a TURF A firm managing the TURF can choose a and b and thus can determine X If the NGO can observe X, it can pay for performance easements making the fact that

b is unobservable superfluous. Rents are maximized by the easement, and NGO achieves goal at minimum cost

b

T

bT

b

=0T

a

X

Conclusions

In general, our preliminary analysis suggests greater delineation of commercial harvest rights will improve effectiveness of marine easements

Marine easements will achieve nothing under open access Under limited entry and ITQs, easements can improve conservation stock, but

inability to contract over ‘hidden actions’ limits the effectiveness (e.g., raises the costs to NGOs)

Performance easements under TURFs could generate 1st-best outcomes

Future work Constrain NGOs from buying easements from all fishermen in a limited entry and

ITQ fishery and examine implications Allow fishermen to be heterogeneous in costs of harvesting targets or in costs of

avoiding ‘bycatch’ Impose a TAC and season closure on bycatch of ‘conservation stock’