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TRANSCRIPT
Incentives for Biodiversity Conservation:An Ecological and Economic Assessment
DEFENDERS OF WILDLIFEDefenders of Wildlife is a national, nonprofit membership organization dedicated to
the protection of all native animals and plants in their natural communities.
AUTHORSfrank Casey, Director of Conservation economics
sara Vickerman, senior Director of Biodiversity PartnershipsCheryl Hummon, senior Conservation incentives specialist
Bruce Taylor, Director of oregon Biodiversity Program
© 2006 Defenders of Wildlife1130 17th street, nW
Washington, D.C. 20036(202) 682-9400
Cover Photos: Gray Wolf pups, U.s. fish and Wildlife service; farmers, natural resources Conservation service;
forest stream, natural resources Conservation services
Printed on 25% post consumer waste, process chlorine free recycled paper, creating the following environmental benefits: 5.2 trees not cut down; 2,210 gallons of water/waste flow saved; 482 pounds of solid waste not generated, atmospheric emissions eliminated; 3,686,025 BTUs of energy not consumed. Printed with linseed-oil based inks.
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Incentives for Biodiversity Conservation:An Ecological and Economic Assessment
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Executive Summary ................................... 4
I. Introduction ................................................. 7 WhyIncentives?.............................................. 7
AMixofTools................................................ 8
DefiningaMoreSuccessfulApproach........... 10
II. The Importance of Biological Diversity: The Context for Conservation Incentives ............................11 ImportanceofBiologicalDiversity..................11
TheRationaleforIncentivesin
ConservingBiodiversity..................................12
FrameworkforBiodiversity
ConservationandIncentives...........................15
III. Methods for Evaluating Incentive Mechanisms: Taxonomy, Assessment and Recommendations ..............................18 ATaxonomyandDescription
ofIncentiveMechanisms................................18
CriteriaforAssessingEffectiveness
andEfficiencyofIncentiveMechanisms..........20
ImplementingandStructuring
ConservationIncentives..................................23
IV. Regulatory and Economic Disincentives ...............................................24 GovernmentalRegulations..............................24
ConservationCompliance...............................25
FinancialCharges............................................26
V. Legal/Statutory Incentives .......................27 SafeHarborAgreements.................................27
CandidateConservationAgreements
withAssurances...............................................29
RegulatoryRelief...........................................30
VI. Property Rights Innovations .....................�1 ConservationEasements........................ 31 CovenantsandDeedRestrictions........... 35 StewardshipExchangeAgreements......... 36
VII. Market-Oriented Institutions ...................�7 UserFees.........................................................37
Ecotourism....................................................38
EcolabelingandCertification..........................39
MitigationBanking.........................................43
ConservationBanking....................................45
TransferableDevelopmentRights...................46
EcosystemServiceMarkets..............................48VIII. Financial Incentives ...................................49 CompensationPrograms................................49
Insurance.......................................................51
Cost-ShareIncentives......................................52
ConservationStewardshipIncentives..............57
LandandWaterRentalandLeases..................57
ConservationContracts..................................61
DebtForgiveness.............................................61 IX. Public Tax Incentives .................................62 IncomeTaxIncentives.....................................62
PropertyTaxIncentives..................................64
EstateTaxIncentives......................................64
CapitalGainsTaxIncentives...........................65
GeneralAssessmentofTaxIncentives.............65
TaxIncentiveRecommendations....................66
X. Facilitative Incentives ...............................68 EducationandTechnicalAssistance................68
AdministrativeandOrganizational
Structures........................................................69
RecognitionIncentives....................................71
XI. Summary of Findings .................................72 and Recommendations OverallAssessment.........................................72
RecommendationsSummary..........................74
XII. Conclusions .................................................85
XIII. References ...................................................87
Table of Contents
4 | Incentives for Biodiversity Conservation
Thisreportisaneconomicandpolicyassessmentofthebiologi-caleffectivenessandeconomic
efficiencyofincentivemechanismsforprivatelandownerstoconserveU.S.biodiversity.Itsfocusisonrurallandsthattendtobeusedforforestry,agricultureandresidentialpurposes.Itsaudienceisthosework-ingtoamendthe2007FarmBilltoimproveitseffectivenessinconserv-ingnativehabitatandtoenhancethecapacityoftheEndangeredSpeciesActtoencouragevoluntaryactivitiesthatarebeneficialtolistedspecies.Theseincludepolicymakers,re-sourceprofessionalsandlandowners.
Thisreportrepresentsacontinu-ingcommitmentbyDefendersofWildlifetoworkwithlandownersandpolicymakerstodevelopincen-tivesforconservingbiodiversity.De-fenders’compensationfund,aimedatreimbursinglivestockoperatorsforlossescausedbycarnivores,hasalongandsuccessfulhistory.Inaddition,Defenders’staffhasgenerateddiscus-sionsandproposalsforimprovinglandownerincentivemeasures,withinthecontextofregulatoryframeworks
forprotectingendangeredspeciesandhabitats,formorethanadecade.
Muchofthisreportoutlinesmajorincentivemechanismsandassesseskeyincentivetoolsincaseswhereadequateinformationexists.Foreachincentivemechanism,thereisadescription,anassessmentofitsecologicaleffectivenessandeconomicefficiency,andrecommendationsforimprovingitsbiodiversityconserva-tion.Thefollowingtypesofincen-tivesareaddressed:regulatoryandeconomicdisincentives,legalandstatutoryincentives,propertyrightsinnovations,market-orientedinstitu-tions,financialincentives,publictax
incentives,andeducational,technicalassistance,administrativeandrecog-nitionincentives.Unfortunately,theliteratureonconservationincentivescontainsfewsystematicassessmentsofthesemechanismsorprograms,sofurtherresearchisneeded.
Thisreportalsoprovidesseveralgeneralobservationsandrecommen-dationsonincentivemechanisms.First,therearemanypublicandprivateincentivemechanismsandprogramsforbiodiversityconserva-
tionavailable,butthereisnocoordi-natinginstitutiontoguidelandown-ersintheselectionanduseofthesemeasures.Second,thereisnooneincentivemechanismthatmeetsallthecriteriaforbiologicaleffectivenessandeconomicefficiency.Therewillalwaysbetradeoffswhenemployingoneincentivemechanismoveranoth-er,andthesecompromisesneedtoberecognized.Whatmaybemoreusefulisimplementingasystemorprogramof“flexibleincentives,”wherebylandownerscanaccessacombinationofpublicandprivateincentivemea-suresthatbestfittheirecologicalandeconomiccircumstances.Third,itisusefultothinkaboutusingbothanopportunisticandtargetedapproachforapplyingincentivemechanisms,andtotakefulladvantageofcom-biningvariousprivateandpublicapproaches.Fourth,toimprovethefutureeffectivenessandefficiencyofincentivetools,incentiveprogramsneedamorerobustmonitoringandevaluationcomponent.
Incentivesarenecessarytosupple-mentotherconservationtools,suchasregulationandlandacquisition.Itisgenerallyacknowledgedthatalthoughtherearemanypublicandprivateincentiveprogramsdesignedtoencourageconservation,theytendtobeoverlyspecializedandprescrip-tive,fragmentedandunderfunded.Theseprogramsarealsogenerallyconstrainedbythefactthatthepri-marythreatstobiodiversity–habitatloss,degradationandfragmentation–operateacrosspublicandprivateownerships.Existingprogramsare
Executive Summary
“ Incentives are necessary to supplement other conservation tools, such as regulation and land acquisition.”
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alsoimplementedtobenefitthegreatestnumberofconstituents.Targeted,strategicinvestmentsinconservationincentivesaretheexcep-tionratherthantherule.Therecentcompletionofstatewildlifeactionplansbyall50states,andecoregionalassessmentsprovidedbyTheNatureConservancy,canhelpguidemorestrategicinvestmentswithgreaterecologicalbenefits.
Sincelandownerneeds,objec-tives,attitudesandcapacitytoconservebiodiversityvarywidely,programflexibilityisneeded.Public-privatepartnershipsmayprovidethebestapproachtobiodiversityconservation,sincepublicfundingislimited.Theeliminationorrealloca-tionoffundingforprogramsthatcreateperverseincentives,likecropsubsidies,maysavetaxpayerdol-
larsandreduceecologicaldamage.Performance-basedprogramsmayproducebetterresults,buttheywillrequirethedevelopmentofspecificgoalsandanefficientandcost-effec-tivemonitoringsystem,whicharenotcurrentlyinplace.
DefendersofWildlifeandpartnersdevelopedthefollowingsetofcriteriaforevaluatingconserva-tionincentives:Effective programs focus on habitat and multiple species, rather than taking a single species approach. Implementation is strategic, based on clearly defined statewide or regional ecological goals. Program implementation is tracked, biological outcomes are monitored, and adaptive management allows for adjustments to improve achievement of program goals. Effective incentive programs are also administered well. Partnerships and
coordination leverage limited resources, fill gaps and prevent duplication. Adequate funding, research and tech-nical assistance are critical. Programs need to be accessible to landowners, including streamlined paperwork and realistic timelines.
Thereportconcludesthat,al-thoughincentiveswillbeanimpor-tantpartofstrategiestoconservebiodiversityonprivateland,therewillalwaysneedtoberegulationsthatsetaminimumorbaselevelofperformanceforalllandowners.Regulationsshouldpreventecologi-caldamage,whileincentivesmaybemosteffectiveatpromotingrestora-tionandmaintainingintacthabitats.Landownerswhohaveahistoryofgoodstewardshipshouldnotbepe-nalizedbylimitingassistancetothosewhoselandshavebeendamaged.
Stripcropping to prevent soil erosion, Maryland | Natural Resources Conservation Service
6 | Incentives for Biodiversity Conservation
Oneimmediateneedistodecreasethepublicandprivatesectorcostsofaccessingandimplementingincentiveprograms.One-stopshop-pingthatofferslandownersaclearpictureofthefullrangeofoptions,incentives,permitrequirements,fundingsourcesandotherinforma-tioncouldresultinhigherlevelsofparticipationandimprovedadmin-istrativeeffectiveness.Buildingmoreflexibilityintoexistingpro-grams,whileminimizingadditionaltransactioncosts,maybringaboutimprovedeffectiveness.
Anincentivetoolthatdeservesfurtherexplorationisanecosystemservicesmarketplacethatpromotesbiologicalintegrityandeconomicefficiency.Thetoolisbeginningtobe
appliedintherealmofcompensatorymitigation,butthepotentialexistsforbroader,moreintegratedapplicationthatcouldmakeconservationprofit-ableforsavvylandowners.Regardlessofthemechanism,however,incen-tiveswillbemosteffectiveiftheyareimplementedwithinthecontextofspecificbiodiversityconservationgoalsoroutcomesthatallowustomeasureprogressagainstthegoalsandmakeadjustmentsasnecessaryovertime.Developinganefficientsystemtomeasureprogressandtodevelopaperformance-basedsystemwillnotbeeasyorinexpensive,butitshouldbeapartofanoverallconser-vationstrategy.
Althoughtherehasbeenalackofassessmentandcomparisonofincen-
tivemechanismsandprograms,thesemechanisms,overthemanydecadestheyhavebeenusedbyprivateland-owners,havenodoubtcontributedtohelpingconserveat-riskspeciesandtheirhabitats.Indicatorsofthisarethehighparticipationrateofapplicantstoaccesspublicincentiveprogramsandthededicationofmanyfederalandstateagentsinconservingat-riskspecies.Thisreportdoesnotconcludethatpastandcurrentincen-tivemeasureshavebeenineffectiveorinefficientinprotectingbiodiversityinthiscountry,onlythatweimple-mentrecommendedchangesandcontinuemonitoringandevaluationofincentivemeasuresinordertoimprovetheirbiologicaleffectivenessandeconomicefficiency.
Restored wetland, California | Natural Resources Conservation Service
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technicalfoundationforitsworkontheseissues,Defendershiredanatu-ralresourceeconomistin2000,andin2002itcreateditsConservationEconomicsProgramtoapplysocio-economicscienceandprinciplestobiodiversityconservation.Economicanalysisofthebenefitsandcostsofbiodiversityconservationisamajorthrustoftheprogram.BecausethepurposeoftheConservationEconomicsprogramistoinformpolicychoices,theworkisbasedonateamapproachandaugmentedwithassistancefrombiologists,habitatconservationplannersandlegalexpertsfromotherDefendersprograms(forexample,seeGeorge(2002),HummonandCasey(2004)andHummon(2005)).
Thisreportisintendedtosummarizeandsynthesizecurrentthinkingabouttheroleofprivatelandownerincentivesinbiodiversityconservation,whatworks,what
doesn’tworkandhowincentivescouldbeusedmoreeffectively.Althoughthereportassesseskeyincentivemechanismsbasedonanextensiveliteraturereview,thesearchwasnotexhaustive.Nevertheless,anevaluationofexistingincentivemechanismsisparticularlytimelynow.Thebiggestsinglesourceoffundingforconservationincentives,theFarmBill,isupforreautho-rizationin2007,andimprovedconservationincentivesforprivatelandownersfigureprominentlyinthecontinuingdebateonpossiblechangestothefederalEndangeredSpeciesAct.
Why Incentives?Despitehavingperhapsthemostcomprehensivenationallegislationintheworldtoprotectendangeredspeciesandtheirhabitats,theUnitedStatescontinuestosuffersignificantbiodiversityloss.Thefederalagen-
Scope of This Report This report is applied in nature and does not delve into the economic or social theory related to an analysis of incentives.1 It describes current biodiversity conservation incentives mechanisms and programs and how they work, and it suggests improvements. Existing public and private incentive mechanisms are addressed and, to the extent possible, assessed in terms of their biological ef-fectiveness and economic efficiency. The emphasis of this report is on voluntary economic incentives (e.g., finan-cial assistance, market development, tax code changes, etc.) that have the po-tential to influence conservation behavior on private lands. The term “economic incentives” includes institutional arrangements that affect landowner conserva-tion choices. For example, although mitigation banking might be thought of as a private, quasi-market financial transaction, the actual establishment of the bank and its operational rules are institutional innovations (and therefore an incentive) that make private transactions possible. This report addresses both market-based and non-market incentives. The one exception to this is that fee-simple and donation land acquisition programs are not considered, because manage-ment responsibility is transferred from one landowner to another.
I. Introduction
Thisreportisapolicyandeco-nomicassessmentoftheeffec-tivenessofincentivesforprivate
landownerstoconservebiodiversityintheUnitedStates.Thefocusisonexistingincentives,whichtendtobeappliedonrurallandsthatarepri-marilyusedforagriculture,forestryorresidentialpurposes.Theprimaryaudiencesforthisreportarepolicymakers,publicconservationagents,theprivateconservationcommunity,legislativestaffandlandowners.
DefendersofWildlifehasbeeninvolvedinpromotingincentivesforprivatelandownerconserva-tioneffortsformorethanadecade.Someofitsworkhasfocusedonfinancialcompensationandproac-tivecost-sharefundsforlandownersdirectlyaffectedbyreintroductionandrecoveryoflargepredatorssuchaswolvesandgrizzlybears.Startingin1993,Defenders(seeHudson1993)hassponsoredworkshopsandprovidedpolicyguidanceontheuseoflandownerincentivemechanismsandprograms.Defenders’interestinapplyingincentivestobroaderbiodiversityconservationgoalsalsogrewoutofitsexperiencewiththeOregonBiodiversityProjectinthemid-1990s.Thatproject,whichconductedastatewideassessmentofOregon’sbiodiversityconservationneedsandopportunities,highlightedtheneedforconservationeffortsonprivatelandsandledDefenderstoundertakeitsfirstexaminationofincentivesavailabletoprivateland-owners(Vickerman1998).Recog-nizingtheimportanceofastronger
1. For examples of more theoretical approaches to the economic analysis of incentive mechanisms, see Casey et al. (1999).
8 | Incentives for Biodiversity Conservation
cieschargedwithimplementingtheEndangeredSpeciesActarefrag-mented,under-fundedandsubjecttoconsiderablepoliticalpressurebythosewhoperceiveconservationtobeanimpedimenttoeconomicgrowth,pri-vatepropertyrightsand/orwell-being.Theseperceptionshavesloweddowntheprocessofbothlistingspeciesforprotectionandfordefiningthecriticalphysicalhabitatandlandmanagementpracticesrequiredforrecovery.Otherconservationprogramsareunder-fundedorlackclearbiodiversityconservationgoals.
Theneedforprivatelandownerin-centivesaspartofanoverallbiodiversityconservationstrategyhasbeenwidelyacceptedinrecentyears.Theprincipalthreatstobiodiversity–habitatloss,degradationandfragmentation–oper-ateacrosspublicandprivatelands,andweedsandotherinvasivenon-nativespeciesrecognizenoboundaries.Re-sourcemanagementonpubliclandsisclearlyamatterofpublicpolicy.Thereismuchlessconsensusonthedegreetowhichpublicpolicyshouldguidemanagementofprivatelands.Eveniftherewereaconsensusinsupportofa
strongerregulatoryapproach,itisdif-ficulttoenvisionalegalframeworkthatcouldadequatelyaddressthecomplexi-tiesinvolvedindevelopingaprescrip-tionforbiodiversitymanagementonprivatelands.
A Mix of ToolsThisreportproceedsfromtheassump-tionthatincentivesshouldsupplement,notreplace,existingregulationsandlandacquisitionprogramsdesignedtoconservehabitatsandspecies:
•Effectiveregulationscanpreventactivitiesthatcontributetobiodi-versitylosses.
•Landacquisitionprogramscansecurethemostimportantplacesandhelpensuretheirlong-termprotection.
•Economicincentivescanencour-ageandassistlandownersintakingactiontomaintainandenhancebiodiversityvaluesonprivatelands.
Organization of This Report Section II describes the importance of biodiversity conservation and the crucial role that incentives play in achieving this objective on private lands. It discusses the complementary conservation strategy of combining voluntary incentive mecha-nisms with land acquisition and a regulatory approach. Finally, it provides the framework for the successful implementation of incentive measures. Section III presents the methods used to evaluate different incentive mecha-nisms in the subsequent sections. Sections IV through X each deal with one related set of incentive mechanisms. Each section describes the mechanisms, gives a preliminary assessment of biological effectiveness and economic efficiency, and presents recommendations. Both public (federal and state) and private incentive mechanisms are considered. Examples of incentive programs are discussed. Section XI provides a summary of the descriptions, assessments and policy recommendations from Sections IV through X. Section XII presents conclusions about the future structure of conservation incen-tive mechanisms and programs and their application to biodiversity conservation.
Mountain stream, Maryland | Natural Resources Conservation Service
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Creatingreservesonpublicorprivatelandsisunlikelytoconserveadequatelythefullrangeofbiodiver-sity.Althoughpublicreservesprovideimportantconservationbenefits,privatelandssupportnearly67percentofknownpopulationsoffederallylistedendangeredorthreatenedspecies.Itisneitherrealisticnordesirableforgovernmentstoacquireandmanageallofthelandnecessarytoconservethenation’sbiodiversitythroughfee-simplepurchaseorpermanenteasements.Ithasbeenestimatedthatitwouldcostapproximately$488billionover40yearstopurchaseenoughlandtoestablisharepresentativenetworkofbiodiversityareasintheUnitedStates(Shafferetal.2002).Althoughthisexpenditurelevelisequivalentorevenbelowothertypesofsocialinvestments,therearealsopoliticalandpracticalconstraintstosuchalargelandconser-vationprogram.Thus,workingwithprivatelandownersandmanagerstoconservenativespeciesandecosystemsoutsidethetraditionalreserve-basedmodelbecomesimperative.
Manylandsusedprimarilyforhu-manpurposes(includingagriculture,forestry,recreationandurbanuses)cansupportsomeelementsofbiodiversityandhelpsustainecosystemfunctions.Theseincludeextensiverangelandsthatretainnativevegetation,lightlyman-agedforestlands,intactnaturalareaswithinagriculturallandscapes,andevenruralresidentialandsuburbanar-easwithsignificantecologicalelementsretainedorrestored.
Land-useplanningandzoningareimportanttoolsformaintainingnativebiodiversityinselectedplaces.Inten-sivedevelopmentmaybeencouragedinsomeareasinordertosparehabitatsandspeciesinothers.However,increasedland-useintensitycanbeadouble-edgedsword.Forexample,maintenanceofadequatefarmincome
inthefaceofdecliningproductpricescanleadtomoreintensiveuseoffertilizersandchemicalsthatdegradewaterqualityanddamageaquaticecosystems.Similarly,recentlegislationtargetingconservationfundstowardslarge“confinedanimalfeedingopera-tions”todealwithmanuremanage-mentmayactuallysubsidizeexpansionoftheselargeoperationsandleadtoevenmoreenvironmentaldegradation.
Althoughmuchremainstobelearnedaboutecologicalrestorationtechniques,informationisavailabletoguidelandownersinconservingspeciesandtheirhabitats,andrestora-tioneffortsonprivatelandshavebeensuccessfulinmanyareas.However,itremainsdifficultandexpensivetomea-surethecontributionofanindividuallandownertobroaderenvironmental
benefits,especiallythosenotdirectlyobservableoreasilymonitored.With-outmulti-scale,coordinated,strategicmonitoringwithinthecontextoflandscape-scaleconservationplans,itwillbedifficulttodeterminetheeffectivenessofconservationeffortsonindividualsitesoracrossprograms.
Targeted,strategicinvestmentsinconservationincentivesaretheexceptionratherthantherulewithmostexistingincentiveprograms.Politicalconsiderationsoftenreinforcebureaucraticinclinationstospreadresourcesaswidelyaspossible,ratherthantargetinginvestmentstolocationsandactivitiesthatcangeneratethegreatestconservationbenefits.Until
recently,fewbroad-scaleassessmentswereavailabletohelpguideconserva-tionprioritiesingeneralandbiodiver-sityvaluesinparticular.TheNatureConservancy’secoregionalassessmentsandotherstatewideandregionalcon-servationplanningeffortsnowprovideusefulinformationformanyareas.Thestatewildlifeconservationstrategiesthatwerecompletednationwidein2005undertheStateWildlifeGrantsprogramcouldprovidethepublicpolicyfoundationformoreeffectivetargetingofincentivesinthefuture.
Whichtypeofincentiveormixofincentivesaremostappropriatetoad-dressanyparticularconservationneedwillvary,dependingonthetypeofland-useactivity(e.g.,agriculture,for-estry,suburban,etc.),landownershipandthemixofecologicalattributeson
theland.Inareaswherehigh-qualitynaturalhabitatsstillexist,incentivestoencouragecontinuedconservationwillbethemosteffectivemechanism.Thepotentialtorestorenativehabitatsormodifyproductionpracticeswillvarysignificantlybylanduseactivity.Therearealsosignificantdifferencesintheconservationvaluesandpreferredstrat-egiesindifferentpartsofthecountryandamongindividuals.
Programflexibilityisimportantinapplyingandcombiningindividualincentivemechanismsattheland-ownerlevel.Landownersvarywidelyinthephysicalcharacteristicsoftheirlands,theirfinancialneedsandtheirwillingnesstocooperatewithconserva-
“ Land-use planning and zoning are important tools for maintaining native biodiversity in selected places.”
10 | Incentives for Biodiversity Conservation
tionpartners.Disparateconservationprograms,eachwithacomplexsetofincentivesandparticipationrules,arelesseffectiveandefficientthanaflexibleconservationprogramthatoffersseveralincentivemechanismstochoosefromandcombine(BatieandErvin1999).
Especiallyinthecurrentpoliti-calandfiscalclimate,publicfundingforlandownerincentiveprogramsislimited,sopublic-privatepartnershipstappingabroadrangeoffundingsourcesmaybethemostpracticalapproachtobiodiversityconservation.Stateandlocalprogramswillneedtocomplementfederalandprivateincentiveprograms.Some“perverseincentives”likesubsidizedcropsandexportsubsidiescaninadvertentlycausehabitatlossandmayneedtobereducedoreliminatedtosavetaxpayerdollarsandreduceecologicaldamage.
Ifsocietydemandsgreaterefficien-cyintheuseofconservationfunding,theremaybesupportformoreper-formance-basedincentiveprograms.
Publicfinancialassistancetoachievepublicbenefitswouldbebasedontheactualphysicaloutcomesthatlandownersaccomplish:improvedwaterqualityandaquatichabitat,restoredterrestrialwildlifehabitat,lesssoilerosionandotherecologicalbenefits.However,performance-basedsystemswillrequiredefiningspecificgoalsorperformancelevelstobeachieved,developingtheindicatorstomeasureprogresstowardsthosegoals,andimplementinganeffectiveandef-ficientmonitoringsystemtomeasureactualperformance.Thesetasks,whilenecessary,arenottechnicallyeasy–andareexpensive.
Defining a More Successful ApproachDefendersofWildlifehasestablishedinverygeneraltermscriteriaforef-fectivehabitatprograms(Hummon2005).Thesecriteriacanbesum-marizedasfollows:Effective incentive programs focus on habitat and multiple native species, rather than taking a
single species approach. Implementa-tion is strategic, based on clearly defined statewide or regional ecological goals. Program implementation is tracked, biological outcomes are monitored, and adaptive management allows for adjust-ments to improve achievement of pro-gram goals. Effective incentive programs are also administered well. Partnerships and coordination leverage limited resources, fill gaps and prevent duplica-tion. Adequate funding and technical assistance are critical. Programs need to be accessible to landowners, including more efficient application processes and realistic timelines.
Mostconservationincentiveprogramscurrentlyfallfarshortoftheseideals,butourexaminationofexistingincentivessuggestsapowerfulpotentialstillwaitingtobetapped.Wehopethisreportwillhelpbringsomeclaritytothiscomplexissueandprovideaframeworkformorecreativethinkingaboutthewaysincentivescanbeusedtoadvancebiodiversityconservationinthe21stCentury.
Federal conservation agent and farmer, Pennsylvania | Natural Resources Conservation Service
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Thissectionlaysthegroundworkforadiscussionoflandownerincentivemechanismsandpro-
grams.ItdiscusseswhyconservingthebiologicalheritageoftheUnitedStatesisimportant;therationaleforusingacombinedapproachofregu-lation,acquisitionandincentivestoincreaseconservationeffort;andthephysical,institutionalandadminis-trativecontextinwhichstewardshipincentivesarelikelytobesuccess-ful.Thecontextincludesthescaleofconservationeffort,theuseofconservationplanning,flexibilityandadaptivemanagement,andthedesignofincentivemechanismsinrecognitionoflanduseintensities.
Importance of Biological DiversityAnessentialstepindescribingtheimportanceofbiologicaldiversityistofirstdefinewhatbiologicaldiver-sity,orbiodiversity,is.Thedefinitionofbiodiversityusedinthisreportis:“Thevarietyoflivingorganismsconsideredatalllevelsoforganiza-tion,includingthegenetic,speciesandhighertaxonomiclevels,andthevarietyofhabitatsandecosystems,aswellastheprocessesoccurringtherein”(MeffeandCarroll1997).Theinclusionof“ecosystems”inthedefinitionisespeciallyimportant,becauseitiswidelyrecognizedthatecosystemsprovide“services”thatbenefithumans–reflectingamutualinterdependenceoflifeatalllevels.
Biodiversitycanbedescribedatfourinteractivelevels:genetic,species,community/ecosystem
andlandscape/regional(WisconsinDepartmentofNaturalResources1995).Alloftheselevelsofbiodi-versityrequireconservationeffort.Becausetheapproachtowardsbio-diversityconservationinthisreportisappliedinthecontextoflanduse,wedefinebiodiversityconserva-tionasmaintainingnativeplantsandanimalsandthecommunitiesandecosystemsinwhichtheyoccur(Vickerman1998).
Twotypesofvaluesareassociatedwithconservingourbiodiversityheritage.Callicott(undated)hasdescribedthesevaluesasintrinsicandinstrumental.Thevalueofsomethinginandofitself,or,asanendinitself,isintrinsicvalue.Thevalueofsomethingasameanstoanendisinstrumentalorutilitarian,thatis,usefulforachievingsomeanthropocentricgoalsuchasfoodconsumption.
Intrinsicandinstrumentalvaluesarebothimportantreasonstoconserveourbiodiversityheritage.Instrumentalvaluesincludeenhance-mentofappreciationandaestheticenjoymentofnature,supportfortheintegrityofecologicalsystemsandservicesonwhichhumansdepend,theprovisionofresilienceinthefaceofenvironmentalstress,andthesupplyoffood,medicinesandothergoodsfromlivingplantsandani-mals.Speciesandhabitatsalsomakeeconomiccontributionstohumanlivelihoodsthroughtheprovisionofnaturalresources(e.g.,soils,forage,lumber,etc.)aswellasforecosystemservicesincludingfloodcontrol,
waterfiltration,carbonsequestra-tionandpollination,tonamejustafew.TheOrganizationforEconomicCooperationandDevelopment(1999)hasdescribedtheimportanceofbiodiversityininstrumentaltermsasanassetforpresentandfuturegenerations–asabasisforsustainabledevelopment,includingtheprovi-sionoffood,energy,rawmaterials,industrialchemicalsandmedicines,aswellasforimportantsocialandculturalbenefits.
Theliteratureanalyzingandquantifyingthebenefitsofspeciesandhabitat/ecosystemrestorationandprotectionislargeandgrowing.2Forexample,Costanzaetal.(1997)estimatedworldwideecosystemservicebenefitsatabout$16to$54trillionperyear,withanaverageestimateof$33trillionperyear.Otherstudiesrelatetoindividualspeciesorlocalareas.Inastudyofseaotterrecovery,Loomis(2004)es-timatedcombinedpublicandprivatebenefitstotheeconomiesofseveralCaliforniacountiestobeabout$172millionperyear.Usingconservativeestimates,researchbyDefendersofWildlife(2004)ondesignatingcriticalhabitatfortheCanadalynxshowedthatgrossbenefitsrangedfrom$2.5to$19.2millionperyearinlocalcommunitiesandfrom$34to$256millionperyearatthenationallevel.Kroeger(2005)hasestimatedthatecosystemservicebenefitsderivedfromprotectingnaturallandsinfourcountiesofnorthernFloridaamounttoabout$3.2billionperyear.
II. The Importance of Biological Diversity: The Context for Conservation Incentives
2 . An extensive reference list on resource valuation is available at Defenders’ website for conservation economics at www.biodiversitypartners.org/econ/pub.
12 | Incentives for Biodiversity Conservation
The Rationale for Incentives in Conserving BiodiversityTheconservationofintrinsicandutilitarianvaluesassociatedwithbiodiversitywillrequirethecoop-erationofprivatelandowners,withparticipationenhancedthroughincentivemechanisms.Therearethreemajorreasonswhytheroleofprivatelandownersandincentivesareimportant:thelocationoflistedandat-riskspecies,theneedforcon-servationtoolsthatarecomplemen-tarytoregulationandthelackofmarketsforpublicgoodslikespeciesandhabitatconservation.
Listed Species Distribution and Land Ownership and Fragmentation Eighty-fivepercentofthespecieslistedasthreatenedorendangeredbythefederalgovernmentareinthatcondition,atleastinpart,becauseofthelossordegradationofthehabitatstheyneedtosurvive(Wilcoveetal.1998).Althoughthefederalgovernmentownsand/ormanagesmorethan30percentofthenation’slandarea,federallandssupportonlyabout33percentofknownpopulationsofthreatenedandendangeredspecies(Groves
etal.2000).Thus,67percentoftheknownpopulationsofthreat-enedandendangeredspeciesoccureitherinaquatichabitatsoronthe1.485billionacresofnon-federallands.Atthespecieslevel,Hudson(1993)notedthatabout50percentofthespecieslistedasthreatenedorendangered(728)werefoundexclusivelyonprivatelands.
Privateagricultural,forestryandotherrurallandsareanextremelyimportantcomponentofnon-fed-erallands,with92percentusedforprivatecrop,forestryand/orlivestockproduction.In2001,landinagriculturalproductionaccountedforalmost50percentofalllandinthecontiguous48statesandcomprised401millionacresofcropland,522millionacresofpastureandrangelandand405millionacresofforestland.About34millionacresofcroplandarecurrentlyidledbytheU.S.Depart-mentofAgriculture’sConservationReserveProgram.Withsomanythreatenedandendangeredspeciesoccurringsolelyonprivaterurallands,theidentificationofeffectiveandefficientincentivemechanismsandtheimplementationofeffective
landownerconservationincentiveprogramsarecrucial.
Privateagriculturallanduseandmanagementhavecontrib-utedsignificantlytothedeclineofbiodiversityconservationintheUnitedStates.Overtime,habitatlossassociatedwithmodernfarmingmethodsonmorethan400millionacresofcroplandbroughtaboutdramaticreductionsinmanywildlifespeciesinNorthAmerica(WildlifeManagementInstitute1995;Risleyetal.1995).In1995,nearly84percentof663plantandanimalspeciesinhabit-ingthecontiguous48stateswerelistedasthreatenedorendangeredbecauseofagriculturalactivities.Specifically,272species(41per-cent)werelistedexclusivelyduetoagriculturaldevelopment,115(17percent)becauseoffertilizerand/orpesticideuseand171(26percent)duetograzing(Lewand-rowskiandIngram1999).
ThereareincreasingthreatstobiodiversityconservationintheUnitedStates,primarilythroughuncontrolledconversionandfrag-mentationoflandtouses(mostlyurbanization)thathavelittleorno
Common egrets | U.S. Fish and Wildlife Service
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habitatvalue.Overthefive-yearperiodof1992to1997,therewasacombinedlossofnearly20millionacresofrurallands,asrepresentedbydiminishingcropland,grassland,range,pastureandforestedlandcategories.Thoselandsthatarethemostsuitableforthemaintenanceofnativebiodiversityandecosystems(grassland,rangeandforestland)accountedforthree-fourthsofthedecreaseorabout15millionacres.Partofthislosswasoffsetbytheincreaseinspecialrecreationandwildlifeuselands(federalandstateparks,wildernessareasandwildliferefuges)of9millionacres.Nonethe-less,from1992to1997,therewasanetlossofabout11millionacresofrurallands,posingasignificantrisktobiodiversityconservation.Mostofthislossmaybeattributedtoincreasingsprawlandurbaniza-tionandtheconversionoflandtousesthatareunsuitableforsupport-ingspeciesandtheirhabitats.Forexample,between1997and2001,almost9millionacresofrurallandsweredeveloped–46percentofwhichwereforestland,20percentcropland,15percentrangelandand16percentpastureland(NaturalResourcesConservationService2003needreference).Combined,forestlandandrangelandconversionaccountedforabouttwo-thirdsofthegrowthindevelopedlandfrom1997to2001.Thesetrendscontin-uedthrough2003.Animportantconditionforthesuccessfulapplica-tionofincentivemechanismsforbiodiversityconservationwillbetoimplementmoreeffectiveland-useanddevelopmentpolicies.
Complementing Regulation With IncentivesTheEndangeredSpeciesActof1973istheUnitedStates’principalregula-
torymechanismtohaltbiodiversityloss.Thelawprohibitsthetakingofnativeplantsandanimalsthreatenedwithextinctionandprotectstheirhabitats.Oneofitsfundamentaltasksistobringabouttherecoveryofspecies,whichisachievedinmanycasesbytheprotectionandresto-rationofhabitatonprivatelands(GoldsteinandHeintz1993).Inthenameofapublicgood(e.g.,health,safety),certaintypesoflanduseandpracticeshavebeenbanned(Claassenetal.2001).Regulationcanbeaveryeffectivetool,providedthereisenforcement.Unlikepolicychoicesinwhichlandownerpartici-pationmaybeuncertain,regulations
requireparticipation.Themajordis-advantageofregulatoryrequirementsisthattheyhavetheleastamountofflexibility,oftenrequiringlandownerstoadoptspecificpracticesortechnol-ogies.Thisapproachislessefficientthansettingconservationgoalsandperformancestandards,becauseitdoesn’ttargetlow-costproducersofenvironmentalbenefits.3
ConflictsoverlanduseandeconomicactivityhaveoccurredwithimplementationoftheEndangeredSpeciesAct,andrelyingsolelyontheregulatoryapproachmayonlyin-creasetheseconflicts(GoldsteinandHeintz1993).Undertheact,somelandownersfeeltheyarebeingaskedtocarrytheprimaryresponsibility
forendangeredspeciesrecoverywhilethepublicatlargeenjoysthebenefits.Althoughlandownersshareinthebenefitsfromspeciesconservation,theycannotrealizepotentialeco-nomicbenefitsfromdoingsounlessinstitutionalarrangementsarecreatedtodoso(Hudson1993).
Apurelyregulatoryapproachmaymissconservationopportunitiesandcanengenderunnecessaryopposi-tiontospeciesandhabitatprotection(Brown1999).GoldsteinandHeintz(1993)pointout,“Thereisgrowingevidencethattheapproachadoptedintheactismakingtheachievementoftheseconservationgoalsmorecostlyandmorecontroversialthan
needbe.Theactreliesonregulatoryauthorityandcivilpenaltiestopre-ventthedegradationordestructionofthehabitatoflistedspecies,makinglittleifanyuseofpositiveeconomicincentivestoinduceconservation.Sinceregulatoryconstraintscanpreventprivatelandownersfromreal-izingcommercialusesoftheirland,itisnotsurprisingthattheyfrequentlyresisttheimpositionofhabitatconservationmeasuresneededtosupportlistedspecies”(p.51).Withinthecontextoftheact’sregulatoryframework,therearenowvoluntaryinstitutionalincentivesthatprovidelandownerswithalevelofregulatorycertaintyinexchangefortheconser-vationofwildlifehabitatandspecies.4
3. A performance standard sets a benchmark or outcome level and allows those who are required to achieve this outcome to do so in the best, least-cost way they can. One of the challenges for biodiversity or wildlife habitat “outcomes” is the difficulty in defining what a suitable outcome is and developing the indicators to measure those outcomes. These issues are discussed in more detail in Section XI.
“ An important condition for the successful application of incentive mechanisms for biodiversity conservation will be to implement more effective land-use and development policies.”
14 | Incentives for Biodiversity Conservation
Whileeconomicactivitiescanresultinhabitatandspecieslossordegradation,McKinneyetal.(1993)observethat“economicandmarketforcesdonothavetoactcountertoournationalgoalofendangeredspeciespreservation.Theseforcescancomplementtheregulatoryapproachtoconserveandrestoreendangeredspeciesandbiodiversity.Asystemofeco-nomicincentives,bothpositiveandnegative,canbegintotranslatethebroadervaluesofbiologicalconser-vationintoprices.Economicactivi-tiesthatconserveorrestorevaluablehabitatsorspeciescanbeencour-agedthroughlowercostsorhigherreturns....Thosewithvaluablebiologicalresourcesontheirlandcanberewardedforconservationorrestorationeffortsandintegratinghabitatprotectionwithsustainableeconomicactivities....Thereisaneedtotranslatethepublicsocialvalueofconservationintofinancialincentivesforprivatelandownerstoinvestinandmanagelandsforbiodiversity”(p.1).
Inlightoftheconflictaris-ingfromland-useregulation,thecertaintythatpopulationgrowthandeconomicdevelopmentwillexac-erbatethepressuresonspeciesandhabitat,andthegrowingeconomiccostsofspeciespreservation,itseemsusefultodiscussthemeanstouseincentivestopromoteprivateconservationefforts.AccordingtoGoldsteinandHeintz(1993,p.52),“Twoprincipalobjectivesareimpor-tantintheapplicationofincentivestoconservebiodiversity:(1)Induc-ingprivatelandownerstoparticipatevoluntarilyinconservationefforts,and(2)reducingthecostsofspeciesandhabitatconservation.”
Asystemofflexibleincentives,inthecontextofwell-defined
environmentalgoalsorperformancestandards,isthemostpromisingapproach(Caseyetal.1999).Vol-untaryflexibleincentivescanhavethreecomplementaryadvantages:theyreduceresistancetoregulation,theyprovidevaluetolandownersforsupplyingimportantnon-market
socialbenefitsassociatedwithbiodi-versityconservation(Brown1999),andtheyencourageincreasesincon-servationeffort.Therightincentivemechanismscanencouragechangesinland-usepatternsthatachievehabitatobjectivesatlowercost.In-centivesmayalsoinduceinnovationsinhabitatconservationandinthetechniquesemployedinmanaginglandforcommercialusesthatallowsomehabitatobjectivestobemet(GoldsteinandHeintz1993).
Regulation,acquisitionandincentivesarenecessaryin-gredientsinasuccessfulstrategyofbalancingbiologicaleffective-nesswitheconomicefficiencytoconservebiodiversity.SectionIIIprovidessomebasicdescriptionsofregulatoryprogramsthatdefinetheinstitutionalboundarieswithinwhichvoluntaryincentivescanbeeffective.5
Private Lands and Public GoodsFromtheperspectivesofeconomicsandlaw,wildlifespecies,biodiver-sityandecosystemservicesarepub-
“ The right incentive mechanisms can encourage changes in land-use patterns that achieve habitat objectives at lower cost.”
4. These voluntary institutional incentives are Safe Harbor and Candidate Conservation Agreements with Assurances. Both are described and analyzed in Section V. 5. Although critically important for the success of conservation efforts, “perverse” incentives or policies that encourage destruction of wildlife habitat, either directly or indirectly (e.g., logging and mining policies on
federal lands, mortgage deductions, absence of taxes on new infrastructure, etc.), are not treated in this report. Brown (1999) has noted that eliminating perverse subsidies that encourage environmental degradation would have a significantly positive impact on the environment and be fiscally prudent ( p. 480).
licgoods.Publicgoodsaredefinedviatwopredominantcharacteristics:non-exclusivenessandnon-rivalry.Non-exclusivenessistheinabilitytoexcludethosewhobenefitanddonotcontribute,orthosewhoim-posecosts,butdonotpay(Randall1999).Non-rivalrymeansthatthere
arenoadditionalcostsforprovid-ingagoodtoadditionalusersonceaparticularamountofthegoodhasbeenprovided(Randall1999).Classicalexamplesofnon-exclusive-nessandnon-rivalryarethebenefitsprovidedbyanationalarmyandthewarningservicesprovidedbylight-houses.Thenon-rivalryandnon-exclusivenatureofpublicgoodsresultinwhatiscommonlytermed“marketfailure.”Marketfailureexistswhenthereisaninabilityofprivatemarketstoprovidecertaingoods,eitheratallorin“optimallevels”(Pearce1989).Inlegalterms,wildlifespeciesandtheecosystemsinwhichtheyexistarecharacterizedbyres nullis,“aresourceownedbynoone.”Thecombinationofnoownershipandmarketfailureforenvironmentalgoodshasresultedinasituationwhere,exceptforanindividuallandowner’sownprivatevaluation,therearefewperceivedeconomicbenefitsfromrestoringorconservingspeciesandtheirhabitatsthatarecommensuratewithotherlanduses(e.g.,cropagriculture,
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ranching,forestryordevelopment)thathavereadilyavailableprivatemarkets.Thefactthatthesesamepublicgoodsareprovidedfromaphysicalbase(land)thatisprivatelyownedandvaluedforattributesunsupportiveofbiodiversityfurthercomplicatesmatters.
Althoughprivatemarketshavearole,itisnotfeasible,nordesir-able,torelyprimarilyonthemforthepreservationofbiodiversityandspecieshabitat(GoldsteinandHeintz1993).First,biodiversityisapublicgoodthatisintrinsicallyvaluableandrequiresprotection.Second,manycriticalconditionsnecessaryformarketstofunctionproperlycan’talwaysbefulfilledforbiodiversityorecosystemserviceresources.However,thisdoesnotmeanthatprivatemarketincentivemechanismscannotbeselectivelyemployedandstructuredtoachievesustainablebiodiversityconserva-tion.Privatemarketincentivemechanismsforlandownerscanbeusedtoachievebiodiversityprotec-tionortoenhanceecosystemser-vicesthroughreducedcompliancecostsand/ornewprofitopportu-nities(e.g.,ecotourism,ecolabel-ing,tradabledevelopmentrights,etc.).Undersomecircumstances,quasi-privatemarketinstitutionscanbedevelopedforlandownerstocapturesomeeconomicvalueofthepublicconservationbenefitstheyprovide.
Thepublicgoodsofbiodiversityandhabitatconservationmustberecognizedinordertodevelopandapplyincentivemechanisms.Sinceecosystemservicescomprise,forthemostpart,non-marketpublicgoods,itbecomesincumbentuponpolicymakerstoprovideconserva-tionincentivestoprivatelandown-ersto“supply”theseservices.
Framework for Biodiversity Conservation and IncentivesAframeworkoffourcomponentsisessentialtosuccessfullyunderstand-ingtheimportanceofbiodiversityconservationandusingincentivestoachieveconservationgoals:scaleandcontext,conservationplanning,flexibleimplementationandadaptivemanagement,andmultipleconserva-tionstrategiesacrossvariouslanduses(Vickerman1998).Theseareneces-saryconditionsfortheidentificationofappropriateincentivemechanismsandeffectiveandefficientimplemen-tationofincentiveprograms.
Scale and ContextVickerman(1998,p.7)saysthat“Effectivelyconservingbiodiversityrequiresanapproachthatconsidersbothscaleandcontext.Scalereferstobothtimeandspace.…Contextreferstothebioticcompositionofthesurroundingregionandtheactivitiestakingplaceonadjacentlands.”Spatialscaleisimportantbecausetheremaybeaminimumgeographicalareainwhichaspeciesorecosystemcanfunctioneffec-
tively.Thetemporalscaleisequallyimportantbecausesomeecologicalprocessesmayrequirelong-termtimeframesinordertoremainbiologicallyfunctional.Boththetimeandgeographicalscaleandthecontextrequirementsfacilitatewhatecologistsrefertoasthe“threeR’s”formaintainingsustainable,healthyecosystems:representation,resiliencyandredundancy(Shafferetal.2002)
Conservation PlanningBiodiversityconservationplanningaddressestheneedtopreventthelossofnativespeciesandhabitatandtosustaintheconditionsthatallowdi-verseplantandanimalcommunitiestosurviveandthriveovertime.Targetinghabitatsforprotectionandrestorationrequiresthatthesehabitatsfirstbeiden-tified,mappedandprioritized.Severalnationalandstateplanninginitiativestoachievethisobjectivehavebeenimplementedoverthepastfewyears.Forexample,initialplanningeffortshavetakenplaceinFlorida(Coxetal.1994),Oregon(DefendersofWildlife1998)andMassachusetts(Common-wealthofMassachusetts2001).
Cypress bay, Georgia | Natural Resources Conservation Service
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OregonandFloridahaveidenti-fiedlandareas,includingthoseinagriculturalproductionorowner-ship,necessarytomaintainnaturalcommunitytypes.TheFloridaGameandFreshwaterFishCommissionpublishedacomprehensivehabi-tatconservationplanforthestate(Coxetal.1994).Thecommissiondocumentedthatsome4.82millionacresofprivatelands(13percentofthestate’slandarea),muchofitinagriculturalproduction,wouldneedtobekeptintheircurrentnaturalorsemi-naturalconditiontoachievecomprehensiveconservationofthestate’sat-risknativespecies.AsimilarplanningexerciseinOregonidentified25percentofthestate’slandareaasimportantforhabitatconservation(DefendersofWildlife1998).Thislandareaincludestheexistingnetworkofpublicandpri-vatelandsdedicatedtoconservation(e.g.,wildernessareas,parks,refuges,etc.)and42new“ConservationOp-portunityAreas.”Thenewareaswereselectedbyevaluatingtheoveralldistributionandstatusofvegetationtypes,speciesatrisk,aquaticdiver-sityandotherfactors.AsinFlorida,
theOregonprojectfoundthatselectedprivatelandswillbeessentialtoachievingcomprehensiveconser-vationgoals.Morethan31percentofthelandinOregon’sConserva-tionOpportunityAreasisinprivateownership,muchofitinsomeformofagriculturalproduction.
Federalfundingforstate-basedwildlifeconservationplans(nowreferredtoinmanystatesasstatewildlifeactionplans)wasauthorizedthroughTitleVIIIofthe2001Inte-riorAppropriationsActandTitleIXofthe2001Commerce,JusticeandStateAppropriationsAct.Thean-nuallyappropriatedStateandTribalWildlifeGrantsprogramisdesignedtoassiststatesandtribesinconserv-ingwildlifespeciesnotcoveredbyhuntingandfishingfeesorbyen-dangeredspeciesappropriations.Inordertoreceivefunding,eachstatewasrequiredtodevelopacompre-hensivewildlifeconservationplanbyOctober2005.Theobjectiveoftheseplansistoidentifyandaddressthebroadrangeofstatewildlifeandassociatedhabitatsinacomprehen-sivefashion.Specialemphasisisplacedon“speciesofgreatestconser-
vationneed”topreventtheneedforfurtherlistingsundertheEndan-geredSpeciesAct(TheBiodiversityPartnership2005).Allstateshavenowcompletedtheirwildlifeactionplans,whichcanserveasastrategicframeworkforconservationprojectsandinvestmentsthroughouteachstate.AllstateplanswerereviewedbyDefenders’staff(Lerneret.al.2006)andfoundtobegenerallyadequate(withafewexcellentex-amples),butfurtherworkisneededintheareasofsettingconcervationgoals,producingfocalareamaps,prioritizingconservationactions,agencyandpolicycoordination,anddevelopingmonitoringsystems.
Underconditionsofscarcepublicresources,planningbecomesessentialinordertoefficientlytargetthosespeciesandhabitatsthatneedtobeconserved.Furthermore,planningthatappropriatelyconsidersscaleandcontextcanbenefitlandownersinavarietyofways.Justknowingwhereconservationneedstotakeplaceprovidesaninformationalbenefittolandownersandlendssomecertaintytotheirland-usedecisions(Vicker-man1998).Therearepotentially
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significantcostsavingsindesigningincentivemechanismsandprogramstoprotectorenhancehabitatsiftheytargetlandsbasedonidentifiedneedforprotection.Theabilitytotargetvaluablehabitatareasforprotectionrequiresthatconservationprogramsbeflexibleenoughtoaccountfordifferentspecies,habitatsandactivi-tiesindifferentpartsofthecountry(LewandrowskiandIngram1999).Theconservationareasorhabitatsidentifiedinthestatewildlifeactionplanscanserveastheexplicitgoalstowhichincentivescanbetargeted.
Insummary,conservationplan-ningcanincreasethebiologicaleffectivenessandeconomiceffi-ciencyofpublicandprivatefinancialresourcesandincentivemechanisms.Onecounter-balancingissueisthatplanningexercisescanalsoaddtothecostsforprivatelandowners.Inthepublicrealm,planningandtargetingmayresultinchangesinthedistributionofincentivebenefitsandwillthusraisesocialequityissues.ThisisespeciallyaconcernforU.S.DepartmentofAgricultureFarmBillconservationincentiveprogramsthatarevoluntaryinnatureandwheresubstantialfundingisallocatedmoreorlessevenlyacrossthestates.
Flexibility and Adaptive ManagementTheconditionofindividualspecies,andthehabitatsandecosystemsofwhichtheyareapart,aredynamicandstochasticinnature.Forbiodi-versityconservationtobesuccess-ful,thechallengeistoimplementflexibleanddynamicmanagementapproachesthatintegrateconserva-tiongoalsthrougheconomicandsocialinterests(Vickerman1998).Itisthereforeimportantthathabitatrestorationandconservationplans,andtheincentivemechanismsto
achieveplanobjectives,haveadegreeofflexibilityinordertorespondtounforeseenphysical,economicorlegaleventsthatcouldharmconser-vationefforts.Theprocessofadaptivemanagementisonemeanstodealwithdynamicenvironmentalchangesandtheuncertaintiesthatspeciesandtheirhabitatsaresubjecttoovertime.BrunnerandClark(1997)defineadaptivemanagementasapractice-basedapproachbywhichactionsareimplemented,monitoredandrefinedasnewinformationbecomesavail-able.Theprincipleofadaptiveman-agementrecognizestheimportanceofincorporatingnewinformation,thatourknowledgeabouthowecosystemsfunctionisincomplete,andthatwemustmonitoractionstodeterminewhetherconservationgoalsarebeingmet(Vickerman1998).
Itisnotonlyimportanttohaveagencyflexibilityintheimplementa-tionofconservationandrestorationplans,itisalsonecessarythatland-ownershaveflexibilitywithrespecttothetypesofincentivemeasurestheycanaccessandmanagementpracticestheyemployinmeetingthegoalsofconservationplans.Becauselandisusedinvaryingdegreesofintensity,thereisneedforavarietyofincentivestopromotehabitatprotectionandrestorationeitherpermanentlyoraspartofthework-ingagriculturallandscape.Aflexibleapproachtoincentivesrecognizesthatthesocialandeconomicfactorsthatinfluencehabitat-conserva-tiondecisionsarenotthesameforallproducers,orinallpartsofthecountry.Rather,anarrayofpublicandprivateincentivemechanismsisrequiredtoprovidealevelofflexibil-itywithinwhichmanyindividualsmayfindacombinationoffeaturesthatsuitthephysicalandeconomicconditionsoftheiroperation.With
respecttoconservationmanagementpractices,landownersneedflexibilitytodesign,testandimplementnewagro-environmentaltechnologiesandmanagementpracticesthatareap-propriatetolocalenvironmentalandeconomicconditions.
Incentives and Multiple Land-Use CategoriesTheincentivemechanismsdiscussedinmoredetailinthefollowingsec-tionscanbeselectivelyappliedviaathree-partstrategycorrespondingtoland-useintensityandalternativeproductionsystems.
First,someprivatelandsmayberelativelyuntouchedandstillmain-tainalargeportionofnativebiodi-versityandecosystemfunctions.Ac-cordingly,oneconservationstrategywouldselectincentivemechanismstomaintainintactremnanthabitatssuchasconservationeasementsorlong-termstewardshipagreements.
Second,theintensityofuseonotherprivatelandsmaybefairlylowovertime,allowingforthepossibilityofrestoringsomespeciesandeco-systems.Thistypeoflandscapemayrequirecost-shareincentivemecha-nismsforrestorationandsometypeofpermanentprotectiontofollowup.
Lastly,privatelandsmayhavebeensubstantiallymodifiedtosup-portthecurrentproductionsystem.Thus,athirdstrategywouldfocusonminimizingproductionimpactsonnativespeciesandhabitats.Eachofthesestrategieswillnecessitateadif-ferentmixofincentivemechanismsrequiringabalancebetweenlandconservationprogramsandincentivesforalternativeproductionpractices.Themosteffectivemixofincentivemeasureswilldependonthetypesoflanduseandownershippatternsandtheviabilityoftheeconomicenter-prisespracticed(Vickerman1998).
18 | Incentives for Biodiversity Conservation
Thissectionpresentsthemethodsusedinevaluatingindividualincentivemechanisms.First,we
developedataxonomyofconserva-tionincentivestoserveasaframe-workfordescribingandassessingindividualincentivemechanismsinalogicalandcomprehensivemanner.Thetaxonomyisstructuredwithasocio-economicperspective,becauseitprovidesacomprehensiveapproachtoexaminingchoicebehavior.Thetaxonomydevelopedinthissectionservesastheorganizingtoolforthemorein-depthassessmentofindi-vidualincentivecategoriesinSectionsIVthroughX.Afterpresentingthetaxonomyofincentivemechanisms,welayoutsomegeneralcriteriaforassessingandprovidingrecommenda-tionsforthevariousincentivesinthesectionsthatfollow.
A Taxonomy and Description of Incentive MechanismsAnincentivemechanismisdefinedasanytypeofinstrumentthatisdesignedtoencourageachangeinbehavior.Inthiscase,itisbehavior(inducedorvoluntary)thatisassoci-atedwithbiodiversityconservation.Incentivesprovideaseriesofeconom-icmessagestoprivatelandownersthatconveythevalueofthebiologicalhabitattheymayown(McKinneyet.al1993).Therightcombinationofregulatoryprohibitionsandincentivescouldmoreeffectivelyguideprivatelandownerstomakesociallyben-eficialdecisionsaboutthewaytheyusetheirlandstosupporthabitatforendangeredandimperiledspecies.
Abroaderdefinitionofincentiveusedforthepurposesthisreportisanypolicy,program,institutionoreconomicinstrumentthatmotivateslandownerstoconserveand/orrestorenativespeciesandhabitat/ecosystemfunctionsontheirland.Behaviormaybeinducedthroughregulatory“disincentives”thatdiscourageharmtoat-riskspeciesandtheirhabitatsandthroughtheimpositionofsometypeofpenaltyfordoingso.Land-ownersmayalsochoosetovolun-tarilyparticipateinpublicorprivateeconomicincentiveprogramsthatsupportconservationandrestoration
activities.Bothtypesofincentivesarerequiredtoeffectivelypreventat-riskspeciesfrombecomingextinctandtoensuretheirrecovery(BatieandErvin1999;Segerson1999;SwintonandCasey1999).
Thereisawidearrayofvolun-taryincentivemechanismscurrentlyinusetoachieve,eitherdirectlyorindirectly,biodiversityconservationonprivatelands.Althoughthissec-tiondescribesindividualincentivemechanisms,manyconservationprogramsemployseveralincentivemeasuressimultaneouslytoattainconservationgoals.Forexample,
III. Methods For Evaluating Incentive Mechanisms: Taxonomy, Assessment and Recommendations
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easementprogramsincludethreetypesofincentivemechanisms:thecreationorredistributionofapropertyright(legalinnovation)thatdefinesaneasement,theactualfinancialpaymentassociatedwithaneasementcontract,andfrequentlysometypeofpublictaxadvantageincreatingtheeasement.Becauseeachofthesemechanismsmayhavedif-ferentimplementationrequirementsanddistributionalconsequences,theyareconsideredseparately.
Anincentivestaxonomytocon-servewildlifehabitatcanbedefinedbyanynumberofcategories.Incen-tivemeasuresrangefromregulatoryapproachesandenvironmentaltaxestovoluntarymechanismsthatincludetechnicalassistance,publicsubsidyorcost-shareprograms,orprivate-mar-ketapproaches.
Claassenetal.(2001)describeavarietyofincentivestoencouragecon-servationbehaviorthatareavailabletopolicymakers.Thesearebroadlycategorizedasinformationdissemina-tiontools,economicincentivesandregulatoryrequirements.Importantdifferencesamongthesecategoriesaredefinedbythedegreetowhichlandownerparticipationisvoluntary,theroleofgovernmentandthenatureoftheland-managementdecisiontargeted.Apolicycanbedesignedtoinfluencelandownerchoicesabouthowmuchandwhichlandtofarmforeconomicpurposes.Or,itcantargetdecisionsabouthowthelandisman-agedusingconservationpractices.
Incentive-basedpoliciescanpro-videpositiveinducementsdesignedtoencouragebeneficialactivitiesforspeciesandtheirhabitatsornega-tiveinducements(e.g.,taxes,fees,etc.)designedtodiscourageactivitiesharmfultospeciesortheirhabitats.Positiveincentivescomeintheformoflandownerpayments,risk
reductionorthecreationofprivatemarketopportunities.
HeimlichandClaassen(1998)de-fineataxonomyofincentivemecha-nismsconsistingoffourcategories:involuntaryregulatorydisincentives;voluntary,non-regulatoryeconomicincentives;institutionalinnovationsthatprovidethemarket,legalandplanningauthoritiestoenhanceresourceconservation;andfacilitativeincentivesthateasetheimplementa-tionofeconomicincentivesand/ornewinstitutions(e.g.,administrativecoordination,educationalprograms,technicalassistance,etc.).
Brown(1999)utilizesanexpand-edtaxonomyofincentive“tools”thatiscomprisedofsixcategories:propertyrightstools,taxpolicies,incentive-basedtools,private-publicpartnerships,governmentprogramsandvoluntaryinitiatives.Property
rightstoolsrefertoconservationeasements,covenants,deedrestric-tions,conservationagreements,andlandexchangesandtrusts.Taxpoliciesincludeproperty,incomeandestatetaxallowances.Incentive-basedtoolsareinclusiveofalltypesof“market”mechanismstoallowlandownerstocapturethebenefitsofprovidingapublicenvironmen-talgood.Thesemechanismsarerepresentedbyuserfees,ecolabeling,greeninvestmentsandenvironmen-talcontracts.Notalloftheseareaimedattheindividuallandowner,
however.Public-privatepartnershipscoverinstitutionalarrangementslikesafeharboragreements.Market-ori-entedtoolsincludetradabledevelop-mentrights,mitigationbankingandconservationbanking.
Finally,BatieandErvin(1999)havedevelopedatypologyofflexibleincentivesthatdefinescategoriesofbothvoluntaryincentivesandeconomicdisincentives.Flexibleincentivesaredefinedasenviron-mentalmanagementtoolsthatspecifyobjectivesbutdonotdictatehowtheenvironmentalobjectiveistobeachieved.Inorderforflexibleincentivestobeeffective,aperfor-mancestandardoroutcome(forexample,achievingaspecificlevelofwaterqualityorhabitatorspeciesrestoration)needstobedefined.Aperformancestandardspecifieswhat needstobeaccomplished,butnot
theexactmeans(technologiesormanagementpractices)tobeutilizedinattainingthestandard.TheBa-tie/Ervintypologyusesthefollowingclassificationofincentives/disincen-tives:charges/financialpenalties(effluent,ambient,inputorhabi-tat/speciesmodification),subsidies,educationalandtechnicalassistance,compliancerewards,depositrefunds,marketablepermits,ecolabeling,performancebonds,contractsandassignedliability.Subsidiesincludetaxallowances,costsharing,lowinterestloansandgrants.
“ Positive incentives come in the form of landowner payments, risk reduction or the creation of private market opportunities.”
2 0 | Incentives for Biodiversity Conservation
Thetaxonomydevelopedinthisreportoffersanewperspectivebutalsodrawsonsomeelementsoftheapproachesdescribedabove.Theprimarydifferenceisthatourbroaddefinitionofinstitutional incen-tivemechanismscoversmarketandnon-marketinstitutionalinnovations.Wealsoincludebothpublicandprivateincentivemechanisms.Publicincentivesarecomprisedofregulatoryandeconomicdisincentives,institu-tionalinnovations,financialpayments(includingtaxallowances),educationandtechnicalassistance,administra-tiveandorganizationalstructures,and
recognitionprograms.Forthepur-posesofthisreport,taxallowancesaretreatedasafinancialincentive,eventhoughtheyarefrequentlyapplicableonlytospecifictypesofeasements.6Privatemarketincentivesoverlapwithpublicincentivesandincludeeasements,userfees,ecotourism,ecolabeling,habitatpermittrading,andcompensation,insuranceandrecognitionprograms.
Themajorcategoriesofvoluntarystewardshipincentivesincludeinsti-tutionalinnovations,financialpay-ments,facilitativeincentivesrelatedtoeducation,technicalassistance,conservationprogramadministrationandlandownerrecognitionprograms.Withtheexceptionofsomeinstitu-tionalinnovations,taxincentivesandselectedkindsoffinancialinstru-
ments,theseincentivesaregenerallyavailablethroughboththepublicandprivatesectors.Someconservationincentiveprogramsdiscouragetheuseofenvironmentallysensitivelandinproduction.Otherprogramsfocusonfinancialassistancetochangeproduc-tionpracticesorrestorehabitats.Educationandtechnicalassistancehelplandownersimproveenviron-mentalperformance,withorwithoutfinancialincentives.Tobeeligiblefortheseandotherconservationprogrampayments,however,landownersintheagriculturalsectormustfrequentlymeetminimumstandardssetout
throughthecompliancemeasurespreviouslydescribed.Mostoftheseincentivesareavailabletointerestedlandownerswhomeetminimumstandardsratherthanbeingtargetedtothehighestconservationpriorities.
Eachofthemajorincentivecatego-riesisdiscussedinthesectionsthatfol-low(seeTable1,p.21forasummary).RegulatoryandeconomicdisincentivesarecoveredinSectionIV.Institutionalinnovations,propertyrightsandmar-ket-orientedinstitutionsareassessedinSectionsV,VIandVII,respectively.FinancialincentivesarediscussedinSectionVIII,andsectionIXcoverstaxincentives.SectionXisdedicatedto“facilitativeincentives,”whichincludesthetopicsofeducation,information,technicalassistance,administrativereformandrecognitionprograms.
Criteria for Assessing the Effectiveness and Efficiency of Incentive Mechanisms Thissectiondiscussestwomaincriteriaforevaluatingincentivemechanismsinthesectionsthatfollow:biologicaleffectivenessandeconomicefficiency.7Thisisan“initial”assessmentinthesensethatecologicalmonitoringandevalua-tioninformationforassessingmostincentivemechanismsdoesnotexist.Thisisclearlyagapinourknowl-edgethatneedstoberemedied.AsWilcoveandLee(2004)haveobservedinthespecificcaseofsafeharboragreements,amajorcon-strainttoafullassessmentisthelackofadatabaseonendangeredspeciesmanagementactionsandassociatedincentivetypes.
Withrespecttobiologicalgoals,thereareseveralcriteriathatdeter-minewhetherornotaparticularincentivemechanismiseffective.Firstandforemostiswhetheranincentivemechanismhascontributedtothelong-term,sustainableconservationofwildlifeorhabitat.Thesecondcriterioniswhetherthemechanismistargetedtoindividualspeciesormorebroadlytoprotectpriorityhabitats.Bothspeciesandhabitatapproacheshavearoletoplay.Thethirdcrite-rionistheextenttowhichincentivemechanismstargetlargeorsmalllandowners,andlandsinagricul-turalproductionorintactnaturalareas.Dependingonthespeciesorhabitatstobeconserved,flexibilityrequiresthatbothtypesoflandown-ersbeeligibleforincentives.Afourthcriterioniswhetherornotthereisahabitatorbiodiversitymanagementplanthatstipulatesconservationgoalsandguideslandownerconservationdecisions.Fifth,biologicaleffective-nessisalsodeterminedbythecapac-ityoftechnicalassistancetodeliver
6. Deposit refunds, assigned liability and performance bonds incentives have not yet been developed or utilized for the conservation of wildlife habitat or species and are not included in this report. 7. Equity, or the way that costs and benefits associated with particular incentive measures are distributed among affected groups, is extremely important from a public policy perspective. Relevant conditions include
whether incentives are targeted or open to all landowners and whether they should be delivered to primarily small or large landholders. Although some examples of equity impacts are illustrated in this section, a lack of prior analysis prevents us from fully investigating the equity dimension in this report.
“ ...to ensure that an incentive mechanism continues to be biologically effective, there must be outcome- or performance-based evaluation and adaptive management systems in place.”
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Table 1. A Taxonomy of Conservation Incentive Mechanisms
Type of Incentive Public Private Section in Report
Regulatory & Economic Disincentives IV
GovernmentRegulation X
ConservationCompliance X X
FinancialCharge/Penalty X X
Voluntary Incentives
Institutional Innovation V
Legal/Statutory X
SafeHarbor X
CandidateAgreements X
RegulatoryRelief X
Property Rights VI
ConservationEasements X X
CovenantandDeedRestrictions X
StewardshipExchangeAgreements X
Market Oriented Institutions VII
UserFees X
Eco-Tourism X X
EcolabelingandCertification X
MitigationBanking X X
ConservationBanking X X
TradableDevelopmentRights X X
Financial Incentives VIII
CompensationPrograms X X
Cost-shareIncentives X X
LandandWaterLeases X X
ConservationContracts X
DebtForgiveness X
Insurance X X
Public Tax Incentives IX
IncomeTaxIncentives
PropertyTaxIncentives
EstateTaxIncentives
Facilitative Incentives
Education,InformationandTechnicalAssistance
X X X
AdministrationandOrganization X X
Recognition X X X
incentiveprogramsandoutreachtolandowners.Last,toensurethatanincentivemechanismcontinuestobebiologicallyeffective,theremustbeoutcome-orperformance-basedevalu-ationandadaptivemanagementsys-temsinplace.Furthermore,biological(technical)indicatorsonwhichtobaseaperformance-basedincentivesystemmustbedefinedandmeasured.
Broadlyspeaking,thecriteriaforeconomicefficiencyincludecost-ef-fectivenessandtheleveloftransac-tioncosts.Costeffectivenessreferstotheattainmentofthegreatestecologicalbenefit(biologicaleffec-tiveness)attheleastcost.Transac-tioncostsoccurattwolevels.Theyoccurattheindividuallandownerlevelforinformationsearchandaccessing,implementing,orevaluat-ingincentivemechanisms.Atthepublicorprogramlevel,transac-tioncostscomprisetheexpensestoadministeraparticularincentivemechanism.Theconditionsthataffectwhetheranincentivemecha-nismisefficientincludethecostofmanagementpractices,thecostofdeliveryofincentivemechanismstolandowners,thedegreeofcoor-dinationamongincentives,howincentivetoolsarefinancedandwhatsecondaryeconomicimpactsstewardshipincentivesmayresultin.Fromthestandpointofefficien-cy,economicincentivesmayallowlandownersgreaterflexibilitythanregulatoryapproaches,aslongasconservationgoalsareclearlystated.Landownerscanweighthecostsandbenefitsofparticularincentivemechanismsinachievingatargetconservationgoalorotherfinancialgoals.Whetheraspecificincen-tivemechanismisefficientwillalsodependontheagro-environmentalsettinganddetailsofprogramde-sign(Claassenetal.2001).
22 | Incentives for Biodiversity Conservation
Therewillalwaysbetradeoffsbe-tweenattemptingtosimultaneouslymaximizebiologicaleffectivenessandeconomicefficiency.Forexample,conservationsubsidieslikecost-shareagreementsmayencouragelandown-erstoexpandproductionintoareasawayfromcriticalhabitatforonespeciesbutmayresultinthreatstootherspeciesinexpansionareas.Conservationeasementsencouragelandownerstoreduceproductionarea,whichmayonlybepossibleforlargelandowners.
Despitetradeoffs,therearesomegeneralcharacteristicsofincentivemechanismsthatwillfacilitatethejointachievementofeffectivenessandefficiency.Onecharacteristicisthatanincentivemechanismshouldprovidegreaterrewardstolandownerswhoconservemoreorhigherqualityhabitat.Inother
words,incentivesshouldbegearedtorewardbetterperformance.Second,anincentivemechanismshouldbecontinuousandresponsive(i.e.,flexible)tothequantityandqualityofhabitatovertime.Third,incen-tivemechanismsforagivenecologi-calareaandlandownershippatternshouldencourageactivitiesthatwillreducethetotalcostofprovidingthehabitatneededtosupportviablepopulations.Lastly,incentivemecha-nismsthatprovidelandownersnewtechniquestoprovidehighqualityhabitatatlesscostshouldbepro-moted.Toachievetheseobjectives,thereisaneedforon-goingresearchandadaptivemanagement.
OtherconditionsforachievingconservationeffectivenessthroughincentivemechanismshavebeenidentifiedbyWilcoveandLee(2004,p.644).“First,thehabitatrequire-
mentsofspeciestobeprotectedmustbereasonablywellknown;second,thehabitatitselfmustberestor-ablewithoutexcessivecostofeffort;third,thehabitatmustberestorablerelativelyquickly.”Thislastcondi-tionisparticularlyrelevanttosafeharborincentivesbecausealthoughtheparticipatinglandownerisnotobligatedtoprotectrestoredhabi-tatpermanently,theU.S.FishandWildlifeServicemustbesatisfiedthattemporaryprotectionwillresultinanetbenefittothespecies(Wil-coveandLee2004).
Themostfrequentevaluationcriteriathatareemployedbyboththepublicandprivatesectorstoindirectlydeterminetheeffectivenessorefficiencyofincentivemechanismsarelandownerparticipationratesandagencyallocationoffunding.Thesedataincludethenumberofpartici-
Federal conservation agent and rancher, Hawaii | Natural Resources Conservation Service
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pantsoracresinvariousconservationprogramsandthesurplusdemandforaparticularconservationprogramasmeasuredbythebacklogofquali-fiedapplicationsthatexceedavail-ablefunding.However,actualandpotentialprogramparticipationmayhavelesstodowitheffectivenessandefficiencyofaparticularincentivemechanismandmoretodowithfi-nancialorenvironmentalcompliancerequirementsofindividuallandown-ers,oreffectivenessofoutreachortechnicalassistance.
Publicincentivemechanismsforwildlifeorhabitatrestorationandconservationarenumerousandhavebeendescribedinpreviousdocu-mentspreparedbyDefendersofWildlife.8Nearlyallfinancial(cost-share,landrentals,taxbenefits)andeducational/technicalassistanceincentivesforecosystemrestora-tionareofferedbystateandfederalagencies.Mostoftheseprogramsarenotdirectlyaimedatbiodiver-sityconservationbutcananddohavepositiveimpactsonhabitatsinparticularecosystems.
Thereishardlyanyresearchavailablethatassessestheeffective-nessorefficiencydimensionsofpublicorprivateconservationincen-tivemechanisms.Forexample,atthepubliclevel,mostoftheassessmentworkthatexistshasbeendonefortheU.S.DepartmentofAgriculture’sConservationReserveandWet-landReserveprograms.9However,asstatedearlier,successhasbeenmostlydefinedbythenumberofacresandlandownersenrolledinaspecificconservationprogramandthetypeandnumberofmanage-mentpracticesbeingimplemented.Therehavethusfarbeennodirectmeasuresofbiologicalperformancewithrespecttospecificincentivemechanismsorprograms.
Implementing and Structuring Conservation IncentivesThissectionprovidesgeneralstruc-turalrecommendationsthatwillfacilitatetheachievementofthecriteriadiscussedabove.Recom-mendationsareprovidedattwolevels.Weprovidespecificrecom-mendationswithrespecttoim-provingthetechnicaleffectivenessandeconomicefficiencyofselectedindividualincentivemechanisms. Thesecondlevelismoregeneralanddefinesthestructuralorpro-grammatic conditionsunderwhichspecificincentivemechanismscanbemoreeffective.
Structuralprogram conditionsforsuccessarebroaderinnature
andrefertothedeliveryapparatusandstructureofaparticularincen-tive,orpackageofincentives.Thesestructuralprogramconditionsincludegoalsetting,planningandtargetingtoprioritybiodiversityandwildlifehabitats,technicalandadministrativecapacity,scaleoflandownership,incentivefund-inglevels,meetinggeographicandtemporalrequirements,incentivepolicyconsistency,andmonitoringandevaluation.10ThesestructuralrecommendationsarediscussedinSectionXI.
Therecommendationsprovidedhereapplytothreehabi-tatconservationapproachesthatcombinelanduseandconservationpotential:protectingremainingintactnativewildlifehabitats;restoringandconservingnativehabitatsalteredbypastorcurrentlanduse;andimprovingwildlifehabitat,waterqualityandsoilqualityonlandsthatremaininproduction.
Thefirstpermanentlyconservesintactnativehabitatsonprivatelands.Thesecondrestoresandthenprotectsnativehabitats.Thethirdremediestheadverseimpactsonwildlifeandtheirhabitatfromproductionpracticesandencour-agesmoresustainableconservation
ofwildlife,waterandsoilresourcesonlandsthatremaininproduc-tion.Thethirdapproachrecog-nizesthattherearelandusesandmanagementstrategiesthatcancontributetotheconservationofbiodiversity,achievingwaterqual-itystandardsandmaintaininglowratesofsoilerosion.
Thethreeapproachesarecomplementaryandimplicitlyrequirethatamenuofconserva-tionmanagementpracticesandeconomicincentivesbeavailabletolandowners.
“ There is hardly any research available that assesses the effectiveness or efficiency dimensions of public or private conservation incentive mechanisms.”
8. Two recent reports that describe in detail federal and state incentive mechanisms are Status and Trends in Federal Resource Conservation Programs: 1996-2001. (Hummon and Casey 2004) and Conservation in America: State Government Incentives for Habitat Conservation (George 2002). Both reports can be found at Defenders’ website at www.biodiversitypartners.org.
9. See Heard et al. (2000) and Haufler (2005). 10. The programatic recommendations in this section are based on Casey, Boody, and Cox (2004) , and C. Hummon (2005). Both references are available at www.biodiversitypartners.org/incentives/workshop.shtml.
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Regulatoryandeconomicdisincentivesarelaws,policiesandeconomicinstruments
thatdefinerequiredenvironmentalperformancestandardsandprescribetheformofeconomicpenaltyfornon-compliance.Regulatorypolicyhasalsooftenprescribedspecifictech-nologiestoaccomplishconservationgoals.Itisbelievedthatthepres-enceandenforcementofregulatorystandardsandpenaltiesarewhatdrivelandownerstocomplywithenviron-mentallawsthroughparticipationinincentiveprograms.Thissectionwillprovideadescriptionofeachregulatorymechanismfollowedbyanassessmentandrecommendations.
Developingvoluntaryincentivesforbiodiversityorhabitatconserva-tiondoesnotmeanaretreatfromnationallawstopreventspeciesextinction.Resultsofpublicopinionpollsindicatethatamajorityofcitizenspreferexistingorhigherstandardsforendangeredspeciesandotherwildlifeprotection(BatieandErvin1999).Furthermore,incen-tivesmustoperatewithinaregula-toryframework“toensurethataminimumhabitatismaintained,contractsareenforcedandpromisesarekept”(Brown1999,p.464).
Therearethreegeneraltypesofpolicyinstrumentsthatconstitutedisincentivemechanisms:govern-
mentalregulation,conservationcomplianceandfinancialcharges.
Governmental RegulationTheprimarypurposeofenviron-mentalregulationsistoprotectpublicgoodssuchascleanair,cleanwaterandourbiodiversityheri-tage.Governmentalregulationstoconserveand/orrestoreindividualspeciesandtheirhabitatsarebothdirectandindirectinnatureandareconceivedandenforcedatthefederal,stateandlocallevels.Thepreeminentformofgovernmentreg-ulationwithrespecttobiodiversityandhabitatconservationisthefed-eralEndangeredSpeciesAct,which
IV. Regulatory and Economic Disincentives
Stream restoration project, California | Natural Resources Conservation Service
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prohibitsany“take”ofaspeciesthathasbeenlistedasthreatenedorendangered.Theactmayconstraintheuseofprivatelandsfromcertainuses,dependingonthehabitatneedsofparticularspecies.SomeotherfederallawsthatinvokeregulationsthatimpactthequalityofhabitatincludetheCleanWaterAct,CleanAirActandCoastalZoneManage-mentAct.Manystategovernmentshavetheirown(andsometimesmorerestrictive)regulationsthatimpactthesesameresources.
Itisgenerallyrecognizedthatregulatorymechanismsthat“settherulesofthegame”arebothneededanddesirabletoachievespecificenvironmentalgoalsandtoprotectthepublicinterest(BatieandErvin1999).WithrespecttothebiologicaleffectivenessoftheEndangeredSpe-ciesAct,onlyninespecieshavebeenlostsinceitsinception.
Regulatorymechanismsareanimportantcomplementtoincentives.Fromthestandpointofthepublicandthepolicymaker,regulationsarerelativelycheapertoadministerthanincentiveprograms,especiallyifthereisminimalcompliancemonitoring.However,ifthereisaneedtomoni-torlandownerbehavior,thencostscanbecomequitehigh.Meetingregulatoryrequirementsonthepartoftheprivatelandownercanbesub-stantialintheabsenceofincentives.
Fromaneconomicstandpoint,thereisampleevidencethatitismoreefficienttosetenvironmentalgoalsandlettheregulatedcommunitychoosethemeanstoreachthosegoals(BatieandErvin1999).Settingtech-nologystandardsbyspecifyingwhichphysicaltechnologiesandmanage-mentpracticesaretobeemployedtomeetanenvironmentalobjectivegenerallyconstrainscost-effectivesolutionsandinnovation.
Thereiscurrentlymuchdiscus-sionaboutchangestotheEndan-geredSpeciesAct.Thesediscussionsarecenteredonthreemajorpoints:makingthelawmoreeffectiveatrecoveringspeciesandprotectingandrestoringhabitats,decreasingthecostsoflandownercompliance,anddevelopingincentivemechanismstoassistlandownersinconservingat-riskspeciesandtheirhabitats.Webelievethatpartofthisdiscussionshouldincludetherecognitionthattheactcanalsogeneratebothpublicandprivateeconomicbenefitsrelatedtospeciesandhabitatconservation.
Conservation ComplianceCompliancemechanismsrequireabasiclevelofenvironmentalperfor-manceasaconditionofeligibilityforincomesupportprograms(Claassenetal.2001).CompliancehasbeenprimarilyassociatedwithfederalFarmBilllegislationthatpenalizesproducerswhocultivateonhighlyerodiblesoilsorwhodestroywetlands.Thepenal-tiesconsistoftakingawaygovernmentsubsidyorincomepayments.Underthe“Sodbuster”and“Swampbuster”provisionsofthe1985FarmAct,pay-mentsarewithheldfromfarmerswhocultivatehighlyerodiblelandwithoutanapprovedconservationplanorwhodrainwetlands,respectively(Classsenetal.2001).ViolationofSwamp-busterregulationscanmeanthelossof
eligibilityforallfarmprogrambenefits—includingpricesupportsandloans,commodityanddisasterpayments–untiltheviolationisremedied(Claas-senetal.2001).
Amajorcharacteristicthatallowsforfederallandrentalincentivestobemorebiologicallyeffectiveisconserva-tioncompliance.Thatis,inordertoreceivecommodityorrentalpayments,recipientsmustbeincompliancewithsoilandwaterconservationregulationsontheirwholefarm.Conservationcomplianceasarequirementforlandrentalpaymentshasbeencitedasoneofthemajorreasonsforachievements
inreducingsoilerosionandimprovingwaterquality(Heimlichetal.1998;Brady2005).Between1992and1997,totalerosiononU.S.croplandfellfromabout3to1.9tonsperyear,adeclineofabout40percent.Conservationcompliancerequiredconservationplanson91millionacresofhighlyerod-iblecropland.However,thereissomeevidencethatbecausetheConservationReserveProgramhelpedraisecroppric-esthroughsupplycontrol,landownerseventuallyreactedbyputtingadditionalmarginallandsintoproduction,thusactuallyincreasingerosiontothedetri-mentofaquatichabitats.Inaddition,the1996FarmBillsignificantlyweak-enedcross-compliancerequirementsbydecreasingthenumberoffarmsupportprogramsthatcouldbepenalized.
“ Meeting regulatory requirements on the part of the private land-owner can be substantial in the absence of incentives.”
2 6 | Incentives for Biodiversity Conservation
Compliancemechanismssharecharacteristicswithbothgovern-mentstandardsforprivategoods/actionsandeconomicincentives.Becauseexistingprogramsareusedforleverage,compliancemecha-nismsrequirenobudgetoutlayforproducerpayments,althoughconsiderabletechnicalassistanceisneededtodevelopconservationcomplianceplansandtoactuallymonitorcompliance.Wewouldrecommendthattheenforcementofconservationcompliancebelefttoathirdpartygovernmentoffice,perhapsoutsideoftheU.S.Depart-mentofAgriculture,andnotbeimplementedbyagriculturalexten-sionandtechnicalagentswhoarechargedwithassistinglandownerstobeincompliance.
Conservationcross-complianceneedstobestrengthenedintermsofthepenaltiesthatlandownerswouldfaceforproducingonhighlyerod-iblelandsand/orbreakingoutnewlandsforproduction.Inaddition
tothesignificant,butnon-quanti-fied,contributionofconservationcompliancetotheconservationofspecificspeciesandhabitats(Brady2005),weneedtohavebetterestimatesoftherelativeprivateandpubliceconomiccostsandbenefitsofvariouscompliancemeasures.
Financial ChargesFinancialchargesrefertoanypay-mentsthatlandownersmakeascompensationforhabitatdegra-dation.ThesepaymentsincludefeesorfinesassociatedwiththeEndangeredSpeciesAct,effluentorambientwaterqualitycharges,taxesoninputssuchasfertilizersandpesticidestoinducelessuse,taxpaymentsforconversionofhabi-tat,andrealestatetransferfeestodiscouragelandconversiontomoreintensiveuses.
Environmentaltaxesareper-unitchargesforactionscontribut-ingtoenvironmentaldegradation.Chargesmayalsobeassociatedwith
exceedingemissionlevelsortheuseofcertaininputs.
Twoconditionsmustbemettomakechargeseffective:theyhavetobesethighenoughtodiscouragedegradationorconversionofat-riskhabitatsandtheprobabilityofen-forcementmustbefairlyhigh.
Statesalsolevyenvironmentaltaxes.Forexample,MinnesotaandIowataxagriculturalpesticidesandfertilizerstoinducelessuseandimprovegroundwaterqualityandaquatichabitat.Generallyspeaking,however,salestaxrateshavebeentoolowtohaveasignificantimpactontheuselevelsoftheseinputs.
Nodatacouldbelocatedontherelativeeffectivenessorefficiencyofenvironmentalchargesandtaxesonbiodiversityconservationactivities.Wewouldrecommendtakingasampleofsuchprogramsandanalyzingthemfortheirimpactsonresourceconservationandtheircost-effectivenessfrombothapublicandprivateperspective.
American wigeon brood | U.S. Fish and Wildlife Service
Institutionsareprinciples,laws,conventions,codesandsocialnormsthatstructurebehavior
betweenindividualsandsociety.Inthecontextofourincentivestaxonomy,institutionalinnovationscomprisethreemajorsubcategories:legal/statutory,propertyrightsandmarketinnovations.Thissectionaddresseslegal/statutoryincentives,andSectionsVIandVIIaddresspropertyrightsandmarketinstitu-tionalincentives,respectively.
Legal/statutoryinnovationsrefertonewrulesorregulationsthatinsomewaylimitliabilityorissuesometypeofpermitforhabitatmodifica-tion.Legal/statutoryinnovationsinclude“assurances,”usuallycom-binedwithliabilitylimitationand/orregulatoryrelief.
Legal/statutoryandpropertyrightsincentivesareoftenreferredtoasnon-marketinstitutionalmecha-nisms.However,theyareofequalimportancerelativetomarketinnova-tionsintheirapplicationtowildlife
habitatconservation.Non-marketinstitutionssettheconditionsformarketbehaviorandthelegalactionsthatalterthedefinitionsofpropertyuseorownership.Therightsanddutiesassociatedwiththeowner-shipofwildlifehabitatandthelegalenvironmentaffectingownershipandmanagementconstituteimportantdeterminantsofeconomicbehaviorandtheeffectivenessofvariousfinan-cialincentives.
Therearethreemajortypes
ofvoluntarylegalarrangementsthathavebeenusedtoencouragelandownerstoprotectspeciesandhabitatsandtorelievesomeoftheperceivedregulatoryburden.Safeharboragreements12andconser-vationagreementsaregenerallyreferredtoas“assurances.”Theseagreementsarepurelyvoluntary.Thethirdtypeoflegalinstrumentisclas-sifiedas“regulatoryrelief.”
ThestateofWashingtonoffersseverallegalincentives.Inadditiontoprovidinglandownerswithsafe
harboragreements,liabilitylimita-tionforpublicaccessandno-takecooperativeagreements,thestatealsoallowscertainlandownersanexemp-tionfromnewregulationsifalong-termhabitatmanagementplanisadoptedunderitsHabitatIncentivesProgram.Theprogram,establishedin1998,allowslandownerstoenterintoanagreementtoenhancehabitatforfoodfish,gamefishorotherwildlifespeciesinexchangeforstateregula-torycertaintywithregardtofutureapplicationsforirrigationprojectap-provaloraforestpracticespermit.
Safe Harbor AgreementsDescription
Safeharboragreementsconstitutealegalinnovationtoassistlandownerswiththeuncertaintiesofmanagingtheirlandsthatarehabitattolistedspecies.Thepurposeofanagree-mentistopromotethemanagementandconservationoftargetedspecies.Participationisvoluntaryandmayincludeprovisionsforproposedorcandidatespeciesifaparticipantchooses.Undersafeharboragree-ments,participantsareguaranteedareductioninliabilityandareensuredthattheywillbeexemptfromanyfutureregulationsnotincludedintheiragreement.Allnon-federallandownersareeligibletoparticipateintheprogram,buttheirlandmustcontain,orbepotentiallysuitablehabitatfor,listedthreatenedandendangeredspecies.
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V. LEGAL/STATUTORY INCENTIVES11
11. Within this section and others that follow, there are some incentive mechanisms for which no assessment literature could be found. In these cases, we combine the assessment and recommendation sub-sections for these mechanisms.
12. Habitat Conservation Plans (plans), as defined under the Endangered Species Act, are not considered a “voluntary incentive” for purposes of this report because they are a purely regulatory requirement. These plans are a mechanism to reconcile development and land use on private lands subject to Endangered Species Act regulations (Brown 1999). The act was amended in 1982 to allow “incidental taking” (killing, harming or disrupting essential habitat of an endangered or threatened species incidental to otherwise lawful activities such as land development or logging) provided the landowner submits and funds an approved plan. The plan must be submitted along with an application for an incidental take permit and should provide strategies that minimize and mitigate the impact of the proposed development or land use on endangered or threatened species (Bean and Wilcove 1997).
“ Legal/statutory innovations refer to new rules or regulations that in some way limit liability or issue some type of permit for habitat modification.”
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Safeharboragreementsaredesignedtoencouragelandownerstovoluntarilymaintainorenhancehabi-tatontheirpropertytoattractthreat-enedorendangeredspecieswithoutfearoffutureland-userestrictions.Alandownermaynotfacepenaltiesifhe/sheengagesinvoluntarywildlifesurveyandmonitoringactivities.
Asafeharboragreementcontainstwomainelements.Firstisthedelin-eationofasetofbaselineconditionsthatdescribetheinitialnumberandlocationofindividualsofthelistedspeciesandameasurementofthehabitatsizeandquality.Thesecondconsistsofestablishingamonitoringprogramdesignedtoassessthesuccessofarecoveryeffort.Attheconclusionoftheagreementterm,landownersareallowedtoreturnthepropertytothebaselineconditionandstillbecoveredbytheassurancesoftheagreement.Theagreementmaybeamendedtoaddanon-coveredlistedspecies,forwhichtherelevantagencyandtheparticipantwouldagreeonproperenhancementormaintenanceactions.Attheendofasafeharboragree-mentalandownermaydevelopthecoveredpropertyorundertakeotheractivitiesthatresultinalegal“tak-
ing”ofthethreatenedorendangeredspecies(MinetteandCullianan1997),providedthatthereareprotectionsfortheminimumandpreviouslydefined“baselinepopulation.”
Therearetwotypesofsafeharboragreements.Oneisanindividualagreementbetweenalandownerandtherelevantfederalagency(U.S.FishandWildlifeServiceorNationalMarineFisheriesService),depend-ingonthespeciesaddressed.Theotherisanumbrellaagreementunderwhichastatefishandgameagency,agriculturalagency,localgovernmentorprivateconservationorganizationcanactasanintermediarybetweentherelevantfederalagencyandseveralindividuallandowners.Theinterme-diarydevelopsasafeharborprogramforadefinedareaandspeciesandworkswithlandownerstodevelopindividualagreementsthatareconsis-tentwiththeintermediary’sumbrellaagreement.Forexample,severalstateshavesignedanintermediaryagree-mentwiththeU.S.FishandWild-lifeServicefortherestorationandconservationofKarnerbluebutterflyhabitatintheNortheastandupperMidwest.Thereare16stateswithsafeharboragreementsforfederallylisted
species,butafewofthesewerestillindraftformasof2004(EnvironmentalDefense2005).
Elevenstatesprovidesafeharboragreements(George2002).Forexample,Kansashasastate“SafeHarborLaw”whichoffersownersoflandoraquatichabitatdeemednecessaryfortheconservationofnon-gameorstate-designatedthreatenedandendangeredspeciestheopportunitytoenterintoanagreementwiththestate,allowingthelandownertocarryoutactivitiesspecifiedintheagreementwithoutfearofliabilityorpenalties.
Assessment Legaland/orstatutoryincentivesincludeengaginginsafeharboragree-mentsandcandidateconservationagreementswithassurances,asdefinedundertheEndangeredSpeciesAct.Onlysafeharboragreementshavebeenassessedinanydetail.
Asdopublicagencies,WilcoveandLee(2004)basetheirassessmentofthesafeharborincentivemechanismonthenumberofenrolledlandown-ers,thenumberofspeciestargetedforassistanceandthecumulativeacreageenrolledundersafeharboragreements.
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San Joaquin kit foxes | U.S. Fish and Wildlife Service
2 8 | Incentives for Biodiversity Conservation
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Theauthorsconcludethatsafeharborhasbeen“remarkablysuccessful”(p.639),becauseitremovesregulatoryburdensassociatedwithattractingendangeredspeciestopropertyasaresultofengaginginconservationactivities.WilcoveandLee(2004)alsofoundthattechnicalassistancetorestorehabitatsforendangeredspecies,andcost-shareincentivesforendangeredspecies,werealsoveryimportantcomplementaryincentivesthatenhancedtheeffectivenessofsafeharboragreements.
Therehasbeenasteadyincreaseinthenumberofprivatelandownersparticipatinginsafeharboragreementssincetheprogrambeganin1995.In2002,189landownershadenrollednearly2millionacresoflandandwererestoringhabitatsfor21endangeredspecies,andnolandownerhadwith-drawnorexercisedtherighttoaltertherestoredhabitats(WilcoveandLee2004).By2005,participationhadin-creasedto325landowners,protecting36speciesoverabout3millionacres(EnvironmentalDefense2005).Thisgrowthinparticipationandthenum-berofspeciesandacrescoveredisoneindicatorofitseconomicbenefits,asdemonstratedbythegrowthinprivatelandownerswillingtoparticipate.
WilcoveandLee(2004)statethatalthoughthesafeharbormechanismistoonewtodetermineitsbiologi-caleffectiveness,theynotethattherehavebeensomenotablesuccesseswithrespecttotherecoveryofthenorthernaplomadofalconintheSouthwest,thenenegooseinHawaiiandthered-cockadedwoodpeckerinNorthCarolina.Forthered-cockadedwoodpecker,about35percentofthetotalpopulationlivesonsafeharborlands(EnvironmentalDefense2005).Inaddition,safeharboragreementshavebeensignedthatrunfor30to80years,indicatingthatsafeharbor
maybeaneffectiveconservationtoolbecauseitmeetstherequirementforasufficienttemporalscale.
Therearetwoissuesrelatedtothebiologicaleffectivenessofthesafehar-borincentivemechanism.Thefirstisthatsafe-harboragreementsareprimar-ilysingle-speciesoriented,nothabitatoriented.Second,ifabaselinepopula-tionissetatzeroandthelandownerattractsspeciestohisorherproperty,thenthelandownercouldpotentiallyreturntozeroattheendoftheagree-ment,andanyrestorationgainswouldbelost.Althoughnolandownershavereturnedtoazerobaseline,thepotentialforthemtodosounderscorestheneedtocombinesafeharborwithotherincentives.13Oneofthemainbenefitsofsafeharboragreementsisthattheyhavereducedlandownerfearandhaveallowedlandownerstobeinmorecontrol.14Intermsofbiologicaleffectiveness,safeharboragreementswerenotintendedtobealong-termsolutionbutwereinsteaddesignedtobuytimeforspeciesrecovery.15
Thereisnoevidencethusfarthatsafeharboragreementsareamoreorlesscost-effectivemeanstomain-tainwildlifehabitatcomparedtootherincentivemechanisms.However,WilcoveandLee(2004)notethatthesafeharborprogramhasgrownrapidlynationwide,which“suggeststhatmanylandownersarewillingtoassistendangeredspeciesifdoingsodoesnotcarrytheriskofaddedregula-toryburden”(p.643).Nonetheless,ithasbeenobservedthatlandowners’enthusiasmforsafeharboragreementshavedimmedsomewhatduetothehightransactioncostsassociatedwithbureaucraticdelaysinprocessingtheagreements.ZhangandHehmood(2002)foundthatthelackoffinancialincentiveswasashortcomingofthered-cockadedwoodpeckersafeharborprogramintermsofgarneringmore
landownersupport.Fromapublicfinanceperspective,somesafeharboragreementshavenotbeencost-effectivebecausetheyhavebeenimplementedatsiteswhereaparticularspeciesmaynotactuallybeusingthehabitat.
Recommendations Recommendationsforsafeharborincentivespertaintoincreasingtheirbiologicaleffectivenessandloweringcurrenttransactioncosts.Safeharboragreementscanbemorebiologicallyeffectiveandeconomicallyefficientbyallowinglandownerstoengageinmultiplecompatiblelandusesthatdonotnegativelyimpactaspeciesoritshabitat.Themoreflexibletheagree-mentis,themoreefficientitisfromthelandowner’sperspective.
Decreasingtheamountoftimeandfinancialresourcesfornegotiationandentryintosafeharborprogramscouldexpandparticipation.Thereareseveralwaysthiscouldhappen.First,theper-mitfeeforlandownersapplyingforsafeharboragreementsshouldbeeliminated(EnvironmentalDefense2005).Second,apackageofadditionalfinancialandtechnicalassistanceincentivesshouldbeofferedinconjunctionwithasafeharboragreement,possiblythroughagriculturalresourceconservationincen-tiveprograms.Third,regionalprogram-maticsafeharboragreementscouldlowertransactioncostsforindividuallandownersandincreasetheirparticipa-tionrates.Inaddition,designingsafeharboragreementsthataddressmultiplespecieswouldbeanimportantimprove-mentforprotectingbiodiversity.
Candidate Conservation Agreements with Assurances Description
ThepurposeofCandidateConser-vationAgreementswithAssurances(“ConservationAssurances”)isto
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13. Watchman, L. Personal communication. August 24th, 2005. Defenders of Wildlife. 14. Clark, J. Personal communication. August 24th, 2005. Defenders of Wildlife. 15. Senatore, M. Personal communication. August 24th, 2005. Defenders of Wildlife.
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facilitateactionfortheconserva-tionneedsoffederalproposedandcandidateplantandanimalspeciesandspecieslikelytobecomeacandi-dateorproposedinthenearfuture.ConservationAssurancesoffertwoincentiveinstruments.ThefirstallowsanexchangeofconservationmeasuresforareductioninliabilityundertheEndangeredSpeciesAct.Landownersareissuedan“enhance-mentofsurvival”permitthatallowsforthemodificationofhabitat,andtheincidentaltakeofindividuals,accordingtotechnicalprovisionsofeachagreement.
Thesecondincentiveisanexemptionfromfutureregulations.Participantsareprovidedassur-ancesthat,intheeventthatthecoveredspeciesbecomeslisted,theirconservationeffortswillnotresultinfutureregulatoryobligationsinadditiontothosedescribedintheoriginalagreement.
Privateandothernon-federalpropertyownersareeligibleforconservationassurances,buttheirlandmustcontain,orbepoten-tiallysuitablehabitatfor,proposedorcandidatespeciesorspeciesofconcern.Theremustalsobeareasonableexpectationthataspecieswillreceiveasufficientconservationbenefit,definedasremovaloftheneedtolistthespecies.Anagree-mentmustincludeadescriptionoftheexistingpopulationlevelsandhabitatcharacteristicsontheland,adescriptionoftheconservationmeasuresthattheparticipantwillundertakeandanestimateoftheexpectedconservationbenefits.
Assessment Todate,onlyabout10candidatecon-servationagreementsareinoperation,
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andnoevaluationoftheseagreementswithrespecttotheireffectivenessoref-ficiencyhastakenplace.ThisismostlyduetothefactthattheseConservationAssurancesarerelativelynew.
Recommendations Eventhoughthenumberofagree-mentswithconservationassurancesissmall,werecommendthatanassessmentbecarriedouttostarttrackingprogressandtosignalanyunforeseentechnicaloreconomicproblems.Basedonthefactthattheseagreementsarepreventativeinthesenseofkeepingspeciesfrombeingfederallylistedasthreatenedorendangered,weseetwomajorpotentialbenefitsthatConserva-tionAssurancescanprovide.First,dependingonthebiologicalandmanagementcharacteristicsofaformalagreement,ConservationAssurancescanleadtotechnicallysoundrecoveryofspeciesandtheirhabitats.Second,bypreventingspe-ciesfrombeinglisted,substantialtransactioncostscanbeavoided.Thereissomeanecdotalevidence,however,thatlongplanningandne-gotiationtimeframesforagreementscanleadtonotinsignificantpublicandprivatecosts. Regulatory ReliefDescription
Regulatoryreliefallowsaland-owneranexemptionfromlegalobligationscontainedinpublicenvironmentalregulations.Reliefissometimesaccompaniedbyaliabilitylimitation.Inadditiontofederalsafeharborandassur-ancesprograms,somestatesalsoofferregulatoryrelief.Georgia,forexample,providesaliabilitylimita-tionforallowingpublicaccesson
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conservationeasements.Washing-tonstateallowscertainlandownersanexemptionfromnewregulationsifalong-termhabitatmanagementplanisadoptedunderitsHabitatIncentivesProgram.Theprogram,establishedin1998,allowsland-ownerstoenhancehabitatforfoodfish,gamefishorotherwildlifespe-ciesinexchangeforstateregulatorycertaintyonfutureapplicationsforirrigationprojectapprovalorafor-estpracticespermit.
Assessment SimilartoConservationAssur-ances,noinformationwasfoundthatdirectlyassessedtheimpactsofregulatoryreliefonthebiologi-calandeconomiccharacteristicsofthisparticularincentivemecha-nism.Certainly,benefitingfromregulatoryreliefasaconsequenceofenteringintoaSafeHarbororCandidateConservationAgree-mentwithAssuranceswouldnotnecessarilyentailanyadditionalfinancialresources,andthereforeonecouldsaythatitiscost-effec-tive.However,ifregulatoryreliefinsomewaycompromisedthestatusofadditionalspecies,thenitmaybelesstechnicallyeffectivethanothermechanisms.
Recommendations Becauseregulatoryreliefcanhavethebenefitofaddressingtheriskanduncertaintythatlandownersperceivewithrespecttothepresenceofendangeredspeciesorhabitatscompromisinglanduse,itcanaddtobothmorebiologicallyeffectivesolutionsandleastcostlysolutionsifanagreementismonitoredandenforced.Wedobelievethatmoreresearchonthistopicisrequired.
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Propertyrightsincentivesareassociatedwithchangesinthedistributionofhabitatowner-
shiporuserights.Propertyrightstoolsprovideopportunitiesforland-ownerstoaltertheirlegalrightsuseorownershipoftheirproperty.Thesetoolsincludeconservationeasements,covenantsanddeedrestrictions,andstewardshipexchangeagreements.
Propertyrightsinnovationsarebasedonthelegalconceptthatsuchrightsareessentiallya“bundleofsticks”thataredivisiblefromeachother(Bowlesetal.1996).Atoneendofthespectrumisthesaleordonationofland,whichamountstosurrenderingtheentire“bundle”oflandrights.Otherpropertyrightstransfermechanismsinclud-
ingcovenants,deedrestrictionsandeasementsseparateoutsomerightsfromothers.Thepurposeofthesemechanismsistorestrictthede-velopmentand/orintensityoflanduseortoencouragespecifictypesoflanduse(Brown1999).Taxincen-tivesareanimportantcomplementformakingpropertyrightstoolsmoreattractive.Transferringsomeorallofthepropertyrightsmayyieldtaxbenefits,becauserestrict-ingthepropertytocertainusesmaydecreaseitsoverallvalue.
Atthestatelevel,propertyrightstoolsarelikewiseoftenpartofalargerprogramthatofferssometypeoftaxbenefitorfinancialpayment.Allstatesprovideopportunitiesforlandownerstovoluntarilyaltertheir
propertyrightsforconservationpur-poses.Themostcommonmethodistheauthorizationforplacementofaconservationeasementonprivateproperty,whichisavailablein48states(George2002).
Conservation EasementsDescription
Aconservationeasementtransfersaportionoftherightsassociatedwithapieceofproperty,whileal-lowinglandownerstomaintainownershipandtousethelandinwaysthatdonotconflictwiththetermsoftheeasement(KuslerandOpheim1996).Alandownercreatesaconservationeasementbydonatingorsellingthedevelopmentrightstoanotherparty.Theeasementholder
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VI. PROPERTY RIGHTS INNOVATIONS
Restored wetland, Wyoming | Natural Resources Conservation Service
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(buyer)isprohibitedfromusingrestricteddevelopmentrightsandisresponsibleformonitoringtheease-ment(Brown1999).Conservationeasementsbindcurrentandfutureownersofthelandintheeventofatitletransfer.Easementsmaybeeither“perpetual”or“term.”Landtrustsandothernon-profitsuseperpetualeasementsalmostexclu-sively,whilegovernmentalagenciesofferbothtermandperpetualease-ments.Federalandstategovern-mentagencieshaveconservationeasementprograms.
Thereareusuallytaxbenefitsassociatedwithperpetualeasements,includingincometaxreductions,propertytaxexemptionsorestatetaxreductions(seesectionbelowontaxincentives).However,toreceivefederaltaxbenefits,theeasementholdermustbe“aqualifiedconserva-tionorganization”asdefinedbytheInternalRevenueService.Therearealsosomestatetaxlawsthatallowforreductionsorexemptionsassoci-atedwitheasements.
Thefederalgovernmenthasincreasinglybecomeinvolvedinpri-vatelandownereasementprogramswhereitistheeasementholder.Therearecurrentlysevenfederaleasementprograms.Fiveareadmin-isteredthroughtheU.S.DepartmentofAgriculture:theFarmandRanchLandProtectionProgram,theWet-landReserveProgram,theGrass-landReserveProgram,theHealthyForestsReserveProgramandtheForestLegacyProgram.TheCoastalWetlandsConservationGrantPro-gramandawesternregionGrasslandEasementProgramaremanagedbytheU.S.FishandWildlifeService.
Thescopeandstructureoffeder-aleasementprogramsdiffer16.First,theactualphysicalresourcetobeprotectedvariesbetweenprograms:
activefarmandranchland,wetlands,grasslandsandforests.Second,theeasementoptionsvary.Forinstance,thewetlandsprogramofferstwodifferenttermeasementoptionsandapermanentoption.Alternatively,thegrasslandsprogramofferstermandpermanenteasements,butalsolandrentals.Third,easementsdifferinwhopaysthecosts.Whilethewetlandandgrasslandprogramspaythefullcostofaneasement,thefarmandrancheasementprogramrequirescontributionsbyeitherstateorprivateentities.Lastly,programsizeandtheamountoffundingreceiveddifferamongtheprograms,withthemajorityoffederalresourc-esthusfargoingtotheWetlandReserveProgram.
Fifteenstateshaveeasementpro-grams.Inoneexample,Massachu-setts’openspacebondprovides$5to10millionannuallyforacquisi-tionsoffeesimpletitleoreasementsonlandsthatcontainnativespeciesorimportantnaturalcommunities.Theprogram,whichhasbeeninexistencesince1990,hadacquiredapproximately10,000acresby2002.
Inadditiontoeasementpro-gramsadministeredbyfederalandstateagencies,thereisasignificanteffortbytheprivatenon-profitsec-tortoholdconservationeasements,althoughforavarietyofpurposesotherthanfortheprotectionofbiodiversityandwildlife(e.g.,rec-reation,openspace,historicalsites,scenery,etc.).Landtrustsareprivate
Grazing cows, California | Natural Resources Conservation Service
16. For detailed description of the various federal easement programs, see Hummon and Casey (2004).
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non-profitconservationorganiza-tionsthatprotectlandfrominten-siveusesthroughdirectinvolve-mentinvoluntarylandtransactionactivities.In2003,morethan1,500privatelandtrustsoperatedatthelocal,stateorregionallevels,pro-
tecting9.4millionacres,including5.1millionacresinabout18,000conservationeasements(TrustforPublicLandandLandTrustAlliance2004).Between1998and2003,vot-ersacrossthenationapprovedmorethan500ballotmeasurestoprovideover$20billiontoprotectfarmland,openspacesandenvironmentalqual-ity(TrustforPublicLandandLandTrustAlliance2003).However,itisunknownwhatpercentageofthisfundingisdedicatedeitherwhollyorpartiallytobiodiversityorwildlifehabitatconservation.
Themajorprivategroupswhobuyandholdconservationease-mentsincludeTheNatureCon-servancy,TrustforPublicLand,AmericanFarmlandTrust,andallofthelocallandtrusts,mostofwhichareassociatedwiththeLandTrustAlliance.Recently,severalprivateorganizationshaveemergedwhosepurposeistocoordinatetheactivi-tiesofseveralindividuallandtrusts(Albersetal.2004).
Assessment Conservationeasementsaretheonlytypeofpropertyrightstoolthathasbeenadequatelyassessedintermsofbiologicaleffectivenessandeconomicefficiency.Specificconditionshavebeenidentifiedascontributingtothe
biologicaleffectivenessofanease-mentprogram.Oneconditionisthatthevalueofaneasementcannotbedestroyedthroughpunitivetaxlaws17thatdevalueuseofeasementsforhabitatconservation.Forexample,agriculturalorforestrylandonwhichaconservationeasementisplaced,andthatcanpotentiallygeneraterec-reationalincome,istaxedatahigherrateinWisconsin.Thus,therecanactuallybedisincentivesforrestoringandconservingnaturalhabitat.Inaddition,theeffectivenessofpublicagenciesandprivateorganizationsinusingeasementstoprotectenviron-mentallysensitiveareasdependsonthespecificland-userestrictionsthateachindividualeasementcontains(Wiebeetal.1996).Theserestric-tionsmayvarywidelyfromoneagreementtothenext.
Thesuccessofeasementsasanincentivemechanismalsodependsonthestringencywithwhichland-userestrictionsaremonitoredandenforced.Useofeasementscanresult
• inpassivemanagementbytheland-ownerratherthanactivemanagementbyapublicagency.Passivemanage-mentmeansthatlandownersusuallydonotmaintainthebiodiversityvaluesofthelandareacoveredbyaneasement.Themanagementrequire-mentsofaconservationeasementneedtobeclearlyidentified,includ-ingwhatneedstobedoneandwhoisresponsiblefordoingit.Intimesofdwindlingstateandlocalbudgets,takingonmanagementcoststhrougheasementsmaybeeconomicallyinef-ficientforthelandownercomparedtoothertypesoflanduseinvestments(RokaandMain1999).
Conservationeasementsinasso-ciationwithwetlandrestorationhavebeensuccessfulintheprotectionofwildlifehabitatandwaterqualityandintheretentionoffloodwaters.Ease-mentshaveprotectedimportantwild-lifehabitat,openspacesandforestsaswellasranchandfarmlandsonmorethan17,000propertiestotalingmorethan5millionacres(AndersonandChristensen2005).Asmeasuredbyapplicationbacklogsfor30-yearandpermanenteasementsofferedbytheU.S.DepartmentofAgriculture’sWetlandReserveProgram,thereweremorethan3,000landownerswaitingtoenrollalmost536,000acresthatdidnotgetfundedin2004.Heimlichetal.(1998)indicatethatthisprogramhasbecomethesinglelargestnationalprogramforwetlandrestorationandhasreducedtherateofwetlandlossonagriculturalland-scapes.TheWetlandReserveProgramhasalsoincreasedtheavailabilityofauniquehabitatusedbyagreatdiversityofwildlifespecies(MitschandGosselink1993).
Thesuccessofeasementincen-tivesintheWetlandReserveProgramhasnottakenplaceinavacuum.Complimentarypolicychanges
“ The management requirements of a conservation easement need to be clearly identified, including what needs to be done and who is responsible for doing it.”
17. Haglund, Brent. March 2005. Personal communication. Madison, Wisconsin.
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relatingtotheinstitutionalframe-workhavealsobeenabigfactor.Forexample,Section404oftheCleanWaterActof1972regulatesdischargeofdredgeandfillmaterialintowetlands,andtheTaxReformActof1996eliminatedtaxprefer-encesthatencouragedwetlanddrainage.Lastly,swampbusterregulationsdenyawiderangeoffarmprogrambenefitstolandown-erswhoconvertwetlandsforcropproduction.Claassenetal.(2001)
estimatethatbetween1.5and3.3millionacresofwetlandsarebe-ingpreservedwithswampbustercompliance,dependingonproducerexpectationsofcropandlivestockprices.Thus,legaldisincentiveshaveplayedanimportantroleinaugmentingtheeffectivenessoftheWetlandReserveProgram’svolun-taryeasementmechanism.
Asissimilartothecaseforsafeharboragreements,easementshavebeenfoundtobemoreeffectivewhencombinedwithcomple-mentaryfinancialandtechnicalincentives.Still,thereisastrongneedformoreeducationofprivatelandtrustsonthestrategicuseofeasementsforbiodiversityconserva-tion.Assomeauthorshavenoted,“Byusingeasements,landtrustsacrosstheUnitedStateshavedonearemarkablejobconservinglandoverthepast30years.However,muchofthisefforthasfocusedon
preventingdevelopmentoffarm-landandforestlandandprotect-ingscenicvalues.Existingwildlifehabitathasbeenconserved,buteasementsrarelyincludespe-cificmanagementrequirementstoprotectorenhancehabitatvalues.Asaresult,clear-cuttingandotherintensivesilvi-culturalandagricul-turalpracticesoftenendupbeingpreserved,tothecontinueddetri-mentofwildlifeandwaterquality.Althoughthislimitedconservation
maybeconsistentwiththewishesofsomelandowners,itmayalsoresultfromsomelandtrustsnotbeingwellequippedtoprovideadviceandexpertisetolandownersregardingallconservationoptions”(Biophilia2005,p.1).
Fromaneconomicperspec-tive,easementshavebeenoneofthemostcost-effectiveincentivesforconservingland.AccordingtoAndersonandChristensen(2005,p.11),“Thebeautyofconserva-tioneasementsisthattheyprovideawayforthepublictohelppayforenvironmental-protectioneffortsbylandownersonprivatelands.”Parker(2004)studiedconservationeasementsheldby1,250landtrustsaroundthecountry.Hisresultssuggestthatmostlandtrustsmakeeconomicallyefficientchoicesaboutwhethertoacquireconservationeasementsonpropertiesorpurchasethelandoutright.Landtruststend
toacquireeasementsonpropertiesforwhichthecostsofenforcingsucheasementsagainstviolationsarefairlylow.Propertiesthatlandtruststendtobuy,orseektogetdonatedoutright,requiremoreintensivehands-onmanagementtoachieveconservationgoals.Suchpropertiesincludelandwherehabi-tatforrareandendangeredspeciesneedstoberestored.Becauseease-mentsformanagementpurposesonlycanbedifficultandcostlytoenforce,itismoreefficienttoownandmanagelandwithsignificantrestorationormanagementneeds.
DespiteParker’sfindings,thereareeconomicefficiencyissuesas-sociatedwitheasements.Thefirstisthatforsomelandowners,theopportunitycostsassociatedwithnotextractingmarketableresourcesorconvertinglandtocommercialorresidentialusescanbesubstan-tial.Thismaylimittheamountoflandthatisavailableorafford-ablethrougheasementprotec-tion.Second,therearethehightransactioncostsassociatedwithdevelopingguidelinesandmonitor-ingwhetherlandisbeingmanagedeffectively.Third,theeasementtoolhasoccasionallybeenabused,therebycausinglegalandpublicfinancingproblems.AndersonandChristensen(2005)indicatethatsomelandownershavemadeaprofitbyusinginflatedapprais-alstotakeadvantageofhugetaxwrite-offsattheexpenseoftaxpay-ers.Anotherproblemisthatsomelandownershaveusedeasementstoprotectswampsandmountainsidesthatcouldneverbedeveloped,orgolfcoursesandprivatelotsthathavelittleornoconservationvalue.Theseabusescanweakenpoliticalsupportforeasementincentivesandtheirpublicfunding.
“ From an economic perspective, easements have been one of the most cost-effective incentives for conserving land.”
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RecommendationsForeasementincentivestobemoreeffectiveinconservingwildlifehabitatwehaveafewrecommen-dations.First,thereneedstobemorecoordinationbetweenpubliceasementprogramsatthestateandfederallevels,andalsobe-tweenpublicandprivateeasementprograms.Inaddition,recommen-dationsshouldbedevelopedandimplementedthatwoulddecreasethetimeandfinancialresourcesneededtoestablishandmaintainconservationeasementagreements.
Therehavebeensomerecentproposalstoreducethefederaltaxde-ductionthatalandownercantakefordonatingaconservationeasement,fromthefullvalueofthedonationtojust33percentofthatvalue.However,reducingdeductionswoulddiscouragesomelandownerswiththemosteconomicallyvaluableconserva-
• tioneasements,suchasforgrazinglands.Thefulldeductionneedstobemaintained(AndersonandChris-tensen2005).Ifthegoalistostopinflatedeasementvaluations,thentheInternalRevenueService,statetaxdepartments,landtrusts,countytaxassessorsandappraisersneedtopolicetheappraisalprocess,andspecificstandardsareneededforappraisingconservationeasements.Theremaybealimitedroleforself-regulationamongconservationistlandtrusts,tocurbanyabuses(Parker2004).However,self-regulationwillrequirerigorousaccreditedstandardsthatareperiodicallymonitoredwithpublicoversight.TheLandTrustAlliancehasdevelopednewguidelinesthatmemberlandtrustsarerequiredtohaveappraisersuse,ifthelandtrustswantaccreditation.Thealliancere-quireslandtruststoinformpotentialeasementdonorsabouttheInternal
RevenueCodeappraisalrequire-ments,thatthedonorshoulduseaqualifiedappraiserwhofollowstheUniformStandardsofProfessionalAppraisalPractice,andthatthelandtrustwillnotparticipateinadona-tionwhereithasconcernsaboutthevalueofthededuction.18
Intheprivatesector,thereisaneedtodevelopthecapacityoflandtruststoeffectivelyenhance,restoreandprotectwildlifehabitatandbiodiversityvalues.Therigorofconservationeasementsheldbylandtruststoencompasshabitatrestora-tionandlong-termstewardshipgoalsneedtobeexpanded.Existingstateandfederalconservationprogramscanprovideassistanceforrestorationandenhancementofconservedhabi-tats,andlandtrustscanprovideaservicebyactivelyguidinglandown-ersthroughtheseprograms.Ensur-ingappropriatelong-termmanage-menttomaintainthesehabitatsandprotectthepublic’sconservationinvestmentswillalsorequirelandtruststoadoptappropriatemanage-mentlanguagewithineasementlanguage.Landtrustswillneedtrain-ing,technicalassistanceandfinancialsupporttoaddressalloftheseissues.
Covenants and Deed RestrictionsDescription
Acovenantisacontractbetweenalandownerandasecondpartythatmaystipulatecertainlandusesorpractices.Likeeasements,acovenantcanbeusedtorestrictcertainlanduses,anditmayfollowthepropertytosubsequentowners(Brown1999).Acovenantcanalsobeplacedinalanddeeditself,whichthenbe-comesadeedrestriction(KuslerandOpheim1996).Covenantsarelesssecurethanconservationeasementsbecausetheydonotfollowauniform
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Lehmi River restoration project, Idaho | Natural Resources Conservation Service
18. Hummon, C. January 17, 2005. Personal communication. See www.lta.org/sp/land_trust_standards_and_practices.pdf.
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federalstatute,lackclearenforce-mentprovisionsandmaybechal-lengedbyfuturelandowners.
Minnesotaemployscovenantsforthepreservationofwetlands.Thisstatutoryauthorizationallowslandownerstoenterintoacov-enantwhereprivatelandbecomesa“wetlandpreservationarea.”Thisentitleslandownerstoapropertytaxexemption.Pennsylvaniaalsoallowsforthecreationofcovenantsfordesignatedusessuchasfarm,forestoropenspace.Landownersenteringintocovenantsreceiveapropertytaxreductionthroughalowerassessedvalue.
Deedrestrictionsaresimilartocovenantsinthattheycanbeusedtorestrict,forexample,theconver-sionofwetlandsorforeststomoreintensiveuses.Theproblemwithadeedrestrictionisthatitisgener-allynotenforceableortransferable(KuslerandOpheim1996).
Assessment Wewereunabletolocateanyinformationthatassessedeitherthebiologicaleffectivenessoreconom-
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icefficiencyofcovenantsanddeedrestrictionsasincentivemecha-nismstoconservebiodiversityorwildlifehabitat.
RecommendationsBecausethesemechanismsarein-stitutedataverylocallevelandcanvarybystateorcounty,wewouldrecommendthatasampleoftheseinstrumentsbeevaluatedtoseehoweffectiveorefficienttheyhavebeen.Clearly,therelativelyshort-termnatureofthesemechanisms,andthefactthattheycanchangewithownership,wouldseemtocom-promisetheirbiologicaleffective-ness.Althoughthereisanissueonnon-permanence,covenantsanddeedrestrictionscouldbelookeduponasabridgingdevicebetweennoprotec-tionandapermanenteasement.Webelieve,however,thatmonitoringcouldbeimprovedandthatspecificbiologicaloutcomesshouldbestipu-latedinthesetypesofagreements.Withrespecttoeconomicefficiency,therewouldbeenforcementcosts,butthesewouldprobablybelessthanthecostsincurredthrougheasements.
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Stewardship Exchange AgreementsDescription
Stewardshipexchangeagreementsin-volvelandownersimplementingcon-servationmeasuresontheirprivatelandinexchangeforuseprivilegesonpubliclands.Anexampleofsuchanagreementisalandowner’sactiontoprotectprivatelyownedripar-ianareasinexchangeforforageorgrazingrightsonpubliclands(Otley199819).Arizonaemploystheuseofastewardshipagreementtoencourageprivatelandconservationbyprovid-ingimprovementstoalandowner’spropertyinexchangeforguaranteedpublicaccessto,orthrough,thatsameproperty.
Assessment Thereisnoinformationforsteward-shipexchangeagreementscurrentlyavailablethatassessestheirbiologicaleffectivenessortechnicalefficiency.
RecommendationsThereisaneedtodoaninventoryofstewardshipexchangeagreementsandnotonlyevaluatetheircon-tributiontobiodiversityconserva-tionbutalsoestablishtherelativeadvantagestoboththeprivateandpublicsectors.Forexample,intheaboveexampleoftheexchangeofpublicgrazingrightsforconserva-tionofprivateriparianareas,itisnecessarytoassesstherelativecostsandbenefitstoboththepublicandprivatepartiesinvolved.Thebasicquestioniswhetherprivateriparianrestorationismoreorlessvaluablecomparedtograzingonpubliclands.Ifthedamagetopublicgrazinglandsexceedsthepublicbenefitsthatcomefromriparianrestoration,thenthestewardshipagreementwouldresultinanetcosttothepublicbutanetbenefittotheprivateparty.
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Evaluating rangelands, Arkansas | Natural Resources Conservation Service
19. Otley, M. Personal communication as referenced in Vickerman (1998).
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VII. MARKET-ORIENTED INSTITUTIONS
Marketinnovationsareincen-tivesthataffectthevalueofaresource(includingwildlife
habitat),orproductderivedfromaresource,throughthecreationofneweconomicopportunities.Forexam-ple,increasedmarketopportunitiesandhabitatvaluescanbeachievedthroughthecreationofecolabelingand/orcertificationinformation,benefitssharingmechanismssuchasecotourism,mitigationorconserva-tionbanking,andthetransferofdevelopmentrights.
Insomecasesitispossibletocre-ateprivatemarketinstitutionstoad-dresswhatwasdescribedinSectionIIasmarketfailure.Publicinstitu-tionscancreatemarketsthroughtheestablishmentofatradingstructureandtherulesandregulationsoftradingactivitybetweenprivatepar-ties.Agoalofcreatingquasi-marketinstitutionsistoprovideanefficientwaytoincorporatepublicenviron-mentalconcernsintoprivatemarketstructures.Oneexampleofsuchaquasi-marketisthecurrent“cap-and-trade”programadministeredbytheEnvironmentalProtectionAgencytoimproveairquality.
Privatemarketincentivesexistwherelandownershaveanop-portunitytoturnspeciesandtheirhabitatsintoassetsthatconsum-ers(privateorpublic)willbuy.Inordertocreatetheseopportunities,itisoftennecessarytocreateaninstitutionalstructurethatallowsamarkettoevolveandfunction.Creating,developingandauthoriz-ingeffectivemarketstructuresandrulesareprerequisitesforpublicgoodsforwhichpurelyprivatemarketsdonotexist.
Thereareseveraltypesofmar-ketmechanismsthatarerelevanttowildlifehabitatconservation,includingtheallowanceforuserfees,certificationandecolabelingprograms,mitigationandconser-vationbanking,andtransferabledevelopmentrights.Tovaryingdegrees,eachofthesemechanismsrequirescooperationbetweenprivateandpublicentities.Seven-teenstateshavecreatedsomeformofmarketinstitutiontoencourageconservationonprivatelands.Themostcommonarethosethatfacilitatethepurchaseortransferofdevelopmentrights,foundin10states(George2002).
Assessmentshavebeenmadeformechanismssuchasuserfees,ecotourism,ecolabeling,mitiga-tionbanking,conservationbankingandtradabledevelopmentrights.Theseassessmentstendtofocusontheconditionsfortheimprovedeconomicefficiencyandlessontheirbiologicaleffectiveness.
User FeesDescription
Userfeesarestate-authorized“feeschargedtothirdparties(byprivatelandowners)fortheuseofnaturalresources,whichmaybeconsumptiveornon-consumptive,onpublicorprivateland”(Brown1999,p.471).Feesinvolveanagreementbetweenalandownerwhoengagesinconserva-tionactivityandapublicagencythatregulatesaparticularnaturalresource.Compatibleconsumptiveandnon-consumptiveusesareusuallydefinedashunting,fishing,wildlifeviewing,etc.Somefederalagenciesgranttherighttolandownerstocollectuserfeesinexchangeforaminimumlevelofconservationactivity.Atthestatelevel,Colorado’sRanchingforWildlifeprogramallowslandown-erstomarketaguaranteednumberofhuntinglicensesinexchangeforallowingaccesstoprivateland.
Assessment Financialassessmentsofuserfeeshavebeenlimitedtothosesitua-tionswherelandownersaregiventheauthoritytochargeindividualhuntersorfishermenafeeforaccesstolandandwaterresourcesonprivate
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“ Seventeen states have created some form of market institution to encourage conservation on private lands.”
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propertyinexchangeforpublicassis-tancewithhabitatimprovement.Nodatawasfoundthathasassessedthebiologicaleffectivenessofuserfeesasanincentivemeasureforbiodiversityconservation.Althoughuserfeeshavebeenattractivefromtheprivatelandownerperspective,intheinitialyearsofuser-feeimplementation,whenprivatehunting,fishingorbird-ingpreservesarebeingestablished,start-upcostsassociatedwithhabitatmaintenancecanbehigh(Robles2000),andsomeeconomiclossescanoccur.Otherpotentialeconomicis-suesrelatetothecostsofsupervisionandschedulingandthepotentialformarketsaturation.
RecommendationsResearchneedstobedoneonthebiologicaleffectivenessofuserfees.Onemeansofachievingbiologicaleffectivenesswouldbetoencouragecooperationbetweenseveralcon-tiguouslandownersincaseswhereindividualdispersedholdingsaretoosmalltosupportviablehuntingorfishinghabitat.Becauseofpotentialthreatsfromover-useanddamagetopotentialbiologicalresources,wewouldalsorecommendthatvisitationtoconservedlandsbecontrolledtooptimizebiodiversityconservation.
EcotourismDescription
Inmostcases,establishinganeco-tourismenterpriseissimplydrivenbythemarketforcesofdemandandsupply.However,insomecasessuchenterprisesmayneedlegalpermissionorstart-upassistancefrompublicentities.Thedevelopmentandrulesofconductforanecotourismmarketforat-riskspeciesisusuallytheroleofafederalorstateagency.
Somestatesandprivatepartieshaveprovidedfundingtoinvesti-
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gatetourismmarketsandtourismassistanceprojects.Forexample,DefendersofWildlifecommissionedastudytoinvestigatetheecotourismpotentialinNorthCarolinaassoci-atedwithreintroductionoftheredwolf.20EcotourismisbelievedtobeespeciallylucrativeasaresultofreintroductionofgraywolvesinYel-lowstoneNationalPark.
Anexampleofaprivatewildlife-basedecotourismactivityisMooseCreekAdventuresinIdaho,whichofferswolftoursaswellashorsebackriding,hunting,cattledrivesandbisonviewingonprivateranches.
Birdingfestivalstakeplaceonprivatelandsthroughoutthestates.Onanindividuallevel,ecosystemtourismprovideslandownersanopportunitytocommunicatewiththepublicabouttheirstewardshipefforts(Robles2000).
Assessment PrivatemarketecotourismincentivesareincreasinglyimportantintheUnitedStatesandofferapotentialeconomicopportunitytoencourageprivatelandownerstorestoreandconservewildlifehabitat.Worldwideindicatorsshowthegrowingeco-nomicimportanceofnaturetourismandecotourism,whichnowmakeupabout20percentofallinterna-tionaltouristtravel.Suchtravelisgrowing10percentto30percentperyear.Theannualdirecteco-
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nomicimpactofnaturetravelandecotourismrunsintothehundredsofbillionsofdollars,andtheUnitedStatesmaintainsanimportantshareofthesedirectbenefits.
Theeconomicpotentialforwild-life-basedecotourismintheUnitedStatesissubstantial.Nationalsurveysshowthat50percentofAmericantouristsnowseekoutnature-basedactivities,includingwildlifeandbirdviewing(Claudill2003).Passiveusesuchaswildlifewatchingwasesti-matedtohavegeneratednearly$38billioninexpendituresbyalmost66millionpersonsin2001(Claudill
2003).Birdwatchersaloneaccount-edforalmost$32billioninretailsalesbyalmost46millionpartici-pantsin2001(LaRouche2003).
Intermsofbiologicaleffective-ness,badlyplannedandimplement-edecotourismcanbeadetrimenttoconservation.Forexample,excessiveecotourismactivitycanputincreasedpressureonhabitatsandspeciesthatcanresultindegradationorloss(Clayton2004).Althoughecotour-ismhasdonemoregoodthanharm,therearegrowingsignsthatprivatetouroperationscanemphasizeprofitmarginsoverspeciesconservation(Clayton2004).
Animportantconditionforecotourismtobeeconomicallyat-tractiveisthatprivatelandownersmustdevelopanunderstandingofwhattheirlandcanofferinterms
“ ...ecosystem tourism provides landowners an opportunity to communicate with the public about their stewardship efforts.”
20. See Lash and Black (2005).
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ofwildlifeopportunities(Robles2000).Thismaymeanfinancinganinventoryofwildlifepresentintheirarea.Itisalsoimportantforland-ownerstoidentifyandselectthetimesoftheyearthatofferthebestopportunitiesforviewingspeciesandtoorganizetourismactivities.Ecotourismmaybeamoreviableincentiveforprivatelandownersifitisalsotiedtoruraldevelopmentactivitiesthatbringmultipleben-efitstolocalcommunities(LashandBlack2005).
Inordertoincreasetheeco-nomicefficiencyofecotourismincentives,itisnecessarytoestimate
whatthepotentialdemandwillbeforawildlife-basedexperience.Marketstudiestoestimatehowmuchpeoplewouldbewillingtopayandwhattheyareinterestedinviewing(LashandBlack2005;Rosen1996)areessential.
Animportantconsiderationwithrespecttothelong-termeco-nomicviabilityofecotourismisthattheproceedsaregeneratedinandstayinthelocalcommunity.LashandBlack(2005)haveestimatedthatthepotentialbenefitstolocalcommunitiesthatsupportredwolfecotourismcouldbeasmuchas$1millionperseason.
Recommendations VerylittleinformationisavailablerelatingtothebiologicaleffectivenessofecotourismintheUnitedStatesasanincentivetooltopromotespeciesorhabitatconservation.Ourfirstrec-ommendationthereforeistosupportmoreresearchinthisarea,especiallyintheareasofimpactstotargetedspeciesandhabitats.
Ontheeconomicefficiencyside,severalrecommendationscanbeputforward.Toprovideanyeconomicbenefittotheprivatelandownersthatmaysupportas-riskhabitatsorspecies,marketresearchanddevelop-mentarecrucialandmoreofthisshouldtakeplacebeforesettingupanecotourismactivity.Justasimpor-tant,thereisaneedformoreworkindeterminingthefiscalmechanisms(e.g.,salestax,revenuesharing,etc.)bywhichtotranslateecotourismincomeintomaintainingtheruralcharacterofthearea(andhenceitsvalueaswildlifehabitat)andlinkingthetourismactivitytoruralcom-munitydevelopment.Thereisalsoaneedtodevelopprogramsthatminimizeliabilityrisktolandown-ers.Finally,establishingecotourismactivitiescanhavesubstantialstart-upcosts.Therefore,werecommendthatmorepublic-privatepartnershipsbedevelopedtoinitiateandmanageecotourismprogramsthroughvariouscost-sharingagreements.
Ecolabeling and CertificationDescription
Ecolabelingprovidesconsumerswithinformationregardingtheenviron-mentalimpactofagoodorservice.Basically,eco-labelsuseinformationtochangeproducerandconsumerbe-haviorandtoimproveenvironmentalperformancebylinkingmanagementpracticestoconsumerdemandforenvironmentalgoods(Brown1999).
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Red wolf, North Carolina | U.S. Fish and Wildlife Service
4 0 | Incentives for Biodiversity Conservation
Ecolabelingforprivategoodshasthepotentialtocreateorexpandmarketsforproductsproducedwithenviron-mentallysoundpractices.
Agovernmentagencyorprivatecertificationorganizationsetstechni-calstandardswhichmustbemettoallowforaproducttobecertifiedascontributingtospecificenvironmen-talgoals.Byinformingconsumersoftheenvironmentalbenefitsofaparticularproductorproductionsys-tem,itispossibletocreateamarketforapublicgoodlikebiodiversityorhabitatconservation.
Certificationisanintegralandcrucialcomponentofecolabelinginthatitverifiestheenvironmentalclaimbeingmadebytheproductortheproducer.Forexample,forproductslabeledorganicbytheU.S.DepartmentofAgriculture,thedepartmentestablishescertificationstandardsassociatedwiththeuseofpesticides,fertilizersandotherinputs.Certificationinspection,carriedouteitherbyagovernmentagencyorathirdparty,canreassuretheconsumerthattheclaimsoftheeco-labelarereliable.
Consumersofecolabeledgoodswanttopurchaseaproductnotjustbecauseitisgoodfortheirhealth,butalsobecauseitisgoodforthehealthoftheenvironment,forfami-lyfarms,orforthelocalcommunityandeconomy.Ecolabelinginitia-tivesthatdistinguishproductsaswildlife-friendlyarerelativelynew.However,thesetypesofeco-labelshavethepotentialofattractingasubstantialamountofconsumerinterestandmarketshare,ifviablemarketsareavailable.
Therearetwotypesoflabelingprograms.First-partylabelingin-volvesclaimsmadebyaproducerthathisorheroutputiswildlifefriendly.Aproducersignsanaffidavitpro-
claimingthatlanduseisbeneficialtowildlifeornotharmfultopredators.Or,alandownerstipulateshe/shemanagesanoperationinaccordancewithbestmanagementpracticesoraconservationplan.Third-partylabelingorcertificationprovidesanindependentinspectionthatverifiesthatapropertyismanagedonasetofagreeduponandscientificallysoundcriteria.Effortsbyprivate,non-profitenvironmentalorganizationshaveledtocertificationforforestprod-ucts(e.g.“SmartWood”),marine
andfreshwaterproducts(Turtle-safeShrimp,Dolphin-SafeTuna).OtherexamplesofecolabelsforspeciesorhabitatconservationactivitiesincludePredator-FriendlyWoolandSalmon-Safe.FortheSalmon-Safelabel,ThePacificRiversCouncilhasdevelopedaprograminwhichanindependentthirdpartycertifiesgrowersasbeingsalmon-safeiftheyadoptspecificagriculturalpracticestoimprovewaterqualityandsalmonhabitat.FoodAlliancestandardsaddressfishandwildlifehabitat,soilandwaterresources,andworkingconditions.
PredatorfriendlywoolinMon-tanaiscertifiedbyPredator-Friendly,Inc.,anon-profitorganizationmadeupofbiologists,environmentalists
andranchers.Thegrouphasdevel-opeda“certificationmark”oreco-labelforwoolproducedonranchesthatusenon-lethalcontrolofpredators(Robles2000).Aspartofthecertificationprocess,theranchermustsignanaffidavitcommittingtheranchtonon-lethalpredatorcontrol.TheGrowers’WoolCo-operativeisaseparateorganizationofrancherswhocarrythePredatorFriendlylabel.MarketingstrategiesincludealineofPredatorFriendlywoolproductssuchassweatersand
hatssoldlocallyandthroughTheNatureConservancycatalogue.
TheWisconsinVegetableandPotatoGrowersAssociationhasdevelopedathird-partycertificationprocessandecolabelfortheirfreshpotatoharvestcalled“WisconsinHealthyGrown.”Certificationiscarriedoutonanannualbasisbyathirdpartynon-profitcalled“Pro-tectedHarvest.”Thelabelcertifiesthatmembergrowersareachievingtargetedreductionsintheuseofpesticidesthatareconsideredtoxictoarangeoffishandbirdspecies.SomeofthesesamegrowersarerestoringhabitatsnativetotheirareaandarebeingcertifiedbyProtectedHarvestfortheirrestorationactivities
“ Consumers of ecolabeled goods want to purchase a product not just because it is good for their health, but also because it is good for the health of the environment...”
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in2006.Thegrowerswantthisad-ditionalbenefittoincreasetheprivatemarketpremiumormarketsharetheyreceivefortheirproduct.
Therearefewstatesthatsponsorecolabelingprograms.OneexampleisOklahoma’sWild-ScapeCertifi-cationProgram,whichrecognizesindividualsandbusinessesthathavelandscapedtheirpropertywiththegoalofwildlifeconservation.Certi-fied“wild-scapes”becomeapartofastatewidenetworkofnaturalareassetasideforwildlife.Whethercertifica-tionthroughthisprogramhasledtoanykindofeconomicadvantagethroughincreasedmarketingoppor-tunitiesisunknown.
Assessment Althoughcertificationandecolabel-ingcanprovidemarketpremiumsorincreasedmarketsharetoproduc-ersandlandownerswhoengageinhabitatconservation,thereareseveralconditionsthatmustbemetforecolabelingincentivestowork.Aparticularadvantageofcertifica-tionstandardsisthattheyassureconsumersofthevalueofaspecial-izedproduct,makingiteasierforproducerstocapturepricepremiums
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ormarketshareforspeciesorhabitatfriendlypractices.
Theeffectivenessofcertificationandecolabelingincentivesispartlyconditionedbywhethercertificationiscarried-outbya“firstparty”or“thirdparty.”Firstpartycertificationreferstoalandownerorresourceuserwhoatteststhathisorhermanagementpracticesarehabitatorspeciescompatible.Thirdpartycertificationrequiresanoutsideentitytomeasureandverifywhethertheenvironmentalgoalsoftheland-ownerareachieved.
Thedownsideoffirst-partycer-tificationandlabelingisthatthereislittleornoregulation,anditishardfortheconsumertotellwhichlabelsarelegitimate.Manyconsumersarereluctanttobuyproductscertifiedandlabeledasenvironmentallyben-eficialbytheproducersthemselves(Robles2000).
Third-partycertificationandlabelingarenotwithoutissues,either.Themajorchallengefortheseprogramsisconsumerrecogni-tionanddemand(Robles2000).Recognitionleadstodevelopingamarketnichewhereconsumerswillpayapremiumforproductsthey
trust—oratleastbuymoreofthem.Thereisalsotheissueofcompetingforshelf-spacewithconventionalcounterparts(Robles2000).Agoodexampleoftheseconstraintsisthehabitat-friendlyWisconsinHealthyGrownlabelforfreshpotatoespro-ducedinmid-stateWisconsin.SomegrowersfortheWisconsinPotatoandVegetableProducersAssocia-tionareintheprocessofcuttingbackontoxicpesticideuseandarerestoringnativeecosystemsinordertorecoverandconservesomelistedplantandanimalspecies.Althoughtheirgoalhasbeentoreceiveapricepremiumfortheircertifiedproduce,todatesuchapremiumhasnotbeenattained.However,marketsharehasgraduallyincreasedovertheyears,eventhoughtheefforttodevelopandsecurenewmarketshasbeenexpensive.Becauseofthehighdegreeofpricecompetitionandthestructureofthefreshpotatomarket,theassociationhasbeeninvestinginmarketdevelopmentfortheir“eco-potato.”However,marketdevelopmentcostscanbequitehighandaddtothetransactioncostsofcapturingthepublicbenefitsofres-torationworkintheprivatemarket.
Wisconsin farmer with “Healthy Grown” potatoes | Wisconsin Potato and Vegetable Producers Association
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Anexampleofanunsuccessfulthird-partycertificationwastheTallGrassBeefeco-labelthatwasbasedonthepreservationoftallgrassprairiehabitat.Inadditiontotheconstraintsofself-certification,issuesarosewhentheU.S.DepartmentofAgriculture’scertificationofgrass-fedbeefasbeingleanandlow-fatwassought.Thetransactioncostsinattainingthedepartmentcertificationwerehighduetothelongtimeperiodittooktoadheretoprogramrulesandassoci-atedhighcostsofproductionanddistribution.Inaddition,thedepart-ment’sapprovalprocesswaslengthyandtheoutcomeremaineduncertain,causingincreasedtransactioncostsandeconomicrisks.
Inordertoincreaseeffectivesales(andthereforeconservation),thereisanimportantrolefornon-govern-mentalorganizationstoplayintermsofsupportingecolabeledproductsthroughadvertisingtotheirmember-shipandcontactingdistributorsandretailersofeco-friendlyproducts.Oneimportantfactorinthiseffortwillbetodeterminetheprocessesformonitoringandevaluatingwhetherimprovementsareactuallybeingmadewithrespecttobiodiversityrecoveryandconservation.
TwowildlifehabitatandspeciesecolabelsthathavemetwithlimitedsuccessaretheSalmon-SafelabelandthePredatory-Friendlylabelsforsheepwool.OneadvantageofSalmon-Safeisthatitistiedtoahigh-profilespeciesthatconsumersatthemarketplacecanidentifywithandwanttoprotect(Robles2000).Be-tween2000and2004,theareaunderimproved,Salmon-Safeproductionpracticesincreasedfrom10,000to40,000acres.Althoughthereisnopricepremium,thelabelhasledtoincreasedmarketshareforproducersusingimprovedpractices.
ThePredatorFriendlyeco-labelforwoolinMontanahasreceivedquiteabitofmediaattention,andotherranchesaroundtheUnitedStateshaveinquiredaboutthelabel.However,marketsaturationmaybeapotentialproblem.Mostoftheranchersusingpredator-friendlymanagementtechniquesoperatesmallranchesandadmitthatnon-lethalmethodsaremoredifficulttoimplementonlargeroperations(Robles2000).
Intheprivatemarketcontext,certificationstandardswillgenerallybeeffectiveonlywhereprivategainsfromprovidingpublicgoodscanbecapturedinamarketsetting.Oneofthemostimportantissuestoaddress
isthedifficultyinlinkingprogramparticipationtomeasurableenviron-mentalbenefits.Torespondtothisproblemitisnecessarytohavecon-servationobjectivesspelled-outandamonitoringandevaluationprogramestablishedtodeterminethelink-agesbetweenactionsandresults.Forecolabelstobeeconomicallyefficient,theymustbebasedontransparentstandardsthatclearlydefineproduc-tionpracticesandwhole-farmman-agementstandardsthatlinkeconomicandenvironmentalsustainability.Insum,whilecertificationandecolabel-ingincentivesfacesignificanthurdlesintermsofpriceandcostdifferen-
tials,monitoring,marketing,adop-tionlevelsandpotentialtradeissues,theyrepresentonemarketapproachforprivatelandownerstopartiallycapturethedemandforpublicgoodssuchaswildlifehabitatconservation.
Recommendations Inordertoincreasethebiologicaleffectivenessofecolabelingasaviableincentiveforecosystemrestoration,itisnecessarytodevelopspecificcon-servationgoalsandtosetupmonitor-ingprotocolstomeasureachievementtowardsthosegoals.TheWisconsinPotatoandVegetableGrowersAs-sociationandtheFoodAllianceareintheprocessofdevelopingdesiredoutcomesandindicatorsformeasur-
ingthoseoutcomes.Theseactivitiesareakeyinputforgainingconsumerconfidenceintheecosystemrestora-tionclaimsoftheeco-labelandneedtobeexpanded.Acomplementaryrequirementistoincreasethetechni-calcapacityofthird-partycertifierstoevaluateecosystemandspeciesrestorationactivities.
Inordertomakeecolabelingafinanciallyviablemeansforland-owners,thereneedstobebetteridentificationandverificationofpotentialmarketoutletsand/orpricepremiums.Marketresearchanddevelopmentisaconstant,on-go-ingrequirementinordertofind
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“ One of the most important issues to address is the difficulty in linking program participation to measurable environmental benefits.”
www.de fenders .o rg | 4�
newconsumersandmarketniches.Marketingstructuresshouldbeemployedthatcreatealinkbetweenproducersandconsumersthatisasdirectaspossible.
Mitigation Banking Description
Mitigationbankingisanexampleofastate-establishedquasi-marketfortheconservationofhabitatsandspe-cies.Marketstructureandconduct(rules)aredesignedbypublicagen-cies,andmarkettransactionsareusu-allyrestrictedtocertainparticipantsandconditions.
Mitigationbankingwasoriginal-lyappliedtowetlandhabitats.Thefederalgovernmentdefinedmitiga-tionbankingas“therestoration,creation,enhancementorpreserva-tionofawetlandandotheraquaticresourcesforpurposesofprovidingcompensatorymitigationinadvanceofauthorizedimpactstosimilarresourcesatanothersite(FederalRegister1995).MitigationbankingisauthorizedbytheCleanWaterActSection404permitprogramandtheSwamp-Busterprovisionsofthe1985FarmBill.Itisoverseenbyseveralfederalagenciesandrequiresdevelopersoragriculturalproducerstoreplace,inanequalamount—measuredbychemical,physicalandbiologicalfunctions—thewetlandstheydestroy.Itallowsforoutsidepartiestoestablishwetlandsanddesignatetheirecologicalvalueas“credits”inawetlandsbankingsys-tem.A“credit”ismeasuredinacreunits.Developersandfarmerswhoneedtomitigatewetlandconver-sionontheirlandscangotothesebanksandpurchasecreditstocoverthe“debits”theywillinflictontheirownwetlands.Debitsareconsid-eredtobeanyharm,degradationordestructiontowetlands.
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Underthebankingconcept,amitigationbankerassemblesacontigu-ousareawhereexistingwetlandscanbeprotected,newwetlandscreatedordegradedonesrestored.Asthebankcreatesorrestoreshabitat,itearnsmitigationcreditsfromaregulatoryagency.Thosecreditscanthenbesoldatmarketratestoeitherpublicorprivatedevelopersthatfacemitigationrequirementsfortheirprojectsthatinvolveconvertingwetlandsatthede-velopmentsite.Buyingcreditsrelievesthedeveloperoftheneedtoconducton-sitemitigation,whichgenerallyresultsinlow-qualitywetlands.Fromalandowner’sperspective,buyingashareinabanktransfersmitigationresponsibilitytobankownerswhopayforthesite,restorationandlong-termmonitoring.Dependingonthecostofthecredits,thiscouldsavelandownersmoney(Hemminger2003).Theestab-lishmentofabankis“anticipatoryandaggregative”(WhiteandErnst2004).
Bankscanbeestablishedbypri-vatelandownersorinvestorswhoseektoprofitfromhabitatconservation.Mitigationbankingcreatesaprivatemarketbyplacingamonetaryvalueonaresourcethatprovidesseveralpublicgoodsintheformofvariousecosystemservices.Mitigationbankscanpreventadecreaseinpropertyval-uesasaresultofbeingdesignatedasconservationland.Todate,themajor-ityofbankcreatorshavebeenprivatecompanies,notindividuals.Individu-allandownersmaybeapproachedbyamitigationcompanythatwishestousetheirlandforwetlandsprotectionordevelopment.Thecompanymaypurchasetheland,oraconservationeasementfromthelandowner,orothercompensationsmaybeworkedoutbetweenthetwoparties.
Inadditiontothefederaleffort,somestateshavecreatedmitigationbankingprograms.Forexample,the
ArkansasWetlandMitigationBankProgramisaimedatprovidingoff-sitemitigationopportunitiesforimpactstowetlandsfromdevelopmentandisadministeredbytheArkansasSoilandWaterCommission(George2002).
AssessmentFromthestandpointofbiologicaleffectiveness,mitigationbankinghasbeenhighlycontroversial.TheNationalResearchCouncil(2001)foundthatmitigationbankingthroughwetlandcreationdoesnotre-placetheoriginalecologicalfunctionsofthedestroyedwetland.Bymitigat-ingoff-site,theimpactedarealosesthebiologicalvaluesandhydrologicfunctionsthatwetlandsprovide.Thestudythereforerecommendedthatmitigationbankingbeminimized.Toaddresstheissueofecologicalfunctionrequiresafullspecificationofwhatconstitutessuccess,identifi-cationofthepartiesresponsibleforbothmitigationandlong-termmain-tenanceofthesite,provisionsformonitoring,andenforceablepenaltiesforthefailuretomeetspecifications(GoldsteinandHeintz1993).
Theavailabilityofappropriatephysicalpropertiesformitigationisalsoabiologicalissue.Availabilityandexistenceofsuitablemitigationsitesvariessignificantlyamongregions/statesandecosystems,especiallywithrespecttoendangeredspecies’habitat.
Conceptually,privatemitigationbankshavethepotentialtoreducelandownercostsofconservationbycreatingamarketmechanismforprotectingwildlifehabitat(GoldsteinandHeintz1993).Thepotentialtomakefinancialgainscouldincreasetheprotectionofhabitatonprivateproperty.However,mitigationbank-ingcanbeveryexpensiveintermsoflocatingandbuyingmitigationsites,conductingrestorationandmanaging
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thebankitself.Thehighcostofmiti-gationbankinghasequityimplica-tionsintermsofwhocaninitiateandsupportabank.Mitigationbank-ingworksonlywhenalandownerwithsufficientholdingsandmeansgoesthroughthelegal,administra-tiveandrestorationcostsofsettingupabank(Olsonetal.1993).Theneedtomeethighstart-upcostsisnotconducivetosmalllandownerparticipation.Thissuggeststhatotherincentivemechanismsmaybemoreeconomicallyefficientfromtheprivateperspective,atleastforsmallholdings.Inaddition,smallerlandholdingsmaybelessbiologi-callyeffectivebecauseofisolatedandsmallerhabitats,andtheymaybelesseconomicallyefficientduetothelackofeconomyofscale.
WhiteandErnst(2004)identifyadditionalissueswithrespecttomitigationbanking.First,regula-torshavefounditdifficulttodenyapermittoprojectswhichotherwiseposeunacceptableimpacts,becausetheyprovideexistingmitigation.Theproblemisthatmitigationisautomaticallyassumedtoreplaceecologicalfunction.Inaddition,sitesaresometimesofferedonthebasisofavailabilityandprice,ratherthanappropriatefeaturesandscaleforhabitatequivalentsandastrongprobabilityofrestorationsuccess.Thiscompromisesbiologicalef-fectivenessforcostconsiderations.Thereisalsotheproblemofallowingmitigationforonespeciesorhabitatbyprovidingbenefitsforothertypesofspeciesandhabitats:theapplesandorangesissue.
Therecanbesubstantialeconom-icrisksassociatedwithmitigationbanking.McClure(2005)reportsthatamitigationbankinggroupinCaliforniacalledTheEnvironmentalTrustrecentlydeclaredbankruptcy
andhadabandonedmanyoftheirpreserves.TheTrustwasrespon-sibleformanagingmorethan90propertiescoveringabout4,600acres,includingadjacentlandsthatdevelopershadtobuyforapprovalofhousingprojects.Managementofthepreserveswassupposedtohavebeenpaidforbyobtainingendowmentsfromdevelopers.Themoneywastohavebeeninvested,withtheinterestpayingforup-keep.However,costsoflaborandequipmentfaroutpacedtheendowment.ThefailureofTheEnvi-ronmentalTrusttomaintainlong-termviablehabitatthroughmitiga-tionbankinghighlightstheoverallproblemofhowmitigationbanks,whetherrunbypublicorprivateenti-ties,aremanaged,andhowthereislittletonooversightbypublicagen-ciestoensurethatmitigationisbeingcarriedoutpertheissuedpermits.21
Anequallyimportantissueisthattheexpertisetobothmanageandmoni-tormitigationbankinglandsneedstobeimproved.
Recommendations Toavoidtheproblemofnotre-placingtheoriginalfunctionsofadestroyedwetland,mitigationlands
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shouldbechosenfromidentifiedconservationpriorityareasthatareestablishedunderarespectedhabitatplanningeffort.Also,mitigationbankingprogramsneedtorecognizethatthereisapointwhenaspecificecosystembecomesirreplaceableduetoscarcity.Atthispoint,nomoredevelopmentormitigationshouldbeconsidered.
Inordertopromotebiologicaleffectivenessandimprovedeconomicefficiencyofpublicresources,themitigationbankingcommunityshouldestablishaccreditationcriteriaanddevelopanoversightmecha-nismbywhichindividualbanksandbankersareheldaccountableforthebiologicalvaluesthattheyareresponsibleformanaging.Furtherre-searchonwhatatradableunitshouldconsistof,andontheindicatorsusedtomeasurethebiologicalintegrityofthoseunits,shouldbeestablishedthroughpeerreview.
Anewassessmentofmitigationbankingshouldinvestigatethefulleconomiccostsandbenefitsofthisincentivemechanism,whatneedstobeimproved,andrecommenda-tionsabouttheappropriaterolesforthepublicandprivatesectors.
California red-legged frog | U.S. Fish and Wildlife Service
21. Delfino, K. 2005. Personal Communication. Defenders of Wildlife, Sacramento, California.
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Otherhelpfulinformationwouldincludedevelopingastandardsys-temtomonitorbankeffectivenessandperformance.Establishingamonitoringandevaluationprogramformitigationbanksbecomesevenmoreimportantinlightofthenu-merousrecentstatementsbypublicagenciesthatmitigationbankingwillbeaprimaryincentivetoolgoingintothefuture.
Conservation BankingDescription
Conservationbankingisanoff-shootofmitigationbanking.Conservationbanksareareasthataresetasidetoprotectendangeredorat-riskspeciesandtheirhabitats.Conservationbankingallowsprivatelandownerstoobtainconservationcreditsforconservingandmaintainingendan-geredspeciesortheirhabitatandarenearlyadecadeold.Creditsare“banked”forfuturetrading(Yeager1993),andbanksmustbepre-ap-provedbyfederalandstateagenciesandestablishedwithinthecontextofafederalhabitatconservationplanundertheEndangeredSpeciesAct.Thepurposeofconservationbanksistoproactivelypreservelargecontigu-oustractsofhabitattooffsetimpactsfromdevelopmentactivities(WhiteandErnst2004).
Conservationbankingdiffersfrommitigationbankinginthatconservationbankingisbasedonconservingtheoriginalecosystemandrelevantspecieswheretheyexist.Conservationbankingisbasedonthe
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principlesofincreasingtheprobabil-ityofsurvivalandaddressingpopula-tionswithadequatenaturalhabitat.Asof2004,about35conservationbankshadbeenestablished(Fox2004).Californialeadsthenationinestablishedbankswith30,including11inSanDiegoCountyalone.Itisestimatedthatthesebanksshelterabout22speciesprotectedbytheEn-dangeredSpeciesAct.Cumulatively,
thebankscoverover44,200acresofhabitatandprotectavarietyofplantsandanimalssuchasthegolden-cheekedwarbler,red-leggedfrog,vernalpoolfairyshrimpandPimapineapplecactus(FoxandNino-Mur-cia2005).Therearealsostate-widebankinginitiativesinColoradoandNorthCarolinatopreservehabitatinvolvingbothpublicandprivateparticipants(WhiteandErnst2004).
Assessment Thereareseveralconditionsthatmustbemetforconservationbank-ingtoserveasaviableincentivemechanismforbiodiversityconser-vation.First,conservationbankswillhavetocomplementotherprotectedareasinordertoconservewildlifehabitatonascalethatisbiologi-callyviable.Bankswillthereforerequirelarge,contiguousareas.Smallisolatedpatcheswillbeinsufficienttoprovideviablehabitat.Second,conservationbanksalsorequiresubstantialmanagementinordertomaintaindesiredbiologicalfunc-tions.Withoutprotectionandman-
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agement,thehabitatmaydegrade,andthespeciesmaybedisplaced.Ifconductedintheframeworkoflarge-scaleconservationplans,con-servationbankinghasthepotentialtopermanentlyprotectnativehabi-tatsandtheirspecies.Establishedconservationbanksdonotreflectalloftheidealssetforthbythefederalguidance,buttheyhaveprotectedsignificantamountsofecologicallyfunctioninghabitatthatwouldhaveotherwisebeendeveloped(FoxandNino-Murcia2005).
Thoseindividualsorentitiesthathaveparticipatedinconservationbankinghavefounditfinanciallyat-tractive.Financialmotivesdrovethefoundingof91percentofthebanks,andthemajorityoffor-profitbanksarebreakingevenorbetter(FoxandNino-Murcia2005).Withcreditpricesinconservationbanksrangingfrom$3,000to$125,000peracreinCalifornia,bankingagreementsofferfinancialincentivesthatcompetewithdevelopmentactivitiessuchasbuildinggolfcoursesandhomes(Fox2004).
ResearchhasshownthatthetransactioncostsofestablishingaconservationbankagreementwiththeU.S.FishandWildlifeServicecanbehigh.However,63percentofbankownersreportedthattheywouldsetupanotheragreementgiventheappropriateopportunity(FoxandNino-Murcia2005).Thetimeofestablishmentofaconservationbankisabouttwoyears(Fox2004).Highestablishmentcosts,andthelargear-easrequired,maybedisadvantageoustosmallerlandownersunlesstheycanestablishacooperativebankingprojectthatoffersenoughhabitatatacompetitiveprice.
Moreneedstobeunderstoodabouttheactualandpotentialconstraintstoconservationbanking.
“ ...the majority of for-profit [conservation] banks are breaking even or better.”
4 6 | Incentives for Biodiversity Conservation
Amongmanyprofessionalconser-vationplanners,thereisalackofunderstandingandknowledgeofwhatconservationbankingis,andsomethatdounderstanditperceiveitasfinanciallyandbiologicallyrisky.Becausetheoverallpositiveandnegativeimpactsofbankingarenotwellknown,theremaybeunantici-patedconsequencesintermsofhabitatprotection.
Recommendations Thegoalofconservationbankingshouldbetoprotectin-kind,on-sitehabitatsandspecies.Toachievethisgoal,astandardizedandcentralizedinformationbaseforidentifyinglandsthatcouldserveasviablecon-servationbanksforvariousspeciesandhabitatsshouldbeestablished.Inordertoavoidanetlossofhabi-tat,conservationbankingshouldincludearestorationcomponent,andnotbejustaprotectionexercise.Anecessarycriterionforapprovingbankingoperationsshouldincludeestablishinglargecontiguousareasofappropriatehabitat.
Toimprovethefinancialreturnstoconservationbanking,bankersandpublicagenciesshouldconsidersegmentingdifferentecologicalservicescontainedatabankingsiteandidentifyinganarrayofpoten-tialbuyersinterestedinmultipleorindividualservices(e.g.,pollination,floodcontrol,waterpurification,etc.).TheconceptofecosystemservicemarketsisbroadlyexploredintherecommendationspartofSectionXI.Inordertolowerthetransactioncostsofestablishingandmanagingaconservationbank,wewouldrecommendimplementingaresearchprojecttoquantifysuchcostsinboththepublicandprivatesectorandtoprovidesuggestionsforimprovedadministrativeefficiency.
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Transferable Development RightsDescription
Transferabledevelopmentrights(alsoreferredtoastradabledevelop-mentpermits)arecreatedrightstodevelopalandscape.Underatransferofdevelopmentrightsapproach,alandownerinadesignated“sendingarea”isassignedtradabledevelop-mentrightsforpreservinghisorherlandandmaysellthemtoanownerofadesignated“receivingarea,”tobeusedtoincreaseallowabledevelop-mentdensities.Priortoagovern-mentagencyestablishingamarketintradabledevelopmentrights,alocalplanningcommissiondefinesconservationanddevelopmentzonesanddetermineswhichareasshouldbeconserved,wheregrowthshouldoccurandwheretoallowbuffer-zoneactivitiessuchasagricultureorforestry(Brown1999).
Establishingatradabledevelop-mentrightsprocessandmarketinvolvesseveralsteps(GoldsteinandHeintz1993).First,aconservationplanisdevelopedforadelineatedandzonedregionspecifyinghowmuchareawillbeprotectedtogetherwithaprocessfordeterminingwhichareaswillbedeveloped.Second,apro-cessisestablishedforevaluatingthehabitatvalueofprotectedlandsandassigningtradableconservationcred-itstolandowners.Third,adevelop-ment/conservationratioisdefinedfordeterminingtheamountofmitiga-tion(andhenceconservationcredits)requiredtoundertakeaproposeddevelopment.Fourth,anactualmar-ketprocessisdevelopedforconduct-ingtradetransactionsinconserva-tioncredits.Last,amonitoringandevaluationprogramisestablishedforsecuringperformance,guaranteeingcompliancewithmitigationrequire-mentsandmakingsureconservation
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objectivesaremet.RecentexamplesoftradabledevelopmentpermitprogramsincludetheNewJerseyPinelands,theCentralPineBarrensinNewYorkandPalmBeachCountyinFlorida(Robles2000).
Aswithmineralrights,waterrights,easementsandtradablepollu-tionpermits,developmentrightsonprivatepropertythatsupportsimpor-tantbiologicalhabitatcanbedisag-gregatedfromtheoriginallandbaseandtradedfreelyontheopenmarket.Ownersoflandprovidinghabitatwouldbeallowedtotradeorsellrightstodevelopment.Bothdevelop-mentandnon-developmentinterests,publicandprivate,wouldbeeligibletobuythesedevelopmentrights.Thedeterminationontheamountofhabitateligiblefordevelopmentwouldbebasedonbiologicaldataontheamountofhabitatrequiredtosustainandmaintainspeciesandoverallbiodiversity(Hudson1993).
Delaware’sAgriculturalLandsPreservationProgramhascreatedatradinginstitutionthatallowsland-ownerstoselldevelopmentrights.Whilethisprogramisdesignedtokeepagriculturallandinproduc-tion,itisalsointendedtoprovideforpermanentopenspaceforthepublic.LandownersmayenrollinAgriculturalPreservationDistrictsandreceiveinexchangetheprotec-tionofright-to-farmlegislationaswellastheopportunitytopreservetheirlandinperpetuitythroughconservationeasements.
Assessment Thereisafairamountofinformationontheeffectivenessandefficiencyoftradabledevelopmentrights.Withrespecttobiologicaleffectiveness,tradabledevelopmentrightsarecon-sideredparticularlyuseful,especiallywithinsmallgeographicareaswhere
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sendingandreceivingareasareclearlydefinedandrelativelynon-controversial(Olsenetal.1993).Asignificantconditionforbiologi-caleffectivenessisthatmanagementprescriptionsmustbeidentifiedthatwilloptimizethevalueofthehabitat.Anothermajorconditionisthatthepublicagencieshavetomaketheinitialallocationofrightsthatmaximizeshabitatprotection.Thisisdonebydetermininghowmuchoftheparticularhabitatforanat-riskspecieswouldbeeligiblefordevel-opmentandthendistributingtheserightstoeligiblelandowners(McKineyetal.1993).
Fromtheeconomicefficiencyperspective,tradabledevelopmentrightscanpromotetheselectionofthelowestcostlandsforconserva-tion(GoldsteinandHeintz1993).Tradingtendstoencouragethoselandownerstoselltheirrightswhowouldgiveuptheleastvaluebyforegoingdevelopment.But,thesuc-cessoftradingultimatelydependsonwheretheimportanthabitatis.Moreoftenthannot,importanthabitatislocatedwherelandownerswould
havetogiveupthemostinforegonedevelopmentrevenues.
Therearesomeconditionsthatmustbemetinorderfortradabledevelopmentrightstobeeconomi-callyviableforparticipants.Oneofthedifficultiesindesigningatradablerightssystemisthat,atleastforsomelandowners,thepotentialgainsfromdevelopmentmayexceedthegainsfromthesaleofdevelopmentrights.Ifacreditsmarketdoesnotsetasufficientlyhighprice,theamountoflandtradedintoconservationstatusmaynotbeadequate.Inthiscase,amanagingagencymustsubsidizethemarketprice,purchaseadditionalcredits,supplementthezoning/trad-ingschemewithdirectacquisitionoflandoreasements,orreverttoaregu-latoryapproach.Governmentsubsi-dizationofthemarketorpurchaseofadditionaldevelopmentrightsspreadsthecostsofhabitatconservationmorebroadlyamongthegeneralpublic(GoldsteinandHeintz1993).
ManycountiesthroughouttheUnitedStateshaveexperimentedwithtransferofdevelopmentrightsincentives.Thedegreeofsuccesswith
respecttoconservingviablewildlifehabitathasvaried.MontgomeryCountyinMaryland,forexample,haspermanentlyprotected43,000acresoffarmlandthroughtrad-abledevelopmentrights.However,othercountyprogramshavenotbeensuccessful,becauseincentivelevelshavenotbeenhighenoughtoattractlandowners.If,forexample,therearemanylandownerswhowanttoselltheirdevelopmentcredits,butfewdeveloperswhowishtobuythecred-its,thevalueofthecreditwillbelow(simplesupplyanddemand).Countygovernmentshavetobalancethesupplyanddemandofdevelopmentcreditsandinsurethattheareaoflandinthe“receiving”areasmatchestheareaoflandinthe“sending”areas.Asimilareconomicchallengeisthatthetradablelandcommoditieshavetobecomparable.Thatis,itisnotviabletotradelandssupportingpygmyowlhabitatforvernalpoolhabitat,orlynxhabitatinMaineforlynxinMontana.Thisisaproblemassociatedwith“thin”markets.
Thetransactioncostsassociatedwithestablishingandmanagingatradablehabitatdevelopmentrightsmarketcanbeveryhigh.Aprimarycostisthesubstantialecologicalresearchneededtodetermineviablehabitatamounts.Aninstitutionalmechanismtodistributeandmonitortheallowabledevelopmentrightsalsohastobecreated.Fieldsurveystoestablishthehabitatunitsizeandvalueonprivateparcelsmustbecon-ducted.Finally,aplanformonitoringandenforcementhastobedevelopedandimplemented.Alloftheseactionsincreaseboththepublicandprivatecostsofusingtradabledevelopmentrightsasanincentivemechanism.
Therearesocialequityimplica-tionstoasystemoftradabledevel-opmentrights.Dependingonthe
Lynx kitten | ©Corel Corp.
4 8 | Incentives for Biodiversity Conservation
originalpatternoflandownership,tradingcanredistributedevelopmentwindfallscausedbyzoningoracon-servationplanfromthosewhoareal-lowedtodeveloptothosewhoselandisrestricted.Thecostsofconservationthatwouldotherwisebebornemostlybylandownersinrestrictedzonesareoffsetbypaymentsfordevelop-mentrightsmadebylandownersinzonesdesignatedfordevelopment.Furthermore,developersarelikelytopassalongatleastapartofthecostofdevelopmentrightstotheultimatepurchasersorusersofthedevelopedlands,thuspassingonthecostsofconservationmorewidely.Onemajorquestioniswhetheritispossibletocompensateenrolledlandsdifferentlybasedontheiruniquehabitatvalues(Olsen,etal.1993).
Recommendations Weofferthreerecommendationstoincreasethebiologicaleffectivenessoftransferabledevelopmentrightsincentivemechanisms.First,theidentificationoflandsthatareeligibleas“sendingsites”couldbedonebyusingstatewildlifeactionplansand
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thencontactingtheappropriatelandownerstosolicittheirparticipa-tion.Biodiversityconservationwouldbenefitbecausetheamountofhabitatauthorizedtobealteredwouldbeclearlydefinedandcapped.Second,asinthecaseofmitigationandcon-servationbanking,biologicalcriteriaforin-kindandon-siteconservationneedstobeestablished.Third,werecommendthatadditionalresearchbedonetodeterminewhatsizelandbaseisnecessaryforrecoveringindi-vidualspeciesandtodefinebiologi-callyeffectivemanagementpractices.
Toimprovetheeconomicef-ficiencyoftradedevelopmentrightsmeasuresthereisaneedtoconducteconomicvaluationstudiesofuniquehabitatsinordertosetoutcompensa-tionvaluesforcredits.Anotherre-searchrequirementistoestimatetheleveloftransactioncostsfordevelop-ingamarketintradabledevelopmentrights(e.g.,designingaconservationplan,developingtradingratios,deter-miningmarketrules,etc.)inordertoidentifycost-savingmechanismsthatdonotcompromiseestablishedbio-logicalgoals.Becausetheopportunity
costsofforgoinglanddevelopmentmaybehigh,thereisaneedtode-veloptransferabledevelopmentrightsprogramsthatleveragefundsfromseveral“receiving”sourcesinordertocontinuetopayformanaginglandsfortheirbiologicalvalue.
Ecosystem Service MarketsTheemergenceofprivatemarketsforecosystemservicessuchascarbonsequestrationandwaterqualityisjustbeginning,andnoformalassess-mentoftheirbiologicaleffectivenessoreconomicefficiencyhasbeencarriedout.Todate,theseservicemarketshavebeenfocusedononespecificresource.Theoneexcep-tiontothishasbeenaveryvibrantmarketinpollinationservicesforcommercialcropproduction.
TheWillamettePartnershipinOregonisdevelopinganecosystemmarketplacewherebusiness,govern-mentandconservationinterestsworktogethertoprotectandrestoretheWillametteRiverBasin.Conserva-tioncredits,whichwillbetradedinthemarketplace,canleveragethecollectiveresourcesoffactories,farms,forests,citiesandsewer/waterratepayerstomakestrategic,coor-dinatedconservationinvestmentsthatyielddividendstotheentireecosystem.TheinitialfocusofthemarketplacewillbetoreducewatertemperaturesintheWillametteBasintobenefitfish,publichealthandwildlifehabitat.
Thereisaneedtomonitorandevaluatetheforthcomingexperimentsinecosystemservicemarketstomakesurethatbiologicalresourcesarenotbeingcompromised.Manyoftheconcernsandassessmentneedsformitigationandconservationbank-ingwouldapplytotheconceptofanecosystemmarketplace.
Willamette River wetlands, Oregon | © Jim Yuskavitch
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VIII. FINANCIAL INCENTIVES
Financialincentives,orsubsidies(seeBatieandErvin1999;HeimlichandClaassen1998),
constituteapaymentinexchangeforhabitatconservationprojectsoractivities.Thereareseveraltypesoffinancialincentives,suchascom-pensationprograms,cost-sharingofnewconservationtechnologiesormanagementpractices,landrentalorleasing,conservationcontracts,debtforgiveness,insuranceprogramsandpublictaxbenefits.Over-and-abovecost-sharepayments,incentivepay-mentsarebroadlydefinedtoincludepaymentsexceedingfarmers’costs.Arelativelynewincentivemechanismprovidespaymentsforcontinuedprotectionofenvironmentalre-sourcestoagriculturalproducersandissimilartowhatsomewouldcalla“greenpayment.”
Thefinancialincentivemecha-nismsassessedinthissectionincludepublicandprivatecompensation,insurance,cost-share,stewardshippayments,rentalpaymentsanddebtforgiveness.Becausetherearemanypublictax-relatedinstruments,wetreattheseincentivesseparatelyinSectionIX.
Compensation ProgramsDescription
Conservationistshavebeenex-perimentingwithcompensationthatdirectlypayslandownerstooffsetwildlifethreatstocrops,livestock,propertyorpersonalsafety.Compen-sationprogramsaredesignedtoreim-burseindividualswhosuffereconom-iclossesduetowildlifedepredation
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ordamage.Fullorpartialpaymentismadeintheformofcashorotherassistance(Nyhusetal.2003).ThemostfrequentapplicationoftheseprogramsintheUnitedStatesistoreimburselivestockownersforlossesincurredbylargepredatorssuchaswolvesandgrizzlybears.These
programsaremanagedbybothpublicandprivateentitiesandtheiroverallpurposeistomitigatehuman/wildlifeconflicts,withtheintentionofprovidingsupportforthepresenceofwildlife.
Whenhumansencroachoncar-nivores’habitats,orasreintroducedorrecoveringpopulationsincrease,carnivoresmorefrequentlyencoun-terandpreyonpetsorlivestock.Suchencounterscanbecostlyandcanunderminewildliferecoveryprograms.Naughton-Trevesetal.(2003,p.1501)offertherationaleforsuchprograms:“Compensa-tionprogramsofferameanstoredresstheinequitabledistributionofcostsandbenefitsassociatedwithrestoringlarge-carnivorepopula-tions.MostU.S.citizenssupport
carnivoreconservationandmanyenjoytheenvironmental,aestheticandeconomicbenefitsofrestoringcarnivores.However,thedirectcostsofconservingtheseanimalsoftenfallsonaminorityofindividualsinruralareaswholoselivestockorpetstocarnivores.Wildlifemanagershope
thatdirectcompensationpaymentswillimprovetheseindividuals’toler-anceforcarnivoresanddissuadethemfromkillingcarnivoresinretaliation.”Forillustrativepurposes,wedescribeapubliccompensationprogramman-agedbythestateofWisconsinandaprivatesectorprogrammanagedbyDefendersofWildlife.22
Since1982,Wisconsinhashadaprogramtocompensatefordamagecausedbyspecieslistedasendangeredorthreatened,drawingonfundsfromthestateEndangeredResourcesFund(fundedbyvoluntarycontri-butionsontaxreturnsandthesaleofspeciallicenseplates).Thestatehascompensatedwolf-relatedlossessufferedbylivestockproducers,gamefarmersandbearhunters(forhuntinghounds).Compensationdependson
“ Compensation programs are designed to reimburse individuals who suffer economic losses due to wildlife depredation or damage.”
22. See Wagner et al. (1997) for a list of states with wildlife compensation programs.
5 0 | Incentives for Biodiversity Conservation
afieldinvestigationandconfirmationbytheU.S.DepartmentofAgricul-ture’sWildlifeServicestoverifythatlosseswereduetowolves.Thetimetocompleteacompensationpay-mentaveragesabout80daysfromthefirstreportofdepredation(Trevesetal.2002).Between1976and2002,theWisconsinDepartmentofNaturalResourcesofferedcom-pensationfor121verifiedincidentsoncattle,sheep,horses,farmdeer,
petsandhuntingdogs.Thevalueofthecompensationpaymentissetbytheprojectedfallmarketpriceoftheanimal(e.g.,$602percalfin2002)(Trevesetal.2002).
Thecompensationprogramman-agedbyDefendersofWildlifehasbeeninexistencesince1987.ThiswasthefirstprivatecompensationfundforwolveseverestablishedinNorthAmerica(Nyhusetal.2003).By1992,Defendershadestablishedapermanentfundtopayforveri-fiedlossesanywhereinthenorthernRockies(thiswaslaterextendedtoincludetheSouthwest).Atrustfundhasbeenestablishedwithprivatefoundationcontributionsthatcompensateslivestockownersforlossesduetowolvesandgrizzlybears.Thegoaloftheprogramistoshifttheeconomicresponsibilityforwolfrecoveryawayfromtheindividualrancherandtowardsocietyatlarge.
Livestockownersarereimbursedfortheirlossesuponconfirmationbytheappropriatestate,federalortribalofficial.AfteraninvestigationreportissenttoDefenders,itthencontactstheranchertodeterminethevalueofthelivestocklost.Fullmarketvalueispaidforconfirmedkillsbywolvesandgrizzlybears,and50percentofthecurrentmarketvalueforprobablelosseswhentheevidenceisstrong,butinconclusive.
Assessment Privateandpubliccompensationmechanismsdifferintheireligibil-itycriteriaandtheiradministration.Intheprivatesector,DefendersofWildlifeadministersacompensationincentivemechanismtoencourageprivatelandholders,primarilyranch-ers,toacceptthepresenceofpreda-tors,mostlywolvesandgrizzlybears(Brown1999).Between1987and2004,Defenderspaidover$400,000incompensationto345ranchersforpredator-relatedlosses.About1,580livestockanimalswerelost,almosttwo-thirdsofwhichweresheep.Nyhusetal.(2003,p.39)observedthat“Somefeelthisisahugesumtopayforwolfdamage,othersfeelitisatinyprice.Butalmostallwolfexpertsagreethatshiftingtheeco-nomicresponsibilityforwolvesawayfromrancherstowardswolfsupport-ers(thegeneralpublic)hascreated
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abroaderpublicacceptanceforwolfrecoveryandhelpedpavethewayforreintroductions.”
PubliccompensationfundssuchasthatmanagedbythestateofWis-consinhavehadtheirshareofissuestocontendwith.Theseissuesaresetwithinthecontextthat,aswolfpopulationshavebeengrowingandexpandingtheirrange,depredationsareontherise.Naughton-Trevesetal.(2003)foundthatwhileallWisconsinitesapprovedofcompensa-tionpaymentsasawolfmanagementstrategy,thereareparticularsocietalgroupswhohaveexperiencedlosses(e.g.,bearhunters)whoarelesstoler-antofwolves.
Publiccompensationincen-tiveshavebeencriticizedforbeinginadequate,fraudulentorcumber-some.Naughton-Trevesetal.(2003)maintainthatpubliccompensationsuffersfromwhateconomistsrefertoasa“moralhazard”problem.Thatis,theexistenceofacompensationpro-grammaymitigateagainstalivestockownertakingpreventativemeasurestoprotecthis/herherdtolowertheriskofdepredation.Thus,thecom-pensationmechanismcouldresultinhigherpublicorprivateoutlays.
Thereareadditionaleconomicandsocialreasonswhycompensationprogramsmaynotbeveryeffectiveorefficientinincreasingtoleranceforpredators.Thesecaninclude:(1)traditionalattitudestowardswolvesconsiderlethalcontroltheonlyvi-ableoption;(2)ranchersconsidercompensationpaymentsinadequategiventheemotionandyearsinvestedintheirlivestock;and(3)recipientsincurhighcostsforcomplyingwithrequirementstohavedefinitiveevi-denceofapredatorattack(Naugh-ton-Trevesetal.2003).Withrespecttoadequatepayments,landownershavelongmaintainedthattheyexpe-
“ Defenders of Wildlife administers a compensation incentive mechanism to encourage private landholders, primarily ranchers, to accept the presence of predators...”
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rienceundiscoveredandunverifiedlossesoflivestock.Thequestionthenbecomeswhatwouldbeanadequateandfaircompensationratio.Inaddi-tion,publiccompensationprogramshavebeencriticizedbecausetheyfrequentlyrunoutoffunding.
Whethercompensationfundsareprivateorpublic,therearecommonconditionsunderwhichtheycanbesuccessfulinprotectingwildlife.Themostimportantconditionistheneedforclearandconvincingevidencethatadepredationhasbeencausedbyaprotectedspecies.Obtainingevidenceisoneofthemostcriticalchallengestocompensationschemes.Ignoringordelayingverificationcanhavenegativeimpactsontheaccept-abilityofcompensationmechanisms.Finally,thereisaneedfortimelypaymentsbasedonverifiedlossesiflandownersaregoingtocontinuetoparticipate(Bulte2005).
Althoughcompensationprogramsmaynotcompletelyameliorateindi-viduals’grievancesagainstcarnivores,theyareconsideredtobeveryuseful.Compensationpaymentsaresupport-edandexpectedbythebroadpublic.Research(Bangsetal.1998)suggeststhatceasingcompensationpaymentscausesretaliationandincreasedhostility.Someexpertssuggestthatcompensationprogramsofferameanstobuyoffbroaderpublicconstituen-ciesandearnsupportfromstate-levelpoliticalrepresentatives(Nyhusetal.2003).Oneobserverhasnotedthatonly$15,000peryearhasbeenpaidforgrizzlybeardepredationsonlivestockinMontanaandIdaho,a“puny”amountofmoneyspenttoshifttheeconomicburdenfromlive-stockgrowerstobearsupporters.23
Recommendations Ourmajorrecommendationwithrespecttocompensationprograms,
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publicorprivate,istomakecom-pensationpaymentsdependentonsomelevelofadoptionofproactive,preventativemeasures.Thisachievestwogoals.First,itcaninduceincreasedprotectioneffortsthataremorebiologicallyeffectivebecausetheylessentheprobabilityoftheneedforlethalcontrol.Fromaneconomicperspective,insistingonpreventativemeasureswouldcounterthemoralhazardproblemdiscussedabove.
Themajorfutureconstraintforpublicandprivatecompensationincentiveswillbefundinglevels.Tolessentheimpactofthisconstraintsomewhat,itwouldbemoreeffec-tivetotryandleveragepublicandprivateeffortsanduseexistingfundsinamoretargetedmanner.Targetingcompensationfundstocoverspecificareasanddomesticpreythataremoreatriskofpredationwouldhelpthesefundstobeusedmoreefficiently(Haneyetal.2005).Theremustalsoberesearchonwaystolowerthetransactioncostsassociatedwithre-porting,verifyingandreimbursementoflosses.Lastly,compensationratiosshouldbeestablishedonthebasisofecologicalregionsandthespeciesconfigurationsinthoseregionsinordertosettlethequestionofverifiedversusunverifiedlosses.
Insurance Description
Insuranceisanotherformofcom-pensation,withtheexceptionthatprivateindividualpotentialclaimantspaypremiums.Insuranceprogramscanbeprivate,ortheymayincludetheparticipationofapublicagency.Premiumsaredeterminedbymarketvaluesandhistoriclossrates(Nyhusetal.2003).Theyaredesignedtominimizepotentialfinanciallossesincurredasaresultoflivestockpredationbycarnivores.
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SeveralEuropeanandAsiancoun-trieshaveusedinsuranceprograms(Klemm1996;Fourli1999;Blanco2003).Inmanycases,insuranceprogramsarecombinedwithothertypesoffinancialinvestmentssuchasruralcommunitydevelopmentfunds,localsavingsandloanassociations,ortheestablishmentofecotourismactivities(Mishraetal.2003,KarkyandCushing2002).Infact,itistheseactivitiesthatusuallygeneratethefundingtostartupcommunityinsur-anceprograms.Inmostcases,localcommunitiesdeterminepremiumratesandclaimrules.Amajoradvan-tageoflinkinginsurancewithothereconomicopportunityprogramsisthatthereislittleincentivetocommitfraud,becausecommunitydevelop-mentactivitieswouldsuffer.
Assessment Becauseoftherecentdevelopmentofinsuranceincentivesasaspeciesorhabitatconservationincentivetool,thereisnotmuchinformationoneithertheirbiologicaleffectivenessoreconomicefficiency.24However,basedonourearlierdiscussionofcom-pensationmechanisms,itispossibletooutlinewhatthegeneralcondi-tionswouldbefordeterminingthebiologicaleffectivenessandeconomicefficiencyofinsuranceincentivesforbiodiversityconservation.
Inaninsurance-basedcompensa-tionprogram,landownersareinsur-ingthemselvesagainstcatastrophicloss,thatis,thoselossesthatarebeyond“average.”InsurancefundsthatarefinancedthroughanexternaldonormaybebetterabletoaddressaverageorindividuallossesHowever,relianceoncompensationfundingfromexternalsourcesmayalsomakeinsurancemechanismslesssustain-able,andthereforelesseffective,overthelongrun.
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23. Johnson, M. 2005. Personal Communication. Defenders of Wildlife. Missoula, Montana. 24. See Mishra et al. (2003); Karky and Cushing (2002); and Hussain (2000).
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Primaryweaknessesofinsuranceincentivesarethecurrentlackofanactuarialbasisforsettingpremiumsandthedifficultyindeterminingtheactualvaluelostbylandown-ers(GoldsteinandHeintz1993).Theseconditionsmustbeaddressedinorderforinsuranceincentivestobeeconomicallyefficient.InthecaseofwolvesandgrizzliesintheUnited
States,governmentalreintroductionhasbeentheprimaryeventthathascausedlivestocklosses,andthuslossesdonothavethetypeofrandomoc-currenceexhibitedbymostinsurableevents(e.g.,caraccidents,hurricanes,floods,etc.).Therefore,anytypeofinsuranceincentivemechanismwouldhavetobebasedonexpectedlossesduetocontinuingbusinessoperations.Thedesignoftheinsur-ancemechanismswouldbemorelikeabusinessinsurancemodelforinventorylossordamage(GoldsteinandHeintz1993).
Nyhusetal.(2003)pointedoutthatoneobviouspitfallisthatthecostofinsurancepremiumscouldoutweightheaveragepercapitacostofdamagetoanindividualland-owner.Thisproblemcouldbeoffsetbycombininganinsuranceproductwithacommunitydevelopmentfundtohelpoffsetindividuallosses.
Similartoanycompensationmechanism,insuranceissusceptibletothemoralhazardproblemwherebyalandownermayhaveareducedincentivetopreventlossesifhe/sheknowsthataninsuranceprogramwillreimburseatfullvalue.Thisresultsinhighercostsforinsuranceprovidersandperhapsanunwillingnessofpro-viderstooffertheinsuranceproduct
RecommendationsSimilartothesituationwithcompensationincentives,insuranceincentivescanbemorebiologicallyeffectiveiftherearerequirementsforranchersandlandownerstopreventlossesfromoccurringinthefirstplace,byrequiringtheuseofproactive,preventativemanage-mentpracticestoavoidconflicts.Incaseswherenopreventativemeasuresweretaken,reimburse-mentrateswouldbeloweredorstandarddeductiblescouldbeincreased.Fromapurelybiologi-calperspective,actuarialratesfordeterminingthelevelofriskoflossshouldbedevelopedforvariouspartsofcountry.
Wethinkthereisagoodopportu-nityfortestingcommunity-develop-mentbasedinsuranceprogramsinthewesternUnitedStates.Insuranceprogramscouldbeofferedthrough
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localRuralConservationandDevelopmentorganizationsorthroughspecializedcooperatives.Thiswouldcontributetoloweringthecostsofverifyingandadminister-ingclaimsforlosses.
Cost-Share IncentivesThisdiscussionofcost-shareincen-tivesisdividedintotwocategories:publicandprivate.Theoverwhelm-ingmajorityofcost-shareincentivesareinthepublicfederalsector,andweselectedafewrepresentativeexamplesoffederalcost-shareincentivestoassess.
Public Cost-Share Mechanisms
Description Atthepubliclevel,therearecost-shareincentivesthataredirectlyal-locatedtoat-riskspeciesandhabitats,whileothercost-shareprogramshaveindirectimpacts.Mostpublicconservationincentiveprogramsthatprovidecost-shareassistancealsocontaintechnicalassistanceandeducationalcomponents.Examplesofcost-shareincentivesatthefederallevelthatdirectlyimpactspeciesandhabitatconservationincludetheU.S.DepartmentofAgriculture’sWildlifeHabitatIncentivesProgramandEnvironmentalQualityIncen-tivesProgram,andtheU.S.FishandWildlifeService’sPartnersforFishandWildlifeandLandownerIncentivePrograms.
Atthefederalandstatelevels,thereareliterallydozensofprogramsdesignedtoassistlandownerswiththecostsofimplementinghabitatandresourceconservationprojects25,eachwithitsownuniqueeligibilitycriteria,paymentlevelsandmecha-nisms.Forthegeneralpurposesofthistaxonomy,however,therearecommoncharacteristicsofthesepro-
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“ ...insurance incentives can be more biologically effective if there are requirements for ranchers and landowners to prevent losses from occurring in the first place...”
25. A detailed description of recent federal cost-share, grant and other incentives programs is provided in Hummon and Casey (2004).
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gramsthatwarrantdescription.First,mostpubliccost-shareprogramsalsoprovidefortechnicalassistance.Second,mostarenotaimeddirectlyatspeciesorhabitatconservationbutinsteadpredominatelyaddresssoilerosionandwaterqualityproblemsthathaveindirectbeneficialimpactsonspeciesandhabitats,especiallyaquatichabitats.Third,dependingonthepurposeandstructureofeachindividualprogramorrecommendedmanagementpractices,cost-shareamountscanrangefrom50percentto100percent.Inaddition,manyprograms,especiallythoseatthefederallevel,offerextraincentivepaymentsfortheadoptionofspecificpracticesorforaselectedhabitattype(e.g.,riparianzones).
Typically,thefederalgovern-ment,especiallytheU.S.DepartmentofAgriculture,determineswhichmanagementpracticesitwillcost-share.TheEnvironmentalQualityIncentivesProgramadministeredbytheDepartmentofAgricultureusesanEnvironmentalBenefitsIndextotargetcost-sharefundstoprojectsconsideredtohavethehighestenvi-ronmentalbenefit.
Ninetypercentofstateshaveatleastonetypeofpublicpaymentpro-gram.26Themostcommonaregrantsorcost-shareprogramsthatpayallorpartofthetotalcostofactivitiessuchashabitatrestorationorenhance-ment.Thirty-sevenstateshavecost-shareprograms,and20stateshavegrantprograms.Oneexampleofastatecost-shareincentiveforhabitatconservationisWisconsin’sTurkeyandPheasantStampProgram,whichprovidesfundingtolandownersforpracticestomanage,restoreandpre-servewoodlands,savannah,wetlandsandprairie.Thecost-shareprovidesfundsforthelaborcostsofprescribedburningaswellasin-kindmateri-
alssuchasburningequipmentandprairieseed.Thecost-shareincentivealsocoverssomepaymentstoland-ownerstoallowhuntingaccessandrequiresaten-yearcommitmentfromlandowners.Georgiaadministersacost-shareincentivetolandownersforthepreservation,creationorenhance-mentofbobwhitequailhabitat.Underthisincentive,alandownerorleaseholdercontrollingaminimumof50contiguousacresofrowcropagriculturallandorthinnedpinestandsmaybeeligibleforpaymentsofupto$10,000.
Twenty-onestatesofferin-kindmaterialstolandownerstoencourageenhancementorrestorationofresourc-esonprivateland.Forexample,theIllinoisPrivateLandWildlifeHabitatProgramassistslandownerswithna-tiveplantmaterials,equipmentandlabortodevelopandmaintainwildlifehabitatmanagementpractices.
Assessment Todate,thereislittleinformationoneitherthetechnicaleffectivenessoreconomicefficiencyofindividual
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cost-sharemechanismstoconservespeciesandwildlifehabitat.Fromthestandpointofbiologicaleffectiveness,thecost-sharemechanismmayonlybeatemporarysolutionunlesstheinitialone-timepaymentisaugment-edwithmanagementfundsorotherlonger-termmechanisms.
Fromaneconomicperspective,cost-sharepaymentsincreasethelikelihoodthatlandownerswilladoptpracticesconducivetospeciesandhabitatconservation,becausetheyreducethenetcostofdoingso(Claas-senetal.2001).Incentivepaymentsthatexceedthecostofadoptioncanprovideincomesupporttofarmerswhoadopthabitatconservationpractices,compensatingthemforprovidingapublicgoodsuchaswildlifehabitatandnativespeciesdiversity.Iflandownersarerequiredtoimprovetheirenvi-ronmentalperformanceasaresultofaregulatoryrequirement,publicsub-sidiesforadoptingrequiredpracticesareconducivetovoluntarycontractsspanninganumberofyears,ensuringcontinuityofpracticesandmaintainingspeciesandhabitatsovertime.
Masked bobwhite quail | U.S. Fish and Wildlife Service
26. See George (2002) for a more detailed description of selected state direct payment programs.
54 | Incentives for Biodiversity Conservation
Cost-sharemechanismsthatprovidelessthan100percentofadoptioncostswillbeeffectiveonlytotheextentthattargetedpracticesprovideadditionalprivateeconomicbenefitsorregulatorycompliance.Participationwillincreasealongwiththeincentivepaymentlevel.Howev-er,itmaybeexpensivefortaxpayersalonetofundsubstantialeffortsinspeciesandtheirhabitats.Therefore,private-publicpartnershipsmaybe
apotentialsolutiontofundingcon-straintsforcost-sharemechanisms.
Onefeaturethatmakessomepubliccost-shareincentivesbiologi-callyeffectiveisthattheyareopentoalltypesoflandowners,notjustthoseintheagriculturalsector.Forexample,arelativelyrecentadditiontotheU.S.DepartmentofAgricul-ture’sWildlifeHabitatIncentivesProgramistheoptionfora15-yearorlongercost-shareagreementthatisaimedspecificallyatat-riskspe-ciesandhabitats.Furthermore,thecost-shareincentivecancover100percentoftheinvestmentneededfordefinedmanagementpractices.Bothoftheseelementscontributetothisprogram’sincreasedeffective-nessand,fromthestandpointoftheparticipant,financialviability.
TheWildlifeHabitatIncentivesProgramhastosomeextentbeen
implementedinatargetedfashion.Underthisprogram,eachstatehasprepared(andsomehaveupdated)asummaryofgeneralwildlifehabitatconditions,andthatdeterminespri-orityhabitatsorspeciesfortargetingcost-sharefunds.EachstatebiologistfortheUSDANaturalResourcesConservationService,inconsultationwiththeirstatetechnicalcommit-teeandotherentities,prioritizestatehabitatconservationneedsbydesig-
natingpriorityregions,habitatsorspecies(Burke1999).Insomestates,threatenedandendangeredspeciesandtheirhabitatshavebeentargetedforcost-shareassistanceonagricul-turalandnon-agriculturallands.27
OneindicationofthefinancialattractivenessoftheWildlifeHabitatIncentivesProgramisthebacklogoflandownerswhowishtoparticipatebutcannotgetfunding.Forexample,between1998and2001,morethan2,500landownersappliedforcost-sharefundstocover250,000acresofhabitat,butalackofprogramfundspreventedtheirenrollment.In2004alone,thebacklogwas2,000landowners.Presumably,privatelandownerswouldnotbeinterestedinthisprogramifthecostsofdoingsooutweighedtheperceivedbenefits.Onedrawbackinimplementingtheprogramislackoffunding,withonly
about$40to$60millionavailableperyear,whichisonlyenoughforafewprojectsperstate.Grayetal(2005)haveindicatedthattheWild-lifeHabitatIncentivesProgramhasawiderangeofhabitatenhancementactionsthataffecthundredsoftargetandnon-targetspecies.Furthermore,whiletheauthorsstatethatfewquan-titativedataexist“describinghowfishandwildlifehaverespondedtoter-restrialandaquatichabitatsenrolledintheprogram…thereisanecdotalevidence(that)impliesthattangiblebenefitstotargetspeciesarebeingrealized”(Grayetal,2005,p.155).
Themajor“workinglands”cost-shareincentivemechanismisdeliv-eredthroughtheU.S.DepartmentofAgriculture’sEnvironmentalQualityIncentivesProgram.Theprogramisthelargestsinglefederalcost-shareincentiveprogramthatindirectlyimpactsspeciesandwildlifehabitat.From1996to2001,thiscost-shareprogramwasusedtoimplementalmost14,000projectsnationwide,coveringmorethan5.3millionacres,foratotalcostofnearly$13mil-lion.Mostoftheprojectsrelatedtoimprovedwaterqualityprobablyhadbeneficialimpactsonaquatichabitat,butthisisasyetunverified.Projectsprovidingindirectbenefitstowildlifeincludedthoseforsoilerosion,residueandpesticidemanagement,vegetativebuffersandwindbreaks.Theprogramalsoprovidesfundingforprojectsthatconservehabitatforat-riskspecies.Forexample,programfundinghasbeenappliedtoprevent-ingthelistingofthearcticgraylinginMontanabypayingfarmersforfore-goneproductionfromnotirrigating,andforrehabilitationofsagegrousehabitatonagriculturalandranchlandsinseveralwesternstates.
However,neithertheeffective-ness,northeeconomicefficiency,of
“ One indication of the financial attractiveness of the Wildlife Habitat Incentives Program is the backlog of landowners who wish to participate...”
27. States that have indicated that their primary goal is improving conditions for threatened and endangered species are Arizona, Colorado, Kentucky, Maine, Maryland, Montana, New Jersey, Nevada, and New Mexico (Burke 1999).
www.de fenders .o rg | 5 5
thecost-shareincentivemechanismonbiodiversityconservationhasbeenexamined.Before2005,thiscost-shareprogramsupportedtwoprojects(coveringonly20acres)thathadadirectimpactoncontributingtotherestorationandmanagementofde-clininghabitats.However,newusesofthisprogramin2005haveincludedpredatordeterrentmeasuresaswellasandhabitatimprovementsforpipingplover,salmon,arcticgraylingandpallidsturgeon.Theefficacyofcost-shareincentivesforthesedirectuseshasnotyetbeenevaluated,butallpublicfundingallocatedforcost-shareamountswasappliedforbylandown-ers.28Atleastattheprivatefinanciallevel,thisindicatesthatthecost-shareamountsweresufficientenoughtoattractlandowners.
TheU.S.FishandWildlifeServiceofferscost-shareincentivesthroughitsPartnersforFishandWildlifePro-gram.Underthisprogram,thehigh-estpriorityisgiventoprojectsthatbenefitdecliningmigratorybirdandfishspecies,threatenedandendan-geredspecies,andspeciesproposed
forlisting,andtothoseproposalsonprivatelandsthatsatisfytheneedsofpopulationsadjacenttoNationalWildlifeRefuges.Specialconsider-ationisgiventoprojectsthatareonpermanentlyprotectedlandsorthatreducehabitatfragmentation.Projectsoflongerduration,thosethatleveragenon-federalmoney,andthosethataremostcost-effectivearehighlyranked.Todate,therehasbeennoanalysisofeitherhoweffectiveorefficientthecost-shareincentivemechanismhasbeeninmeetingtheprogram’sgoals.
TheU.S.FishandWildlifeService’sLandownerIncentivePro-gramofferscost-shareandtechnicalassistanceincentives.Thisprogram,whichisadministeredbyeachstate,helpslandownersenhancehabitatforat-risk,threatenedandendangeredspecies.Itisthereforetargetedtocost-sharingconservationpracticesforspeciesinneedofconservationandassistance.Somestatesareprioritizingfundingforprojectsthatimplementtheirstatewildlifeactionplan.
Oneofthebiologicalbenefitsofthecost-shareincentivesofferedby
theU.S.FishandWildlifeServiceisthattheycanpreventhabitatdeg-radationforat-riskspecies.Oneofthefeaturesthatmakethiscost-sharepotentiallymoreeffectiveisthatitincorporatesamonitoringcompo-nent,whichincludesapre-agree-mentsurveyandaperiodicprogresscheck.Themonitoringactivitylendstheprogramflexibilitythroughadaptivemanagement.Ontheotherhand,U.S.FishandWildlifeServicecost-shareprogramshavebeencriticizedwithrespecttowhethertheyhelpendangeredspecies.Someobserverssaythatthestructureoftheseincentivesactuallydiscouragelandownersfromconservingfeder-allylistedspecies(Freedman2003).Theprogramguidelinesestablishthatprojectsshouldbenefit“at-risk”species,whichisbroadlydefined.However,thehightransactioncostsassociatedwithaccessingcost-shareincentivesforfederallylistedspecieshasencouragedstatestousethefundsforstate-listedorotherat-riskspecies(Freedman2003).
Therearetwotypesofeconomicconstraintsthatmayreduceprivatelandownerparticipation.First,thefinanciallevelatwhichlandown-ersmeettheirpartofthecost-sharerequirementsmaybetoohightoallowforwidespreadparticipation.Forexample,aprivatelandownercanreceiveupto$20,000inFloridatocost-sharepracticesforconservingen-dangeredspecies.However,a50per-centnon-federalmatchisrequired,whichmaydiscouragesmallerprivatelandowners.Second,landownersonlyreceivereimbursementafterrestora-tionworkiscompletedandevaluatedbystatefishandwildlifebiologists.
Fromthepublicfinanceperspec-tive,CongressandtheU.S.FishandWildlifeServicehavehadproblemsgettingenoughincentivefunding
Bombay Hook National Wildlife Refuge, Delaware | U.S. Fish and Wildlife Service
28. David White. May 2005. Personal Communication. Natural Resources Conservation Service. Bozeman, Montana.
5 6 | Incentives for Biodiversity Conservation
outtothefield,thereforemakingitlesseffective.
Recommendations Totheextentthattargetingcost-sharefundsalreadytakesplaceinthepublicrealm,thoseeffortsshouldbemaintainedandexpanded.Atthefederallevel,theDepartmentofAgriculturecost-shareincentiveprogramsshoulddevelopbiologicalcriteriaforincorporationintotheEnvironmentalBenefitsIndexasadecisionmakingtool.ForDepart-mentofAgriculturecost-shareprograms,wewouldrecommendthatonlyaportionbetargetedtohabitatsidentifiedinstatewildlifeactionplansasneedingconserva-tion.ForbothfederalAgricultureandFishandWildlifePrograms,themanagementpracticesthatarecost-sharedshouldbereviewedfortheirbiologicaleffectivenessandeconom-icefficiency.Toalimitedextent,theDepartmentofAgricultureisalreadyimplementingsuchareviewthroughitsConservationEffectsAssessmentProgram.Thiseffortneedstobecontinued.
Wehavethreebasicrecommenda-tionsthatcouldbeusefulinimprov-ingtheeconomicefficiencyofpubliccost-shareincentives.First,thereneedstobecoordinationofpractices,paymentlevelsandpriorityareasbetweenthestateandfederaleffortsinordertomakemoreeffectiveuseofexistingfunds.Second,wewouldrecommendthataneconomicevalu-ationofenvironmentaloutcomesbeimplementedinordertogaugethepublicbenefitsoflandownerconservationefforts,andperhapstoreadjustcost-shareamounts.Third,forthoselandownersthatengageinactivitiesthatcanresultinbetterconservation(e.g.,coordinationwithotherlandowners,conducting
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monitoringandevaluationactivities,addressingcriticalresourcesofcon-cern,etc.),incentivebonuspaymentsshouldbeoffered.
Private Cost-Share IncentivesDescription
Oneexampleofaprivatecost-shareincentiveisthefundingofproactiveprojectsandpracticestopreventconflictsbetweenlandown-ers’economicutilizationoftheirresources(cropsorlivestock)andnativewildlife.Privatefundshavebeenemployedtoprovideassistancetolivestockownersandotherrurallandownerstocost-sharepreventa-tivemeasurestoavoidconflictsbetweenwildlifeandhumans.
DefendersofWildlifeestablishedaproactivecost-sharecarnivoreconservationfundin1999tohelpwithrecoveryeffortsforwolvesandgrizzlybearsandtopreventconflictsbeforetheyoccur.Otherobjectivesaretokeeppredatorsfrombeingunnecessarilykilledbyagenciesinresponsetohumanconflictsandtoincreasegeneraltoleranceforcarni-voresacrossthelandscape.Defend-erscollaborateswithfederal,stateandlocalgovernments,livestockproducers,andprivateenterprisestoinitiateproactiveprojects.
Examplesofproactivepracticesincludefurnishingguardanimals,radio-activatedguardboxes,flagsofribbonfabriconfencing,elec-tricfencesaroundcalvinggrounds,electricnightpensandaerial
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monitoringflights;retiringgrazingallotments;providingalternativegrazingpasturesandfeedsourcesforlivestock;andhiringrangeherd-
ersandriders.From1999to2003,Defenders’completed76projectsforacostofabout$257,000.For2004and2005,investmentsinproactivemeasuresreached$219,000.Mostoftheseprojectshavebeenaimedatre-ducingconflictsbetweenwolvesandlivestockintheNorthernRockies.
Assessment Todate,therehasbeennoassessmentofthebiologicaleffectivenessoreco-nomicefficiencyofprivatecost-sharemechanisms.Withrespecttoeconomicefficiency,andtotheextentthattheprivatesectorcanadministerfundingwithfeweradministrativerequire-ments,privatecost-sharemechanismsmayinvolvefewertransactioncoststhanpublicprograms.Anothereco-nomicadvantageofprivatecost-shareincentives,specificallyforlivestockdepredationsbylargecarnivores,isthattheycanimprovetheeffectivenessofcompensationprograms.
Recommendation Ourmajorrecommendationisthatprivateproactivecost-shareincentivesbemorerigorouslyassessedtodeter-minetheireconomicefficiencyandtheirimpactsonspeciesandhabitatconservation.Thisworkisimportant,asdemandforsuchprogramsislikelytoincreaseinthefuture.
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“ To date, there has been no assessment of the biological effectiveness or economic efficiency of private cost-share mechanisms.”
www.de fenders .o rg | 57
Conservation Stewardship IncentivesDescription
Conservationstewardshipincen-tivesarepaymentstolandownersforsupplyingandmaintainingenviron-mentalservicessuchascleanwater,reducedsoilerosionandimprovedbiodiversity.Thisincentivemecha-nismdiffersfromcost-sharepay-mentsinthesensethatlandownersreceivecompensationforthepublicresourcegoodsthattheyarealreadyproviding.Thatis,landownersarenotreceivingcompensationoras-sistancefor“fixing”environmentalproblems,butratherformaintainingsoundenvironmentalpracticesthattheyarealreadyimplementingandwillcontinuetoimplement.Themajorjustificationforasteward-shipincentiveisthatlandownerswhomanagetheirlandtogenerateenvironmentalbenefits,whichareenjoyedbythepublicatlarge,shouldreceivesomeformofcompensationforpublicbenefitsthathavenoread-ilyavailablemarkets.
Assessment TheonlyconservationstewardshipincentivemechanismnowbeingimplementedisthroughtheDepart-mentofAgriculture’sConservationSecurityProgram.Thisprogramwasauthorizedin2002,andthefirstpar-ticipantswereenrolledin2004.Sincetheprogramissonew,therehasbeennobiologicaloreconomicassessmenttodetermineitseffectivenessoreffi-ciency.However,becausetheprogramhasbeeninhighdemandthroughoutthecountry,weassumethatprivatelandownersarefindingitcost-ef-fectivetoparticipate.Oneobserver(Henry2005)hasstatedthatthepo-tentialforimprovingwildlifehabitatthroughtheConservationSecurityProgramisenormous.Certainly,
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offeringincentivestolandownerstomaintainpublicbiodiversitybenefitsovertimethroughactivemanagementcouldbemorebiologicallyeffectivethataone-timecost-shareincentiveforinstallationofapractice.
RecommendationOurmajorrecommendationforthisstewardshipincentivemechanismisthatitundergoafullevaluationtodetermineitscontributiontobiodi-versityconservationanditsprivateandpubliceconomicefficiency.Thiswillrequiresomeestimatesoftheeconomicvalueoftheenviron-mentalgoodsandservicesthatarebeinggeneratedandmaintainedbylandownersintheConservationSecurityProgram.
Land and Water Rental and LeasesDescription
Conservationincentivesintheformoflandrentalpaymentsoccurprimar-ilyinthefederalsector,andspecifi-callythroughtheU.S.DepartmentofAgriculture.ThemajorlandrentalprogramsaretheConservationRe-serveProgramanditssisterprogram,theConservationReserveEnhance-mentProgram.29TheConservationReserveProgramwasestablishedin1985andprovidescompensationthroughlandrentalpaymentstolandownerswhoceaseproductionofagriculturalproductsonerodibleandotherenvironmentallysensi-tivelandsandestablishperennialgrassortrees.Whereastheprogramwasoriginallyconceivedasadual-purposecommoditysupplycontrolandsoil-erosion-reductionprogram,ithasevolvedintoamultipurposeconservationprogramwithwildlifeconservationnowrecognizedasoneofitscoregoals(McKenzie1997).TheConservationReserveProgramis
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thelargestfederalresourceconserva-tionprogramintermsofthenumberofparticipantsandprogramexpendi-tures.Morethan34millionacresarecurrentlyinlandrentalagreements.In1996,policymakerscreatedtheConservationReserveEnhancementProgram,afederal/statepartnershipprogram,tofocusonlocalenviron-mentalproblems.InMaryland,forexample,theEnhancementProgramistargetedtoprotectwaterqualityintheChesapeakeBay.InWashingtonandOregon,theprogramfocusisonsalmonrecovery.Rentalcontractsarefor10to15years,withannualpaymentssetatlevels(basedonlo-calagriculturallandrentalrates)tocompensatelandownersforforgonenetrevenues(netbenefitstheywouldhavereceivedhadtheyusedthelandforsomeformofproduction).
Anexampleofastate-fundedlandrental/leaseprogramisKansas’s“Walk-InHuntingAccess.”Thisincentiveprovideslandownersleasepaymentsforwildlifehabi-tatretentionandenhancementinexchangeforaccesstothepublicforhunting.In2001,theKansasDepartmentofWildlifeandParksleasedabout680,000acresofhabi-tatunderthisprogram.
Contrastedtolandrentals,leas-ingin-streamwaterrightstoprotectaquatichabitatandspecieshasbeenprimarilyaninstrumentutilizedbyprivatewesternconservationgroupssuchastheOregonWaterTrust.Inaddition,Oregon’sConservationRe-serveEnhancementProgram,whichusesfederalandstatefundstorestoreriparianareasforhabitatandwaterquality,includesanoptionforleasingirrigationwaterforin-streamuses.Todate,therehasbeennoanalysiscon-ductedtodeterminethebiologicaleffectivenessoreconomicefficiencyofwaterleasingincentives.Thus,the
29. The U.S. Department of Agriculture’s Grassland Reserve Program has only been implemented since FY 2003, and not enough experience has been gained to determine either its effectiveness or efficiency in protecting wildlife habitat.
5 8 | Incentives for Biodiversity Conservation
assessmentandrecommendationssub-sectionsbelowaddressonlylandrentalincentives.
AssessmentVanBuskurkandWilli(2004)foundthatlandwithdrawnfromagriculturalproductionthroughlandrentalpay-mentsenhancednativebiodiversityintheUnitedStates.Thenumberofspe-ciesofbirdsandinsects,forexample,arehigheronrentallands,andpopu-lationdensitiesincrease,especiallyforthoseindecline.Additionally,theyconcludedthatlandrentalincentivesimprovedtheviabilityofnativeplantsandanimalsonadjacentlandsthatremainedinagriculturalproduction.Themajordeterminantsofbiologicaleffectivenesswereidentifiedasusingnativeplantspecies,rentinglargerparcels,usinglessintensiveproduc-tionpracticesandhavinglongerrentalagreements.
TheavailabilityofpermanentcoveronConservationReserveProgramrentallandshashadsomepositiveimpactsonbiodiversityintheformofprovidingnestingcover,winteringhabitat,andplantandinsectfoodsources.Landrentalagreementsusuallycontainsomerestrictionsonharvestingpracticesinordertobenefitwildlife.Forinstance,theenrolledlandsinaspecialbiomassproductioncategorymaynotbeharvestedmorethanonceeveryotheryear,andthebiomassmaynotbeusedforanythingotherthanenergyproduction.Therearerestric-tionstoprotectparticularbirdspecies,suchasforbiddingharvestingormow-ingduringnestingseasons.
Landrentalincentivesareparticu-larlywellsuitedforsecuringenviron-mentalbenefitsthatincreasewiththelengthoftimelandisremovedfromcropproduction.Landretirementcanbeeasilyconfirmedand,therefore,easilyenforced.However,sinceland
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rentalprogramsaretemporary,thereisnolong-termguaranteethathabitatwillremainprotectedaftera10to15yearagreementhasexpired.Further-more,only25percentofthelandareaofanyonecountymayberentedun-dertheConservationReserveProgramatanyonetime,possiblymitigatingtheachievementofasufficientbiologi-calscaleforsomespecies.
Itisgenerallyassumedthattakinglandoutofintensiveproductionwillbenefitnativeplantsandanimals.However,therehavebeenseriousquestionsabouttheconservationvalueoflandrentalincentivepayments.AsVanBuskurkandWilli(2004,p.998)pointout,“Variousecologicalandeconomicargumentssuggestthattheseprogramsandincentivesareinefficientandrelativelyunsuccessfulatprovid-inghabitatforwildlife.Agro-eco-logicalmonitoringoftheimpactsofset-asidesonbiodiversityhasproducedalargeandcontradictoryliterature.”However,theauthorsdonotexplic-itlyrecognizethattheConservationReserveProgramhasbeenprimarilyaimedatreducingsoilerosionandthatprovidingwildlifehabitathasnothistoricallybeenitsmajorfocus.
Despitesomesuccessesinattainingbiologicaleffectiveness,theConserva-tionReservelandrentalshavehadsomeunintendednegativeconse-quences.Oneisthatnativeprairiehabitathasbeendestroyed(Baker2005).“Sodbusting,”thepracticeofconvertingvirginprairieintocrop-land,hasapparentlybeenparticularlyacuteinSouthDakota.However,thefederalagenciesoverseeingtheConservationReserveProgramhaveindicatedthatafter2000,sodbustinghasnotbeenalargeproblem.Still,fromapublicgoodsperspective,landrentalpaymentsarelesseffectiveandeconomicallyinefficientiftheyresultinlossesofecologicalfunctionin
adjacentnativeprairies.Anothertechnicalproblemwith
theConservationReserveProgramhasbeenthelackofanexplicitprohibi-tionagainstcertainpracticesthatmayunderminenativeprairiehabitat,suchasplantinginvasivespecies.Becausetheoriginalpurposeoftheprogramwasreducingsoilerosion,federalagen-ciesatonetimeevenrequiredtheuseofinvasivegrassspecies.Currently,however,newenrollmentpoliciesencourageandrewardlandownerstoplantnativegrasses.
Fromtheperspectiveoftheland-owner,AllenandVandever(2003)reportsurveyfindingsdesignedtogaugetheimpactsoftheConservationReserveProgram,andindirectlytheeffectivenessoflandrentalincentives.Theauthorsstatethat85percentofrespondentsreportedimprovedcontrolofsoilerosionasaresultofputtinglandintotheprogram,morethan75percentbelievedthattheben-efitstowildlifeareimportant,and73percentbelievedthattherewereposi-tivechangesinwildlifepopulations.Ontheotherhand,only39percentofthelandownersthatrespondedthoughttherewereimprovementsinwaterquality.
ThebiologicalimpactoftheCon-servationProgramReservehasdifferedbyregion,buttherearenodefinitivenumbersintermsofspeciesprotected.Winkleman(2005)reportedthattheprogramhashadapositiveinfluenceonnestingsuccessofthegreaterprairiechickeninMinnesotabyprovidingdensegrasslandhabitat,detractingpreda-tors,andprovidingagreaterfoodsupply.
IntheMidwest,Heardetal.(2000)observedthatbirdabundancehasbeensubstantiallyhigheronunconvertedConservationReserveProgramlandsthanonrowcropfieldstypicallyreplacedbyreserveplantings.Limitedevidenceindicates
www.de fenders .o rg | 5 9
thatreproductivesuccessandsurvivalaresufficientlyhightoyieldpositivepopulationgrowthforafewspe-cies.Todate,however,asignificantpositiverelationshipbetweentheestablishmentofhabitatandgrowthofpopulationshasbeendocumentedforonlytwograsslandbirdspecies.Overall,theevidenceaccumulatedtodateindicatesthatreservehabitatprotectedwithrentalpaymentsintheMidwestlikelycontributestothepopulationstabilityorgrowthofmany,butnotall,grasslandbirdspecies(Reynolds2000).However,thereisaneedtocontrolmanage-mentpracticessuchashayingandgrazingfortheconservationofhabitattoremaineffective.Johnson(2005)hasindicatedthechangefromcroplandtograsslandsince1985hasinfluencedbirdpopulationsandthatmany,butnotall,grasslandspeciescandowellonreservelands.How-ever,theresponsesofbirdswilldifferbyspecies,region,thevegetationcompositioninthefield,andwhetherornothayingorgrazinghastakenplace(Johnson,2005,p.17).
IntheGreatPlains,theeffectsoftheConservationReserveProgramonwaterfowlhavebeendocumented.Inareviewofpublishedandunpub-lishedstudies,Johnson(2000)foundthatgrasscoveronreservelandrent-alswashighlyattractivetonestingbirds.Between1992and1997,ithasbeenestimatedthatreservelandsintheprairiepotholeregioncontributedtoa30percentimprovementinduckproduction.Reynolds(2005)hasup-datedthisassessmenttoindicatethatthereserveprogramhas“significantlyincreasedduckproductivityfromthemostimportantduckbreedingareainNorthAmerica”(p.38).
Burger(2005)estimatedthatmorethan1.3millionhectareswereenrolledintheConservationReserveProgram
intheSoutheast.Becauseofnaturalsuccession,however,thewildlifespe-ciesthatoccuronreservelandswillvaryovertime.Theprovisionandmanagementofwildlifehabitatovertimerequiresactivemanagement,includingtheeradicationofexotic
foragegrasses.Burger(2005)con-cludesthatthewildlifehabitatvaluesofreservefieldsintheSoutheasthavediminishedovertimebytheselectionofcoverpracticeswithshortdurationorminimalhabitatvalue.
Intheareasforwhichlandrentalsoccurthroughthefederal-statepart-nershipoftheConservationReserveEnhancementProgram,norealevalua-tionofbiologicaleffectivenesshasbeencarriedout.Nonetheless,researchonwildliferesponsestoconservationbuffers,whichareanapproachcom-monlyavailablethroughtheenhancedprograms,havebeenassessedbasedonareviewofstudiesofbirdcom-munitiesinvariousstripcoverhabitats(Best2000).Birdabundancesandnestdensitieswerefoundtobehigherinstrip-coverhabitatsthaninbloc-coverhabitats,butnestsuccessinstrip-coverhabitatsisoftenverylow.However,strip-coverhabitats(orbuffers)mayfunctionasbiologicalsinksthatcannegativelyimpacttherecoveryofaspecies.Allen(2005)pointsoutthatmostReserveEnhancementprogramshaveonlybeeninexistenceforfouryears.Monitoringprogramstoevalu-
atetheperformanceoftheprogramhavebeenestablished,but“becauseofthetimeneededtoestablishvegeta-tivecoversandthecomplexitiesoflandscape-levelanalysis,quantifiableresultsarelimitedatthistime”(Allen2005,p.115).
Fromaneconomicefficiencyperspective,therearebothadvan-tagesanddisadvantagestolandrentalincentives.First,fromanationalperspective,thepublicfacesconstantlyrecurringcostsofrent-ingthesameamountofecologicalservices,ratherthanowningthosesameservices.Shafferetal.(2002)haveshownthatforconservingarepresentativenationalsampleofnativebiodiversityandwildlifehabitats,landacquisitionwithmanagementandeasementsaremorecost-effectivethanlandrent-als.Anothereconomicdisadvantageisthatrentalpaymentsmustcoverthefullvalueoftheproductivecapacityofthelandandthereforecanbemoreexpensiveonaperunitbasisthanothertypesofincentivemechanisms.Attheprivateland-ownerlevel,rentalratesforirrigatedland,andtheriparianlandsthatarecrucialtosomanyspecies,arenotsethighenoughincomparisontovalueoflandinproduction.
TheReserveProgramhasdemonstratedsomepositivepubliceconomicbenefits.Asitislinkedto
“ From an economic efficiency perspective, there are both advantages and disadvantages to land rental incentives.”
6 0 | Incentives for Biodiversity Conservation
thelandrentalincentive,conserva-tioncompliancehasbeenestimatedtoprovideenvironmentalnon-mar-ketbenefitsofabout$1.4billionperyear(Claassenetal.2001).Erosionreductionsonprogramlandsarees-timatedtoprovide$694millionperyearinnon-marketbenefits(Claas-senetal.2001).Thesevaluesincludewater-basedrecreation,soilproduc-tivity,andindustrialandmunicipalwateruses.Thevalueofimprove-mentstowildlifeviewingandtohuntinginducedbytheprogramhasbeenestimatedat$704millionperyear.Thisrepresentsalowerboundestimateofwildlifebenefits,becauseitdoesnotincludenon-usebenefitsofincreasedprotectionofthreat-ened,endangeredandotherspeciesthatsocietyasawholevalues.
Therehavebeensomeattemptstocombinetechnicaleffectivenesswitheconomicefficiencyintheselectioncriteriaforlandrentalincentives.ProposedlandrentalcontractsfromlandownersarerankedaccordingtoanEnvironmentalBenefitsIndex,which
consistsofdeterminingaratioofprojectcoststoestimatedbenefitsgen-eratedintheformofwildlifehabitat,waterqualityandsoilerosioncontrol.Proposedcontractswiththehighestbenefit-to-costratioreceiveprioritiza-tionforfunding.
Oneeconomicfactorthatwillbeimportantfromapublicfinanceperspectiveisthatthelandrentalagreementsonabout28millionConservationReserveProgramacreswillbeexpiringandupforrenewalin2007-2008.Itispossiblethatthegoaloffederalbudgetdeficitreductionwillresultinfeweracresbeingrentedwithpublicfunds.Whilelowerenrollmentrateswillresultinsomecostsavings,thereisaconcernthattheprogramwillbescaledbackandthebiologicalgainsthathavebeenmadewillbelost.
RecommendationsThereareanumberofrecommen-dationsthatwecanofferwhichwebelievewouldincreasethebiodiversityimpactsoflandrentalincentives.Theserecommenda-
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tionsareprimarilyaimedattheConservationReserveProgram,buttheyshouldalsobeapplicabletootherprogramsthatofferrentalpayments,suchasthenewGrass-landsReserveProgram.Perhapsthemostimportantrecommenda-tionistostrengthenandenforcethesod-busterprovisionsoftheFarmBillsothatlandsunderrentalagreementsarenotsubstitutedwithnewlandsthatarebrokenopenforproduction.Second,althoughithasbeendemonstratedthatcertainbirdspecieshavebenefitedfromtheConservationReserveProgram,thereisaneedtoevaluateandadjustmanagementpracticesthatarerequiredunderrentalagreementsinordertoimprovetheirbiodiversityimpacts.Third,activemanagementbylandowners,includingburning,controlofinvasivespecies,etc.,shouldbeadequatelycompensated.Biodiversityconservationandenhancementdoesnotstopwiththesigningofarentalagreement.Fourth,asinourrecommendationsforotherincentivemechanisms,webelievethereshouldbesomedegreeoftargetingtheReserveProgramtohabitatsandspeciesidentifiedinthestatewildlifeactionplansasneedingattention.Tosomeextent,thisisalreadydonebyratingapplicationsfortheprogrambasedontheEnvi-ronmentalBenefitsIndexdescribedabove.Whatmaybeusefulistoincorporatetheprioritiesofthestatewildlifeactionplansintocurrentindexesforeachstate.Finally,the“25percentrule”;thatis,thatonly25percentofanyonecountycanbeenrolledintheReserveProgramatanyonetime,shouldbesuspended.Thisputsanartificiallimitontheareathatlandownersmaywishtorentoutandmayunintentionallyleadtohabitatfragmentation.
Farmer and conservation agent, California | Natural Resources Conservation Service
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Withrespecttoimprovedeconomicefficiency,thefactthatprivatelandownersarewaitingtogetintotheprogramisasignthattheReserveProgramisprofitableforthem.However,asreportedearlier,landrentalcontractsoveralongtimehorizonarelessefficientfromthepublictaxpayerperspectivethanlandpurchases.Toimprovetheeconomicefficiencyoflandrentalincentiveswehavetworecommendations.First,rentalratesforirrigatedlandsneedtoberaisedbecausecurrentratesbasedonMidwestcroplandarejustnotcompetitivewithirrigatedcropproduction,especiallyfruitsandveg-etables.Second,inordertoremaincompetitivewithalternativelanduses(includingsprawl),rentalratesshouldbebasedontheirfairmarketvalueinalluses,notjustagriculture.
Conservation ContractsDescription
Conservationcontractsforresourceconservationservices,betweenprivatepartiesorbetweenpublicagenciesandprivateparties,cantakemanyforms.Althoughconservationcontractsdonottransferspecificownershiprights,theycontractuallybindtheownertomanagehisorherpropertytoachievespecificenviron-mentalobjectives(Brown1999).
Typically,alandownerwhoagreestocontracttermsmayreceiveapaymentinreturn.AllconservationprogramsmanagedthroughtheU.S.DepartmentofAgricultureinvolveacontractualagreementtoimplementspecificconservationpracticesinexchangeforpayment.Intheprivatesector,producer-processorcontractscanrequiretheuseorbanofspecificinputsormanagementpracticestoimprovefoodsafety,improvewaterquality,orprotectspeciesandtheirhabitats(Swinton,etal.1999).
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Contractingforthesupplyofgeneticresourcesalsoprovidesdirectfinancialpayments.Biodiversitymaybeextremelyvaluableintermsofgeneticresourcesforpharmaceuticalandmedicinalresearch,agricultureandindustry.
Forinstance,itisestimatedthat25percentofmedicinesandpharma-ceuticalswereoriginallyderivedfromplantspeciesandanother25percentfromanimalsandmicro-organisms(Meyers1997).Examplesincludetaxolforcancerandbacteriumcol-lectedfromYellowstonehotspringsthatallowforgeneticfingerprinting(Brown1999).Thesecontract-ingmechanismsprovidethemeanstoderiveassetvaluesfromnaturalresourcesandactasanincentivefortheirconservation.
AssessmentWithrespecttothetypesofprivateconservationcontractslistedabove,therehasbeennoempiricalanalysisofspecificprojectsorprogramsintermsofbiologicaloreconomicimpacts.
RecommendationThereisaneedtocarryoutanassess-mentofconservationcontarctsandtocomparetheresultstoothertypesofincentivemechanisms.Oneparticularconcernfromaneconomicsperspec-tiveisthatincentivesreflectmultiplenon-usevaluesofbiologicalresources,justnottheirprivatemarketvalueforuseinfulfillingsomeparticularhumanneed.
Debt Forgiveness Description
TheFarmServicesAdministrationoftheU.S.DepartmentofAgriculturemanagesaDebtforNatureProgram.Thepurposeofthedebtforgivenessincentiveistohelplandownerstoimprovetheiroverallfinancialstability
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andsimultaneouslyimprovewildlifehabitat,environmentalqualityandthescenicvalueofagriculturallands.
Thefinancialincentiveiscancel-lationofaportionofthepartici-pant’sdebtinexchangeforconserva-tionactivities.Notallagriculturallandsareeligibleforthisincentivemechanism.Onlyhighpriorityareascomposedofwetlands,highlyerod-iblelandsorlandsin100-yearfloodzonesmayparticipate.
Theamountofdebtthatcanbecancelediscalculatedbyconsideringthepresentmarketvalueofthefarm,thevalueofthedebtitselfandthenumberofacrestobecoveredbyaconservationcontract.BorrowerswhoareuptodateontheirDepartmentofAgricultureloanpayments,orwhoarereceivinganewloan,canhavenomorethan33percentoftheirloancanceled.Therearerestric-tionsontheuseofenrolledlands,includingnoconstruction,timberharvestingoragriculturalproduc-tion.Theparticipantmustagreetocontinuetheconservationpracticesfor10,30or50years,dependingontheloanreimbursementschedule.
AssessmentAsinthecaseforconservationcon-tracting,therehavebeennoassess-mentsofeitherthebiologicaleffec-tivenessoreconomicimpactsofdebtforgivenessasanincentivemeasureforhabitatandspeciesconservation.
RecommendationsWewouldrecommendthatasub-sampleofparticipantsbesurveyedandfieldvisitsmadetorespondtotheseinformationneeds.Oneimportantquestioniswhetherthemarketandnon-marketvaluesgener-atedthroughconservationeffortsarecomparabletotheforgonedebtrepaymentsoftaxpayerfunds.
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62 | Incentives for Biodiversity Conservation
Taxincentiveshavelongbeenusedbyfederalandstategovernmentstohelpachieve
conservationobjectives.Taxallow-ancesprovideafinancialbenefittothoselandownerswhomaintainorrestorelandforavarietyofconserva-tionpurposes.Taxincentivesdonotseektobalanceexistingland-basedrevenuesandopportunitycosts.Theyareintendedasmotivatingincentivesandeconomicsignals,notascom-pensationfortheeffectsoflawfulandappropriategovernmentregulation(Olsonetal.1993).
Themajortypesoftaxin-centivesallowforreductionsinincome,property,estateorcapitalgainstaxes.Federaltaxincentives
toconserveandprotectbiodiversityfallintotwocategories:incometaxreductionsandestatetaxreduc-tions.Reductionsinincometaxescancomeaboutbydonatingaconservationeasement,excludingconservationcost-sharepaymentsfromgrossincome,ordeduct-ingconservationexpenditures.Moststatetaxincentivebenefitsarereceivedinexchangeforeitherpassivelymaintainingpropertyinitscurrentstateoractivelymanag-ingthelandaswildlifehabitat.Forty-onestatesprovidesomeformofstatetaxbenefitforcitizensthatmaintainwildlifehabitat.
Thissectionisorganizedalittledifferentlyfrompreviousdiscus-
sionsofincentivemeasures.First,wedescribealltaxincentivesinonesub-section.Thisisfollowedbyageneralassessmentforalltaxincen-tivemechanismsandrecommenda-tionsthatarebasedonindividualtaxmeasures.
Income Tax Incentives Federalincometaxincentivestoen-couragehabitatconservationincludedeductionsfordonatingconservationeasements,forincurringconserva-tionexpenditures,andfromrevenuederivedonlandsthataremanagedtosupportnaturalhabitat.Thevalueofadonatedconservationeasementmaybedeductedfromfederalincometaxesiftheeasementisforconserva-
IX. PUBLIC TAX INCENTIVES�0
30. This section on public tax incentives draws from previous papers by Hummon and Casey (2004) and George (2002).
Columbine and Parnassian butterfly | U.S. Fish and Wildlife Service
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tionpurposesandistransferredtoaqualifiedorganization.Landownerexpendituresforrestoringorcreatinghabitatforendangeredspeciescaneitherbedeductedfromincometaxesorreceivedasataxcredit.
Anotherstrategyistoexempt,ortaxatalowerrate,revenuesfromlandsthataremanagedforendan-geredspecieshabitat.Thisincentivecurrentlyonlyexistsatthestatelevel. Relieffromstateincometaxesforpri-vatelandownerstomaintainwildlifehabitat,thoughlessnumerousthanpropertytaxprograms,isthesecondmostprevalentstateincentivemecha-nism.Elevenstatesutilizeincometaxincentives,andtheyfrequentlyexistintheformofcreditsordeductions.
Themostcommonstateincometaxreliefprogramsinvolvedonatinganeasementtothestateorqualifiednon-profitorganizationforconservationpurposes.Theseprogramstypicallyallowacreditagainstthestateincometaxinsomeproportiontothevalueofthedonation.InVirginia,forexample,theLandConservationIncentivesActof1999giveslandownerswhodonateconservationeasementsastateincometaxcreditofupto50percentoftheeasement’sfairmarketvalue.
Donation of a Conservation Easement:Adonatedconservationeasementcanqualifyasacharitablegift,whichentitlesthelandownertodeductionsonhis/herfederalincometaxreturn.However,thereareseveralconditionsthatmustbemet,asde-finedbySection170(h)oftheInternalRevenueCode.Theeasementmustbeperpetual,donatedtoaqualifiedorga-nizationforconservationpurposesandprovidesomebenefittothegeneralpublic.Thelandsubjecttoanease-mentmusteitherprotectascenicviewforthegeneralpublic,openspace,animportant,relativelynaturalhabitat,orhistoricproperty,orprovidepubliceducationoroutdoorrecreation.Thelandownerretainsownershipofthepropertyandmaychoosetoshapethetermsoftheeasementtoallowforcompatibleuses.Inaddition,theeasementdoesnothavetocoveralloftheproperty,orallowpublicaccessinordertoqualifyasacharitablegift.Originally,upto30percentofalandowner’sgrossincomemaybedeductedeachyearforsixyears.InNovemberof2005,however,anewtaxbillexpandedtheincentivespro-gramfordonatedeasements.Thisbillextendedthedeductionperiodfrom
1to16yearsandraisedtheceilingfordeductionsto100percentofadjustedgrossincomeforfarmersandranchers(AmericanFarmlandTrust2005).
Exclusion of Cost-Share Payments from Gross Income:Section126oftheInternalRevenueCodeallowslandownerstoexcludefromtheirgrossincomeallorsomeofthecost-sharepaymentsreceivedfromfederalandstategovernmentconservationprograms.Inordertodoso,twoconditionsmustbemet:(1)TheSecretaryofAgriculturemustdeter-minethatthepaymentisprimarilyfortheconservationofsoilandwaterresources,protectingorrestoringtheenvironment,improvingforests,orprovidingwildlifehabitat;and(2)TheSecretaryoftheTreasurymustdeterminethatthepaymentdoesnotsignificantlyincreasetheannualincomederivedfromtheproperty(Haneyetal.2001).Forqualifyingconservationprogramsonagriculturallands31,theInternalRevenueServiceandtheU.S.DepartmentofAgricul-turedeterminewhichpracticesareeligibleforexclusion.Governmentpaymentsforlandrentalsdonotqualify,makingtheConservationandGrasslandReserveProgrampaymentsineligibleforexclusionfromgrossincome(Haneyetal.(2001).
DeductionsforConservationExpenditures;Section175oftheInternalRevenueCode(Haneyetal.2001),enableslandownerswhoinvestinsoilorwaterconservationtodeductrelevantexpensesontheirincometaxreturn,aslongasthelandis,orwasinthepast,usedforfarming.Eligiblefarmsincludethoseproducingstock,dairy,poultry,fish,fruitorvegetables.Thedeductionforsoilandwaterconservationexpensescanbenomorethan25percentofthelandowner’sgrossincomefromfarming.Iftheexpensesaregreater
Native grasses in conservation buffer, Iowa | Natural Resources Conservation Service
31. These programs include the Environmental Quality Incentives Program, the Wildlife Habitat Incentives Program and the Wetland Reserve Program, among others.
64 | Incentives for Biodiversity Conservation
than25percent,surplusexpensescanbecarriedovertothenextyear.Thedeductioncanonlybemadeiftheexpensesareconsistentwithanapprovedfederalconservationplanorcomparablestateagencyplan.Approvedconservationexpendi-turesfordeductionincludethosefor(1)treatmentormovementofearth,suchasleveling,conditioning,terracing,grading,contourfurrow-ingandrestorationofsoilfertility;(2)theconstruction,controlandprotectionofdiversionchannels,drainageditches,irrigationditches,earthendams,watercourses,outletsandponds;(3)theeradicationofbrush,and(4)plantingwindbreaks.Expensesfromdrainingorfillingwetlands,andpreparinglandforacentralpivotirrigationsystem,cannotbedeductedassoilandwaterconservationexpenses.Ifthelandownerchoosestodeductsoilandwaterconservationexpenses,he/shecannotexcludeanycost-sharepaymentsreceivedfortheexpensesfromgrossincome.Iftheexpensesarenotdeducted,thentheymustbecapitalized.InFlorida,landownerswhoparticipateinFlorida’sgreenwaysystemareexemptedfromanystateincometaxesdueonmonetarycom-pensationreceivedfromconserva-tionactivities.
Property Tax IncentivesPropertytaxincentivesareallowabletaxdeductionsatthestateand/orlo-callevel.ThisincludestaxcreditsforhabitatmaintenanceorimprovementorpartialtaxcreditsforEndangeredSpeciesActcomplianceexpenditures.Akeycomplimentaryincentiveisrelatedtohowlandvaluesareas-sessedforappraisalpurposes.Severalstatesrequireappraisalaccordingtocurrentuseratherthan“highestandbestuse”toprotectagriculturaland
ranchlands.AversionofthisstrategyisthePublicBenefitRatingSystemwherebylandownersaregiventaxcreditsiftheyrestrictthepotentialdevelopmentorusepotentialoftheirproperty.Forexample,themorealandownerdoestoprotectwildlifehabitat,thelargerthecredit.
Thirty-sixstatesofferpropertytaxincentivesfortheestablishmentormaintenanceofwildlifehabitat(George2002).Thereareseveralpermutationsofstatepropertytaxincentives.Commonapproachesin-cludecurrentusevaluationfortaxas-sessmentpurposes,reducedpropertytaxesoroutrightexemptionfromtaxation.Lesscommonmechanismsincludetaxincentivesassociatedwiththetransferofdevelopmentrights,creditforopenspaceorhabitatman-agement,ortaxreliefforpropertyusedexclusivelyforpreservationpurposesbyconservationgroups.
Currentuseassessmentcom-prisesthelargestgroupofpropertytax-basedincentiveprograms.Theseprogramstakeintoaccountthelegalrestrictionsonlandusewhencalcu-latingtheproperty’svalue.Themostcommoncurrentusevaluationstat-utesthatcanbenefitwildlifehabitatconservationincludethoseforfarm,forest,openspaceandconservationuseproperty.Forexample,Illinoisprovidesthatpropertydedicatedasanaturepreserveorasanaturepreservebuffershallbedepreciatedforassessmentpurposes.
Seventeenstatesprovideforpropertytaxreliefforlandsubjecttoaconservationeasement.ColoradoandSouthCarolina,forexample,allowbothincometaxbenefitsandpropertytaxbenefitsforauthorizedconservationeasements.Propertyownedbyconservationgroupsand
usedexclusivelyforconservationpurposesbenefitsfromoutrightexemptionfrompropertytaxesinsomestates.
All50stateshavepreferentialpropertytaxprogramsforagricul-turallandthatcanserveashabitatforsomespecies.Whilesomestateshavepurepreferentialprograms(nopenaltiesforchanginglanduse)otherstatesimposeadeferredor“roll-back”tax-pluspenaltiesiflandisconvertedtonon-conservationuses.
Estate Tax IncentivesEstatetaxesmustbepaidonthemarketvalueofinheritedpropertyatits“highestandbestuse.”Thisusuallymeanstheland’sdevelop-mentpotentialintermsofhousing.Consequently,aninheritormayneedtosubdivide,selland/ordevelopsomeorallofthelandtopaythetax.TheFederalTaxpayerReliefActprovideslandownersanincentiveforputtinglandunderconservationeasementbyexcluding40percentofthelandvaluefromthetaxableestateunderaqualifyingeasement(Brown1999).Themaximumamountthatcanbeexcludedis$500,000.These
“ Thirty-six states offer property tax incentives for the establishment or maintenance of wildlife habitat.”
www.de fenders .o rg | 6 5
benefitsareavailableforeasementsthatreducethefairmarketvalueofapropertybyatleast30percent.Fewerbenefitsareavailableforeasementsthatreducepropertyvaluesbylessthan30percent.
Aconservationeasementcangreatlyreducethefairmarketvalueofland,especiallyinareasfacingintensepressuresfromdevelopment.Section2055(f )oftheInternalRevenueCodeallowsthevalueofdonatedeasementstobedeductedfromthetaxableestateofthelandowner.Thus,estatetaxescanbelowereddramati-callybytheuseofeasements.
TheInternalRevenueServiceRe-structuringandReformActof1998amendedsection2031(c)toallowanestatetaxdeductionforapost-mor-temeasement.Thismeansthattheheirstoanestatemaybeallowedtodonateaconservationeasementandstillreceiveestatetaxbenefits.How-ever,noincometaxdeductioncanbemadeunderthisoption.
Thereareseveralconditionsthatmustbemetforadonatedconserva-tioneasementtoqualifyfortheestatetaxbenefits.First,thelandmusthavebeenownedbythedecedentorfamilymemberduringthethreeyearspriortothedateofdeath(Haneyetal.2001).Theeasementsmustalsoqualifyforadeductionundersection170(h)oftheInternalRevenueCode(describedabove).Furthermore,theeasementmustprohibitallbut“deminimus”commercialrecreationalactivities.
The2001taxlawworkstophaseouttheestatetaxaltogetherbyraisingtheunifiedcreditto$1millionin2002,$3.5millionin2009,andnoestatetaxin2010.However,in2011theestatetaxwillreturn,unlessCon-gresstakesactiontochangeitbeforethen.Thereisanon-goingdebateaboutwhethertopermanentlyrepealthefederalestatetax.
Atthestatelevel,Virginiaallowsforpersonalrepresentativesandtrust-eestodonateaconservationeasementontheirdecedent’sorsettler’sprop-ertyinordertoobtainthebenefitoftheestatetaxexclusionoftheUnitedStatesInternalRevenueCode.Montana’sestatetaxstatuteallowsawaiverofinheritanceandestatetaxesbytransferringlandeasementstothestatetoconserveopenspaceandpreservewildlifehabitat.
Capital Gains Tax IncentivesTaxesoncapitalgainsmaybeavoidedwhenalandownerdonateslandtoaqualifyinggovernmentagencyornonprofitconservationorganization.Thisallowsthelandownertowriteoffaportionofvalueofthepropertyandsimultaneouslycontributetoenvironmentalprotection(Hudson1993).However,thecurrentexclu-sionratefromcapitalgainstaxesisonly25percentofthevalueoflandswithconservationeasements.ExamplesofexemptionsfromstatecapitalgainstaxesincludeArkansasandVirginiaforthesaleorexchangeoflandoraneasementtoapublicorprivateconservationagency.
General Assessment of Tax IncentivesTherehasbeenlittleanalysisoftheeffectivenessorefficiencyofanypublictaxincentivetoconserveorrestorewildlifehabitats.Theinformationwepresentislimitedtopersonalincomeandpropertytaxincentives.Brown(1999,p.468)indicatedthat,ingeneral,taxmechanismsare“oneofthemostpowerfulmarket-basedpolicytoolsforprovidingincentives(ordisin-centives)forencouragingprivatelandownerstorestoreorprotectbiodiversity.”Robles(2000),ontheotherhand,pointedoutthattax
lawsarefrequentlymodified,andlong-termprotectionofhabitatsandspeciesmaynotbepossiblethroughtaxincentives.Whileitistruethattaxlawsprovideimportantsignalstoresourcemanagers,theviabilityoftaxincentivestoprovideforlong-termwildlifeconservationcanbeopentoquestion.
McKinneyetal.(1993,p.3)concludedthattherearethreemajoreconomicandequityreasonsfor“usingthefederaltaxcodeasabasisforprovidingincentivestoprivatelandownerstoconserveandrestorewildlifehabitat.First,acentralizedtaxsystemservesasthemechanismneededtosupplementthetransferofmoneyamonggroupsinsociety.Itismoreefficienttodistributetaxdollarstoprivatelandownersattemptingtorestoreandpreserveendangeredspeciesandtheirhabitatsthanitisforconcernedcitizenstowritecheckstoindividuallandown-ers.Second,thefederaltaxcodeisusedregularlytostimulateandshapeinvestmentanddevelopmentdecisionsformanyfacetsofoureconomy.Third,thefederaltaxcodeisacentrallocusthatreachesalleco-nomicagentsintheUnitedStates,andisthereforeequitable.”
Transactioncostsassociatedwithpropertytaxincentivesincludethoserelatedtoidentifyingspecieslocation,acreagequantificationanddelineation,managementplandevel-opment,andcompliancemonitor-ing.Biologicalsurveysareneededtoidentifyanddelineatehabitats.Thesetypesofsurveysareongoingandareutilizedincurrenteffortsbysomestatestodeveloptheirstatewildlifeactionplans.Transactioncostsofpropertytaxincentivescanbequitehighwhenadditionalre-sourcesformonitoringandstatetaxrevenuereductionsareincluded.
6 6 | Incentives for Biodiversity Conservation
Onemajorproblemfacingtheapplicationofpropertytaxincen-tivesonprivatelandsisthewaythatprivatelandisvalued.Thebenchmarkforlandtaxassess-mentsisthe“highestandbestuse”towhichlandcanbeput,whichmeansdeterminingitsmaximumlikelyrevenuepotential.Intheviewofpropertyappraisers,thepresenceofanendangeredspeciesisnotconsideredaspartoftherevenuepotentialofalandarea,itiscon-sideredasdecreasingthevalueofaproperty.Thetaskistodevelopin-centivesthatmaximizethevalueofbiodiversityandhabitatassetsandminimizetheprivatecostsoftheirconservation.Properlystructured,therightsystemoftaxincentivescouldslowtherateofhabitatlossandprovideeconomicreturnstoprivatelandowners(McKinneyetal.1993).
Tax Incentive RecommendationsTaxdeductionsformaintainingwildlifehabitatareneeded.Taxdeductionsandcreditsshifttheburdenofthecostofbiodiversityconservationfromtheprivatetothepublicsector,providingamoreequitablefundingsource.However,taxdeductionsandcreditsdonotmakethecostsgoaway.Givencurrentfederalbudgetconstraintsandtaxcuts,thegoalofatax-basedincentiveprogramshouldberevenueneutral,wheremoniesfromdisincentivesfundvariousincentives.However,withoutdataontheacreagelevelsofprivatelandsupportingeligiblehabitatorthenumberoflandownerswhowoulddecidetotakeadvantageofthetaxincentives,itisnotpossibletodeterminetheextentoftherevenueshortfall(Olsenetal.1993).
Income TaxesTherearetwotypesofincometax-relatedincentivemechanismsforconservingwildlifehabitatandspecies.Thefirstisanincometaxcreditforexpenditurestorestoreandconserveviablewildlifehabitat.Thesecondisanincometaxdeductionfromrevenuesthatmaybeearnedfromeconomicactivitiesonlandsusedforhabitatconservation(e.g.,research,education,wildlifewatch-ing,hunting,fishing,etc.).
Atthefederallevel,thereiscur-rentlynoincometaxcreditforexpen-diturestoprotect,createorimproveendangeredspecieshabitatforland-ownerstoimplementprotectionandconservationmeasuresundertheEn-dangeredSpeciesAct.Thisshouldberemedied,andwewouldrecommendallowingapremiumtaxdeductionforestablishingeasementsinhabitatareasidentifiedbythestatewildlifeactionplans.Federaltaxcreditscouldbeallowedforexpensesincurredinimprovingdegradedhabitat,orcreatingnewhabitat,forendangered,threatened,orcandidatespeciesandforsignificantbiodiversity.Restoredandnewlycreatedhabitatareascouldalsobeeligibleforannualpropertytaxcredits.Bonuscreditscouldbemadeavailabletothoserestorationeffortsresultinginre-colonizationbypreviouslyextirpatedendangered,threatenedorcandidatespecies.Thedisadvantageisthatitcaninvolvesubstantialadministrativecostsfordevelopingaconservationplanandassociatedmonitoringcosts.
Othereligibleexpensesforanincometaxcreditcouldincludeincurringexpensesassociatedwithbiologicalstudiesandfieldsurveys,labordevotedtohabitatprotectionandconservation,specialequipmentorconstructionmethods,andfeespaidbyprivatelandownerstopartici-
pateinhabitatconservationplan-ning.Acaponthetotalamountoftaxcreditsmaybewarranted,becausemanyoftheseexpensescanbesimplypassedontoconsumersintheformofhighertimber,commodity,energyorhousingprices.
Revenuesderivedfromeconomicactivityonlandsthataremanagedtofullysupportendangered,threat-enedandcandidatespeciescouldbedeductiblefromtheearningsthatqualifyforfederalincometaxa-tion.Examplesofactivitieswouldincludemodifiedtimber,grazingoragriculturalpracticesthatsustainnativebioticcommunities,hous-ingdevelopmentsdesignedtoretainsensitivehabitats,orprivatelyman-agedrecreationandhuntinglandswherefeeswerecollectedforwildlifeviewing,recreationorhuntingaccess.Onlyrevenuesstemmingfromlandssupportingthesespecieswouldbeeligibleandwouldincludeahabitatmanagementcomponent.
Property TaxesLocalandstatepropertytaxesonlandsprovidinghabitatforendan-gered,threatenedandcandidatespeciesandforsignificantbiodiversitycouldbeoffsetbyanannualfederaltaxcredit.Propertytaxesarealreadydeductiblefromfederalincometaxes,butataxcreditintheamountoftheallowabledeductionwouldamplifythetaxbenefitsothatqualifyinglandswouldbecomecompletelyex-emptfrompropertytaxes.Thiswouldshifttheeconomicburdenofreducedtaxesfromthecountytothefederalgovernment,whichisappropriateforfederallylistedspeciesandothernationallysignificantbiodiversity.
Reductionsinpropertytaxesareawidespreadandacceptedmethodforpreservingfarmandrangelands,openspaceandhistoricproperties.Proper-
www.de fenders .o rg | 67
tytaxcreditsmaybeeffectiveonthefringesofrapidlydevelopingurbanandsuburbanareaswhereassessedpropertyvaluesincreasedramati-callyandwhereincreasednumbersofplantandanimalspeciesarebeinglistedasendangeredorthreatened.However,landownerswithprimarilyfinancialmotivationswouldchoosetheprofitsfromdevelopmentifapackageofeasementsandtaxincen-tiveswasnotcompetitive.
Estate Tax and Capital Gains TaxesTheallowablereductionsinestateandcapitalgainstaxesneedtobeincreasedforlandsthatareputunderaconservationeasement.Amajorreasonforseriouslyconsider-ingasignificantreductioninthesetaxratesisthatlandundercon-servationeasementsmayactuallyincreaseinvalueasafunctionofit’sprotectedstatus.Withrespecttotheestatetax,wewouldrecommendan
increaseintheexcludableportionofthelandvaluefrom40percentto60percentandamaximumexclud-ableamountthatistaxableatthe2009levelof$3.5million.Theseincreasedbenefitsareespeciallyimportanttokeeplandsinhighgrowthandconversionareas,suchasCaliforniarangelands,frombeingsub-dividedanddeveloped.
Forfederalcapitalgainstaxes,werecommendaprovisionthatwouldexcludeallcapitalgainsfromthesaleoflandsforwildlifehabitatconser-vationeasements.Webelievethiswouldalsocontributetosupportingruraleconomiesandsecurelandstewardshipoveralongtimeperiodandwouldnotdecreasethelocaltaxbase.WhilethereiscurrentlyaversionofataxreconciliationbillbeforetheSenate,itdoesnotcontainaprovisionforanyexclusionofcapitalgainsfromsalesoflandforconservationeasementpurposes.We
Bird watchers | U.S. Fish and Wildlife Service
recommendthatacapitalgainstaxexclusionbeincorporatedintoanyfuturetaxlegislationorattheveryleastadecreaseinthetaxburdenof50percent.
Researchisneededonesti-matingthebenefitsandcostsofimplementingandmonitoringtaxincentiveprogramsdesignedtoconservespeciesandtheirhabitats.Theseactivities,whichconstitutetransactioncosts,areneededtoen-surethatincentiveprogramsareanefficientandcost-effectivemeansofsafeguardingimportantbiologi-calhabitats.Bydoingthisresearch,wecanfindoutwhatthedemandisfortaxincentivesandwhatthepublicfinanceimplicationswouldbeforimplementingtaxcredits.Becauseequityissuesareinvolved,researchneedstobedonetode-terminethedistributionalimpactsfromimplementingthesevarioustaxincentivemeasures.
6 8 | Incentives for Biodiversity Conservation
Facilitativeincentivesaredefinedasthoseinstitutionalmeasuresthatfacilitateandassistland-
ownerparticipationwith,andunder-standingof,variousincentivemecha-nismsandprograms.Thesemeasuresincludeprovisionofeducationandtechnicalassistance,establishmentofadministrativestructuresandland-ownerrecognitionprograms.Therearenumerousfederal,state,localandprivatesectorprogramsthatofferallthreefacilitativeincentivemeasures.
Education and Technical AssistanceDescription
Atthefederalandstatelevels,educa-tionandtechnicalassistanceareusu-allyofferedinapackagealongwithcost-sharingofmanagementpracticesorsomeformoflandconservationprogram.Educationalprogramsandtechnicalassistanceinvolvethetransferofconservationinforma-tiontolandownerstoimprovetheirdecisionmakingandtofacilitatetheadoptionanduseofenvironmentalpractices.Assistancecanrangefromprovidingdata(e.g.,onsoilquality),disseminatinginformationaboutnewtechnologiesorpractices,helpingwithgrantorpermitapplications,coordinatingprojectsandhelpingtoprepareconservationplans.Themajorsourcesofconservationeduca-tionandtechnicalassistanceatthefederallevelaretheU.S.DepartmentofAgriculture’sCooperativeStateResearch,Education,andExtensionServiceandtheNaturalResourceConservationService.Thecost-share
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LandownerIncentiveProgramman-agedbytheU.S.FishandWildlifeSer-vice(assessedinSectionVIII)alsohasamajortechnicalassistancecomponent.
Inadditiontofederalprograms,state-leveleducationandtechnicalassistanceareofferedinallbutsevenstates.Oftentechnicalassistanceisprovidedalongwithotherincen-tives.InMissouri,forexample,theLandownerAssistanceProgramofferslandownerscost-sharefunds,in-kindmaterials,equipment,andlabortoinstallwildlifefriendlypractices,inadditiontoprovidingtechnicalas-sistance.Theprogramhelpslandown-ersinstallriparianfencing,stabilizestreambanks,plantgrasses,removelevees,useprescribedburningandinstallalternativewateringsystems.
Severalprivateconservationorganizationsalsooffereducationandtechnicalassistanceprogramsforaccessingpublicincentivesandforinstallingandmaintainingconserva-tionpractices.Thesegroupsinclude,amongothers,DucksUnlimited,JointVentures,PheasantsForeverandEnvironmentalDefense.
AssessmentAlthougheducationandtechnicalassistancearecrucialtothesuccessfulimplementationofincentivemecha-nismstoconservewildlifehabitatandspecies,therehasbeennoanalysisastowhethertheseincentiveshavecontributedtomorebiologicallyeffectiveoreconomicallyefficientwildlifehabitatconservationandrestorationefforts.Withrespecttotechnicaleffectiveness,gather-
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inganddistributinginformationtothepublicmayincreasetheuseofconservationpracticesbylandown-erswhoareeitherunawareofthemorunsureabouthowtoadoptthem.Privatebenefitsmayincludegaininganeconomicopportunitytodirectlybenefitfromaspeciespresence(e.g.,ecotourism,etc.).Onedisadvantageofpubliceducationandtechnicalassistanceincentivesisthataccessingthesetoolsiscompletelyvoluntary,witheffectivenesslargelydependentonwhetheragivenpracticecre-atesbenefitsforfarmersthatoffsetthecostsofadoption(RibaudoandCaswell1999).
Onemajorconstraintthathasbecomeapparentoverthelastfewyearsisthechronicunder-fundingofpublicagenciestoprovidesufficientbiologicaltechnicalassistanceforhabitatrestorationandconservation.Thedemandbylandownersfortech-nicaladvicefaroutstripstheavailablesupply,withtheconsequencethatfewerlandownerstakeadvantageofexistingconservationincentivesthanwhatotherwisemightbethecase.
Withrespecttoprivatetechnicalassistanceandeducationprograms,itisstilltooearlytotellwhetherhabitatrestorationactivitieshaveanyimpacts.Thereissomeevidence,however,thattheLandownerConser-vationAssistanceProgrammanagedbyEnvironmentalDefensehaspro-videdenoughtechnicalassistancetoprivatelandownerstorestorehabitatsforsomebirdspeciesthatshouldbesuitableforoccupancybywithinthenexttwotothreeyears(Wilcoveand
X. FACILITATIVE INCENTIVES
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Lee2004).Asmeasuredbylandown-erenrollment,asofSeptember2003,therewere43individuallandownersenrolledwithprojectscoveringmorethan74,000acresintheassistanceprogram.LandownerinterestintheprogramexceedsEnvironmentalDefense’scapacitytohandlerequests,whichisanindicatorthatthepro-gramisattractivetolandowners.
RecommendationsItisdifficulttomeasurethebiologicaleffectivenessoreconomicefficiencyofwhatareessentially“indirect”in-centivemechanismssuchastechnicalassistanceandeducation.Nonethe-less,thesefacilitativemechanismsarecrucialtothesuccessfulapplicationofallformsofincentives.Thus,ourmajorrecommendationswithrespecttoeducationandtechnicalassistancerevolvearoundincreasingthequan-tityandqualityofresourcesavailable.Certainly,morefundingisnecessarytoincreasethetechnicalassistance
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presenceforbiodiversityconserva-tion.Oneproposalwouldbetoestab-lishaResourceConservationCorpsthatwouldbemadeupofthree-yearvolunteersthatwouldreceiveschoolloanforgivenessinexchangeforprovidingtechnicalassistance.Thereisalsoacrucialneedforimprovedtraininginbiodiversityconservationforfieldextensionagents.Onemeansofcontrollingthecostsoftechnicalassistancewouldbetoform“conser-vationcooperatives,”whichcouldsharetechnicalassistanceandotherresources(Hummon2005).
Administrative and Organizational StructuresDescription
Improvedadministrativeandorga-nizationalstructuresalsoqualifyasfacilitativeincentivesinthesensethattheyencouragelandownerstopar-ticipateinconservationprogramsbyreducingtransactioncosts.Therearetwoprimarytypesofincentivesthat
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qualifyasinducementsforgreaterlandownerparticipation:coordina-tionofincentivesthroughadminis-trativereformandtheprovisionofassistancefromnon-governmentalconservationorganizations.
Administrativeincentivesrefertoimplementationproceduresthatencouragelandownerstoconservehabitatinexchangeforsimplerandlesscumbersomeadministrativerequirements.Coordinationismoreareflectionofagencypolicyorindi-vidualstaffcommitmentsratherthananestablishedincentiveprogram.Nonetheless,itisconsideredextreme-lyimportantforencouragingland-ownerparticipationinconservationprograms.Coordinationrefersmainlytoadministrativereformsthatmakeitlesscomplexandcostlyforland-ownerstoparticipateinvoluntaryconservationprograms.Examplesofcoordinatedproceduresincludesim-plerandfasterpermittingprocesses,allowingformanagementflexibility,
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orcreationof“one-stopshopping”forapplyingforconservationprogramsandenvironmentalpermits.
Atthefederallevel,theForestTaxationProgramprovidesland-ownerswithaconsolidatedsourceofinformationonthecomplextaxissuesassociatedwithforestman-agement.Anexampleofone-stopshoppingatthestatelevelistheIdahoOnePlanprogramthathelpslandownerstodevelopasinglecon-servationplanthataddressesfed-eral,stateandlocalregulationsandtoapplyforconservationprograms
throughonestateoffice.However,thisprogramprimarilyfocusesonsoilandwaterresources,withwildlifeeffortslimitedtocompli-ancewithfederalandstateregula-tions,ratherthanproactivehabitatconservation.Tenotherstatesalsooffersomeformofcoordinatedenvironmentalpermitting.Forex-ample,theArizonaGameandFishDepartmentprovidescoordinatedpermittingaspartofitsPrivateLandsStewardshipAgreements.
Anotherexampleofcreatinganadministrativestructuretoreduce
privatetransactioncostsisOregon’sflexibleincentiveslegislation.In2001,theOregonLegislaturepassedacomprehensiveconserva-tionincentivesbillthatincludedcreatingaflexibleincentivesac-count.Theaccountcanserveasapotentialmechanismforreducingtheadministrativecomplexityandbureaucraticroadblockswithexist-ingprograms.Investmentsfromthefundwouldbeusedtoaccomplishhighpriorityactionsonprivatelandsconsistentwithalandscapescaleconservationplan.Prioritiescouldchangeovertimeasearlyprojectsarecompleted.Landown-ers(oragencystaff )wouldsubmitapplicationsthatsimplydescribehowaproposedprojectfitsintoaregionalconservationplan,andwhatassistanceisneededinordertocompletethework.
Thereareseveralexamplesofprivateorganizationsthatfacilitatelandownerparticipationinconser-vationprograms.Locallandtrustsoftenhavetheadvantageoflower-ingtransactioncostsforindividualswantingtoengageinconservationthroughcreationofeasements.ConservationorganizationssuchasDucksUnlimitedoffertechnicaladviceandassistancetolandownersforapplyingtofederalconservationprogramsliketheWetlandReserveProgram.Watershedcouncilsandsimilarlocallandownergroupsofferassistancetolandownersforthoseprogramsthatmeettheirorganization’smission.
AssessmentToourknowledge,theimpactofsimplifyingadministrativeandorga-nizationalstructurestofacilitatethedeliveryofincentivemechanismshasnotbeenassessedintermsofbiologicaleffectivenessoreconomic
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Canada geese on farm, Maryland | Natural Resources Conservation Service
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efficiency.Forafutureassessment,importantissuestoaddresswouldincludethefollowing:doessim-plificationandcoordinationofincentivemechanismsinanywaycompromisetheireffectivenessinconservingbiodiversityandwildlifehabitat?Towhatextentdoesadmin-istrativereformofincentiveslowertransactioncostsforgovernment,non-profitsandlandownersandencouragemoreconservation?
RecommendationWewouldrecommendthatcurrentprogramssuchastheone-stopshoppingprograminIdaho,andvariouseffortsbynon-profitsandlandtrusts,beassessedtodeter-minewhetherandtowhatextentsimplifyingadministrativestruc-turesiseffectiveandefficientinprotectingbiodiversity.
Recognition IncentivesDescription
Recognitionincentivesarede-signedtoprovidepublicacknowl-edgmentoflandownerswhomaintainand/orrestorehabitatforwildlifeontheirproperty.Theyareameansofdemonstratingpublicappreciationforlandownereffortstoconserveat-riskspeciesandtheirhabitats.Thesupportfromrecognitionprogramsdoesnotre-sultindirecteconomicpayments,butratherthegoodwillofthelocalcommunityandthegeneralpublic.Manyoftheseprogramshighlighttheimportanceofthefamilyfarmtothequalityoftheenvironmentandthestabilityofthelocalcommunity.Typesofrec-ognitionprogramsincludeheritage
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and/orsomeotherformofspeciallanddesignation,publicationofinnovativeapproachestowardsconservationeffortsbylandown-ers,oranannualawardprogram.
Atthistime,therearenofed-eralrecognitionprograms.How-ever,overone-halfofthestatesofferoneormorepublicrecogni-tionincentives.Inmanystates,incentivesareofferedviathestate’sNaturalHeritageProgram,whichgivesheritagedesignationforlandsofecologicalsignificance.Forexample,Kentucky’sNaturalAreasRegistryprovidesrecognitionandaheritagedesignationforlandsthatareuniqueandecologicallyimportant.TheColoradoDivisionofWildlife,throughits“Landown-eroftheYear”program,recognizeslandownerswhomakeoutstandingimprovementstowildlifehabitatand/orhaveprovidedpublicaccesstoColorado’swildlifeontheirpri-vateagriculturalorforestedlands.Theprogrampromotescreationandimprovementofhabitatandprovidesopportunitiesforpublichunting,fishingandwildlifeview-ing.Texasrecognizeslandownerswhopreserverareelementsofbiodiversitythroughits“LoneStarLandStewardAward.”
Privateconservationgroupshavealsoestablishedrecognitionprograms.OneexampleisaReg-istryProgramsponsoredbyTheNatureConservancyinMinnesota.Thisprogramrecognizeslandown-ersthatarecommittedtoconser-vationofnaturalresourcesontheirland,includingtheprotectionofhabitatofrareorendangeredspecies.Another,theMinnesota
ValleyHeritageRegistryProgram,createsanhonorrolloflandownerswhoselandusepracticesbenefitwildlifeandnature.Asof2005,230landownershadregisteredtheirholdingswiththeprogram.DefendersofWildlifeprovideslettersofrecognitiontoagricul-turalproducersinWisconsinwhorestorenativewildlifehabitatandtheshippersandretailerswhomarketapotatocropfromfarmswhererestorationactivitieshavetakenplace.Inaddition,Defend-ersinformsitsmembershipoftherestorationactivitiesthesegrowersareinvolvedin.
AssessmentTodate,therehavebeennoformalassessmentsofrecognitionincen-tivesasatooltopromoteeffectiveandefficientbiodiversityconserva-tion.Thereisnolackofrecogni-tionmechanismsthatcouldbeaddressed,andwesuggestthatresearchbecarriedouttoinvesti-gatethebiologicalimpactsoftheseprogramsandtheirprivatecostsandbenefits.Certainly,itwouldappearthatlandownersdorespondtorecognitionasindicatedbythegrowthofbothstateandprivateinvolvementinofferingrecognitionincentives,andwewouldencouragetheircontinuance.
RecommendationsWewouldrecommendthatthefed-eralgovernment,especiallynationalfishandwildlifeandagriculturalagencies,andthenon-governmen-talconservationcommunity,devel-opprivatelandownerrecognitionprogramstofurthertheseefforts.
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Inthissectionweprovideabriefoverviewandassessmentsummaryforallpublicandprivateincen-
tivemechanisms.ThepurposeofthisexerciseistoillustrateinacompactmannerthefindingsofsectionsIVthroughXthatdescribedvariousindividualincentivemechanisms.Weprovidethissummarywiththeunderstandingthatthereisnocentralinformationbaseorclearinghouseforpublicorprivateincentiveprogramsandthatthenumberofincentivepro-gramsisquitelarge.
Overall AssessmentAsameanstosummarizetheprelimi-naryassessmentofstewardshipincen-tivemechanismspresentedintheprecedingsections,weintroduceasimpletablethatisqualitativeinna-ture.Table2presentsthetaxonomyofincentivemechanismsandprovidesrankingsymbolsfortwocriteria:biologicaleffectivenessandeconomicefficiency.Theeconomicefficiencycriterionissub-dividedintocost-ef-fectivenessandtransactioncosts.Therankingsymbolsforbiologicaleffectivenessandcost-effectivenessareverygeneralinnaturebecauseofthelackofcomprehensivedata,analysisandtestingoftheimpactsofthevariousmechanisms.Thesesymbolsindicateapositiveinfluence(+),anegativeinfluence(-),aneutralinfluence(0),andnoinformationatall(?).Forsomeincentivemeasures,thereisarankingthatusesthedoublesymbolof+*.Thisindicatesthatwhiletheimpactisgenerallypositive,
XI. SUMMARY OF FINDINGS AND RECOMMENDATIONS
Table 2. Assessment Summary of Voluntary Stewardship Incentive Mechanisms
Type of IncentiveBiological
EffectivenessEconomic Efficiency
Economic Efficiency
Cost- Effectiveness
Transaction Costs
Institutional Innovation
Legal/Statutory
SafeHarbor + + �
CandidateAgreements ? ? ?
RegulatoryRelief ? ? ?
Property Rights
ConservationEasements +* + �
CovenantandDeedRestrictions ? ? ?
StewardshipExchangeAgreements
? ? ?
Market Oriented Institutions
UserFees + +* 1
Ecotourism + + 1
Ecolabeling +* +* �
MitigationBanking +* - �
ConservationBanking + + 2
TradableDevelopmentRights + +* �
Financial Incentives
CompensationPrograms +* + 2
Cost-shareIncentives + + 1
LandRentals +* - 1
ConservationContracts ? ? ?
DebtForgiveness ? ? ?
Insurance +* + 2
TaxIncentives +* 0 1
Education,Information,andTechAsst.
+ + 1
Administrationand
Organization ? ? ?
Recognition ? ? ?
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therearecircumstancesthatcouldcompromisethebenefitsoftheincen-tivemechanism.Forexample,thebiologicaleffectivenessofconserva-tioneasementsisonlypositiveaslongasthehabitatmanagementrequire-mentsoftheeasementareadequateandenforced.Therankingforeachincentivemechanismisnotbasedonwhattheimpactcouldtheoreticallybe,butwhatwaslearnedfromexist-ingempiricalinformationregardingthecurrentuseofthatmechanism.
Therankingfortransactioncostsundertheeconomicefficiencycriteriausesascaleof1,2and3toindicatelow,moderateandhightransactioncosts,respectively,relativetootherin-centivemeasures.Forexample,publicandprivatetransactioncostsarerelativelylowerforestablishingasafeharboragreementthantheyareforinstitutingaconservationeasement.Conservationeasementagreementsmustbedoneforeachindividuallandownerandproperty,whereassafeharboragreementscanbeestablishedforagroupoflandowners.
TheobviousobservationfromTable2isthatwestillhavealotofquestionswithrespecttothebio-
logicaleffectivenessandeconomicefficiencyofindividualincentivemechanismstoachievebiodiversityconservation.Partofthisisduetothestochasticnatureofconservationefforts,whichmaybeimpactedbyotherfactorsbeyondtheincentivemechanismorprogramperse.Theprimaryreasonissimplythelackofmonitoringandevaluationofindividualincentivetools.
Intermsofbiologicaleffec-tiveness,foratleastthoseincen-tivemechanismsthathavebeenthesubjectofresearch,therehavebeensignificantbenefits.Formanyincentivesinthepropertyrights,market-basedandfinancialincentivecategories,however,thereissomequestionabouttheireffectivenessgiventhedetailsoftheirimplementa-tion.Forexample,landrentalsundertheConservationReserveProgramareonlyeffectivefromabiodiversitystandpointiftheydonotresultinadditionalmarginallandsbeingputtoagriculturaluse.Taxincentivesarebeneficialsolongastheystayinplace.Similarly,mitigationbankingisonlybiologicallyviableifthereareproceduresandsafeguardsinplace
tomaintainahabitat’slong-termbiologicalintegrity.
Withrespecttocost-effectivenessofvariousincentivemechanisms,therearemoreconcreteresults.Thereareseveralmechanismsthathaveclearpositiveprivateandpublicimpactsabovetherelativecostsofthemanagementpracticesorservicesprovided.Theseincludesafeharboragreements,conservationeasements,ecotourism,compensationprograms,cost-shareincentives,insuranceandthefacilitativemechanismssuchaseducation,informationandtechnicalassistance.Thecost-effectivenessoflandrentalsandmitigationbankingarerankedasnegativefordifferentreasons.AswasshowninShafferetal.(2002),landrentalforbiodiver-sityprotectionislessefficientthaneasementsorlandacquisition.Formitigationbanking,cost-effective-nessisrankedasnegativebecauseofthefinancialcostsassociatedwithmaintaininghabitatsthatarenotequivalentintheirbiologicalfunc-tionasthehabitatsthatwerelosttodevelopment.Conservationbankingavoidsthisproblem.
Therearesomeincentivemecha-nismsthatgeneratehigherpublicandprivatetransactioncostsrelativetoothers,butfordifferentreasons.Therelativelyhightransactioncostsofsafeharboragreements,conserva-tioneasements,mitigationbankingandtradabledevelopmentrightsaremostlyduetothelongtimeframeanddetailednatureofnegotiationtodeveloplegalagreementsoverrightsandresponsibilitiesonthepartofprivateandpublicparties.Thehightransactioncostsforestab-lishingaviableeco-label,however,areprimarilyattributabletothenecessaryefforttocreateorfindvi-ablemarketsandtoassureconsum-ersthatproductsreflectproduction
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processesthatarecompatiblewithhabitatandspeciesconservation.Thoseincentivemechanismswithrelativelylowertransactioncosts(userfees,ecotourism,cost-share,landrentals,andeducation,infor-mation,andtechnicalassistance)indicatethatfewerresourcesandlesstimeareexpendedbyprivatelandownersandpublicagenciesindeliveryofthemechanism.
Theresultsintheprecedingparagraphsarenotmeanttoindicatethatoneparticularincentivemecha-nismissuperiortoanotherintermsoftheirbiologicaleffectivenessoreconomicefficiency.Aswasstatedattheoutsetofthissection,therearetrade-offsamongthevariousmecha-nismsintermsoftheirlong-termviabilityandcost.Furthermore,becauseofvaryingphysicalandeconomicconditions,landownersshouldbeabletocombinevari-ousincentivemechanismsintoareasonableandflexiblepackagethatmeetsboththegoalsofsocietyandtheindividual.Wehavenodoubtsthatallexistingincentivetypesatalllevelshavecontributedinsomewaytobiodiversityconservation,bothintheprivateandpublicsectors.However,weneedmorepreciseinformationwithrespecttothebiologicalandeconomicimpactofvariousincentivetypesonbiodiver-sityconservation.
Wethinkthatallmechanismshaveaplaceintheportfoliooftoolstoachievetherestorationandconservationofourbiologicalheritageatareasonablecost.Thenextsectionoutlinessomeofourrecommendationsbothforindi-vidualincentivemechanismsandforspecificprogramsforincreasingtheeffectivenessandefficiencyofbiodiversityconservationeffortsoflandownersandthegeneralpublic.
Recommendations SummaryTherecommendationsforindividualincentivesmechanismsdiscussedintheprevioussectionsareimple-mentedwithinthecontextofpublicorprivateconservationprograms.Thus,thereisaneedtoaddresswaystoimprovetheprogrammaticaspectsofincentivedeliveryandadministra-tion.Thetopicsaddressedinthissectionincludegoalsetting,planningandtargeting;technical,administra-tiveandresearchcapacity;scaleoflandownership;incentivefund-ing;geographicandtemporalscale;incentivepolicyconsistency;andmonitoringandevaluation.
Goal Setting, Planning and TargetingDefiningconservationobjectives,developingadequatespatialplanstomeetthoseobjectivesandtargetinglandscapesareessentialiftheapplica-tionofincentivemechanismsisgoingtobebiologicallyeffective.Whilegoalsetting,planningandtargetingrevealnothingabouttheinherenteffectivenessorefficiencyofspecificindividualincentivemechanisms,theseactivitiesneverthelessprovideacontextwithinwhichanyincentivemechanismorprogramcanbemoreefficientandeffective.Untilrecently,therehasbeenalackofcomprehen-sivegoaldefinition,planningandtargetingwithrespecttoconservingbiodiversityandat-riskwildlifehabi-tatintheUnitedStates.
Therearetwoprimaryissuesrelatedtogoalsetting.Firstisiden-tifyingwhichhabitatsneedtobeconservedandhowmuchhabitatisitnecessaryinordertoachievebiologi-caleffectiveness.Thesecondissueiswhetherincentivemechanismsshouldbegoal-basedorpractice-based.Goal-basedreferstodeterminingwhetheraparticularincentiveprogramresultsinaspecifiedoutcomeorperfor-mancelevel.Practice-basedlinksanincentivetotheadoptionofapre-de-terminedmanagementpracticethatisassumedtohaveapositiveimpactonbiodiversityconservation.
Mostpublicandprivatehabitatconservationincentivemechanismslackacleardefinitionoftheeco-logicalgoals(oroutcomes)tobeattainedattheprogram,projectorgeographiclevel.Itisthereforedifficulttoassesswhetherthereisastronglinkbetweenincentivemechanismsandspecifiedgoals.Currently,incentiveperformanceisindirectlymeasuredbythenumberofparticipantsoracresenrolledinaparticularprogram,andnotwhetherthemechanismitselfisparticularlyefficientoreffective.Withoutacleardefinitionofthedesiredecologi-caloutcomes,itisdifficultforbothprogramadministratorsandland-ownerstofindthemostefficientandcost-effectiveincentiveforachievingbiodiversityconservation.
“ ... all existing incentive types at all levels have contributed in some way to biodiversity conservation...”
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Whererigoroushabitatconserva-tionplansexist,specificgoalsshouldbeinplaceorrelativelyeasytoestab-lish.Then,variousincentivemeasurescanbecomparedintermsoftheirpotentialcontributiontomeetingthespecifiedgoals.Itmaybechallengingtosetgoalsforindividuallandown-ersthatarecompatiblewithhabitatgoalsatalarger,moremeaningfulscale.Doingsowillrequireplanningthatcrossespropertyboundariesandcooperativemanagement.Themosteffectiveincentivemeasureforeachindividuallandownermayvaryac-cordingtohisorherfinancialstand-ingorpreferences.
Onemeanstodefineanddevelopgoalsisthroughconservationplan-ning.Intheabsenceofconservationplans,itisdifficulttodecidewheretoinvestpublicresourcesandwhichincentivestooffertoconservehabitat.Ideally,statewildlifeactionplanswouldbeconsistentwithnationalguidelines.Regionalconservationplanscouldlinklocallanduseandwatershedplanstogetherinacoordi-
natedefforttomakestrategic,long-terminvestmentsinprojectsthatleadtotheconservationofhabitat,speciesandecologicalprocesses.Unfortu-nately,foronearea,thereareusuallyseveralindividualplansfordifferentnaturalresourcesatdifferentscales,anditisdifficulttovisualizeacoher-entapproachtohabitatconservation.Itisclear,however,thatplanningonlyforoneresourceorprojectatatimecancompromiseeffectivewildlifehabitatconservation,particularlyindevelopedordevelopingareas.Thelackofcoordinatedplanningcomplicatesthetasktodefinewhichparticularincentivetool(s)mayormaynotwork.
Nearlyallcurrenthabitatsteward-shipincentivemechanisms,publicandprivate,areopportunistic.Thatis,theyarebasedonvoluntarydecisionsbylandownerstoparticipate,iftheymeetminimumprogramcriteria.Pro-ponentsoftheopportunisticapproachappreciatetheequitythatincentivemeasuresandprogramsprovide.Withanopportunisticprogram,everyone
canparticipate(intheory)withtheprospectthatneighborscanbeinflu-encedbyneighbors,therebycommu-nicatingtheavailabilityofincentivesthroughoutthewidercommunity.However,giventhatresourcesarelimited,itmaybemoreeffectivetofocusaportionofincentivefundingonprioritylands,totargetlargerpar-cels,andtoensurethatthereissomehabitatconnectivity.Astrongcasecanbemadethatastrategicapproachtodefiningandapplyingspecificstewardshipincentivemechanismsisnecessarytomaximizethelong-termbenefitsofpublicinvestments.
Effectivestrategicinvesting(tar-geting)reliesonestablishedconser-vationgoals.Strategicinvestmentiseasywithasinglefundingsource,centralizeddecisionsoracoordinat-ingmechanismamongallagenciesandtheprivatesector.However,thislevelofcoordinationdoesnotyetexistwithrespecttohabitatconser-vation,orthevariousstewardshipincentivemechanismsmeanttoachieveconservation.32
32 For some voluntary cost-share and land rental stewardship incentive tools, one means of targeting has been the Environmental Benefits Index employed by the U.S. Department of Agriculture to competitively rank proposed landowner conservation projects for program funding. The index was developed to achieve the maximum environmental improvement per dollar of estimated cost-share or rental payment. Producers can increase their index score (and hence eligibility for federal funding) by maximizing the benefit side or by minimizing the cost side. Although producers score higher on the environmental benefit side if they submit a project that includes the restoration or conservation of habitat for threatened and endangered species, minimizing estimated project costs is a more common strategy for achieving a higher index ranking. Furthermore, the index does not address the issue of giving preference to proposed projects that would target areas that have been identified as priorities in a conservation strategy. Thus, the index does not provide a direct link to determining what particular incentive measure may be the most efficient.
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33. Natural habitat protection is defined as leaving key lands in their current natural or near-natural condition where they support occurrences of at-risk elements of biodiversity, as identified by The Nature Conservancy and the network of state Natural Heritage Programs. This approach would involve comprehensive protection and/or restoration of plan communities as well as individual species. At the national level, incentive tools should take into account landscape scale conservation and long-term planning.
Inorderforeffectivetargetingofincentivemechanismstooccur,theremustbeaprocessforestablish-ingexplicitconservationgoalsthatvariousincentiveprogramsuse.Oneprocessistodevelopaconservationvisionatthenationalandlocallevels(Defenders2004).33Atthenationallevel,broadlydefinedgoalswouldincludeecologicallyandeconomicallysustainablelanduses,withafocusonbiologicaldiversity.Withrespecttotheagriculturalandforestrysectors,complementarygoalswouldincludemeetinglong-termfoodsupplyobjectives,helpingachievepublichealthandnutritiongoals,assist-ingruralcommunitystabilityandsmallfamilyfarmers,andfacilitatingconsumereducation.Stewardshipincentivemechanismswouldhavetobecompatiblewiththeachievementofthesebroadergoalsaswellasthoseestablishedforhabitatconservation.
Atthelocallevel,theselectionofincentivemechanismscanbeguidedbythosewithon-the-groundknowl-edgeofthehabitatsthatneedtobeconservedandwhatincentivemecha-nismslandownersmayfindmoreattractive.Incentivemechanismsandprogramsshouldbepartiallyorganizedaroundconservinganativehabitatthatisimportanttolandown-ersandthecommunity.
Apromisingmeansofachievingnationalandlocalbiodiversitygoals,andbetteridentifyingappropriateincentivetools,istousestatewildlifeactionplanstodefineconservationobjectivesandtargetincentivefund-ing.Inorderfortheseplanstobesuccessful,therearecertaincriteriathatneedtobemet.First,theactionplansneedtofocusonmultiplespe-ciesandhabitats,includingnon-listedat-riskspecies,andalsoaddressplantsandinvertebrates.Second,stateswillneedtofollowaniterativeprocess
withpartners,includingpublicagen-cies,privatelandowners,non-profits,tribesandotherorganizationsindefiningandimplementingincentivetools.Furthermore,somefundingacquiredthroughstatewildlifegrantscouldbeusedtoimplementstateac-tionplans.Futurefederalfundingforincentivesaimedathabitatconserva-tion(statewildlifegrantsorotherfederalprograms)couldbeusedtorewardthebeststateplanningefforts.
Inadditiontothenationalandlocallevel,thereisalsoaneedforregional-scaleplanningtoavoidhabitatfragmentation.ExamplesofthesetypesofplanningeffortsincludetheSonoranDesertConser-vationPlanandtheLowerMissis-sippiConservationPlan.Becauseofthediversityoflandownersandlanduses,implementationofregionalconservationprogramswouldbebestservedbymaintainingamenuofconservationincentivetoolstoachievestewardshipobjectives.
Althoughstrategicplanningandtargetingofincentivesmaybethemoreeffectiveapproach,opportunis-ticconservationprojectsshouldalsobeavailableandwilllikelyremainim-portantgiventhevoluntarynatureofmostincentiveprograms.Importanthabitatsmayexistoutsideofthosear-easencompassedinastatewildlifeac-tionplan,andtherearegoodreasons
toimprovehabitatconservationman-agementacrossthelandscape.Thereareworkablestrategiesandincen-tivesforbothtargetingconservationeffortandmaintainingopportunisticapproaches.Forexample,ownersinhigherpriorityareasmightqualifyforamenuofenhancedincentivemecha-nisms.Adjoininglandownerswhoen-rollcontiguouspropertiesmightalsoqualifyforincreasedincentivebenefitsforcooperativeefforts.Totheextent
thatagencystaffhavetheresourcestosolicitparticipationandmanageincentiveprograms,theymightdosoprimarilyinpriorityareas,whileatthesametimeprovidingsupporttolandownersseekingassistancefromnon-priorityareas.
Toimplementatargetedap-proach,individuallandownerscouldreceivefinancialincentivesfordevelopingandadoptingahabitatprotectionand/orrestorationplanthatisconsistentwithastatewidehabitatconservationplan.Withtheappropriateincentiveprogramdesign,landownerscouldhavetheopportu-nitytodesign,testandimplementappropriatemanagementpracticesandtechnologiestofittheirspecificcircumstances,thereforeaddingflex-ibilitytoconservationefforts.Addi-tionalincentivescouldbeofferedforlandownerswillingtodevoteresourcestomonitoringecologicaloutcomes.
“ ...the selection of incentive mechanisms can be guided by those with on-the-ground knowledge of the habitats that need to be conserved...”
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Incentivetoolsandpoliciesthatimprovehabitatconservationonlandsinproductionneedtobeflexibleinordertotakeadvan-tageofthewidearrayofphysical,environmentalandmanagementfactorsthataffecttheimpactsofproductionpracticesonspeciesandhabitats.Recognizingthecom-plexitiesthatnaturecanimposeonwildlifeprotectionefforts,biolo-gistshavedevelopedsomegeneralrecommendationstoprotectandenhancewildlifepopulationsandhabitatsonworkingagriculturallands(LeawandroskiandIngram1999).Theserecommendationshaveimplicationsfortheincentivepoliciesandmechanismsemployedandinclude:(1)allowconservationprogramstheflexibilitytoaddresslocalandregionalwildlifehabitatpriorities;(2)reducechemicaluse;(3)promotelargercontiguoustractsofhabitatoversmalleriso-latedtracts;(4)reducedisturbancessuchasplowing;and(5)encourageconservationtillageonagriculturallands.Habitatconservationincen-tivesonworkinglandscapescouldalsobeappliedtocontrolinvasivespeciesandtoallowthereturnofecosystemprocesses,suchasfireandflooding,thatareessentialtomaintainingorrestoringpopula-tionsofat-riskspecies.
Inadditiontoconcentratingonlandswithessentialwildlifehabitat,targetingcriteriaforincentivescouldincludeprioritizinglandswhereconservationinvestmentsresultinmultiplebenefits(e.g.,si-multaneousimprovementsinnativewildlifehabitat,waterquality,floodplainfunctions,non-impactrec-reationanddecreasedsoilerosion,etc.)andlandswiththehighestmarginalbenefitperinvestmentintermsofresourceprotection.
Facilitative IncentivesFacilitativeincentivesincludetechni-calassistance,administrativeflexibil-ityandresearchcapacity.Themajorissuesrelatedtotheseincentivesincludethequantityandqualityoftechnicalassistancetodeliverincen-tivestolandowners,cumbersomead-ministrativeprocedures,andresearchprogramstoimprovetheeffectivenessandefficiencyintheapplicationofincentivesforhabitatconservation.
Technical AssistanceThemajorproblemwithtechni-calassistance,withtheexceptionofsomestates,isthattherearefewconservationagentsorconsultantstodeliverincentivestoprivateland-ownersforbiodiversityconservationandrestoration.Clearly,conservationplanningandstrategicapplicationofincentiveswouldbemoreefficientifmoreexpertisewereavailabletoassistlandownersindecidingwhatincen-tivemechanismsandlandprotectionandmanagementstrategiesarethemostappropriateandcosteffec-tive.Unfortunately,mosthabitatconservationincentiveprogramsareunderstaffed.Thefundingpatterninrecentyearsatthefederalandstatelevelshasbeentoappropriatemoneyforincentiveprogramswithoutcorrespondingfundingincreasesforfieldandadministrativepersonneltoimplementthem.Someagencieshavebeendevelopingthecapacitytoworkwithprivatetechnicalassis-tanceproviderstorelievethestrainonpublicpersonnel,butsofar,fewoutsidetechnicalagentswithexper-tiseinbiodiversityconservationhavebeenavailable.
Inadditiontohavingmorepublicsectorstaff,thereareotherwaysofdeliveringincentivetools.Beginningwiththeidentificationofimportanthabitatstoconserve
orrestore,extensioneffortscouldbeincreasedbyestablishinglocalconservationgroups/cooperatives.Therecouldalsobeinvestmentsin“peer-to-peermentoring”andtheestablishmentofcommunitycon-servationassistancenetworks.Thereshouldalsobeanincreaseinoverallresourceconservationprogramandtechnicalassistancefunding.WealsorecommendinitiatingaResourceConservationCorps,similartoAmeriCorps,wherebyrecentgradu-atesfromagriculturalandnaturalresourcescollegescouldparticipateinathree-yearvolunteerprograminexchangeforfederalserviceandrepaymentofschoolloans.
Trainingaboutthevarioustypesofincentivemechanisms,alongwiththeiradvantagesanddisad-vantages,isessentialandcouldbeofferedtolandownersandagencystaff.Moreopportunitiescouldbeprovidedtolandownersandpro-gramdelivererstoshareideasandexperiencewithrespecttoincentivetoolsthroughsitevisits.
Communicationandcoordina-tionbetweenextensionstaffandresearchers,withrespecttothecostsandbenefitsofhabitatconservationincentives,shouldbeimproved.Aca-demicresearchstaffneedtocommu-nicatebetterwithextensionagentsinordertohaveabetterunderstandingoftheimpactsofvariousincentivetoolsandwhysomelandownersmaynotparticipateinhabitatconserva-tionprograms.Extension’sroleinbridgingthegapandbuildingrela-tionshipsbetweenlandownersandgovernmentconservationagenciesandprogramsshouldbeexpandedandimproved.Lastly,technicalinformationsources(e.g.,websites,expertsystems,etc.)canbeestab-lishedtoincreaseknowledgeaboutandaccesstoincentivemechanisms.
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Administrative FlexibilityInapplyingforconservationincen-tiveprograms,numerouslandownersfindthemcumbersomeandexpensiveintermsoftheircommitmentoftimeandotherresources.Thistranslatesintohightransactioncosts.Theplethoraofincentivetoolsandpro-gramsmeansthatlandownershavetogotoseveralfederal,stateandprivateinstitutionstoidentifyappropriateprograms,determinetheireligibilityandfindouthowtoapply.
Thereisameansbywhichcum-bersomeadministrationofincentivemechanismscouldbeimproved.“One-stopshopping”couldbeinstitutedbycoordinatingvariousincentiveprogramsbetweenpublicandprivateentities.Thiscouldbeaccomplishedbydevelopingamasterorumbrellaconservationincentiveprogramandthenapplyingamenuofincentivesacrossalargerarea(e.g.,county,stateandwatershed).Thismaybeadaunting,long-termtask,withimprovedcoordinationandaccesstoexistingprogramsamorerealisticgoal.Considerationshouldbegiventoestablishingasinglepointofentryforlandownerstoapplytoincentiveprograms.Simplify-ingadministrativeprocedurescouldresultinthereductionofbarriersandtransactioncoststolandownersinaccessingincentiveprograms.
InOregon,adiversepublic/pri-vatepartnershipisinitiatingtheOregonSustainableAgricultureResourcesCentertoprovideone-stopshoppingtoallfarmers,ranchersandresourceprofessionalsinOregon.Thecenterwillcompileandcross-linkincentiveprogramsandotherfundingsources,regulations,certifica-tionstandardsandothertechnicalresources.Thecenterwillalsoprovidetechnicalassistancedirectlytolandowners.Alonger-termgoalisto
identifywaystolink,streamlineandcombineeffortsbetweendifferentagenciesandorganizations.Thereisstrongsupportforthecenterfromstateandfederalagencies,agriculturalinterestsandconservationgroups.Thiscentercouldserveasamodelforotherstates.
Stewardshipagreementswithoneorseverallandownershavebeenproposedasanimprovedmeansofdeliveringandadministratingincen-tivemechanisms.Theseagreementscouldspecifywhatwildlifehabitatbenefitswouldbeprovidedbyland-ownersandwhattypesofincentiveswouldbereceivedinexchange.SomeexperiencewithforeststewardshipagreementsinOregonsuggestthattheyshouldbeofferedtolandownerswillingtoexceedminimumregulato-ryrequirements,andthattheincen-tivesneedtobesubstantialenoughtoattractparticipation.
Therearethreeformsofflexibilitythatwouldincreasetheperformanceofincentivemechanisms:flexibilityintheapplicationofincentivesatthelandownerlevel,flexibilityintheavailabilityandselectionofmanage-mentpractices,andflexibilityinfunding.Withrespecttotheapplica-tionofincentivetools,landownersshouldhavesomeroleindefiningwhatincentivemechanismsmaybemostappropriatefortheirparticularareaorfinancialcondition.Forstateswithwell-defined(i.e.,mapped)statewildlifeactionplans,manypriorityareasforconservationwillincludelandsinprivateownership.Becausetheselandswillbeusedinvaryingdegreesofintensity,thereisaneedforavarietyofincentivestopromoteessentialhabitatprotectionandrestorationbothpermanentlyfornaturalareas,andaspartofthework-inglandscape.Aflexibleapproachtoincentivesrecognizesthatthesocial
andeconomicfactorsthatinfluencedecisionsabouthabitatconservationarenotthesameforalllandowners.Anarrayofincentivesisintendedtoprovidealevelofflexibilitywithinwhichmanyindividualsmayfindacombinationoffeaturesthatsuitthephysicalandeconomicconditionsoftheiroperation.
Increasedflexibilityintheap-plicationofeconomicincentivescanbeachievedbycreatingacentralizedaccesspointthatallowsindividuallandownersaccesstothefullmenuofpossibleincentives,sotheycanapplyfortheincentivemeasurethatbestfitstheirphysicalandeconomicsitu-ation.Themajortypesofincentivesalandownercouldchoosefromwouldincludetermorperpetualconserva-tioneasements,landrentalpayments,stewardshippaymentsforresourcemanagementpractices,orcost-shar-ingofmanagementpractices.Local,stateorfederaltaxincentivescouldcomplementexistingincentiveop-tions.Secondaryincentiveswouldincluderesearchandeducationalopportunities,marketingassistance(e.g.,eco-certificationandproductlabeling,preferentialgovernmentpurchasing)and/orstewardshiprec-ognitionrewards.Whilecentralizingincentiveadministrationcouldcostmoreintermsofdelivery,isshouldlowertransactioncostsforprivatelandownersandcouldbemorebiologicallyeffective.Ourrecommen-dationistocreateastate-orregional-levelincentivescoordinator,withadditionalstafflocatedaroundthestatethatwouldcoordinatevariousincentiveprogramsandmechanismsforprivatelandowners.
IntheTualatinRiverBasinjustwestofPortland,Oregon,anewinnovativepartnershipisaddress-ingtheproblemofinadequateincentivelevels.Here,farmerswere
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notparticipatingintheConserva-tionReserveEnhancementPro-gram,whichinOregonfocusesonriparianrestorationtobenefitsalmonhabitatandwaterquality.Thelackofparticipationoccurredbecausetherentalpaymentswerenotenoughofanincentivetoretirelandfromproducinghigh-valuecrops.CleanWaterServices,which
providessurfacewatermanagementandsewagetreatmentfortheurbanareasoftheTualatinBasin,neededtoreducethewaterqualityimpactsoftheirtreatedeffluent.TheyareusingcustomerfeestoincreasethepaymentsthatlandownerscouldreceivethroughtheConservationReserveEnhancementProgramtomeetwaterqualitystandardsinthebasinbyinvestinginhealthyruralriparianareas.TheTualatinSoilandWaterConservationDistrict,whichhasalonghistoryofworkingwithrurallandowners,deliverstheprogramincoordinationwiththeFarmServiceAgencyandtheNatu-ralResourcesConservationService.Thepartnershiphasalsodevelopedaparallelnon-federalprogramforlandownerswhodonotqualifyfororprefernottoparticipateinthefederalprogram.Inaddition,thepartnershipisdevelopingaparallelincentiveprogramforforestlandandaprogramtorewardlandown-erswhoconserveintacthabitat.
Thefragmentednatureofconser-vationprogramshasalsocontributedtocomplicatingproducerchoice(s)ofconservationmanagementpracticesthatarefundedwithvariousincen-tives.Forfederalprograms,resourceconservationmanagementpracticesarefirstdevelopedandpilottested.Althoughmanagementpracticesmaythenbepartiallyadaptedtolocal
conditions,incentivemechanismsarenot.Thus,selectedmanagementpracticesandtheirattendantincen-tiveprogrammaystillbeinappropri-ateforspecificlocalenvironmental,ecologicalandeconomicconditions.Therecanbelowprogramparticipa-tionrateswherepracticesareill-suit-edorincentiveratesareinadequate,resultinginlowertechnicaleffec-tivenessandhigherprogramimple-mentationcosts.Formostpubliclyfundedprograms,thereisnotimelyprocessforalteringconservationmanagementpracticesorincentivelevelstoadjusttodynamictechnicalandeconomicconstraints.
SectionIIIofthisreportdescribedthediversenumberofpublicandpri-vatevoluntaryincentivemechanismsforhabitatconservationthatarecur-rentlyavailabletolandowners.Whilethediversityofincentivemechanismsprovidesarichmixofapproaches,existingincentivetoolsandprogramsarefragmentednotonlybytheirenvironmentalandecologicalpurpose
butalsobytheadministrativeagencyresponsiblefortheirimplementation.Thissituationhasledtoincreasedprogramduplication,complexityandcosts.Thefragmentednatureofexistinghabitatconservationincen-tiveprogramshasimplicationsintheformoftransactioncostsresultingfromthecomplicatedandexpensiveprocessesproducersfacetoidentifyandaccesstheincentivemechanismthatsuitstheirconditionsandneeds.
Withrespecttoincentivetoolsadministeredbythepublicsector,thenumberandeligibilitycriteriahavegrownsocomplexandunwieldythatitisbecomingcounterproduc-tivetoacoherenthabitatresourceconservationandprotectionstrategy.Fromthelandowner’sperspective,thenumerous,andsometimesredundant,incentivetoolsandprogramsaredif-ficulttounderstandbecauseeachhasdifferentinformation,eligibilityandtechnicalassistancerequirements.
Consolidatingtheadministra-tionofbiodiversityandwildlifehabitatincentiveprogramsintooneoveralleffortatthestatelevelcouldcontributetodecreasingthecomplexityandcostsofthecurrentsystem,andwouldlikelyincreaselandownerparticipation.Asinglehabitatconservationprogram,whichpooledfundingfromexistingfederal,stateandprivateprograms,couldbemoreeffectivelycoor-dinatedtoallowfor“one-stopshop-ping.”Thissystemwouldfacilitatelandownerinformationacquisitionandselectionofincentivesandreducelandownertransactioncosts.Itcouldalsofacilitatemonitoringcompliancewithhabitat-relatedstandardsandregulations.
ResearchAnotherpriorityistodevelopaclearinghouseofinformationon
“ From the landowner’s perspective, the numerous, and sometimes redundant, incentive tools and programs are difficult to understand...”
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assessmentsoftheimpactsofvariousincentivemechanismsforbiodiver-sityconservation.Webelievethiswouldbenefitlandowners,incentiveprogramdeliveryagents,andpolicymakers.Theestablishmentofsuchaclearinghousewouldmakeiteasiertofocusonareasthatneedfurtherresearch.Toacertainextent,thisisalreadybeingdoneindirectlythroughthecurrentConservationEffectsAssessmentProgramwithintheU.S.DepartmentofAgriculture.However,thisprogramissolelyfocusedonthebiologicalimpactsofconservationpractices,notincentivemechanisms.And,itdoesnotaddressquestionsofeconomicefficiency.
Thedevelopmentofaland-ownerincentiveprogram(througheitherprivatemarket-basedorpublicentities)forprovidingecosystemservices,includingbio-diversity,deservesmoreattentionthroughadditionalresearchandpilottesting.Aspartofthiseffort,thereneedstobeanevaluationofthepublicandprivatecostsandbenefitsofprovidingincentivesforecosystemservicesthroughprivatemarkets,includingthemaintenanceofbiodiversityvalues.
Forconservationmanagementpracticesthatarefundedthroughcost-shareorothertypesofincentivetools,agriculturalproducersshouldhavetheflexibilitytodesign,testandimplement(withtheassistanceofqualifiedgovernmentagencies,nonprofitgroupsand/orcertifiedprivateconsultants)newagro-envi-ronmentaltechnologiesthatareap-propriatetorestoringandconservinglocalwildlifehabitat.Landownerscouldalsobeallowedtomodifyex-istingmanagementpracticesinordertomeethabitatconservationgoals.Onenewincentivetoolwouldbetoinitiateapilot“safetynetprogram”
whosepurposewouldbetoprovideaminimumpaymentfortherisktakeninimplementingnewconser-vationpracticestoprotectwildlifehabitatorspecies.
Scale of Land ManagementAnotherimportantstructuralconsiderationisthedistributionofincentiveresourcesoverdifferentsizedlandholdings.Thebasicques-tioniswhetherincentivesshouldbedirectedtolandownerswithlargeorsmallholdings,orboth.Thedebatefocusesonlandownerswhomaybeabletoprovidelargecontiguoustracksofhabitatversusthosethataremorescatteredacrossthelandscape.Withintheforestrysector,research(Hummon2005)hasdemonstratedthatfamilyforestlandownerswithsmallerholdingsplaceahighvalueontheenvironmental,aestheticandheritagevaluesoftheirland,whilelargeindustriallandownersaremoredrivenbyprofits.However,industriallandownerstendtoownlargerparcels,haveaccesstomoreresources,andmayhavegreatercon-cernsaboutconsumerdemandsandpublicperceptionintheireffortstoconservehabitatsandspecies.Toaddresstheissueofadequatescaleatthesmalllandholderlevel,addition-alincentivescouldbeprovidedtogroupsofadjacentlandownerswhoagreetoprovidehabitatconserva-tionoveracontiguousarea.Inthiscase,abonusincentivecouldbeof-feredforcoordinatedefforts.Atthefederallevel,theConservationSecu-rityProgramallowsforalandownerenhancementpayment(bonus)ifthereisa75percentparticipationratewithinawatershed.Giventhemosaicoflandownershipanduse,incentivemechanismsandpoliciesmustbedesignedforbothtypesoflandowners.
Incentive FundingConservationincentivefundinginthepublicandprivatesectorsisinsuf-ficienttomeetthedemandfrompri-vatelandowners.Additionally,thereareissuesrelatedtotheallocationofavailableconservationfundsandthemeanstogenerateadditionalfunding.
Publicfundinglevels(federalandstate)forhabitatconservationincentivesandtechnicalassistancehavenotbeenadequate,despitegrowingdemandbylandowners.Forexample,thebacklogofapplicationsforfederalFarmBillconservationincentives,acrossallprogramsthatindirectlyordirectlybenefitwildlifehabitatsandspecies,infiscalyear2004totaledabout$4.48billion,whichleftmorethan150,000land-ownerapplicationsunfunded.Atthefederallevel,realfundingfortechni-calassistancetodeliverconservationprograms,andfortheresearchanddevelopmentofnewconservationtechnologies,hasactuallydeclinedoverthelast10years.Thissitua-tionhasresultedintheinabilityofreducedstaffstoprovideeffectiveservicetothegrowingnumbersofproducerswaitingtoparticipateinanincreasingarrayofpublicresourceconservationprograms.
Conservation-relatedpublicinstitutionsneedadditionalfundingtodesign,testandmarketinnova-tivehabitatconservationincentiveprograms.Federalandstateagenciesalsoneedincreasedfinancialsupportforresearchanddevelopmentofpro-ductionpracticesthat,totheextentpossible,simultaneouslymeetprofitandproductiongoalsandreduceadverseenvironmentalimpactsonwildlifehabitat.Increasedfinancialresourcesmustalsobemadeavail-abletosupportbiodiversityconser-vationeducationforlandownersandforprogramdeliverers.
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Theallocationofincentivefundingneedstobemorerationalandcoordinatedbetweenprivateandpublicsources.Thedistribu-tionofincentivefundsshouldbemadeattwolevels:onethatfocusesonimplementingnationalandlocalconservationpriorities,andasecondthatprovidesfundingforinnovativewildlifeconservationactivities(specialprojects).Withrespecttotheimplementationofnationalandlocalpriorities,apor-tionoffederalconservationfundingshouldbeallocatedtoimplement-ingstatewildlifeactionplans.Spe-cifically,incentivepaymentsshouldbeincreasedforthoselandownersthatimplementprojectsthatmeetnationalorlocalhabitatconserva-tiongoalsorthatconserveorrestorehabitatformorethanonespeciesonagriculturalorforestrylands.FuturepublicfundingforhabitatconservationcouldbelinkedtoareasidentifiedbytheConserva-tionEffectsAssessmentProgramashavingpositiveimpactsonwildlifehabitat,assumingthisprogramcaneventuallymakethelinkbetweenfundedmanagementpracticesandbiologicaloutcomes.
Increasedpublicandprivatefundingisneededformarket-drivenincentiveapproaches(e.g.,certifica-tion,niche-marketing,ecotourism,etc.)toencouragelandownercon-servation.Furthermore,aportionofpubliccost-sharefundingshouldbeusedforlandownerandagencystafftraining/educationinbiodiversityandhabitatconservation.Educationeffortscouldbeimplementedthroughfinan-cialassistanceprograms,oriftechnicalassistancefundingwereaugmented.Last,publicandprivateconservationincentivefundsshouldbemadeavail-abletolocalcommunityconservationgroupstorestoreorconservehabitatsidentifiedinstatewildlifeactionplans.
Thereisasignificantpoliticaldimensiontotheallocationofpublicincentivefunds.Althoughtargetingincentivestothoselandswiththegreatestecologicalvalueforthelow-estcostisagoodstrategyfromthebiologicalandeconomicefficiencystandpoint,allocationsmaybedeter-minedforotherreasons.Forequityconcerns,politicalpressuremayforceexpendituresontolandsthatarelessecologicallyvaluableandmoreexpensive.Aneffectiveandefficientstrategywillfocusincentivesinrural
areas.However,resistancemaybein-tensetotheremovaloflandfromtaxrolesorfromcommodityproductiontoaccommodatehabitatconserva-tion.Also,urbanresidentsmayresistchannelingallfundstoruralagricul-turalandforestrylandsattheexpenseoflocalparksandgreenspacesthathavelessecologicalsignificance.
Federalincentivefundstoprotectandconservewildlifehabitatcouldbeprovided,inpart,throughstategrantswithfederalmonitoringandoversight.Stateswoulddecidehowtoallocateincentivefundsamongprior-ityresourceconservationareasidenti-fiedintheirstatewildlifeactionplan.Stateeligibilityforincentivefundingwouldbecontingentonthecapacitytoeffectivelyimplementthehabitatconservationstrategyandontheallocationofadequateresourcestomonitortheeffectivenessofincentiveprogramsandconservationresults.
Inadditiontothearrayofpublicandprivateincentivemechanismsalreadyinexistence,tieredcompensa-tionstructuresfortheprovisionofon-goingpublicenvironmentalben-efitscouldbeanadditionalincentiveforhabitatconservation.Sometimescalled“greenpayments,”thecompen-sationgoestolandownersforon-go-ingandeffectivemanagementoftheirlandstoprovidehabitatbenefits.Forexample,landownersusingconven-tionalintensiveagriculturalorforestmanagementtechniquesthatprovidenoconservationvaluewouldnotbeeligibleforincentivegreenpayments.Operationsdeemed“sustainable,”meaningthattheysustainecologicalvalueswithinaproductioncontext,wouldbeentitledtopartialpay-ments.Thehighestpaymentswouldbemadetolandownersinprior-ityconservationareaswhoagreetomanagelandsprimarilyforecologicalvalues,therebyreducingorforgoing
Sandhill cranes | U.S. Fish and Wildlife Service
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opportunitiestogeneraterevenuefromcommodities.TherelativelynewU.S.DepartmentofAgricultureConservationSecurityProgramcouldbecalledaprecursortoa“greenpay-ments”incentiveprogramthatcouldbecomeincreasinglyimportantinlightofpotentialfuturerestrictionsimposedbytheWorldTradeOrgani-zationonU.S.agriculturalcommod-itypriceandmarketingsupports.
Geographic and Temporal ScaleInorderforincentivemechanismstobeeffective,theirstructureandfund-ingmechanismsmustbeconsistentwithtwoissuesrelatedtothescaleofconservationeffort.Onescaleisgeographic,theotheristemporal.Withrespecttogeography,scaleissuesconfoundincentiveprogramsbecausecurrentincentivestendtobefocusedonindividuallandowners,whileeffectivehabitatconservationneedscrossmultiplejurisdictions,economicsectorsandlanduses.Inordertoconserveenoughhabitatoftherightkind,intherightplace,andwithanappropriateconfigura-tionforwide-rangingspecies,itisnecessarythatincentivemechanismsandprogramsbeapplicableacrossmultipletypesoflandownership.Theexception,ofcourse,iswhereindividualownershavesignificantacreagesthatencompassarepresen-tativeportionofaparticularhabitat.Aninherentdilemmainthisarrange-mentisthatwithsomeexceptions,thelargertheowner(especiallyforindustriallandowners),thegreaterthepressuretomanagethelandformaximumcommodityproduction.Ownersofsmallerparcelsmaybemorereceptivetothenotionofman-aginglandforbiodiversityvalues,butthefragmentedpieces,oftenfoundinruralresidentialareas,havelesspotentialecologicalvalue.
Withrespecttothegeographicalscaleissuefortherecoveryofbio-logicalfunction,werecommendthatregionalorwatershedlevelprojectsshouldbeencouraged.Thisapproachcouldofferadditionalincentivesforlandownercooperationandcoordina-tionthatcouldhavealargerimpact
onconservationtargets.Somepublicstewardshipprogramsalreadyofferadditionalincentivestoencouragecooperativeconservationeffortsbetweenindividuallandowners.
Examplesofregionalconserva-tioninitiativesincludetheMalpaiBorderlandsintheSouthwestandtheChesapeakeBayregionontheEastCoast.Also,boththeU.S.FishandWildlifeServiceandtheU.S.DepartmentofAgriculturemanageconservationincentiveprogramsthatcanbeappliedonaregionalbasisacrossmanylandowners.Forexample,variousU.S.DepartmentofAgricultureincentiveprogramshaveusedsomefundstotargetsagegrousehabitatthroughout11statesintheWest.ThePartnershipsandCooperationProgramestablishedin2002undertheU.S.DepartmentofAgricultureisanexampleofaconservationprogramthatimple-mentsspecificprojectswiththegoalofencouragingconservationacrossmultiplejurisdictionsandnaturalresources.
Thetemporalscaleisequallyimportant.Restorationandconser-vationofwildlifehabitatrequiresalong-termcommitmenttobesuccess-ful.Withtheexceptionofpermanenteasementoptions,mostpubliclyfundedhabitatincentivemechanismsaretemporaryinnature,employing
predominatelycost-shareorlandrentaltools.Theseincentivesarenotgearedtothelong-termgoalofpermanentlyconservingbiodiversityvalues.Forso-calledworkinglands,theConservationSecurityProgramhasthepotentialtoprovidelandown-erincentivesonanon-goingbasistomanagetheirlandforecosystemser-vicesthatincludespeciesandhabitatprotection.Thisprogramrecognizesthatresourceconservationshouldnotendaftercost-sharingtheadoptionofaconservationpracticewithinashort-termcontract.Inaddition,thereisaneedtocontinueincentivesforthepurposeofongoingconserva-tionmanagement.
Incentive Policy ConsistencyTheconsistency,andthereforetheeffectiveness,ofwildlifeandconser-vationincentivesisconfoundedbytwoproblems.Theseproblemsresidemoreinthepublic,especiallyfederal,domain,althoughconsistencyandcompatibilitybetweenpublicandprivateincentivemechanismsand
“ ...the Conservation Security Program has the potential to provide landowner incentives on an on-going basis to manage their land for ecosystem services...”
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programsalsoneedstobeaddressed.Thefirstconsistencyissuestemsfromtheinterplaybetweenincentivemea-sures.Althoughonesetofincentivemechanismsmaybeaimedatprotect-ingandconservingwildlifehabitat,anotherincentivesetmayactuallyencouragedestructionofhabitat.Forexample,whilesomeU.S.Depart-mentofAgricultureorU.S.FishandWildlifeServiceincentivesareaimedatconservingspecifichabitats,otherfederalsubsidiesavailablethroughthetransportation,housingorenergysectorsmayactuallyresultinadverselyalteringthesesamehabitats.
Toaddresstheissueofconsistentpoliciesbetweenfederalandstateagencies,theagenciesresponsibleforwildlifeconservationshouldcoordinatewithotherpublicagen-ciesonaregularbasisonthelocationandnumbersofatriskspeciesandtheirhabitats.Toalimitedextent,thiscoordinationalreadytakesplacewiththeframeworkoftheNationalEnvironmentalPolicyActandtheEndangeredSpeciesAct.However,itisbecomingincreasinglynecessarytomakesurethathabitatconservationincentivesarebeingappliedeffectivelyandefficientlywithinthecontextofincentivesofferedinthetrade,energy,commerce,housingandtransportationsectors.Evenbetweenfederalnaturalresourcesagencies,coordinationhasbeenminimal.Forexample,imple-mentationisgenerallynotcoordinatedbetweentheCleanWaterActandtheEndangeredSpeciesAct.TheEnvi-ronmentalProtectionAgencywouldnotconsiderimpactsofpesticidesonlistedsalmonuntilalawsuitforcedtheagencytocomply.
Thesecondconsistencyissueinvolvesincompatibleincentivepro-gramswithinthesameagency.ThereisalackofcoordinationbetweentheconservationobjectivesoftheFarm
Billandtheproductionobjectivesofthecommodityandriskmanagementprograms.TheinterplayofthesevariousFarmBillTitlesisimportantindetermininghoweffectivehabitatconservationincentivescanbe.Insomecircumstances,productionin-centivesmayprovetobecounterpro-ductivetohabitatconservation.Forexample,althoughanincreaseinthesubsidyonfederalcropinsurancecandecreaseaproducer’sfinancialrisk,itcanalsoactasaninducementtoputunusedmarginallandsintoproduc-tion,therebyimpairingtheirvalueashabitatforat-risknativeanimalandplantspecies(Adamsetal.1999;Wu1999).TherearealsoinherentconflictswithinFarmBillpolicyconcerningcommodityproductionandwildlifehabitatconservation.ThecommoditytitleofFarmBillsubsidizeseightcommoditycrops,resultinginmorelandbeingconvert-edorputintomoreproductionforthesecrops,allofwhichareextremelyintensewithrespecttoresourceuse.Itisestimatedthatalmost300,000acresofnativegrasslandwerecon-vertedtocroplandbetween2002and2005inNorthandSouthDakotaandthatannuallossratesofgrasslandsince2000exceed2percentperyear(ArgusLeader2005).Increasedpro-ductionintensitycanleadtoadirectlossinbiodiversityoncommoditycroplandsandtotheimpairmentofecosystemsduetotheintenseuseoffertilizers,pesticidesandotherinputs.
Thereareseveralwaysthatpoliciesaffectinghabitatconservationcanbeconsistentandcoordinatedwithinindividualagencies.TheU.S.Depart-mentofAgricultureservesasagoodexample.Thebasicobjectivewithre-specttofarmpolicyistostrikeabetterbalancebetweenproductioncapacityofthelandandresourceconservation.Thisisabalancebetweenencouraging
landownerstostayonthefarmandassistingtheminadverseeconomicconditionsinawaythatdoesnotresultinhabitatdegradation.Biolo-gistshavebeenchallengedindeter-mininghowmuchproduction,andatwhatintensitylevel,isconsistentwithhabitatconservationandprotection.Commodity-relatedincomesupportpayments(incentivestoproduce)needtobeexplicitlylinkedtotheadoptionofconservationpracticesandstrate-gies(cross-compliance),includingaprohibitionagainsttheexploita-tionofecologicallyvulnerablelands(rarehabitats,highlyerodiblesoils,wetlands,riparianbuffers,etc.).Inadditiontoincentivesembeddedinthecommoditytitleoffarmlegisla-tion,incentiveswithothertitles(e.g.,trade,energy,ruraldevelopment)needtobeconsistentwithhabitatconserva-tionincentives.Examplesofachievingmorecross-titleconsistencywouldbetoreshapeorganiccertificationandmarketingprogramstowardsattainingahighlevelofhabitatconservation,andtoencouragetheuseoffoodstampstopurchaselocallygrownfoodproducedinahabitat-friendlymanner.
Monitoring and EvaluationTheimplementationofhabitatcon-servationprogramshasafairlylonghistory,butwedonotknowmuchabouttheirphysicalcontributiontobiodiversityconservation.Thereisanabsenceofdefinedprocessestomonitorconservationincentivesandtolinkthemwithprojectoutcomes.Thelackofmonitoringdatamakesitdifficulttoaddressdynamicenviron-mentalandecologicalproblemsortoidentifymoreappropriateincentivemechanisms.Monitoringisrequiredtodeterminethebiologicalimpactsoftheeconomicincentivesemployedtoachievedefinedrestorationandconservationgoals.
84 | Incentives for Biodiversity Conservation
Therearemanyapproachestomeasuringconservationprogramout-comes.Oneapproachisimplemen-tationmonitoring,whichmeasuresthedegreetowhichstepshavebeentakentocarryoutaprogram(e.g.,howmanytreeswereplanted).Thesecondiseffectivenessoroutcomemonitoring,whichmeasurestheimpactofanincentivemechanism
ontheground(e.g.,howmanytreessurvived,andhowwasthepopulationofspeciesxaffected).Theproblemwithimplementationmonitoringisthatitassumesthereisarelationshipbetweenprogrammaticactivities(i.e.,landownerparticipationrates,acresenrolled)andbiologicalresults,whichmaynotbeanaccurateassumption.
Thechallengeforeffectivenessmonitoringofincentivesisthatthereisconsiderablenaturalvari-abilityinecosystems,andsignificantecologicalchangesmaynottakeplacefordecades.Whatisneededisanintermediatemeasurementsystemandindicatorsfordeter-miningtheimpactsofincentivemeasuresthat’seasytounderstandandadministerandthatprovidesusefulinformationandfeedbacktoinformandguideincentiveprogrammanagementovertime.
Conservationgoalsshouldbesetatthestateorregionallevelandthenimplementedatthelocallevel,wherehabitatconservationprojectsspecifyclearoutcomestobeachieved.Forexample,awildlifehabitatprojectgoalmaybetoincreasehabitatforan
at-riskspeciesby“x”percentoveraspecifictimeperiod.Forwaterquality,specificgoalsshouldbeconsistentwithexistingnationalstandardsorobjectives.Outcomemeasurementshouldnotonlyaddressthetechni-caleffectivenessofrecommendedmanagementpracticesbutalsothecost-effectivenessofincentiveinstru-mentsselectedbylandowners.
TheNaturalResourcesConser-vationServiceoftheU.S.Depart-mentofAgricultureisattemptingtomeasuretheeffectivenessofconserva-tionpractices.UnderitsConserva-tionEffectsAssessmentProgram,theNaturalResourcesConservationServiceisinvestigatingtheviabilityofandmeasuringvarious“outcome”indicatorsthatcouldserveasthebasisforevaluatingresourceconservationeffortsforthetechnicaleffectivenessofspecificmanagementpractices.
Exceptinaveryindirectway,theConservationEffectsAssessmentProgramdoesnotaddresstheap-propriatenessorefficiencyoftheeco-nomicincentivesusedtoencourageconservationbehavior.Ifindividualpracticesorlevelsofparticipationaredeemedtobeeffectiveinconser-vationefforts,thenbydefault,theincentivemechanismforaparticularprogramisconsideredefficient.Thisconclusionmaybeunfounded,be-causealthoughlandownersmaypar-ticipateinaconservationprogram,theymaydosoforotherreasonsthanfindingaparticularincentivemecha-nismorpaymentlevelworthwhile.
Inaddition,theNaturalResourceConservationServicewillalsobeimplementingamonitoringsystemthatusesdatafromtheirNaturalResourcesInventorytodeterminetheimpactsofagriculturallanduseonwildlifehabitatcompositionandconfiguration(BradyandFlather1995).Totheextentthatlanduseisimpactedbyspecificconservationincentivemechanisms,thismonitor-ingprogrammayormaynottellusanythingabouttheeffectivenessortheefficiencyofindividualincentivetoolsinconservingwildlifehabitat.
Clearly,publiceffortsneedtobeexpandedtoincludethemonitoringandevaluationonincentivemecha-nismsintermsofbiologicalconserva-tiontheeconomicefficiency.Thereisaneedforadedicatedamountoffundinginallpublicprogramsformonitoringandevaluationofincentivemechanisms.
“ Conservation goals should be set at the state or regional level and then implemented at the local level...”
Lark Bunting | Natural Resources Conservation Service
www.de fenders .o rg | 8 5
Inthefuture,thehabitatsandspeciesingreatestneedofconser-vationattentionwillincreasingly
beonprivatelands.Recognizingthatprivatelandownerswillplayakeyroleinbiodiversityconserva-tion,wecanandshouldencourage
theseefforts.However,inadditiontopositive,voluntaryincentives,thereisclearlyaneedforconserva-tionregulationsthatsetaminimumperformanceleveltoguidelandownerdecision-making.Inotherwords,thereisaneedforboththe“carrot”andthe“stick.”
Wealsoneedtoestablishaclearboundarybetweentheregulatoryapproachandtheroleofincentives.Weshouldnotpaylandownerstoobeythelaw.Regulationsdefinethebaselineforprotectionofecologicalvalues.Incentivesshouldencouragelandownerstopursuemoreambitiousgoals.Simplypreventingadditionalecologicaldamageisinsufficient,giventhenation’shistoryofbiodi-versitylossesandthestrengthoftheforcesthatarestilldrivingthattrend.Aneffectivelong-termconserva-tionpolicywillrequirebothactiveecologicalrestorationandcontinuingstewardship.Conservationincentives
policyshouldencouragerestorationwithoutpenalizinglandownerswhohaveahistoryofgoodstewardshipbylimitingassistancetothosewhoselandshavebeendamaged.
Thereareincentivemechanismsforwhichnoformalbiologicalor
economicappraisalhasbeendone,andthereareotherswhereverylittlehasbeendone.Thisdoesnotmeanthatweshouldnotsupportcurrentincentiveprograms,butratherweshouldfindwaystomakethemworkbetter.Indeed,withouttheseprograms,habitatandspecieslosswouldnowbemoreseverethanitcurrentlyis.However,moreresearchisrequiredtomeasurethecomparativeadvantagesofvariousincentivemechanisms.Oneareaofimmediateactionistofindwaystodecreasetheprivateandpubliccostsofaccessingandimplement-inglandownerincentiveprograms.ResearchontheseissuescanbeimplementedthroughtheU.S.De-partmentofAgriculture’sEconomicResearchService,thelandgrantuniversitysystemorbynon-govern-mentalorganizations.
Thereareparticularthemesthatemergefromourassessmentthat
areimportantforestablishingaworkableframeworkforincentivedeliveryandmanagement.First,establishingamarketstructureforlandownerstocapturethepublicbenefitsofwildlifeconservationcanbejustasimportantasfinancialin-centives.Second,administrativeeaseforaccessingincentivemechanismsbylandownersisimportant.Third,thereisagreatpotentialformergingpublicandprivateincentivetoolstoencouragelandownerstoconservebiodiversityvalues.
Landownersneedaccesstoabundleofinstitutional,market-ori-ented,financialandfacilitativeincen-tives.One-stopshoppingthatofferslandownersaclearpictureofthefullrangeofoptions,incentives,permitrequirements,fundingsourcesandotherinformationapplicabletotheirindividualsituationscouldresultinbothhigherlevelsofparticipa-tionandimprovedadministrativeefficiencies.Wealsoneedtofindwaystobuildmoreflexibilityintoactualincentivesusedandintothemanage-mentpracticesthoseincentivesaremeanttoencourage.Whileflexibilitycomesatahigherpriceintermsoftransactioncosts,thetradeoffwitheffectivenessislikelytobepositive.
Anincentivetoolthatdeservesfurtherexplorationisanecosystemservicesmarketplacethatpromotesbothbiologicalintegrityandeconom-icefficiency.Althoughtheconceptisjustbeginningtogainsometraction,primarilyintherealmofcompensa-torymitigation,thepotentialexistsformuchbroaderapplication.
XI. CONCLUSIONS
“ An effective long-term conservation policy will require both active ecological restoration and continuing stewardship.”
8 6 | Incentives for Biodiversity Conservation
ProposalstoshiftFarmBillfund-ingfrom“brownbox”commoditysupportprogramsto“greenbox”con-servationprogramsthatprovidepay-mentsforecosystemservicescouldhaveaprofoundeffectonthescopeandscaleofthisemergingecosystemmarketplace.However,thereismuchtobedoneintermsofdefiningwhat“service”isactuallybeingfurnished,whatmetricsareusedtomeasurethatserviceandwhattheappropri-atemethodofeconomicvaluationshouldbe.
Regardlessofthemechanism,in-centiveswillbemosteffectiveiftheyareimplementedwithinthecontextofspecificbiodiversityconservationgoalsoroutcomesthatallowustomeasureprogressagainstthesegoalsandadaptincentivetypesandlevelsovertime.Investmentsinconserva-tionincentivesneedtobemadestrategically.Fewpolicymakerswouldacceptthenotionthatthegovernmentshouldinvestitslim-itedfundingforconservationlandacquisitionsinpurchasingpropertyfromanylandownerwhosteppedforward.Yetmostincentiveshavebeentreatedthatwayforyears–madeavailabletoabroadspectrumoflandownersandallocatedonafirst-come,first-servedbasis.Wenowhavetoolsthatallowincentivestobetargetedmorestrategically,basedoncomprehensiveconserva-tionassessmentssuchasthestates’newwildlifeactionplans,TheNatureConservancy’secoregionalassessmentsandotherscience-basedconservationstrategies.Monitoring,implementedbythirdpartiesatawatershedorecoregionalscale,canbeusedtogaugeeffectiveness,guideimprovementsinthewayincentivesareformulatedanddeliv-ered,andprovideaccountabilityforpublicinvestments. Three generations of farmers, Iowa | Natural Resources Conservation Service
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