What Price Biodiversity?
Economic Incentives and Biodiversity Conservation in the United States
From the halls of Congress to the counter at the local coffee shop, controversy rages over the costs and benefits of protecting endangered species and biodiversity. CIEL's new report, What Price Biodiversity? Economic Incentives and Biodiversity Conservation in the United States, demonstrates that the price of protecting biodiversity is both acceptable and affordable.
What Price Biodiversity? describes existing programs that are working to give private citizens economic incentives to protect wildlife and habitat. It also suggests policy changes that wouuld save money and protect biodiversity by removing damaging subsidies. The report addresses the arguments behind the current takings dispute and describes efficient ways of strengthening the relationship between economic health and conservation.
The incentives described in What Price Biodiversity? are relevant to ongoing debates about the use of economic incentives in reauthorization of the Endangered Species Act; the 1995 Farm Bill; and tax policy reform. Specific areas of focus include: tax policies; agricultural policies; and the use of market mechanisms (such as tradeable development rights) to protect habitat. This summary is intended to highlight a few of the important points that are covered more thoroughly in the full report.
Biodiversity is the diversity of life on earth, on which we depend for our survival. The variability of and within species and ecosystems helps provide some of our basic needs: food, shelter, and medicine, as well as recreational, cultural, spiritual and aesthetic benefits. Diverse ecosystems create the air we breathe, enrich the soil we till and purify the water we drink. Ecosystems also regulate local and global climate. No one can seriously argue that biodiversity is not valuable.
Nor can anyone seriously argue that biodiversity is not at risk. There are over 900 domestic species listed as threatened or endangered under the Endangered Species Act, and 4,000 additional species are candidates for listing. We are losing species as a result of human activities at hundreds of times the natural rate of extinction. The current rate of extinction is the highest since the mass extinction of species that wiped out the dinosaurs millions of years ago.
The question which engenders serious controversy is whether society can afford the costs associated with saving biodiversity. Opponents of biodiversity conservation argue that the costs of protecting endangered species are too high. They complain that the regulatory burden on private landowners is too heavy, and that conservation measures impede development. They seek to override scientific determinations with economic considerations, and to impose cost/benefit analyses on biodiversity policy making.
An equally important question, however, is whether we can afford not to save biodiversity. The consequences of losing this critical resource could be devastating. As we destroy species and habitat, we endanger food supplies (such as crop varieties that impart resistance to disease, or the loss of spawning grounds for fish and shellfish); we lose the opportunity to develop new medicines or other chemicals; and we impair critical ecosystem functions that protect our water supplies, create the air we breathe, regulate climate and shelter us from storms. We lose creatures of cultural importance - the bald eagle is an example of the cultural significance of biodiversity and also of the need for strong regulations to protect species from extinction. And, we lose the opportunity for mental or spiritual rejuvenation through contact with nature.
There are many other costs associated with the loss of biodiversity, and other values associated with its preservation. Researchers are finding that protection of ecosystems rich in biodiversity can strengthen and diversify regional economies. For example, the estimated economic value of intact natural forests for recreation, production of fish and wildlife, and other benefits, is one-third to three times as much as their value for timber alone, according to the World Resources Institute. These are significant costs and benefits which should be included in any economic analysis of biodiversity conservation.
Much of the current controversy stems from private landowners who resent government regulation of their lands. Government regulation is necessary to protect a critical public resource from private destruction. However, individual citizens should not bear the full cost of protecting biodiversity, since their actions benefit society at large. Within the context of a strong regulatory framework with defined conservation goals, economic incentives can help defuse political controversy by providing increased flexibility and rewarding private sector conservation efforts.
Conservation strategies must be developed that make private landowners willing partners in biodiversity conservation. This is particularly important given that seventy percent of U.S. land outside of Alaska is privately owned. Even more significantly, more than fifty percent of species listed under the Endangered Species Act are found only on private lands, and many more have substantial parts of their remaining range on private property.
In many cases, reforms to benefit biodiversity will require the revision of existing incentives offered to the private sector by government policies. In many cases, economic policies send signals which conflict with the goal of species conservation. If biodiversity considerations are linked to the economic incentive, the signal sent to the private sector is harmonized rather than conflicting. Private landowners benefit from public assistance in many ways. These benefits include subsidized access to vital resources like water and roadways, price supports, and tax breaks, all of which increase the value of property. For example, the American Farm Bureau Federation has estimated that farm support payments have increased the value of farmland in this country by $250 billion. Public support could be conditioned upon requiring recipients to comply with existing laws and to implement management practices that embody sound principles of land stewardship.
In order to fully integrate economic and environmental policy, we must also examine the biodiversity impact of government subsidies. Government subsidies often stimulate or encourage activities that damage biodiversity. Tax breaks for extractive industries are a prime example of this problem. In addition, agricultural policies have a dramatic effect on land use in the United States. As currently structured, farm support programs provide perverse incentives that contribute to soil erosion, overuse of agricultural chemicals, and loss of wildlife habitat. Commodity price support programs are tied to production levels. At the same time, acreage reduction programs restrict the amount of acreage that can be planted. These policies work together to encourage intensive cropping and high levels of chemical inputs on land that is planted, in order to boost production and maximize the government subsidy. These negative effects of agriculture policy could be ameliorated by removing the perverse incentives, linking support to best management practices and purchasing conservation easements to keep certain lands out of agricultural production.
There are many existing economic incentives that are already being used to support private conservation efforts in this country. One of the most important tax incentives is the income tax deduction for charitable contributions, which allows taxpayers to deduct the value of qualified charitable contributions from taxable income. Among other things, the deduction is specifically allowed for a donation of a real property interest for conservation purposes to a qualified organization. The deduction provides a financial incentive to dedicate land for conservation purposes and has stimulated donations of land or easements to land trusts around the country. According to the Land Trust Alliance, as of 1991, over 2 million acres had been protected with conservation easements. Conservation easements can be creatively designed to allow both biodiversity conservation and limited economic use of the land.
In the realm of agricultural policy, the Department of Agriculture has developed several conservation programs. Although they were not generally designed to promote biodiversity, these programs often result in significant biodiversity benefits. For example, the Conservation Reserve Program and the Wetlands Reserve Program operate by purchasing conservation easements from farmers in order to remove highly erodible lands, riparian areas, and wetlands from agricultural production. Although not designed with biodiversity benefits in mind, the CRP has had tremendous benefits for native waterfowl and other wildlife. The CRP program now covers 36.4 million acres, which is twice the size of all national wildlife refuges and state wildlife areas in the lower 48 states.
Finally, both environmentalists and private property rights advocates are exploring ways to build economic incentives into the Endangered Species Act in order to provide landowners with positive incentives to create or maintain habitat for endangered species. Many stakeholders are interested in adopting market-based approaches to habitat conservation. These include tradeable development rights (TDRs) and the habitat transaction method, which is a variation of the TDR process. Both of these systems can be used to control the social and environmental impact of development while maintaining the economic value of land within a community. These approaches are explained fully in the report.
CIEL's report contains numerous recommendations for ways to integrate economic policy with biodiversity conservation. For purposes of illustration, some of those ideas are highlighted below. Readers are referred to What Price Biodiversity? Economic Incentives and Biodiversity Conservation in the United States for a more thorough analysis of each of these issues, as well as for additional policy recommendations and for discussion of other related issues.
Tax Policy and Conservation