Transcript No Slide Title

Assessing Economic and Ecological
Tradeoffs from Tradable Landuse Rights:
Application to Canada’s Boreal Mixedwood
Forest
Marian L. Weber
Alberta Research Council
Sustainable Forest Management Network, University of Alberta
4th BioEcon Workshop on the Economics of Biodiversity
Conservation
Venice, Italy
August 28, 2003
Sustainable Forest Management Network
Boreal Ecology and Economics Synthesis Team
Fiona Schmiegelow, Vic Adamowicz, Glen Armstrong, Steve Cumming, Grant
Hauer, Lee Foote, Marian Weber
"Research focusing on the development of a suite of
models of natural forest dynamics and human
activities that facilitates evaluation of management
scenarios in terms of ecological and socioeconomic
outcomes, for use in an adaptive management
framework."
Natural Reserve Design
Article 8 of Rio Convention on Biodiversity 1992
“establish, regulate and manage networks of protected areas
to promote the protection of ecosystems, natural habitats and
maintenance of viable populations of species in natural
surroundings”
•
Coarse Filter Approach
•
Objectives : Representation and Persistence (dynamic)
Reserve Design Approaches
A. Maximal Coverage
B. Budget Constrained
Max
s.t.
Min
s.t.
Species Metric
Reserve Area Constraint
Camm et al.
Biological Conservation (1996)
Land Cost
Biodiversity Constraint
Ando, et al., Science (2001)
Implementation Problems
1. Methods for selecting ecological criteria ad hoc
Choice of biodiversity metric
Species Weights
Ethical Issues (implicit vs. explicit)
Data Issues
Classification Incomplete
Surrogacy not promising (e.g. Jaarsvald et al. 1998)
Presence-Absence versus Demographic Data
Conflicting Species Requirements
Process Based Higher Level Surrogates such
as Ecosystems (e.g. Margules and Pressey 2000)
2. Political Feasibility
Institutional Context for Forest Management in Canada
1. Forest Lands are Publicly Owned
Overlapping Tenures and Uncoordinated Access
Skewed and missing price signals on public lands.
2. No Legal Framework for Integrated Land Management
What land uses are of highest value?
No mechanism for addressing biodiversity concerns or cumulative effects at
disposition stage.
Currently addressed under Canadian Environmental Assessment Act and
Alberta’s Environmental Protection and Enhancement Act
* incumbency protects low value land use
* unlisted activities can derail plans for CE management
Tradable Landuse Rights (TLR) Approach ...
• Parallels between Land Management and Air and Water Quality
Management
• Require a mechanism for coordinating the activities of multiple
agents on the landscape
• Tradable permit systems organize users of the public good in
order to
- Meet environmental objectives
- Efficiently allocate resources
Tradable Landuse Rights (TLR) Approach ...
• Government sets a “cap” or threshold on habitat loss.
• Rights to develop remaining land are traded.
• Firms self select the best sites for development.
• Minimizes Cost of Landuse Constraint (see paper)
KEY ASSUMPTIONS
1. Biodiversity can be conserved indirectly by setting aside
representative habitat types (Coarse Filter Approach)
2. Requires homogeneous habitat types
3. Assumes configuration less important than total amount of
habitat.
CASE STUDY
Alberta’s (Canada’s) Mixedwood Boreal
Forest
Q1:
What are the ecological and economic tradeoffs of
alternative spatial and temporal arrangements of industrial
activities on regional landscapes?
Q2:
What are the implications of alternative policy and
regulatory structures for achieving specific environmental
objectives.
Boreal Mixedwood Region in Alberta
Boreal
Mixedwood
Forest:
Age and
species
composition
driven by a
Natural
Disturbance
Regime
Land Management in Alberta’s Boreal Mixedwood
1. Oil and Gas Sector


Surface Leases for oil and gas exploration and development
Auctions (bi-weekly)
2. Forestry
Forest Management Agreements (hardwood)


rights to hardwood fiber over a fixed landbase
responsibilities for land management
Quotas (softwood) in Forest Management Units

rights to a fixed percentage of the AAC
3. Landuse Conflict

FMU and FMA areas overlap


Surface and Subsurface Leases Overlap
Surface rights protected by Tort (Timber Damage Assessment)
Data and Study Area
1. BIODIVERSITY
Detection probabilities for 27 bird species over 1137
Townships in NE Alberta (FAN)
2. LAND VALUES
A. Surface Rights
(i)Value of timber obtained from 2000-01 Timber
Damage Assessment
(ii)Crown timber dues.
B. Subsurface Rights
(i) Value of oil and gas leases obtained from 1996-2001
bonus sales for oil and gas lease rights.
(ii) Expected Royalties for underlying reserves.
LAND VALUES
Per TWPPer ha.
Average:
$23,218,242
$2322
Minimum:
$1,435,152
$142
Maximum:
$1,027,664,204
$102,766
Bird Densities over the Study Area
m
d i =   li / m
l=1
6.675 - 12.215
12.215 - 14.356
14.356 - 15.999
15.999 - 21.005
Land Rents over the Study Area
$1,435,152 - 7,985,750
$8,007,936 - 13,014,814
$13,023,694 - 29,597,078
$29,719,725 - 2,504,729,185
Comparing Cost and Biodiversity Outcomes
Under Alternative Approaches
MC:
Max
s.t.
Biodiversity Metric (Z)
Reserve Area Constraint (M)
Z*(M), CMC (M)
BC:
Min
s.t.
Land Costs (C)
Z greater than or equal to Z*(M)
CBC (Z*(M))
TLR: Min
s.t.
Land Costs (C)
Reserve Area Constraint (M)
CTLR (M)
Figure 1. Opportunity Costs Under Alternative Reserve Selection Algorithms
$30,000,000,000
Costs ($)
$25,000,000,000
$20,000,000,000
243% increase in area protected
Maximal Coverage
$15,000,000,000
Tradable Landuse Rights
Budget Constrained
$10,000,000,000
Cost Savings
$5,000,000,000
$0
1
160
320
480
640
800
960 1120
Number of Townships In Reserve
Figure 2. Biodiversity Under Alternative Reserve Selection Algorithms
0.5
0.4
0.35
0.3
Maximal Coverage Approach
0.25
TLR Approach
0.2
0.15
0.1
0.05
Z = expected detection
over study area
88
0
96
0
10
40
11
20
80
0
56
0
64
0
72
0
48
0
80
16
0
24
0
32
0
40
0
0
1
Biodiversity Index
0.45
Number of Townships in Reserve
Table 2. Outcomes Under Alternative Reserve Selection Approaches
Approach
Land Constraint
Cost ($M)
Biodiversity Index
MC
BC*
TLR
TLR
140 twps (~12%)
173 twps (~15%)
140 twps (~12%)
200 twps (~18%)
$3,410
$807
$555
$917
.076
.076
.056
.081
TLR
MC
480 twps (~42%)
380 twps (~34%)
$3,340
$9,360
.195
.190
Implementation Issues
1. Defn of Environmental Objective
- habitat definition is connected to structural forest
characteristics (Stelfox 1995)
- separate markets with land use constraints varying by cover
type and age class in order to achieve appropriate
representation of naturally occurring stand characteristics.
- Young Deciduous, Old Deciduous, White Spruce,
Mixedwood (Cumming and Vernier 2002).
Implementation Issues
2. Temporal Dimension of Right
Habitat protection in a stochastic environment
Adaptive Management Approach
Allocate Rights to a fixed percentage of allowable
disturbance per period
Long Term versus Short Term (spot market) rights
Implementation Issues
3. Spatial Heterogeneity and QUALITY of Reserve network
• Concern that choice of low value sites for reserves will lead to
systematic bias against valuable habitat.
• Within a region the type of habitat(s) is constant.
• Within a region habitat quality depends on
- total quantity of habitat
- spatial configuration of habitat.
• Tradeoff between quantity and configuration of habitat
- Literature suggests that total amount of habitat conserved may be of greater
ecological importance than configuration/configuration important when very
little habitat left.
Relative Impacts of Configuration versus Habitat Loss on
Predicted Abundance
Implementation Issues
4. Economic Efficiency and Competitiveness
- Transactions costs and complexity of trading system
- Market power and hold-out problems
- Network and spatial spillover costs
- Competitive advantage/disadvantage
5. Compatibility with Existing Institutions
Resource Rights allocated through spatial repeated auctions/sales.
Conclusions
Approach
Implementation Issues
Maximal Coverage
- Choice of biodiversity metric
Max
s.t.
- Lack of relevant species information
- Conflicting species requirements
- Political Feasibility
Biodiversity Metric
Reserve Area Constraint
Budget Constrained
Min
s.t.
Opportunity Cost
Biodiversity Metric
Tradable Landuse Rights
Min
s.t.
Opportunity Cost
Reserve Area Constraint
- Requires Land Values
- Requires Species information
- Configuration versus Area
- Assumptions about habitat quality
- Design of trading system
Conclusions
Benefits of TLRs for Biodiversity Protection on Public
Lands
-Management to Thresholds
Stratified by ecosystem types and habitat characteristics.
Eg. Stand age and type.
- Information Revealing.
Rights go to highest bidder/Minimize Opportunity Costs.
Prices reflect the relative scarcity value of each habitat type.
- Flexible
Can change the threshold in response to natural disturbance or changing
preferences.
- Mechanism for Integrated Resource Management
The expected values of all resources are capitalized in permit prices.