Sunday, February 7, 2016

Cooperation Between Environmentalists, Oil, and Agriculture

A recent Twitter conversation with the folks at the Property and Environment Research Center (PERC) pointed me to some interesting examples of cooperation between environmentalists and oil interests, farmers, and ranchers. Some of them involve artificial markets for conservation credits while others are simply payments to land owners to help preserve environmental amenities. I don't specialize in environmental economics but I think it's important to bring up theses issues from time to time on the Farmer Hayek blog. On a related note, I want to be clear that I don't take a position on these issues personally since I haven't studied them carefully.

One example concerns the decline of monarch butterfly habitat. A blog post last week at the Environmental Defense Fund gives the details:

The vast majority of monarch habitat exists on private lands. That’s why you may have seen other environmental groups promoting programs that encourage everyday citizens to plant milkweed in their backyard gardens.  
These efforts are a big step in the right direction, but we need more – a lot more – and fast.
Our approach is to bring more of these private conservation efforts to agricultural lands, which carry the potential to create key corridors of habitat along the monarch butterfly’s great migration. 
Since farmers, ranchers and forestland owners manage much of the habitat appropriate for milkweed, we are working to develop a tool, called habitat exchanges, to accurately determine the value of habitat and allow incentive payments to be directed to the right places at the right time, ensuring maximum bang for the buck, and for the butterfly. 
For example, a farmer who avoids converting his or her marginal lands to cropland can earn conservation credits for instead planting milkweed on roadsides and field edges. In doing so, the farmer earns a new revenue stream and reduces the likelihood of an Endangered Species Act listing in the future.
As the post suggests, this type of arrangement is especially beneficial to the landowner since it reduces the risk of running into regulatory issues. Similar efforts are in place to protect the habitat of the Greater Sage-Grouse and the Calippe silverspot butterfly.

My favorite example is what PERC calls "pop-up wetlands" for migratory birds. Here's the bulk of the blog post on this effort:
Early this year, the Nature Conservancy unveiled a plan to create temporary wetlands for these migratory birds. The pilot program, called BirdReturns, creates habitat on demand by paying rice farmers along the flyway to flood their fields when the birds need it most. 
Here’s how it works: Using satellite imagery, the conservancy determines drought conditions and groundwater availability along the birds’ migratory path. With the help of the California Rice Commission, they are able to identify farmers that might be willing to participate. But knowing when and where to pay farmers to flood their fields required a more creative approach. 
For help, the conservancy turned to the Cornell Lab of Ornithology. Through Cornell’s eBird program, a popular crowdsourced birding project, the conservancy taps into a database with thousands of real-time observations by birdwatchers who share their sightings via smartphone. Thanks to these citizen scientists, the conservancy is able to map the flight paths of migrating birds and determine exactly when to pay farmers to flood their fields. 
Using a reverse auction to gather bids for wetland creation, the conservancy knows not only where willing farmers are located, but also how much those farmers will charge to flood their fields. “You want us to grow birds like we grow rice,” one farmer said. “We know how to do that.” 
In the first year alone, the program created 10,000 acres of foraging habitat for migrating dunlins, sandpipers, swans, and black-necked stilts. “It’s a new ‘Moneyball,’” Eric Hallstein, an economist with the Nature Conservancy, told the New York Times earlier this year. “We’re disrupting the conservation industry by taking a new kind of data, crunching it differently and contracting differently.”
This is a great example of markets and technology combining to provide a public good. What's perhaps most surprising, given standard theory on public goods, is that these efforts are occurring on privately-held land. Unfortunately, this sort of cooperation is often limited by an institutional framework that incentivizes litigation and other lose-win or lose-lose strategies that could, at least to some extent be avoided. I don't know enough about these issues to have a firm opinion on how federal land leases should operate or whether federal lands should be privatized, but Shawn Regan makes some interesting points in a post back in 2010 about bidding for federal lands.
Under current federal leasing rules, leases cannot be held by environmental groups for non-consumptive use. Even if they are the highest bidders, rules require that leaseholders must develop their parcels, precluding such groups from holding them for habitat protection or recreational use.
By inviting private owners and nonprofit groups into the bidding process, competition could promote cooperation between environmentalists and the oil industry. Such cooperation between these two groups already flourishes in lands that are owned privately because property rights require landowners to carefully consider the tradeoffs associated with alternative uses of their land. Consider the Audubon Society's Paul J. Rainey Preserve in Louisiana, which is home to both a wildlife refuge and thirteen natural gas wells. For nearly fifty years, an oil company operated inside the preserve under strict environmental standards put in place by the Audubon Society, such as no pumping during the nesting season so as not to disrupt bird habitat. Whereas on public lands, the Audubon Society has opposed oil and gas development, private ownership has fostered a cooperative, mutually-beneficial agreement. By allowing drilling, the Audubon Society has earned over $25 million with which it has purchased even more land to preserve.
There remains hope that the successful experimentation with open lease auctions in various states will lead to similar changes at the federal level. While private ownership of these public lands would force owners to bear the opportunity costs of alternative uses of the land and elicit cooperation, simple changes to federal lease auction rules can result in similar benefits. Auctions in which all interested parties -- including environmentalists -- can participate and hold leases for non-consumptive use is a sensible and politically-feasible alternative to the monkey-wrenching and politicized land management that characterizes the saga of Tim DeChristopher.
I want to reiterate that I don't personally take a position on these issues, but I find the work of the Property and Environment Research Center very interesting and I hope Farmer Hayek readers will consider following their work as well.

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