Conservation efforts get
a boost from the market
BY B E T T Y J OYC E N A S H
Old pine trees: Home of the endangered red-cockaded woodpecker
ed-cockaded woodpeckers choose real estate Natural Remedy
R carefully. They prefer drilling cavities in old pine trees
— longleaf if they can get it — amid open space.
A golf course, for instance. They’re picky, territorial, and
Conservation increasingly pits private interests against
public. Conflicts will only intensify as development
continues to chop up open land and species habitat.
because they’re endangered, they influence private land Incentives, however, have demonstrated over the past
transactions in a big way. They live in 10 Southeastern states decade that they can turn environmental liabilities into
on a sliver (3 percent) of their original longleaf pine habitat. assets. Under some programs, farmers can sever and sell
Even after federal protection in 1973, their numbers development rights. In others, developer obligations can be
continued to slide, in part because frustrated transferred to “mitigation banks” that sell credits from
landowners tried to deter or get rid of the birds. Some private, certified-restored natural areas. Both create
cut forests before maturity to avoid woodpecker tradable commodities. Both achieve social goals through
cavities or allowed dense hardwood growth to spoil market enterprises.
foraging area under the pines. All this to avoid future Such incentives can inspire landowners to maintain land
limitations on how property owners could use their land. and correct the negative consequences of development.
Something was very wrong with the incentives Now, red-cockaded woodpeckers are multiplying in the
here: Habitat and species preservation demanded a truce. Southeast, with the help of incentive-based agreements like
Owners of the preferred pine tracts needed encouragement Safe Harbor. The Sustainable Land Fund is ironing out
to manage forests in a woodpecker-friendly way without details for a mitigation bank near Elkins, W.Va., for the
liability. A conservation tool called Safe Harbor does that. threatened Cheat Mountain salamander and West Virginia
Landowners voluntarily agree to restore woodpecker northern flying squirrel. And a market for transferable
habitat; in return, the U.S. Fish and Wildlife Service frees development rights in Maryland has preserved 17,500 acres
them from regulatory limits should those management of farmland in Calvert County.
practices attract additional groups of birds beyond the “We know incentives inform what landowners decide to
original “baseline.” Voila — incentive. do with their properties, so the idea of now turning those
PHOTOGRAPHY: U.S. FISH AND WILDLIFE SERVICE
“It removes regulatory risk and allows landowners around and saying, ‘How can we use that same technology,
to engage in practices beneficial to them and the that same financial set of tools to create a longer-term,
woodpecker,” says Michael Bean, an attorney at sustainable future?’ is by my way of thinking just an
Environmental Defense, the nonprofit environmental appropriate new mechanism we need to adopt to do more
group that has pioneered Safe Harbor and other than we can possibly do with the old tools,” says William
conservation incentives. Ginn. He directs the Global Forest Partnership at
28 Region Focus • Spring 2007
The Nature Conservancy and wrote landowner reported a downed cavity One cluster of birds sold for
the 2005 book, Investing in Nature. tree and insisted that a biologist drill $100,000 and went to a conservation
Using market tools to achieve an artificial cavity ASAP so the wood- easement owned by the University of
conservation goals isn’t a new idea, but peckers would stay. Today, about 100 South Carolina, Costa says. The birds
it is gaining currency as preservation Safe Harbor agreements cover about came from property being developed
funds dwindle and regulation proves 50,000 acres, according to Susan Ladd on the coast of South Carolina. “What
inadequate. Miller of the U.S. Fish and Wildlife drives the price [is the] value of
Environmental regulation tries to Service. And six new groups of red- the timber and/or the dirt for develop-
make up for costs that affect society, cockaded woodpeckers have settled in ment on the mitigation property,” he
costs that aren’t borne by firms the North Carolina Sandhills. says. “We have some prices floating
or landowners, called externalities. “What it did was allow us to not around right now approaching
Like pollution. Or doing in the last just be the bad guy, the regulatory guy, $250,000 for a developer who has a
red-cockaded woodpecker. But a but allowed us to have positive group they want to get rid of and it’s
one-size-fits-all standard may not relationships with these landowners,” because the land could be used
work as envisioned. (Economists John Miller says. Safe Harbor and other for timber.” Few high-dollar groups of
List, Michael Margolis, and Daniel conservation plans have inspired woodpeckers remain on coastal high-
Osgood have written a paper suggest- some private landowners to put dollar dirt, Costa says, making such
ing that the U.S. Endangered Species land in conservation easements, one transactions rare.
Act has accelerated development, adjacent to Ft. Bragg, desperate for While such informal trades don’t
leading to habitat and even species noise buffers and critter habitat. constitute a true conservation or
decline. Property owners, the authors (By law, federal lands must recover mitigation bank with active trading,
argue, are forward-looking and when endangered species.) that concept is gaining ground.
they see the “act as a threat to their California established rules for the
development rights,” they may Banking on Conservation first endangered species banks in 1995,
respond “by developing preemptively” Birds can be “banked.” Two elderly and in 2003, the U.S. Department of
that is, before restrictions imposed by women in North Carolina needed to the Interior issued guidelines. Under a
the act are applied to them.) sell timber to pay medical expenses command and control system, if an
but were hindered by the discovery of endangered species were found during
The Birdie three red-cockaded woodpeckers. development, a protracted process
Pinehurst, a resort in the Sandhills of Those birds were moved to Nature ensued that often led to piecemeal
south central North Carolina, was in Conservancy land in Sussex County, preservation. Using endangered
on Safe Harbor from the get-go, says Va. The Piney Grove Preserve, 2,700 species mitigation banks, an “enviro-
Brad Kocher, vice president of acres of primo foraging habitat, has preneur” may buy and manage land,
grounds and golf course management. twice been a mitigation bank for gaining appropriate agency approvals.
His interest dates back to 1995, when the woodpeckers. (Those in the business say that, for
the resort’s No. 8 golf course was Ralph Costa of the U.S. Fish and now, they’re overregulated but expect
under construction. A shame, he Wildlife Service brokered the deal. He that to diminish as the banks prove
recalls thinking, that the resort couldn’t tracks the red-cockaded woodpeckers’ themselves.)
do something to attract more birds. progress and works out agreements A California firm, Wildlands, Inc.,
“But if I did something to encourage with landowners all over the Southeast has opened seven mitigation banks
the species on No. 8, I [would have] — public and private. Between 100 since November; the latest one
encumbered anybody within a half- and 200 groups of birds are growing preserves habitat for the giant garter
mile radius of that tree, and they were annually throughout the region on snake in an eight-county area near
not going to be very happy with me.” public and private land, Costa Sacramento, Calif. Wayne White
Safe Harbor will protect landowners says. Landowners must pay the works as a consultant for mitigation
from future restrictions once the orig- mitigation costs. banks, having learned the ropes during
inal group of birds is documented. Costa explains: “I get a phone his career with the U.S. Fish and
Owners also must enhance the habi- call … ‘Got two groups to get off Wildlife Service.
tat. Pinehurst has about 11 families of my property — I need the money.’ A new mitigation bank carries risk
red-cockaded woodpeckers, and has I give them the names of all the just like any other business. You need
won awards for stewardship. The mitigation banks and contacts within to know your market and how many
agreement extends to neighboring their recovery unit and that’s the end credits you’ll have to sell to break even
properties affected if new woodpeckers of my involvement. At that point, they or to make a profit, White says.
are drawn by Pinehurst habitat. call the bank and negotiate the The bank improves, monitors, and
Incentives can prompt improbable price. I don’t care if it’s free or a establishes an endowment to ensure
acts: After Hurricane Fran in 1996, a million dollars.” management in perpetuity. And here’s
Spring 2007 • Region Focus 29
the trickiest part, he says: “Can you deprives them of income, they’ll and sell TDRs. Owners also can develop
sell the credits?” pressure local authorities for change. their land or buy rights and develop
Conservation banks seem sound, Paul Thorsnes of the University of beyond base zoning limits. A single
but they need tweaking. California’s Otago in New Zealand and Gerald TDR preserves one land parcel.
first bank, formed in 1995, went Simons of Grand Valley State McConnell points out that one of the
bankrupt in 2005. “Agencies and University in Michigan have studied downsides to TDR programs is
bankers learned you have the issue and written: “In short, adverse selection. Conceivably, some
to have a good financial port- however efficient the allocation of owners sell rights who may never have
folio,” White says. Since then, land, the inequitable distribution intended to sell or develop their
state and federal wildlife of costs and benefits plagues open- property in the first place. That could
agencies have developed tools to space zoning.” But creating a market lead to more density than would occur
monitor financial performance. for development rights is preserving under a straight zoning regime.
land, particularly in Calvert and About 142 TDR programs are
Flexible Farmland Montgomery counties. ongoing in the United States, some
in Calvert County Prices are determined through more successful than others. Getting
Perhaps the oldest conservation supply and demand, not appraisals. supply and demand in sync is critical.
incentive tool comes in the form “If the builders are building, and they If people don’t know who is selling
of “rights” that can be sold off need those rights to increase density in development rights, there are problems
farm properties to offset additional the subdivisions, then the price goes matching willing buyers and sellers.
density elsewhere. up,” Hance-Wells explains. To remedy a thin market and
From the top half of Calvert price fluctuation, Calvert County
County, Md., you can commute The Power of Prices began in 1993 to buy TDRs annually
to Washington, D.C., in about 35 Channeling development through at announced prices. They also
minutes. This Eastern Shore county a TDR market draws on the same now publish a newsletter to keep
has been a prime bedroom community principles as free market environmen- information flowing.
even as far back as the early 1980s. talism. In theory, people choose With the uncertainty reduced,
Between 1990 and 2000, Calvert based on self-interest and everybody McConnell says, trading increased.
was the fastest-growing county benefits. “Regulation to a standard A recent study of TDR programs found
Red-cockaded in Maryland. means forcing some people to be at a that market stimulation through such
woodpeckers “We were one of the first to feel the position they’d rather not be,” public purchases helps balance supply
average about effect of the concept of a bedroom says Margaret Walls, an economist and demand and is characteristic of
eight inches community,” says Susan Hance-Wells. at Resources for the Future, a successful TDR markets.
in length and Her family has lived on Calvert farm- Washington, D.C., think tank. Purchases vary from year to year
land since it was established some 300 “Whether it has to do with acres and prices have increased from
years ago. Today, she grows corn, of land or power plant emissions, an average of $2,500 in 2001 to $7,500
face fewer soybeans, and oats, and she breeds market-based instruments tend to in 2005. Maryland’s TDR program
restrictions on Friesian horses. have more flexibility.” has preserved 12,000 acres, and
property Worried about disappearing farm- Walls, with co-authors Virginia Calvert County has bought 5,500 acres
use in land, Hance-Wells and her father, McConnell and Elizabeth Kopits, to retire permanently. Separately,
return for Maryland’s first secretary of agricul- has studied the market for the state has bought easements that
ture, enrolled in Calvert County’s development rights in Calvert County. have preserved 7,000 acres.
transferable development rights “It creates a price for selling these
(TDR) program back in 1979. Their rights, an incentive for people to Not Perfect
fears illustrate the externality that isn’t preserve this land permanently,” Critics point out, though, that devel-
accounted for by a builder — in this McConnell notes. opment in Calvert County sprouted in
case, the reduction of open space and One measure of a TDR program’s the rural communities anyway, demon-
loss of farmland. success lies in trading activity, strating low demand for dense
In a TDR market, development McConnell says. “So often the residential development. While the
potential transfers from one parcel to programs are on the books but nobody development pattern isn’t perfect,
another. It can be used to preserve makes transactions; supply and flexibility may have worked to the
natural or historic areas as well as demand are out of whack. If the county’s advantage.
species habitat. Zoning, a typical market works in the sense that people “A lot of programs try to dictate
regulatory response, often doesn’t are participating, then you know land that the sales go into more high-
work the way it’s supposed to because is being preserved.” density areas; as a result it sometimes
of what economists call “rent-seek- In Calvert County, any landowner limits the demand for them,”
ing.” If owners feel a classification with productive soil may enroll Walls says. “TDRs are not a growth
30 Region Focus • Spring 2007
limiting tool but a growth allocation, cases that don’t suit what you’re looking satisfy everybody, but it’s increasing
spatial allocation tool.” for or don’t accomplish the goals, but populations of the red-cockaded
High land prices have brought new they’re not going to be in the majority.” woodpecker. And mitigation banks are
owners to TDRs, says Susan Hance- OK, so maybe the development criticized for “enabling” development.
Wells, but many are “farmettes” rather isn’t ideally situated. And perhaps it Yet the private banks, the successful
than large-tract farms. “Some of the isn’t a true market, as Thorsnes ones, are preserving larger sites and
land that will get in is not what we orig- points out, because the zones are providing permanent management for
inally intended, but they preserve farm predetermined by planners. But endangered animals. As markets for
communities. It’s insulating the farms the fact remains that farmland is endangered species and open land
in that community against increased being preserved. mature and go mainstream, they may
density,” she says. “Y ou’re going to have Likewise, maybe Safe Harbor won’t reveal nature’s true value. RF
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GRINDING GEARS • continued from page 27
year, while Ford lost $2,015 per vehicle during the onset of the 2001 recession, production and employment.”
and GM lost $335 per vehicle. McAlinden noted, they would This overcapacity has been partially
Some industry observers argue that have laid off tens of thousands of masked by strong sales of high-margin
if it weren’t for the cost of the jobs workers who would have collected trucks and sport-utility vehicles. But
bank, mass layoffs would have been supplementary unemployment bene- continued poor sales of the Big
more common in the automotive indus- fits and, eventually, full pay and Three’s cars are forcing automakers to
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in Ann Arbor, Mich., agreed with this shortfalls, and remembering the disas- challenging environment for both
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Spring 2007 • Region Focus 31