Can Conservation Easements Work in a Marine Setting? An Economic Analysis under Four Regulatory Regimes Robert Deacon Dominic Parker December 3, 2007

Policies to Manage ‘Bycatch’ in Fisheries How can regulators reduce ‘bycatch’ and other environmentally damaging actions?  Bycatch: “the incidental take of a species that has some value to some other group” (Boyce 1998).  “incidental take” can be interpreted broadly to encompass any incidental, negative impact on non-commercial stocks. Policies  Fishery-wide TAC for prohibited species  taxing incidental catch  state-imposed time and area closures  state-imposed gear restrictions (e.g. turtle excluder devise)  ITQs for incidental catch

Private Efforts

Research Questions Can NGOs use ‘marine easements’ to achieve a reduction in damaging actions without incurring excessive costs? How does the effectiveness of marine easements depend on if/how access to comm. harvest is regulated? ‘Marine easements’  voluntary agreements between fishermen and NGOs  fishermen retain the right to harvest as regulated by law  restricted from certain methods of fishing, or in the time and location of harvest

Conservation Easements Agreements between private landowners and conservation NGOs, known as land trusts Typically conserve ‘open-space’ scenery and wildlife habitat  usually prohibit intense development  sometimes also restricts certain farming and logging practices Restrictions in easements “run with the land” Valued as the difference between encumbered and unencumbered value of the land

Land Trust Acreage in the U.S. (in millions) Source: The Land Trust Alliance and The Nature Conservancy Easements Owned Outright

Terms in Western Conservation Easements Land use% of CEs Prohibiting % of CEs Permitting % of CEs Silent on Billboards Mineral exploration Feed lots64036 Subdivison Recreational ORVs Com. timber harvest Agricultural use Source: Parker (2003)

Efficiency Advantages of Conservation Easements In contrast to land-use regulations  easements are incentive-based policies that can be customized – not one-size fits all  selects parcels for conservation with consideration of private land use values In contrast to outright ownership  Land-based commodities (e.g., soil, timber, or minerals) are better managed by a specialized landowner  Depends on transaction costs

Can Marine Easements Work? Key difference is the absence of property rights to marine habitats there is not a owner with whom a NGO can negotiate However, there may effectively be property rights to use the habitat in various ways we consider four regulatory regimes  (i) open access  (ii) limited entry  (iii) individual transferable quotas (ITQs)  (iv) territorial use rights in fishing (TURFs).

Model: Setup An NGO wishes to affect the long-run, steady-state level of a non- commercial fish stock (X) Effect of a on X is negative, effect of b could be positive or negative A commercial stock, Y, is available for harvest by many identical fishermen Fisherman i’s profit is The profit maximizing demands for a and b are:

Model: Setup (cont’d) NGO offers to buy easements to restrict choice of a so that a i ≤ a NGO can observe a but not b so it cannot enforce easements over b A grantor of an easement maximizes π i s.t. a i ≤ a NGO wants to minimize the costs of achieving --- this is equivalent to Four regimes for regulating harvest of Y  R=O (Open access), with equilibrium π O  R=L (Limited entry), with equilibrium π L  R=Q (ITQs), with equilibrium π Q  R=T (TURFs), with equilibrium π T and s.t. fishermen choices of b i

Model: Open Access Fishermen maximal profit π O = π * = 0; profit-maximizing choices are a O and b O Imagine that the NGO tried to hit its target by buying easements that restrict the firm’s use of action a. An easement granted by an existing firm will have no effect on the conservation stock in equilibrium.  Any reduction in action a would result in losses, causing the firm to exit.  Restoring equilibrium requires entry of a new, identical harvester who employs the same level of a that the exiting firm used before the easement

Model: Limited Entry Figure shows case where both a and b are detrimental to X, all identical fishermen under easement, NGO achieves target requiring, anticipating a response of Equilibrium easement price is Easement accomplishes long-run increase in X if easement ‘runs with permit’  b NGO’s stock constraint LL LL bLbL  =0

Model: ITQs The implications aren’t qualitatively different from Limited Entry if the NGO can place all identical fishermen under easement However, implications should be different if NGO can only put a subset of fishermen under easements  b QQ bQbQ H=H Q  =0 QQ

Model: TURFs Assume habitats of Y and X coincide, stocks do not interact, and are fully contained spatially by a TURF A firm managing the TURF can choose a and b and thus can determine X If the NGO can observe X, it can pay for performance easements making the fact that b is unobservable superfluous. Rents are maximized by the easement, and NGO achieves goal at minimum cost  b TT bTbT  =0 TT

Conclusions In general, our preliminary analysis suggests greater delineation of commercial harvest rights will improve effectiveness of marine easements  Marine easements will achieve nothing under open access  Under limited entry and ITQs, easements can improve conservation stock, but inability to contract over ‘hidden actions’ limits the effectiveness (e.g., raises the costs to NGOs)  Performance easements under TURFs could generate 1 st -best outcomes Future work  Constrain NGOs from buying easements from all fishermen in a limited entry and ITQ fishery and examine implications  Allow fishermen to be heterogeneous in costs of harvesting targets or in costs of avoiding ‘bycatch’  Impose a TAC and season closure on bycatch of ‘conservation stock’