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The endangered red-cockaded woodpecker (Picoides borealis) was once a common inhabitant of the pine forests of the southern United States. Red-cockaded woodpeckers (RCWs) are cooperative breeders that excavate nesting cavities in living, mature southern pines and require the sparse midstory conditions created by periodic, low-intensity fires. While RCW groups can be found in most species of southern pine, the bird prefers longleaf pine (Pinus palustris), once the dominant tree species on some 74 million acres of forestland (Frost 1993; Hooper 1988). Reasons for the RCW's decline include loss of nesting habitat, fire suppression, and habitat fragmentation.
Recovery efforts for the RCW are focused on 15 recovery populations designated by the U.S. Fish and Wildlife Service (USFWS) and corresponding to the distribution of federal lands in the southeast. However, private lands can and should play a role in recovery of the species for two important reasons. First, for some designated recovery populations the federal land base is insufficient to support the 500 active groups necessary for recovery. Second, in several recovery areas there are gaps between populations on public lands where the intervening land is private. For example, in the Sandhills of North Carolina, the populations on Fort Bragg Military Base and the state-owned Sandhills Game Lands are separated by several miles of private land.
While many private lands provide critical RCW habitat, preservation costs for some landowners can be significant. Thus, the dilemma facing the USFWS is how to balance the needs of both RCWs and private landowners.
This paper proposes a habitat "trading" scheme for RCWs that will reduce private land conflicts while advancing recovery efforts in a cost-effective manner. Under this proposal, landowners who wish to "take" existing RCW habitat will mitigate the loss by purchasing the rights to habitat created or restored on other private lands. The proposal focuses habitat protection efforts on recovery populations while at the same time insuring that the costs of mitigation are relatively low so that habitat trading is an economically viable alternative.
The cost of RCW preservation is an opportunity cost because the landowner often must forgo revenue from the most profitable use of a forest property. Opportunity costs equal the development and/or timber value of a property minus the value as constrained by RCW preservation. On land where forestry is the profit maximizing land use, the opportunity costs of RCW preservation are a function of a number of mostly site dependent factors, including tract size, stand age, timber prices, site quality, and management objectives (EDF 1995; Cleaves et al. 1994; Roise et al. 1991; Lancia et al. 1989; Judge et al. 1984). Costs of RCW management on some tracts may be small where management is directed at sawtimber production and/or where landowners capture significant non-timber values from older stands of fire-maintained southern pine.
Previous studies have demonstrated that RCW preservation has rising marginal costs (Boyd and Hyde 1989; Judge et al. 1984); that is, costs to protect individual RCW groups in some forest stands will be small while costs in others will be larger. Of course, opportunity costs can change over time depending on landowner objectives, timber markets, development pressure, and other factors. Nonetheless, the variability in landowner opportunity costs has important policy implications. A policy that exploits the cost differences among landowners will achieve RCW preservation on private lands in a far more cost-effective manner than one that ignores differences.
A common complaint about the Endangered Species Act (ESA) is that it penalizes landowners who practice good stewardship on their lands by imposing land use restrictions should threatened or endangered species take up residence. In the case of RCWs, landowners have both an incentive to harvest timber prematurely and a disincentive to burn their forestland lest woodpeckers colonize their property (EDF 1995). In response to this criticism, the Environmental Defense Fund and the USFWS developed a "safe harbor" habitat conservation plan to remove the disincentive to improve or restore habitat for listed species.
Safe harbor was developed for RCWs in the Sandhills of North Carolina and is now being applied in other regions and for other species. Under the voluntary program, landowners agree to maintain the baseline habitat conditions on the property at the time of the agreement and to implement management measures aimed at restoring or improving RCW habitat. These measures can be as simple as agreeing to lengthen rotations and/or to burn portions of the property. In return, the USFWS confers upon the landowner the ability to incidentally take all habitat above the property's baseline conditions. For example, if the landowner has two groups present at the time of the agreement, then s/he has a baseline comprised of the nesting and foraging habitat requirements for two groups. If in the future, the landowner should have three groups present, s/he is free to incidentally take one group. Thus, a safe harbor agreement essentially freezes a landowner's legal obligations under the ESA, thereby removing any regulatory impediment to habitat restoration.
Under safe harbor, those landowners who are willing to provide additional RCW habitat can do so and still maintain the right to harvest timber or develop their property. A safe harbor agreement, however, does not solve the dilemma of private landowners and developers who have high preservation costs per group and who therefore wish to incidentally take RCWs pursuant to a habitat conservation plan (HCP) under section 10 of the ESA.
Some landowners have been allowed to mitigate the destruction of RCW habitat simply by paying for the cost of translocating birds to nearby federal lands. Such a policy is flawed for several reasons. First, given the responsibility of the federal government to recover listed species, private landowners should not pay the costs of provisioning RCW cavity trees on federal lands. Second, merely shifting birds from one location to another does not address the fundamental problem of the woodpecker: lack of suitable habitat. Third, translocation will in fact undermine efforts to preserve habitat on private lands by reducing mitigation costs to such an extreme that landowners will have no incentive to maintain or preserve habitat through the safe harbor program.
An alternative to the translocation strategy is to expand upon the safe harbor program by allowing landowners who wish to take RCW habitat to purchase the rights to safe harbor groups created on other private lands. Once purchased, these groups would be granted protection under the ESA. Habitat trading would complement federal efforts to protect RCWs, provide incentives to create new RCW habitat on private lands, and lower the costs of the RCW recovery.
Transferable credit programs have been used frequently as a market-based alternative to traditional command-and-control environmental regulation. Perhaps the best known example of a transferable credit program is sulfur dioxide emissions trading instituted as a part of the 1990 Clean Air Act amendments. Under the program, companies can choose to meet sulfur dioxide emission standards through self compliance or by purchasing pollution credits from other utilities which have exceeded pollution control requirements. Underlying such a program is the fact that different utilities have different compliance costs per ton of pollution. Companies with high costs of compliance are likely to purchase credits from utilities with lower compliance costs. The end result of transferable rights programs is that environmental objectives are met at a reduced cost to the regulated community.
Similar to electric utilities, landowners with RCWs on their property have varying costs of compliance. And, just as some utilities with more modern pollution abatement technology may be able to meet sulfur dioxide standards with room to spare, landowners with low RCW opportunity costs may be willing to produce additional RCW habitat under the safe harbor program. Given the right price, these safe harbor landowners will also be willing to relinquish their incidental take rights for RCW groups created under safe harbor. Thus, a landowner seeking an incidental take permit can purchase rights from a safe harbor landowner whose baseline responsibilities are increased accordingly.
The underlying principle for RCW habitat trading is that the "take" of private land habitat should be permitted only when there is a comparable habitat gain made elsewhere; recovery of RCWs should not be adversely affected by such trades. Since maintenance of RCW habitat requires prescribed fire, the recipient landowner would agree to periodically burn the property as a part of the mitigation agreement. The costs of such management would be embedded in the purchase price of the safe harbor groups. Since landowners are not legally required to implement proactive management for listed species, habitat purchased through this proposal would actually receive a higher level of protection than that afforded under the ESA.
Trading among landowners outside of or within recovery populations would require a 1:1 ratio - one new group protected for every group lost. However, for mitigating landowners outside of designated recovery populations, a mitigation ratio of less than 1:1 might be permitted for trades into recovery populations. For example, a landowner who wishes to remove two groups from a property located outside a designated recovery population might be permitted to purchase a single group from a landowner whose property is within a recovery population.
While a mitigation ratio of less than 1:1 would necessarily cause a net loss of habitat, such a ratio is justified where mitigation improves the probability of survival and recovery of a designated recovery population. Thus, the gain of a single group within a recovery population may more than offset the loss of two groups outside a recovery population.
Reducing the mitigation ratio for habitat purchases within a recovery population will increase the demand for private land habitat in these areas. This will in turn create an incentive for landowners within a recovery population to engage in habitat restoration. Moreover, a less than 1:1 ratio will reduce the costs of mitigation. This is important not only because it reduces conflicts under the ESA, but also because it provides incentives for landowners with high preservation costs to choose mitigation rather than simply "waiting out" the loss of RCWs through passive neglect or fire suppression.
Two other strategies will further reduce mitigation costs without adversely affecting RCWs. Increasing the number of landowners enrolled in the safe harbor program will increase competition for mitigation dollars and thus reduce the mitigation price. Also, allowing interstate trades will increase the number of possible mitigation sites and thereby increase competition for mitigation dollars.
RCW habitat trading will not work if transaction costs and landowner uncertainty are high. In order to keep transaction costs low, the USFWS should consider an overarching HCP for the entire range of the RCW which establishes a simple protocol for habitat trading. This HCP would negate the need for individual HCPs for each trade. Such an overarching HCP will also assure landowners that the USFWS is committed to trading and this will in turn reduce landowner uncertainty. The USFWS could also facilitate trading by implementing a competitive bidding process for mitigation dollars. Finally, the USFWS would reserve the right to prohibit trading away groups it deemed critical to recovery efforts.
Some private lands with RCWs may have other listed species present. Under the proposal outlined here, the loss of multiple species habitat would have to be met by protection of comparable habitat created through a multiple species safe harbor agreement on some other parcel. In practice, this would be difficult to implement because the recipient safe harbor property would have to have the same habitat conditions as the property seeking incidental take permits. Even so, a landowner with multiple species could choose to mitigate the destruction of RCW habitat by purchasing RCW safe harbor rights. Such a trade would be only one component of a broader HCP which addressed the habitat losses of other listed species found on the property. As the safe harbor program is expanded to other species, it may be possible to mitigate the loss of multiple species by purchasing habitat on several properties if a single suitable property cannot be found. Until this happens or until there is a mechanism under the ESA to conduct interspecies habitat trading, a multiple species trade may be beyond the scope of the framework presented here.
Several statewide coalitions comprised of a broad array of interests are currently discussing habitat conservation planning for RCWs. As these coalitions formulate strategies for dealing with RCWs on private lands, they will need to examine a framework for mitigating the loss of private land habitat. One such strategy, translocation of birds from private onto public land, reduces landowner conflict at the expense of RCW recovery and private land conservation efforts. The habitat trading proposal outlined here also reduces ESA conflicts by lowering the costs of RCW mitigation to private landowners. However, more importantly, this habitat trading proposal complements federal recovery efforts by giving landowners enrolled in the safe harbor program, especially those within recovery populations, an incentive to restore and protect habitat.
Boyd, Roy G. and William F. Hyde. 1989. Forestry sector intervention: the impacts of public regulation on social welfare. Ames, IA.: Iowa State University Press.
Cleaves, Dave, Rod Busby, Brian Doherty and John Martel. 1994. Costs of protecting red-cockaded woodpecker habitat: interaction of parcel and cluster size. In: Newman, David H., and Mary Ellen Aronow, eds. Proceedings of the 24th annual southern forest economics workshop; 1994 March 27-29; Savannah, GA. Athens, GA: The University of Georgia: 276-293.
Environmental Defense Fund. 1995. Incentives for endangered species conservation: opportunities in the Sandhills of North Carolina. Washington, DC.
Frost, Cecil C. 1993. Four centuries of changing landscape patterns in the longleaf pine ecosystem. In Proceedings of the Tall Timbers Fire Ecology Conference 18, Tallahassee, FL: Tall Timbers Research Station.
Hooper, Robert G. 1988. Longleaf pines used for cavities by red-cockaded woodpeckers. Journal of Wildlife Management 52(3):392-398.
Judge, Rebecca P., Randy Strait, and William F. Hyde. 1984. Economics of endangered species management: the red-cockaded woodpecker. Trans. North American Wildlife and Natural Resource Conference 49:375-381.
Lancia, Richard A., Joseph P. Roise, David A. Adams, and Michael R. Lennartz. 1989. Opportunity costs of red-cockaded woodpecker foraging habitat. Southern Journal of Applied Forestry 13(2):81-85
Roise, Joseph P., Joosang Chung, and Richard Lancia. 1991. Red-cockaded woodpecker habitat management and longleaf pine straw production: an economic analysis. Southern Journal of Applied Forestry 15(2):88-92.
Robert Bonnie and Michael Bean are, respectively, Economist and Chairman for the Wildlife Program at the Environmental Defense Fund, a national, non-profit, research and advocacy organization that seeks practical solutions to a broad range of environmental problems.