Economies of Scale in Costs of Land Acquisition for Nature Conservation

Market failure results in more human conversion of ecosystems for development and other uses than likely socially desirable. In response, many government agencies and nonprofits focus on conservation, often acquiring land rights to establish protected areas on which further conversion of ecosystems is precluded. The protected areas created vary greatly in size, even within a particular conservation program. Here we examine the costs that conservation organizations face when acquiring sites for protection and pay particular attention to the consequences of this variability in protected area size. We use as our case study parcels in Central and Southern Appalachian forest ecosystems that were protected through fee simple acquisition and using easements by The Nature Conservancy, a nonprofit land trust. We compare these sites to unprotected areas similar to the protected areas in terms of site characteristics as identified by post-hoc matching methods. When comparing average costs, we found parcels protected under by fee simple transactions cost less than matched unprotected parcels, and that average costs of protecting parcels using easements were lower still. We also found that acquisition costs of protected areas achieve economies of scale under fee simple transactions. However, these economies of scale were often weaker than those present when considering matched, unprotected parcels. Parcels protected by easements did not show economies of scale with area. We were able to identify a subset of transactions where the agreed price was reduced to reflect an explicit donative intent on the part of the seller. For this subset of transactions, we found that the presence of donative intent disrupted any kind of systematic relationship between lot size and acquisition costs for conservation. Our findings imply that to achieve cost effective conservation, conservation organizations will need to strategize with respect to parcel size and contract type. For example, when acquiring parcels under a fee simple transaction, economies of scale in acquisition costs provide an incentive for conservation organizations to favor larger parcels, reinforcing ecological arguments that favor protecting larger protected areas. Also, by quantifying the cost differential between fee simple and easement acquisitions, we provide a benchmark for evaluating how much greater the ecological benefits of fee simple acquisition would have to be to provide the most effective option for conservation.

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Conference Paper/ Presentation
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JEL Codes:
Q57; Q24; Q51

 Record created 2017-04-01, last modified 2018-01-22

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