Instruments for Forest Habitat Connectivity

In places such as the boreal forest of Northern Alberta, where demands for energy and forest products are growing, it is necessary to balance economic development activities on the land with the environmental services the land can provide. Wildlife habitat for species such as woodland caribou is one such service. If adequate habitat for species such as woodland caribou is to be maintained, both the quantity of habitat and its configuration matter. Woodland caribou are in decline partly due to habitat fragmentation. For that species, connections between patches of mature forest are crucial to sustaining viable populations. To ensure continued provision of woodland caribou habitat, it is necessary to develop and use some set of regulatory instruments that will limit overall disturbance and preserve a degree of connectivity among mature parcels. The purpose of this report is to present some economic experimental results on a regulatory mechanism that is a combination of tradable disturbance permits and a procurement auction for connectivity, and compare it with the alternative of a stricter cap on disturbance permits. The usual argument is that the latter approach is less costly. We show that, although the combination mechanism can create significant transaction costs, it is not necessarily the more costly approach.