Impact Fees Coupled With Conservation Payments to Sustain Ecosystem Structure: A Conceptual and Numerical Application at the Urban-Rural Fringe

Communities in exurban areas increasingly rely on land preservation as a strategy to balance sprawling land development with maintaining environmental amenities. Based on a review of existing approaches for preserving land, we consider a conceptual model of environmental impact fees (EIFs) coupled with conservation payments for managing private land of ecosystem value. In this framework, conservation payments are intended to cost-effectively target fair market value compensation for heterogeneous land for preservation that sustains ecosystem health. EIFs serve as a financial instrument to augment conservation payments and to allow flexibility for landowners with private information to pursue development opportunities while accounting for environmental impacts. Using a bioeconomic model of nature-reserve design, we develop an empirical illustration of how to estimate the EIF of development damage to critical habitat in southern Rhode Island in an effort to preserve land as an environmental infrastructure that maintains ecosystem health.