Conserving biodiversity with tradable permits under changing conservation costs and habitat restoration time lags
Tradable permits are a common environmental policy instrument that has recently been applied also to the conservation of biodiversity. Biodiversity conservation differs in many respects to the classical applications of tradable permits like emissions control. One particularity is that, even if the permit system maintains a constant total amount of species habitat, habitat turnover (the destruction of a habitat and restoration elsewhere) affects the ecosystem. Another particularity is that the restoration of habitats often takes much time, leading to time lags between the initiation of restoration activities and the time when restored habitat is available for trading. We use an agent-based model of a tradable permit market to study the influence of heterogeneous and dynamic conservation costs and habitat restoration time lags on key variables of the market, such as the costs incurred to the market participants and the amount of habitat turnover. Our results show that there may be trade-offs between these key variables. We also find that restoration time lags can lead to fluctuations in permit prices that reduce the efficiency of the permit market. We conclude that temporal lags deserve a careful analysis when implementing tradable permit systems for the preservation of natural habitats and biodiversity.
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- Godal, Odd & Klaassen, Ger, 2006. "Carbon trading across sources and periods constrained by the Marrakesh Accords," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 308-322, May.
- Stevens, Brandt & Rose, Adam, 2002. "A Dynamic Analysis of the Marketable Permits Approach to Global Warming Policy: A Comparison of Spatial and Temporal Flexibility," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 45-69, July.
- Cathrine Hagem & Hege Westskog, 2008. "Intertemporal Emission Trading with a Dominant Agent: How does a Restriction on Borrowing Affect Efficiency?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(2), pages 217-232, June.
- Drechsler, Martin & Wätzold, Frank, 2009. "Applying tradable permits to biodiversity conservation: Effects of space-dependent conservation benefits and cost heterogeneity on habitat allocation," Ecological Economics, Elsevier, vol. 68(4), pages 1083-1092, February.
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