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The Cost of Endangered Species Protection: Evidence from Auctions for Natural Resources

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  • Boskovic, Branko

    () (University of Alberta)

  • Nøstbakken, Linda

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

This paper examines the effect that endangered species regulation has on natural resource development. Specifically, we use data from competitive auctions to estimate the effect that land-use regulation protecting endangered caribou in the Canadian province of Alberta has on the price producers pay for the right to extract oil. We exploit a regression discontinuity design to evaluate how prices differ along regulation boundaries that constrain resource development. The auction format and the regulation discontinuity allow use to measure the total cost of the regulation. We find that producers pay 24% less on average for oil leases that are regulated and that the total net present value cost of the regulation exceeds $1.15 billion for leases sold between 2003-2012, all of which is borne by the government. In spite of these costs, the populations of endangered caribou remain in widespread decline.

Suggested Citation

  • Boskovic, Branko & Nøstbakken, Linda, 2016. "The Cost of Endangered Species Protection: Evidence from Auctions for Natural Resources," Discussion Paper Series in Economics 6/2016, Norwegian School of Economics, Department of Economics.
  • Handle: RePEc:hhs:nhheco:2016_006
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    File URL: http://brage.bibsys.no/xmlui/handle/11250/2385158
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    References listed on IDEAS

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    Cited by:

    1. repec:cdh:commen:501 is not listed on IDEAS
    2. Melstrom, Richard T., 2017. "The petroleum industry's response to an endangered species listing," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258281, Agricultural and Applied Economics Association.
    3. Branko Boskovic & Linda Nøstbakken, 2018. "How Much Does Anticipation Matter? Evidence from Anticipated Regulation and Land Prices," CESifo Working Paper Series 6888, CESifo Group Munich.
    4. repec:ags:jlaare:276499 is not listed on IDEAS

    More about this item

    Keywords

    Endangered species regulation; auctions; natural resources; oil.;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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