Payal Shah

Downside versus Symmetric Measures of Uncertainty in Natural Resource Portfolio Design to Manage Climate Change Uncertainty

Recent work uses Markowitz’s mean-variance framework to identify efficient allocations of conservation activity across subregions of a planning landscape to minimize climate change–induced uncertainty in future conservation benefits. We replace variance with a downside measure of uncertainty and compare the resulting portfolios of conservation activity and uncertainty–expected value results against those generated by the mean-variance approach. Results illustrate that conservation agents can manage climate changed–induced uncertainty in future conservation outcomes more efficiently using our framework when they are particularly averse to downside uncertainty and when predicted future conservation outcomes within subregions across their planning horizon exhibit skewed distributions. (JEL D81, Q57)

Evaluating heterogeneous conservation effects of forest protection in Indonesia

Establishing legal protection for forest areas is the most common policy used to limit forest loss. This article evaluates the effectiveness of seven Indonesian forest protected areas introduced between 1999 and 2012. Specifically, we explore how the effectiveness of these parks varies over space. Protected areas have mixed success in preserving forest, and it is important for conservationists to understand where they work and where they do not. Observed differences in the estimated treatment effect of protection may be driven by several factors. Indonesia is particularly diverse, with the landscape, forest and forest threats varying greatly from region to region, and this diversity may drive differences in the effectiveness of protected areas in conserving forest. However, the observed variation may also be spurious and arise from differing degrees of bias in the estimated treatment effect over space. In this paper, we use a difference-in-differences approach comparing treated observations and matched controls to estimate the effect of each protected area. We then distinguish the true variation in protected area effectiveness from spurious variation driven by several sources of estimation bias. Based on our most flexible method that allows the data generating process to vary across space, we find that the national average effect of protection preserves an additional 1.1% of forest cover; however the effect of individual parks range from a decrease of 3.4% to an increase of 5.3% and the effect of most parks differ from the national average. Potential biases may affect estimates in two parks, but results consistently show Sebangau National Park is more effective while two parks are substantially less able to protect forest cover than the national average.

Fine-resolution conservation planning with limited climate-change information.

Climate-change induced uncertainties in future spatial patterns of conservation-related outcomes make it difficult to implement standard conservation-planning paradigms. A recent study translates Markowitzs risk-diversification strategy from finance to conservation settings, enabling conservation agents to use this diversification strategy for allocating conservation and restoration investments across space to minimize the risk associated with such uncertainty. However, this method is information intensive and requires a large number of forecasts of ecological outcomes associated with possible climate-change scenarios for carrying out fine-resolution conservation planning. We developed a technique for iterative, spatial portfolio analysis that can be used to allocate scarce conservation resources across a desired level of subregions in a planning landscape in the absence of a sufficient number of ecological forecasts. We applied our technique to the Prairie Pothole Region in central North America. A lack of sufficient future climate information prevented attainment of the most efficient risk-return conservation outcomes in the Prairie Pothole Region. The difference in expected conservation returns between conservation planning with limited climate-change information and full climate-change information was as large as 30% for the Prairie Pothole Region even when the most efficient iterative approach was used. However, our iterative approach allowed finer resolution portfolio allocation with limited climate-change forecasts such that the best possible risk-return combinations were obtained. With our most efficient iterative approach, the expected loss in conservation outcomes owing to limited climate-change information could be reduced by 17% relative to other iterative approaches.

The Economics of Conservation and Finance: A Review of the Literature

This article summarizes key insights into conservation that come from the intersections of economics and finance: public finance, conservation finance, and financial theory applied to problems of conservation. We discuss some of what has been learned from the study of conservation and finance that helps us to understand when, where, and even whether conservation activities should occur; portfolio theory has been harnessed to help guide conservation planning under uncertainty, and real options theory helps us understand whether to commit to conservation or to wait. We distill some of the extant research on how resources can be gathered to support conservation through local referenda, payment for environmental service programs, private donations, user fees, and value capture through property taxes. The article concludes with suggestions for promising future directions in this area of work.

Permanent and Temporary Policy Incentives for Conservation under Stochastic Returns from Competing Land Uses

Rapid conversion of private land for agricultural and urban use has raised concern worldwide over the loss of ecological services. To inform conservation policy, we model privately optimal land use decisions using a real options framework that assumes both the ecological and commercial values of land are stochastic and that land conversion is irreversible. We analyze permanent and temporary land conservation policy incentives using this dynamic framework to guide policy makers interested in designing efficient payment mechanisms to achieve ecological preservation goals. We find that while the financial cost of temporary policy incentives is generally much lower than permanent policy incentives, this difference is very small in scenarios with high discount rates and lower uncertainties in conversion returns and lower expected trend in conservation returns. Alternately, the financial cost of temporary conservation is substantially lower than that of permanent conservation when the expected trend in conservation returns and uncertainties in conservation and conversion returns is high and the discount rate is low. Comparison with net present value and single-source uncertainty models indicates that the presence of a second uncertainty increases the option value of delaying conversion, and shows that permanent and temporary policy incentives based on either of the two simpler models can be seriously misguided if multiple uncertainties are present. We illustrate the analytical results with a case study of tropical deforestation in Indonesia where private landowners can either conserve forests and earn carbon credits, or convert to palm oil agriculture and earn profits from the sale of palm oil.

Demand-Side Factors in Optimal Land Conservation Choice

The dominant paradigm of conservation-reserve planning in economics is to optimize the provision of physical conservation benefits given a budget constraint, implicitly assuming the value of biodiversity and ecosystem function is not affected by human proximity to that natural capital. There is evidence, however, that human willingness to pay (WTP) for conservation declines with distance - a phenomenon we call “spatial value decay�?. This paper begins a new strand of the conservation planning literature that takes demand-side factors - location of people in the landscape, the degree to which WTP for conservation depends on proximity - into account. We use theoretical models of linear abstract landscapes to explore the impact of demand-side factors on two facets of conservation choices: siting of a single reserve when conservation potential is greatest near a critical site, and siting of multiple reserves when fragmentation reduces physical conservation services produced. Our results show how planners should sometimes employ increased fragmentation to capture value when people’s preferences are not very highly localized, and how optimal policy balances proximity to the ecologically critical site with proximity to people. In some scenarios, the payoff to using a reserve design approach that considers demand-side factors is large, but we find that spatial value decay reduces the benefits that can be gained from any conservation-planning approach.

Shifted Baselines Reduce Willingness to Pay for Conservation

A loss of memory of past environmental degradation has resulted in shifted historical baselines, which may result in conservation and restoration goals that are less ambitious than if stakeholders had a full knowledge of ecosystem potential. However, the link between perception of baseline states and support for conservation planning has not been tested empirically. Here, we investigate how perceptions of change in coral reef ecosystems affect stakeholders’ willingness to pay (WTP) for the establishment of protected areas. Coral reefs are experiencing rapid, global change that is observable by the public, and therefore are an ideal ecosystem to test links between beliefs about baseline states and willingness to support conservation. We find that respondents perceived change to coral reef communities across six variables: coral abundance, fish abundance, fish diversity, fish size, sedimentation, and water pollution. Residents who accurately perceived declines in reef health had significantly higher WTP for protected areas (US

Preferences for marine protection in Okinawa: a comparison of management options and two groups of beneficiaries

256.80 vs.

Downside vs. Symmetric Risk in Conservation Portfolio Design to Manage Climate-Change Uncertainty

102.50 per year), suggesting that shifted historical baselines reduce engagement with conservation efforts. If WTP translates to engagement, this suggests that goals for restoration and recovery are likely to be more ambitious if the public is aware of long term change. Therefore, communicating the scope and depth of environmental problems is essential in engaging the public in conservation.

Demand-side factors in optimal land conservation choice

The trans-disciplinary thematic areas of oceans management and policy require stocktaking of the state of knowledge on ecosystem services being derived from coastal and marine areas. Recently adopted Sustainable Development Goals (SDGs) especially Goals 14 and 15 explicitly focus on this. This Handbook brings together a carefully chosen set of world-class contributions from ecology, economics, and other development science and attempts to provide policy relevant scientific information on ecosystem services from marine and coastal ecosystems, nuances of economic valuation, relevant legal and sociological response policies for effective management of marine areas for enhanced human well being. The contributors focus on the possible nexus of science-society and science-policy with the objective of informing on decision makers of the governmental agencies, business and industry and civil society in general with respect to sustainable management of Oceans.