1 The Efficiency of Voluntary Incentive Policies for Preventing Biodiversity Loss

Abstract: In this paper we analyze the efficiency of voluntary incentive-based land-use policies for conservation. Two factors combine to make it difficult to achieve an efficient result. First, the spatial pattern of habitat across multiple landowners is important for determining biodiversity conservation results. Second, the willingness of private landowners to accept a payment in exchange for enrolling in a conservation program is private information. Therefore, conservation agencies cannot easily control the spatial pattern of voluntary enrollment in conservation programs. We begin by showing how the distribution of a landowner’s willingness-to-accept a conservation payment can be derived from a parcel-scale land-use change model. Next we combine the econometric land-use model with spatial data and ecological models to simulate the effects of various conservation program designs on biodiversity outcomes. We compare these results to an estimate of the efficiency frontier that maximizes biodiversity conservation at each level of cost. The optimization algorithm mimics the solution of a regulator with perfect information who takes account of the spatial pattern of conservation across the landscape. Results indicate that there are substantial differences in biodiversity scores generated by the incentive policies and optimal solutions, indicating the potential for large efficiency gains over what i