Financial Analysis of Habitat Conservation Banking in California

Jagdish Poudel,Raju Pokharel

doi:10.3390/su132212441

Abstract

Habitat conservation banking is a policy instrument for conserving endangered species by providing financial incentives for the landowners in the United States. This policy instrument aims to protect habitat, but little or no thought has been given to its financial performance. A financial analysis of habitat conservation banks (HCB) informs policymakers and conservation biologists of the long-term success of this policy and the future of HCBs. This paper evaluates 26 habitat conservation banks (HCB) in California by calculating their Net Present Values (NPV). We do so by compiling the cost and revenue data for habitat conservation banks. The average annual cost of operating HCBs was $42.78/acre (median: $22.58/acre), and the average credit price or revenue from credit sale was $6014.72/acre (median: $553.65/acre). The average NPV for 26 HCBs was $4205.90/acre at a 4% rate of return, indicating an overall positive return from such an easement instrument. However, only 14 HCBs out of 26 produced a positive return. With the inclusion of land acquisition costs, three of eight HCBs performed financially well. On the brighter side, the number of HCBs has increased with time. But there is not enough evidence to ascertain financial certainty from their revenues. A right selection of space (land acquisition costs can make or break finances for HCB) and species could encourage landowners to establish HCBs. This could build confidence on those who may have been discouraged from lack of knowledge and fear of losing revenue due to regulatory compliance to conserve endangered species habitat in their land. The findings are helpful in identifying lands and prioritizing investments to generate conservation credits.

Highlights

Over the last 30 years, habitat conservation banks (HCBs) have been established as a market-based policy instrument that allows landowners to manage their land for endangered species habitat and generate conservation credits
HCB provides mitigation alternatives to the developers required to comply with the Endangered Species Act 1973 (ESA) [2,3]
The results show that HCBs generating positive Net Present Values (NPV) were producing a larger number of credits per bank and were able to sell most of their credits

Summary

Introduction

Over the last 30 years, habitat conservation banks (HCBs) have been established as a market-based policy instrument that allows landowners to manage their land for endangered species habitat and generate conservation credits. HCB provides mitigation alternatives to the developers required to comply with the Endangered Species Act 1973 (ESA) [2,3]. HCB maximizes incentives for the landowner, called a ‘banker,’ by selling conservation credits to developers required to offset impacts on wildlife habitat elsewhere to comply with the ESA [4,5]. In the HCB framework, landowners/bankers generate ‘credits’ that can be sold to developers required by regulation to mitigate adverse impacts on listed species [2,4,6].

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Conclusion