Challenges

How do we best conserving nature and save endangered species? Protected Areas (PAs) work, but they are underfunded and likely to remain so under current conditions. They are not the only way of conserving nature, but conservation of many if not most endangered species is not possible without them. There are currently more than 100.000 PAs worldwide, more than 18.8 million square kilometer, or 11.5% of the Earth’s land surface. The number of PAs is still growing, and we will probably see a rapid growth in marine PAs.

Financial Shortfalls

One widely cited 2002 estimate suggested that up to $45 billion per year over 30 years may be required to secure a global expanded network of PAs, covering 15% of terrestrial and 30% of marine ecosystems, mainly in the tropics.

Actual PA management expenditure in developing countries was estimated to be $800 million in 2004, with a shortfall of $1.3 billion. Expanding PAs in developing countries to include highest-priority sites might raise annual management costs to perhaps $4 billion per year.

This does not include the opportunity costs, estimated (in 1996) to be $4.9 billion in developing countries. Why are the opportunity costs important? With population growth, the opportunity costs of preserving land for nature go up. Unless people who are affected by the increasing numbers and areas of PAs are somehow compensated, these pressures will grow.

In rich countries there is considerable goodwill towards conservation (mainly of large mammals) in poor countries. A practical scheme would turn part of this consumer surplus into a producer surplus. This would be very cost effective conservation since most species live in poor, tropical countries where land and labor costs are low.

Prices

For a congested PA in need of money it makes no sense to ration access by waiting list, rationing should be done by price.

Cap-and-Trade

As the number of PAs increases, the prospects for solving their resource allocation problems through coordination and committees seem more and more remote. We should instead look to decentralized, market-based mechanisms to align incentives and deliver better results.

One solution could be a dynamic pricing system using an on-line auction model. We propose the introduction of Protected Area Tradable Visiting Quotas, or PATVIQs, as part of a cap-and-trade system.

As the ever increasing number of tourists cause more damage to more protected areas, rationing will become more common. There are already limits to the numbers of visitors on e.g. the Galapagos Islands, in Bhutan, and in the Ngorongoro Crater. By being explicit about visitor carrying capacity in PAs, we will place caps and create scarcity.