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Federal agencies currently use a methodology that finds negligible benefits of protecting critical habitat for endangered species, despite the prime real estate that is often involved. The Endangered Species Act already calls for economic analysis, but agencies currently treat it as a meaningless hoop to jump through. Agencies justify this hollow exercise by pointing to the difficulty in quantifying the increment of added protection that comes with critical habitat designation. However, the increment of added protection for critical habitat can be measured using methods already employed by agencies in other environmental analyses. Although the central benefits of critical habitat are improvements to the condition of listed species, accurate economic analysis should also consider the broad benefits of ecosystem services that flow from protected areas to human populations. I propose that agencies use a methodology that weighs the estimated burdens on regulated parties against the estimated benefits of designating lands as critical habitat. My proposed--more accurate--analysis can lead to more effective implementation of the Endangered Species Act by allowing agencies to target limited resources to projects that offer high net conservation benefits. I use a recent cost-benefit analysis for loggerhead turtles to demonstrate that the benefits of conserving habitat include increased protection of the species as well as a larger flow of ecosystem services amounting to at least $106 million per year in benefits, not the $0 estimate that federal agencies have arrived at. Accurate economic analysis provides useful information to agencies and the public in a way that can improve discussions that are often one-sided because of an emphasis on regulatory costs with little discussion of regulatory benefits. [ABSTRACT FROM AUTHOR]

Financial incentives in the form of payment for ecosystem services (PES) can encourage participation in voluntary conservation programs, but real-world experience with PES is limited for services such as the provision of endangered species habitats. A computer-based laboratory experiment with 139 US college students as subjects suggests there are three barriers to effective PES programs: (1) financial rewards can crowd out altruism—low-level PES in the experiment was less effective than the same program without PES; (2) landowners may assuage guilt over destroying habitats by making contributions to ineffective conservation programs—participants often paired destruction of habitat with token contributions to conservation efforts; and (3) landowners may strategically exit conservation agreements in ways that are detrimental to wildlife—a large proportion of participants chose to leave agreements and destroy habitats when the PESs were structured without credible deterrence of an early exit. Fortunately, the results of the experiment also suggest research to overcome these barriers by ensuring that PES financial incentives are scaled and structured to effectively promote conservation. The lessons from this study—though they issue from the particular context of this experiment—provide suggestions about how to structure benefit sharing schemes that could be used to promote conservation in a range of settings. [ABSTRACT FROM AUTHOR]