Search

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. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]