7887

• UCREFRP Catalog Number: 7887
• Author: Fischer, H., ‎(Wendy E. Hudson, ed.)‎.
• Title: Building Economic Incentives Into The Endangered Species Act, Third Edition.
• USFW Year: 1994.
• USFW - Doc Type: Washington, D.C.
• Copyright Material: NO

priately scaled economic ventures would, by definition, have lower rates of return
on investment than non-sustainable ventures. Federal income tax deductions for
compatible economic activity could serve as an initial boost, and then as a stable
financial platform, for newly scaled, sustainable, and habitat friendly industries
and radically restructured existing industries (Repetto 1992).5 Such deductions
would operate on the same ecological economic principles that have spawned the
increasingly successful sustainable commodity harvesting and game management
programs in developing parts of the world (Rasker 1992, Swanson and Barbier
1992).
Transaction Costs: Substantial work would be needed to define and delineate
"sustainable and compatible economic activity." Compatibility Plans would have
to be developed in cooperation with qualified biologists. The program would
need to be located within an agency capable of managing biological, land use, and
income generating activities. At present, no single agency appears capable of
managing such a program. Regular, comprehensive, and vigorous monitoring
would be required to prevent the considerable temptation to abuse this type of
program.
Research Questions and Issues: The primary research issue is how to delineate
qualifying activities. Guidelines would need to be strict and precise so that only
those economic activities that are fully compatible with the long-term viability of
endangered species populations and the ecosystems that sustain them would
qualify. A second research area would be to determine the program costs, moni-
toring protocols, potential administering agencies, and potential effectiveness of
this incentive program to sustain critically important habitats. A key issue would
be building safeguards against abuses or other unintended consequences. Re-
search into the cost effectiveness of this incentive may show that the transaction
costs outweigh the benefits of attempting to integrate appropriately scaled eco-
nomic activity with the perpetual health of endangered species populations.
Proposal 5 -Tax Penalties for Habitat Conversion
Description: A federal tax penalty, or severance tax, would be levied on lands
converted to uses not compatible with the support of endangered, threatened, and
candidate species, or significant biodiversity habitat. The penalty would be a per
acre tax (probably in the range of hundreds to thousands of dollars per acre).
5 The utility industry provides a relevant example for how tax considerations can spur new areas
of environmentally compatible development. In 1992, 6.6 percent of California's electrical
generation capacity was supplied by non-traditional energy sources such as wind, solar, and
geothermal power (Edison Electric Institute, 1993). The investment tax credits that helped spawn
this nascent, sustainable segment of the utility industry have been scaled back, and renewable
energy sources are approaching cost competitiveness with traditional generation sowces. Despite
tales of non-functional wind turbines and abuse of the tax credits, the combination of tax incen-
tives and vigorous regulatroy support from the California Public Utilities Commission resulted in
this energy success story.
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