Economics Professor: Conserving Land May Be Good for the Economy

July 8, 2010

As the Deepwater Horizon oil spill recovery effort in the Gulf of Mexico drags on, economics professor Kate Sims has some promising news for proponents of greater environmental regulation.

A recently published study of hers has found that environmentally protected land areas (national parks and wildlife sanctuaries, for example) in Thailand actually help the economies of nearby communities. The results of this research, which are discussed in a paper published by the Journal of Environmental Economics and Management, were corroborated in another paper Sims co-authored that examined the effects of protected areas in Costa Rica and Thailand on poverty indicators. (That study was published in the June 1 issue of the Proceedings of the National Academy of Sciences and attracted the attention of ScienceBlog, United Press International and ScienceDaily, among others.)

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Sims sat down with Public Affairs’ Caroline Hanna recently to talk about her work and its implications.

What did you want to find out in these studies and what did you discover?

We wanted to know whether or not communities with more land in protected areas had been harmed economically by environmental protection. What we found was the opposite of the conventional wisdom: Protected areas appear to have actually improved economic indicators in nearby communities.

Why is this contrary to conventional wisdom?

Setting aside land for environmental protection restricts the amount of land available for agriculture and/or curbs the extraction of natural resources—both key sources of economic activity, particularly in developing nations. Such restrictions can be very costly for local communities and might hamper their development. On the other hand, protected areas might help local economies by attracting more tourists and/or infrastructure development, or by protecting ecosystem services that are valuable to locals. The conventional wisdom, though, is that the local benefits are too small to outweigh local costs.

So is creating more natural preserves the solution for third-world countries looking to improve their economies?

Probably not! Creating a protected area system is not a get-rich-quick scheme. Our findings here suggest only small to moderate economic improvements, on average. But what is clear is that protected areas, at least in these two countries, did not have large negative effects, which has been a major concern of biologists and many environmentalists. Nevertheless, I’m not willing to go in the other direction and say that environmental protection should be promoted as a tool of poverty reduction. Not all communities have benefited and—at least in Thailand—many communities perceive that regulations were unfairly imposed by the national government without adequate local consultation.

What other issues related to this research would you and your colleagues also like to study?

Well, one hypothesis is that communities have benefitted from an increase in tourism. Both Thailand and Costa Rica have significant numbers of international and domestic tourists and the income from tourism or corresponding infrastructure investments (roads, electricity, etc.) might have stimulated local economies. An alternate hypothesis is that environmental protection has safeguarded the flow of ecosystem services such as watershed protection or pollination—possibly helping local agriculture—or has improved the generation of valuable renewable forest products. We need to do more work to explore these possible mechanisms. We would also like to know whether the results hold in other countries. Thailand and Costa Rica are fairly stable, middle income countries and clearly not representative of all countries. So one of our hopes is that people will take the methodology of this study and run with it. Knowing more about how to make protected areas work for local communities would be helpful for future reserve planners.

Are there other, larger lessons here?

Yes: Environmental protection doesn’t always turn out to be incompatible with development goals. We need environmental regulation because free markets fail us when it comes to environmental protection. But we often hesitate to pass strong environmental legislation because we focus only on the costs of that regulation. I would say this is the main reason why we don’t yet have comprehensive climate legislation in the U.S.—we simply have not been willing to risk the possibility of any economic downside. 

Why do you think that is?

As a society, we often tend to overestimate the costs of environmental protection. Four decades ago there was major opposition to the new restrictions imposed by the Clean Air Act and the Clean Water Act on the grounds that they would bring the economy to a standstill. On the contrary, both have dramatically improved environmental quality rather than impoverishing us—so much that we are in danger of taking these protections for granted! Similarly, today we are hearing that proposed energy legislation limiting the use of fossil fuels is certain to destroy the economy. But most estimates suggest that current climate legislation would cost between 0.5 and 1 percent of Gross Domestic Product.

I think the broader message here is not that there are no costs to environmental regulation; it’s just that the costs are often smaller than we perceive or expect. And we should compare them in the light of corresponding economic benefits of regulation. As the Gulf of Mexico oil spill has just shown us, we tend to underestimate the value of what we gain from our ecosystems—healthy fisheries and beautiful recreation on the coast, to name two—until they are endangered. My hope is that tragic events in the Gulf will help us to move forward with stronger environmental regulation for the future.

 

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