Program ID: Innovation Anthology #440
Program Date: 12/08/2011
Program Category: Conservation, Economy, Environment, Women in Science
Conserving The Environment With Economic Instruments
PROGRAM #440 INTERVIEW WITH DR. MARIAN WEBER
MP3: 20.9 MB
Time: 22:54 Minutes
Dr. Marian Weber is an economist specializing in rural and conservation issues. She leads the Environmental Planning and Economics Program at Alberta Innovates Technology Futures.
Dr. Marian Weber
CC: MARIAN, WHAT EXACTLY DO YOU DO HERE?
MW: So, I’ll start with the mandate of AITF, and the government has given the Corporation the responsibility to address the social and economic needs of the province through research and innovation.
So in the environmental planning and economics program, we try to do that by providing research in the areas of improving environmental quality of life for Albertans.
CC: AND HOW DOES THAT TIE IN TO THE MORE TECHNOLOGY BASED SCIENCE THAT’S GOING ON HERE?
MW: So, primarily our program is looking at regulatory and economic solutions to environmental problems. And with that comes technology requirements to comply with regulations or to address emerging issues around cumulative effects.
So part of some of those technologies have economic components and we build the regulatory mechanisms into those models.
CC: CAN YOU GIVE ME SOME EXAMPLES?
MW: So an example would be, if firms are required to meet cumulative effects objectives, as they probably will be under regional plans, then they need some way to understand what the current scarcities are in terms of meeting thresholds and objectives. And then what they’re going to look like in the future, because if you are managing for landscapes that take 20 to 50 years to be restored, then your decisions now have an impact on the future landscape.
And so we’re looking at ways to build signals into models so that individual companies can understand what the whole landscape looks like in the future and what the impact of their current decisions on the future scarcities, so they can manage for all those thresholds now and in the future.
CC: SO YOU’RE LOOKING AT THE ECONOMIC AND SOCIAL SIDE OF THE SCIENCE OR DEVELOPMENT. AND WHAT MIGHT BE SOME OF THE WAYS THAT YOU WOULD STUDY THIS OR DO SOME SORT OF RESEARCH THAT WOULD THEN BE INCORPORATED INTO FUTURE DEVELOPMENT?
MW: So primarily what we do in this program is look at economic incentives and what we call market based instruments to manage for environmental problems and a couple of the things that we’re working on now so we work closely with governments and municipalities and even NGO’s, they might be engaged in providing incentives to landowners.
So we help to design the policies. Often governments, municipalities, planners, they’re used to using command and control type of systems. So they might have standards on plants or reclamation standards but that doesn’t tell us how in aggregate all of the impacts and companies that are on a landscape are going to achieve an outcome.
So markets are a way to coordinate those decisions because markets are really ways about sending signals about scarcity. And when we design an economic instrument, what we’re really trying to do is collectively, through all the individual impacts, achieve an aggregate outcome. That’s what we work on here.
CC: WELL YOU HAVE SOME PRETTY EXCITING PROJECTS THAT YOU’RE WORKING ON RIGHT NOW AND YOU MENTIONED ECONOMIC INSTRUMENTS. WHAT MIGHT THAT BE?
MW: So the Alberta Land Use Framework, one of its strategies is to develop market based incentives for achieving cumulative effects outcomes. And then under that they have three or four different instruments that they focused on.
So one of them is conservation offsets. And another one is transfer of development credits. And a third, it’s not really a mechanism but they talk about a conservation exchange, which is a place where you could trade environmental commodities.
So we’ve been working with the government of Alberta to inform them about options to design a conservation offset program. And we’ve been working with the Beaver Hills Initiative in Strathcona County to look at designing a transfer development credit system to, I guess, manage for the sensitive wetlands that are in the Cooking Lake Moraine area.
CC: I GUESS WE NEED SOME DEFINITIONS. WHAT IS A CONSERVATION OFFSET?
MW: A conservation offset is an action taken to compensate for the unavoidable harm from development. So conservation offsets could come from reclamation, restoration or setting aside land, putting an easement on it. Or it could even come from some specific management actions around particular species that aren’t related just to habitat restoration.
CC: AND THEN TRANSFER DEVELOPMENT CREDITS. HOW DO YOU DEFINE THAT?
MW: Transfer development credit is a program and it’s very common in the United States. There are many programs there. In a transfer development credit program, a municipality might identify conservation objectives that it has in a particular area. So a lot of them are around maintaining agricultural landscapes, protecting wetlands and sensitive ecosystems.
However, for most municipalities, say in the white zone of Alberta, primarily the land is privately held. So you need some way to compensate landowners if you’re going to ask them not to produce crops or something like that.
Typically municipalities would have to pay through tax credits or some kind of direct payment scheme but the budgets don’t allow for that. So one way that this has been approached in the U.S. is to say, well we want to actually have smarter growth and we want to increase densities in areas that are suitable for high density development, near transit and shopping locations and things like that.
And when we have country residential development that fragments the landscape, we want to cluster it.
So a transfer development credit program allows developers to exceed their density requirements in an existing zone, and they pay for that, it’s essentially an offset system, by compensating some other landowner to set aside their land.
So in a TDC program, you have a bylaw that says in this zone we want to increase conservation and these landowners can sell credits to developers in other areas where we want higher density.
CC: IS IT VERY HARD TRYING TO FIGURE OUT WHAT THE DOLLAR VALUE WOULD BE?
MW: For transfer development credits, it’s very difficult because it’s a completely designed market, so you have to figure out, well what is the willingness of developers to pay for credit. You need to have development pressure because otherwise there’s no incentive.
At the same time we need to understand what the landowner is willing to accept or to be compensated. And when you set up the credit system you have a credit ratio. So you’re saying, developer, you must obtain x number of credits per extra story of development.
The landowner, on the other hand, you’re going to say you’re going to get three credits for this kind of ecosystem and five for another.
But that’s essentially setting the price. And if you don’t set the price right, then the program won’t work. Nobody will want to sell and nobody will want to buy.
CC: ONE OF THE OTHER THINGS MIGHT BE TOO, IF YOU’RE TRYING TO MAKE AN EXCHANGE, LIKE ONE PIECE OF LAND FOR ANOTHER, WHAT IF THERE ISN’T A SUITABLE PIECE OF LAND NEARBY?
MW: That’s also an issue. In some of the programs in the U.S., they’ve run out of conservation lands to run these programs.
And so they keep expanding the program. But I think a bigger issue is that it’s harder to keep the demand up.
So often there’s not enough conservation and we know where the lands are that we want to keep. But we need to have somebody willing to pay.
In some programs the developer requirements keep increasing. So now, I think it’s in Boulder, Colorado, you have to buy a TDC to have a large house over x number of square feet. And so now there’s getting to be quite a bit of public backlash against some of these programs.
CC: WHAT DO YOU MEAN, PUBLIC BACKLASH?
MW: In the sense that, as the requirements on the demand side keep expanding, they’re getting into areas that are increasingly contentious in terms of what people think their rights are say to build big houses. I think when it was on traditional zonings and densities that the public was quite more amenable to accept that.
CC: IT’S ALMOST LIKE, NOT IN MY BACKYARD. YOU CAN SAVE THE ENVIRONMENT, BUT NOT AT MY EXPENSE OR NOT IN MY BACKYARD, OR DON’T STOP ME FROM DOING THE RENOVATION ON MY HOUSE. IS THAT IT?
MW: Exactly. So these are the same issues we’re running into in Strathcona County. So understanding the economics is really the most minor piece of getting one of these programs off the ground.
So first of all, they’re really complicated for planners to understand because it’s a whole different way of doing approvals. And then secondly, you’re actually passing the cost of conservation onto the development community. And in some cases, it can lead to higher housing costs.
There have been a lot of studies so it just depends on the design of the program. But the feedback we’ve had from developers is you know if you want to conserve this area, why not just conserve it anyways.
Similarly in the U.S., there are issues around regulatory taking. So if you down zone somebody, you have to compensate. But we don’t have the same ideas about property rights in Alberta.
And actually when we focus group testing, the idea of compensation for landowners, the feedback we’ve had is that, if you get down-zoned, it’s just luck of the draw. You don’t deserve to be compensated.
Now people that come to focus groups self select and we don’t know how widespread that view is but it’s an interesting difference and perhaps just plain zoning could work.
CC: I DON’T UNDERSTAND WHAT DOWN-ZONING AND PLAIN ZONING IS. COULD YOU EXPLAIN THAT PLEASE?
MW: So down-zoning is when previously you would have a right to sub-divide and that right is restricted. So, if you would have been allowed eight parcels, you can only do two parcels or something like that. So that’s actually taking away a previously held right to obtain development value.
CC: NOW YOU HAVE A PROJECT GOING ON IN BEAVER HILLS, WHAT IS THAT?
MW: So in the Beaver Hills, there’s been concern because there’s such enormous growth pressure on Strathcona County. And a lot of the population there is high income and they want to live in the country on estates and so there’s been continual subdivision and fragmentation.
And there’s a sensitive eco-system, the Cooking Lake, Beaver Hills Moraine. And it’s a knob and kettle wetland kind of topography and it’s becoming increasingly fragmented. And it’s also a buffer to Elk Island Park.
So I think in 2001, the Beaver Hills Initiative was a partnership between the five municipalities that have jurisdiction over that area to try and come up with voluntary ways to increase protection and respect the property rights of landowners.
So that’s in their land management framework. So transfer development credits are an obvious way to do that because they do provide some compensation and some incentives for landowners to put their land in conservation instead of subdividing.
And so since 2008, we’ve been working with the BHI to look at the feasibility of the program. And then in 2010 we actually started a pilot project to design it with Strathcona County. And so we’re in the middle of that right now.
CC: WHAT ARE YOU HOPING TO ACHIEVE FROM IT?
MW: The objective is to increase the amount of area of intact natural habitat in the Cooking Lake Moraine area and also to increase connectivity of habitat and increase the number of wetlands that are conserved.
And we would do that by not allowing subdivision or trying to discourage subdivision in that area and moving that density into areas more appropriate. The Capital Region Plan has actually identified some growth nodes that are opportunities for that.
CC: WHAT DO YOU SEE AS BEING SOME OF THE CHALLENGES THAT YOU ARE DEALING WITH IN THIS PROJECT?
MW: Well an interesting one is that Strathcona County is actually a very progressive county in terms of its zoning and bylaws. And it has actually precluded a lot of opportunities to use transfer development credits because they’ve already done the down-zoning. They’re very aggressive, I think, in the way they use municipal reserve and ecological reserve which are two tools under the Municipal Government Act that they can also use to conserve land.
So we actually have to show that TDC program on top of those other programs would lead to significant enough conservation benefits that it would be worthwhile for the municipality to try it.
So that’s what we’re in the process of trying to do right now.
We know that it’s feasible, that the economics work. But the issue is how much extra land would be brought in and how much extra level of protection that would provide, because it takes a lot of effort, I think, to put such a program in place.
CC: WELL YOU’RE JUST IN THE MIDST OF THE PROJECT. ARE YOU ABLE TO DRAW ANY CONCLUSIONS AT THIS POINT?
MW: So preliminarily, what we’ve been learning is transfer development credits are a way of distributing the cost of conservation from taxpayers to developers or from taxpayers to landowners who would have been down-zoned. So, somebody has to bear the cost. These programs have been used in Europe and the United States primarily because of the underlying property rights or public views of fairness. What we’re finding in Canada is that the concept of a Fair Land Use policy might not be the same as in the U.S. or in Europe and on a distribution basis the justification for TDCs might not be the same.
So, that’s been interesting. It’s been interesting to work with landowners and understand their perceptions about zoning and conservation. And, like I said, I don’t know how widespread that is because we’re just beginning to test that. I think the other lesson that we’ve learned is that if you want to use a market-based approach something like a transfer development credit program, you actually have to start to think about that at the beginning of your planning phase and this happens in other programs as well.
Planners sort of identify objectives but markets respond to certain types of objectives. You have to have a large enough market. The objective has to be tied to something that can create an incentive that can’t be too complicated. Sometimes there’s already so much regulation and zoning in place that a market is not really appropriate.
So, it could have been used in the past but the opportunity is precluded and so, if you’re thinking of using some kind of market incentive, then you need to consider that right at the outset of planning and not bring it in at the end of the day.
CC: WELL FROM A SOCIETAL POINT OF VIEW, CERTAINLY OVER THE LAST 20-25 YEARS, THERE HAS BEEN A GRADUAL MOVE TOWARDS THE ACCEPTANCE OF SUSTAINABILITY, ENVIRONMENTAL CONCERN AND THE NEED FOR CONSERVATION BUT ARE WE STILL AT THE POINT WHERE IT HASN’T BEEN ENTRENCHED ENOUGH?
MW: I think everybody wants to see more conservation. I think many of the municipalities that we talk to—the councilors are on board, they’re interested in the Beaver Hills Initiative, they’re applying for biosphere status. So, there’s momentum but the issue is who is going to do the conservation and who’s going to pay for it.
You talked about ‘not in my backyard’, that’s a big issue with these programs. It’s not so much of an issue if you increase conservation in an area, it tends to increase property values for the adjacent landowners.
I think the issue is around who’s going to accept the higher densities. So, when we’re moving density or increasing it in a location then the public in that community has to accept that higher density. You’re seeing it in Edmonton, you’re seeing it in Strathcona County that when you try to increase densities, even where it makes sense for smart growth, there’s a lot of push back from the communities.
So that’s the area we’ve had to work the hardest in and that’s why there is a reluctance of councils to take this on unless you can really demonstrate big conservation benefits.
CC: NOW I DID ASK YOU TO DEFINE CONSERVATION OFFSETS. PERHAPS WE COULD LOOK AT WHAT YOU’RE DOING IN THAT AREA NOW.
MW: We recently completed a project for the Land Use Secretariat looking at options for designing conservation offsets to address forestry and energy impacts in the boreal forest. The idea is that what we looked at there because that setting is quite complex in terms the underlying tenures and property rights, it’s mostly public land that the issues would be transferable also to southern Alberta.
Conservation offsets are enabled in the Alberta Land Stewardship Act and some of this work could inform any potential regulations that might come out of that to develop a conservation offset system. So, we modeled the costs and benefits of offsets with different rules.
So, when you’re designing a conservation offset system some of the issues that the Alberta government faces are, should it be a regulatory requirement, should it be an option for meeting some kind of regulatory requirement. For example, you could use carbon offsets or you could pay into the carbon emissions management fund or you could reduce emissions or could it be a completely voluntary system. Then what would the rules around that look like.
What activities should be eligible for offsets? We looked at reclamation and setting aside land but of course, setting aside land on public land where you have leases, there’s no mechanism to do that. So it raises a lot of important policy issues that the government will have to address.
So, what we are looking at are ways for the energy sector to manage some of its impact in a more rational way that’s going to achieve conservation benefits over the long run. I think a lot of the activities that are going on right now because they are uncoordinated and ad hoc, they are not generating real and measurable benefits into the future.
So we looked at potential metrics for measuring changes in ecological condition, what species could be protected and there are still tons and tons of work to do in this area but, I think, that our project opens up that set of questions and is enabling that discussion to happen now between government and industry and some of the NGOs.
CC: WELL HOW DO YOU DEAL WITH THE METRICS? DO YOU HAVE COMPUTER MODELING THAT YOU USE IN ORDER TO ATTACH A VALUE OR ANYTHING TO THESE ISSUES?
MW: What we’ve been using is we worked with Alberta Biodiversity Monitoring Institute and they’ve been developing what they call ecological intactness metrics and what they really are just measures of ecological condition.
They don’t necessarily tell you about what species you’re impacting, the similarity of one site to another. So the idea of an offset system is that you want to offset your impacts with equivalent benefits somewhere else and I think a lot of the early concern of environmental community around offsets is that you would just be setting aside cheap and worthless land that’s not only worthless to industry but worthless to species as well.
When we look at the design of these programs, our objective is to make sure we’re achieving no net loss over ecological condition and species and making sure that the ecosystem is viable. That’s difficult because there’s uncertainty in the science like we might be able to measure characteristics but there’s still risk around the viability of the ecosystem. We have to consider all of those things when we’re looking at a conservation offset system.
On the economic side, we have been working with the University of Alberta and they have a model tardis that looks at the economics of energy and forestry activities and basically optimizes those activities on the landscape. So when we put those two things together we can figure out who’s going to be doing what impacts over time. Then who might be a potential seller of offsets too. So, forestry might sell an offset to an energy company and say well we might not harvest this particular cut-block in this period and you can use that as an offset until you can reclaim this land.
Whether it’s in five years or ten years, many of the impacts have different time frames, different levels of intensity so we have to address all of those little issues and big issues as well.
CC: THIS WHOLE AREA IT REALLY IS LIKE A PIONEERING SCIENCE ISN’T IT?
MW: Yes, it is. In fact, Alberta would be the first place where they looked at developing this kind of an offset system on public lands. There are no other examples in the rest of the world. It’s exciting and it’s interesting and I think in terms of the jurisdictional complexity and the tenure and just the ecosystem characteristic, it’s groundbreaking.
CC: THANK YOU VERY MUCH MARIAN.