Solving conservation's money problems


Approximately $4 billion a year is required to successfully downlist all threatened species by at least one level on the International Union for Conservation of Nature Red List (McCarthy et al. 2012). At first glance, $4 billion annually seems like an insurmountable goal; however, compared with the scale of the global economy, $4 billion is a pittance. Nonetheless, it is significantly more money than conservationists currently have access to.

However, there is a way, a potentially painful way, to come up with billions of dollars every year. It was hinted at by Science editor Marcia McNutt (2014). Conservationists should rescind their opposition to the Keystone XL pipeline in exchange for a tariff on the oil that flows through it. The proceeds from this tariff would then be dedicated to international species conservation.

The Keystone XL pipeline is designed to transport about 830,000 barrels of oil per day from the Athabasca oil sands in Canada to U.S. Gulf Coast refineries. A tariff of about $14 per barrel would generate over $4 billion per year if the pipeline operated at capacity. Obviously, any tariff would be opposed by TransCanada, the pipeline owner, and oil and gas producers and refiners, and a $14 tariff may prove too optimistic, but even a more modest $5 per barrel tariff would generate $1.5 billion dollars per year. For comparison, The Nature Conservancy spent just under $400 million in 2013 on conservation-related programs, and Conservation International spent just over $127 million in 2012. Thus, money from a tariff on the Keystone XL pipeline could make a significant positive impact on conservation funding.

Clearly, this would require a painful compromise for conservationists. Environmentalists have fought against the Keystone XL pipeline for years and their opposition has been one of the major environmental successes, but ultimately, the Athabasca tar sands will be developed, with or without the Keystone XL pipeline. Furthermore, it is unrealistic to think that environmentalists can successfully oppose the pipeline evermore. It is possible that President Obama may approve the pipeline before he leaves office. Even if he does not, any Republican successor, and possibly a Democratic one as well, would probably approve it soon after taking office. Thus, environmentalists need to act quickly to extract the maximum possible concession from policy makers.

The fundamental question is which of three potential futures is the best for biodiversity? In the first potential future, the Athabasca oil sands are not developed and the oil remains in the ground. In the second potential future, the Athabasca oil sands are developed and the oil is shipped by rail to the United States and delivered via pipeline to the Canadian West Coast, where it is shipped to refiners in China. In the third potential future, the Athabasca oil is developed and transported through the Keystone XL pipeline with a multi-billion dollar per year tariff flowing to conservation of endangered species. Of these three scenarios, the first (no development) and the third (development with a tariff) are quite obviously preferable to the second (development with no tariff).

Therefore, the question becomes how realistic is the first option? How realistic is it that environmentalists can, in perpetuity, successfully oppose the Keystone XL pipeline and that without the Keystone XL pipeline the Athabasca oil remains in the ground? Unfortunately, we already know the answer to this question. The Athabasca oil sands are already being developed. The best remaining option for conservationists must be development with a tariff to fund biodiversity conservation.

There are, of course, many potential pitfalls. If accomplished legislatively, such a plan may require an exception to the North American Free Trade Agreement. Furthermore, any tariff imposed on tar sands oil could also be vulnerable to revision by future lawmakers or the courts. Therefore, the actual implementation of such a plan may be more feasible through some sort of legally binding “easement” that TransCanada and conservation organizations would agree to in order to allow development. This would set a precedent in which environmental tariffs are used to help settle differences between opposing stakeholders.

Acquiescence to the Keystone pipeline might also do significant damage to the reputation of conservation in general. Rather than being seen as idealistic champions of the wild, conservationists may begin to be seen as Machiavellian pragmatists, and this may have negative impacts on the fundraising ability of conservation non-profits. Thus, acquiescence to the Keystone pipeline reflects a real choice for the future of conservation; conservation may remain ideologically pure but continue to fight a mostly losing battle against industrial encroachment or a new movement of conservation realism may develop in which environmentalists extract concessions from developers to meet the financial needs of global conservation.

The most obvious objection to this proposal, at least from a conservation perspective, is that it is a slippery slope. That is, once the precedent has been set all manner of environmental degradation will be achievable given the right price. If conservationists sell out on the Keystone XL pipeline, what is to keep them from selling out on oil drilling in a pristine ecosystem, logging in a rainforest, or hunting in a wildlife refuge? The answer is nothing. In each case the costs and benefits of each proposal have to be weighed against the probability of successfully opposing development. In the case of the Keystone XL pipeline, the probability of successful opposition is low while the potential benefits of a tariff are high.

Another example of the same principle is oil and gas development in the area around Lake Albert in Uganda and the Democratic Republic of Congo. There are a number of reasons to oppose oil and gas development in Africa, but from a conservation perspective, the Lake Albert area is home to half of Africa's bird species and contains the last remaining habitat of the eastern lowland (Gorilla beringei graueri) and mountain (Gorilla beringei beringei) gorillas. Obviously, oil and gas development will inflict a cost on conservation efforts, but, as in the Keystone XL pipeline, it is unlikely that conservationists can successfully oppose development indefinitely. Indeed, oil and gas development is already beginning in Uganda. Thus, rather than simply oppose development, conservationists may be wise to attempt to extract a cost from the developers. Specifically, conservationists could lobby the oil companies involved (Britain's Tullow, France's Total, and China's CNOOC) or the governments involved to dedicate a portion of their profits to purchasing land for conservation elsewhere in Uganda or Africa.

Or, to take the argument to the extreme, consider the case of Icelandic and Norwegian whaling. According to the International Whaling Commission, in 2012 Norway and Iceland combined harvested 516 Minke whales (Balaenoptera acutorostrata) from the North Atlantic out of a population of about 120,000. Assume that conservation organizations could convince the governments of whaling nations to pay a fee for every whale taken in return for conservationists’ acquiescence to a sustainable whaling industry. The point is that there would be a price per whale—$10,000, $100,000, $1,000,000—from which global conservation would receive a benefit that far outweighed the costs to biological diversity. Furthermore, because whaling is already occurring and will likely continue to occur whether conservationists object or not, nearly any value paid by whalers to conservation organizations would represent a net benefit to global conservation.

Environmental taxes have been studied for decades (Bovenberg & De Mooij 1994; Copeland 1996) and accepted by the policy community since at least the early 1970s when the polluter pays principle was embraced by the European Community's First Environmental Action Program (Ekins 1999). Thus, there is little novel in my suggestion that the Keystone pipeline, or any other industrial development, pay to offset the ecological damage they cause. What is more novel is the idea that the acceptability of environmental tariffs should be discounted by the probability of successfully opposing development. That is, it makes sense to allow the Keystone pipeline and to extract the maximum possible concession from the developers because continued successful opposition has a low probability of success. This is not so much an ecological economic argument for developers to internalize the costs of their environmental degradation as it is a call for environmentalists to extract the maximum possible benefit from developers and industrialists, regardless of the actual external cost borne by society.

Conservation biologists have been quite good at principled opposition to environmental degradation; they have been less good at cost-benefit analysis and realpolitik. Developments like the Keystone XL pipeline and oil development in Africa have significant environmental costs, and while conservationists do a good job defining those costs in terms of biodiversity, they do a poor job defining those costs monetarily. If concessions on tariffs can be successfully extracted from policy makers, than the benefits of acquiescence surely exceed benefits of opposition in the case of the Keystone XL pipeline, and potentially in many other examples. While tariffs on the Keystone XL pipeline may not solve all of conservation's money woes, the idea of placing environmental tariffs on development could lead to significant new cash flows for conservation governmental and nongovernmental organizations.