Endangered Species Act Impact

October 24, 1996

Oct. 24, 1996 -- Adequate economic data currently are not available to determine the economic impacts of the Endangered Species Act (ESA), according to environmental economist Jay Shogren at the University of Wyoming.

Current cost/benefit figures are inadequate for providing sound economic data to help decisions makers who are debating the reauthorization of the ESA, says Shogren, the Thomas Stroock Distinguished Professor of Natural Resource Conservation and Management in the UW College of Business and the co-author of a new textbook on environmental economics.

When the ESA was enacted by Congress in 1973, economic criteria were not included in the process of protecting species from extinction. However, economic criteria were added in subsequent amendments to the act and in three executive orders that required cost benefit assessments to be made on federal regulatory actions such as the Clean Air Act that cost more than $100 million.

Shogren points out that the cost of protecting species generally has been measured on a species-by-species basis, but there are no scientifically-based national estimates of the economic benefits of most of the nearly 1,000 species listed.

Most ESA cost estimates are based on actual expenditures to help species recover. General Accounting Office figures show that the costs of 23 species recovery plans during a recent three-year period was $350 million, of which half was spent on 10 species that included bald eagles, spotted owls, grizzly bears and whooping cranes.

"We have a lot of anecdotal evidence about the costs of the ESA, we know what the Pitchfork Ranch (near Meeteetse) had to pay to preserve the area where black-footed ferrets were found in the 1980s." Shogren says. "What we do not have is any type of estimate about the ESA's impact on the national economy. Has it slowed it down? Has it promoted overall economic growth? We just don't know."

Estimates of actual costs to property owners include such expenses as time and money spent applying for permits and licenses, designing recovery plans, and legal fees. Shogren says that cost figures based on what are known as "opportunity costs" can provide a more accurate measure of the economic impacts of the ESA. He says these measure the costs of opportunities that are lost because of restrictions placed on property owners when endangered species are found on their land.

"If current or proposed actions are no longer viable because a species is found on private land, the property owner suffers an opportunity cost," he says. "These may include unrealized benefits from agricultural production, timber harvesting, mineral extraction, recreation, wages lost by displaced workers who remain unemployed, and lower county property and severance taxes." As an example, he says the Bonneville Power Administration estimated that preserving an endangered salmon cost $450 million, of which about $300 million was the opportunity cost of lost power revenues.

Another aspect of opportunity costs is that government money spent to recover and protect endangered species could have been used on other programs, such as school lunches or health care.

Economists view opportunity costs as pieces of a pie. Is the ESA really restricting the size of the U.S. economy, or merely shifting it to different constituencies? Shogren says some private landowners will benefit by protection of species, but others will lose a stream of benefits. If it is determined that the overall economy is weaker because of the ESA, then the Act is imposing an opportunity cost on the U.S. economy.

"Current evidence of regional impacts suggests that the economic pie will not decrease because of the ESA, but what changes is who gets what share of the pie," he says. "There may be a redistribution away from traditional businesses to new businesses."

He adds that the biological effectiveness of the ESA has not yet been determined either, in part because there just hasn't been sufficient time to judge the success of different species recovery plans.

Economists normally rely on market prices to determine something's value, but market prices may not be applicable when measuring the benefits provided by the ESA. Such values are measured instead by methodologies developed in the field of environmental economics, which uses non-market values to place a dollar amount on the environment, based on surveys of what people would be willing to pay to obtain the environment they would like to see. Shogren, who received his Ph.D. degree at UW in 1986, says many of the methodologies in this field were developed and refined by professors Ralph d'Arge, Thomas Crocker and other faculty members in the UW Department of Economics, which has been ranked as one of the top environmental and natural resource programs in the country, based on published research citations and other criteria.

"We as economists are challenged to provide economic figures that can be used to help answer questions about the ESA and other environmental issues," he says. "Many cases have gone to court in which the plaintiffs and defendants have presented widely divergent figures on the costs of natural resource damages. We have a long way to go before we can give some credible values that can be used to resolve these questions," he says.

Shogren provided a detailed economic overview for a comprehensive document "Endangered Species Act and Private Property," prepared by the Institute for Environment and Natural Resource Research and Policy (IENR) at UW. The document incorporates scientific, economic and policy considerations in an attempt to balance private property rights with society's desire to preserve species. The IENR was created to provide a unique marketplace for issues, research, debate, innovation, policy, technology and consideration of the public good on matters related to protection of the environment and development of natural resources. The policy board is comprised of outstanding representatives of business and industry, education, government, and environment and natural resource constituencies.

After receiving his Ph.D. degree at UW, Shogren served on the Appalachian State University faculty, was head of the Resource and Policy Division at Iowa State's Center for Agricultural and Rural Development and was a visiting professor at Yale University. He has been an editor and associate editor of several journals, including "The Journal of Environmental Economics and Management" and "Environmental and Resource Economics."

Shogren has published dozens of papers in applied microeconomic theory, environment and natural resource economics, public finance, applied econometrics and experimental economics. He is co-author of a new book "Environmental Economics In Theory and Practice," written with British professors Nick Hanley at the University of Stirling and Ben White, University of Newcastle-upon-Tyne. It is a guide to the most important areas of natural resource and environmental economics, including the economics of non-renewable and renewable resource extraction, the economics of pollution control, the application of cost-benefit analysis to the environment, and the economics of sustainable development.

University of Wyoming

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