Country Name: United States of America
Author: Doug Bruggeman

Environmental markets work best when based on quantifiable estimates of ecological services. Markets for endangered species habitat are currently based on a poor surrogate for biodiversity services, namely habitat area. Researchers at Michigan State University have taken a fresh look at the problem, integrating theories in evolutionary ecology with economics. Doug Bruggeman shares the results of his research with the Ecosystem Marketplace.

Anyone who has looked outside an airplane window knows the extent to which human development can change the landscape. The patchwork of forests, savannah, prairie, desert, and wetlands historically found has been reduced and broken apart by agricultural lands and real estate development. Dubbing this process "habitat loss and fragmentation," scientists have been studying it closely in recent years because it represents one of the biggest threats to biodiversity conservation in the world today.

Market-based approaches are being developed to help prevent the loss of biodiversity, but they largely ignore the influence of habitat fragmentation. To wit, conservation credits for endangered species habitat in the United States are awarded based on the size of a given restoration project rather than its ecological integrity. Acreage is a crude, often inappropriate, measure of the biodiversity support services flowing from a piece of land since the ways in which species utilize a protected area frequently depend upon habitat quality and location, rather than size.

Wildlife often need different land cover types (i.e., habitats) for migrating, feeding, mating, and rearing young. For example, Whooping Cranes may use forested areas to nest, but they require riparian systems for feeding. The combination of these two different habitat types, then, is much more attractive to a Whooping Crane than large isolated expanses of either one. Similarly, bats or other mammals may use the river as a movement corridor, but they generally reproduce in forested areas.

Since wildlife species frequently utilize widely varied types of habitat at different stages in their life history, it is important to take landscape level analysis into account when determining the conservation value of any property. In a study funded by the US EPA S.T.A.R. Program at Michigan State University, we have been investigating a method for doing just this.

Landscape Equivalency Analysis or "LEA" compares ecosystem services provided by different landscape patterns, thus recognizing the effects of both habitat loss and fragmentation on the flow of ecosystem services from any given area. LEA makes possible a market for those ecosystem services that depend on the spatial arrangement of different land cover types. Importantly, the application of LEA to conservation decisions may decrease conservation costs, while increasing the sustainability of species.

The Big Picture

The exchange of genetic material though sexual reproduction is the basis for much of the world's biodiversity. When two individuals with different genetic backgrounds mate, their offspring have a greater diversity of genes. Such individuals may display increased survival and reproductive capacity because genetic diversity often confers increased immunity to disease and greater adaptability to changing environmental conditions, while decreasing the chance that deleterious traits are expressed. Conversely, when individuals with similar genetic backgrounds mate, their offspring often have lower survival and reproductive capacity because they are more vulnerable to disease and environmental change, and are more likely to express deleterious traits.

Since developers too often sub-divide wildlife populations when sub-dividing land, real estate development frequently restricts the ability of individuals within a population to choose from a diverse pool of mates. Genetic diversity declines as related individuals are forced to breed with one another and mortality rates rise. Habitat fragmentation thus revs the engine on local extinction rates, kicking off what scientists call an "extinction vortex".

In order to reverse the extinction vortex or, even better, to avoid it in the first place, it is important to make sure that local populations of a species remain connected. In the field of evolutionary ecology, we refer to the network of local populations connected by migration and gene flow as a metapopulation. Since many endangered species require migration and gene flow over large areas, it is important to design conservation strategies that ensure gene flow throughout an entire metapopulation. Often, this means designing plans at the landscape level so that local populations are connected to one another through habitat corridors.

Imagine, a jigsaw puzzle: Adding any piece to the puzzle is nice, but filling in the key missing link between two sections of the puzzle is much nicer. Just as there are key puzzle pieces in the world of parlor games, there are key habitat parcels in the world of species conservation. Because of their location, some habitat areas contribute more to gene flow throughout a metapopulation than others. In essence, they are more important puzzle pieces to protect from development, and they are more important puzzle pieces to restore through mitigation projects.

To capture this idea, LEA estimates the conservation value of credits traded at a local scale based on the equivalency of metapopulation dynamics before and after the trade.

For example, some land cover types may provide the linkage among local populations that is critical for migration and sharing genetic material. Under LEA, development of said habitat for residential or commercial purposes would create a large negative externality (i.e. loss of biodiversity). Therefore, such development would require any conservation bank selling credits to the developer to be similarly well connected to local populations, thus able to generate a large positive externality (i.e. addition of biodiversity). In contrast, LEA would show that isolated habitat contributing little to genetic variance may be developed by buying fewer credits from a conservation bank.

In theory, a market based on LEA would direct trading toward a landscape supporting the same level of metapopulation dynamics after mitigation as it did prior to development.

Preliminary results recently submitted for publication indicate bankers could sell credits to twice as many landowners under LEA than would be possible if habitat connectivity were ignored. These trades met the regulatory requirement of avoiding a "take", or preventing a reduction in the number of individuals in a population. Further, after these trades were made in a computer simulation, large positive externalities remained as measures of genetic variance shifted toward recovery goals.

We suggest that private individuals or public agencies could purchase these "habitat defragmentation credits" if a secondary market for genetic variance credits were created. This would have to serve as a voluntary market, much like the CO2 market, because there are no provisions under the Endangered Species Act for private individuals to contribute to the recovery of the species or to manage genetic diversity. An additional benefit of a market for defragmentation credits lies in the financial incentive it would provide for bankers and regulators to collect data on the effects of land cover on dispersal behaviors of imperiled species. Without this data we cannot determine whether habitat trades increase or decrease the probability of population extinction.

In sum, then, our study indicates that increasing the scientific rigor used to evaluate habitat trades may create opportunities to better balance the financial sustainability of biodiversity markets with the natural sustainability of biodiversity itself.

Read Landscape Equivalency Analysis: Methodology for Estimating Spatiall Spatially Explicit Biodiversity Credits by Douglass Bruggeman, et. al. [pdf - 366kb]

For those wishing to learn more about LEA see the Environmental Management paper linked below or contact me directly (bruggem3@msu.edu).

First published: March 17, 2006