The Economic Costs of Critical Habitat Designation - Project #2

The Economic Costs of Critical Habitat Designation: Economic Impacts of Critical Habitat Designation for the Coastal California Gnatcatcher The California Resource Management Institute is pleased to be making available the report - CLICK HERE FOR A COPY of the Economic Impacts of Critical Habitat Designation for the Coastal California Gnatcatcher (note: this file is a 4 MB file and will take a few moments to download) - prepared by Professor David Sunding, as associate professor of natural resource economics at U.C. Berkeley and a senior consultant in Charles River Associates' Energy and Environment practice. The U.S. Fish & Wildlife Service proposed a total of 495,795 acres in Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura counties as within the boundaries of critical habitat for the coastal California gnatcatcher. This six-county region is one of the most important centers of economic activity in California and the United States, with over 2.5 million residents and over 800,000 jobs at present. According to Professor Sunding's research, the aggregate impacts of the proposed 495,795 acre critical habitat designation for the gnatcatcher for the period from 2003 to 2020 are between $4.6 and $5.1 billion in current dollars. Considered at the level of an individual project, critical habitat designations have three types of impacts: they increase out-of-pocket expenses to the developer, delay completion of the project, and reduce the output of the project. The impact model developed by Prof. Sunding translates these small-scale effects into regional market effects by considering factors such as demand conditions and development potential in surrounding areas that are not directly affected by the critical habitat designation. Results of the impact model detailed in the report show that the aggregate impacts of critical habitat designation for the gnatcatcher are between $4.6 and $5.1 billion in current dollars for the period 2003 to 2020. Considered on a per-acre basis, the critical habitat designation imposes costs that average close to $150,000 per developed acre. Costs exceed $400,000 per acre in 18 of 321 census tracts, $300,000 in 29 census tracts; $200,000 in 88 census tracts and $100,000 in 198 census tracts. These impacts are borne primarily by consumers in the form of higher housing prices. The designation of critical habitat is the only time the consideration of economics and other relevant factors can be considered in the ESA. Because the Secretary of the Interior is required to balance the biological benefits of the designation with the economic impacts and other relevant issues caused by the designation, the quality of the economic data used in this process is vital in order for the Secretary to properly implement the provisions of the ESA. The Institute believes that the information contained in this report and the economic model in which the report is based on will provide the federal government and the public with a better understanding of the economic costs of critical habitat designations. This report is the second of two reports focused on the economic impacts of critical habitat designations. By focusing on economic impacts at the census tract level, this report takes the economic impact analysis previously developed by Professor Sunding to a higher, more useful level of detail. Click here for a PDF version of the Institute's initial critical habitat research project - The Economic Costs of Critical Habitat Designation: Framework and Application to the Case of California Vernal Pools.