The Cost of Endangered Species Protection: Evidence from Auctions for Natural Resources
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Date
2016-04-12Metadata
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- Discussion papers (SAM) [662]
Abstract
This paper examines the effect that endangered species regulation has on natural re-
source development. Specifically, we use data from competitive auctions to estimate the
effect that land-use regulation protecting endangered caribou in the Canadian province
of Alberta has on the price producers pay for the right to extract oil. We exploit a re-
gression discontinuity design to evaluate how prices differ along regulation boundaries
that constrain resource development. The auction format and the regulation discon-
tinuity allow use to measure the total cost of the regulation. We find that producers
pay 24% less on average for oil leases that are regulated and that the total net present
value cost of the regulation exceeds $1.15 billion for leases sold between 2003-2012,
all of which is borne by the government. In spite of these costs, the populations of
endangered caribou remain in widespread decline.