South Carolina conservation proposal recognizes incentive problem

South Carolina’s legislature is looking for ways to protect its wetlands from development by increasing a deed tax to fund the purchase of development rights to vital wetlands. Although problematic in other ways, such an approach is preferable to the government’s usual tactic of increasing regulations on private property owners, not only because it recognizes where the cost of conservation efforts should lie, but also because it has better incentives.

Wetlands have numerous benefits to the environment, providing wildlife habitat, purifying polluted waters, and soaking up floodwaters. Such benefits serve society as a whole, offering little to the individual property owners other than legal obstacles to using their property. These obstacles can create an incentive for property owners to destroy wetlands without alerting the government. In fact, the EPA recently went after several South Carolina property owners for illegal actions that range from removing beaver dams (to allow a recently created wetland to dry up) to clearing and filling 26 acres of wetlands. If the government would provide incentives to keep and protect such land, perhaps such incidents would become rare.

Perverse incentives are often even worse where environmental regulations are more severe. Consider the Endangered Species Act, which in many documented cases has induced property owners to preemptively destroy critical habitat for various endangered or threatened species. For example, a 2003 study found that landowners in North Carolina, even at risk of violating ESA restrictions, prematurely harvested timber in order to make their land inhospitable for an endangered woodpecker. These landowners were not unusually hateful toward the environment, rather they feared the potentially exorbitant costs that even one woodpecker colony could incur.

Such harsh restrictions on individuals’ ability to use their property not only create perverse incentives, but they are also unfair. The Constitution’s Takings Clause is “designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States. Wetlands and species preservation benefit the public as a whole, but frequently individual property owners pay a disproportionately high price under land use restrictions. Accordingly, states and the federal government should reconsider existing environmental laws and follow the example laid out in the South Carolina proposal, dropping the stick and picking up the carrot.