Transferable development rights and forest protection: An exploratory analysis

As agricultural frontiers expand, and habitats contract, potential conflicts between conservation and development goals increase. Transferable development rights (TDR) programs offer a means of minimizing the opportunity costs (in foregone agricultural rents) of protecting a desired quantity of habitat. These programs may be particularly applicable to Brazil, where long-standing regulations require a fixed proportion of each property to be set aside as a forest reserve. The article develops a simple, geographically explicit simulation model to examine the economic and environmental impact of a hypothetical TDR program under alternative implementation scenarios. Data on land cover and land productivity from the Brazilian state of Minas Gerais are used to calibrate the model. The model shows substantial reductions in conservation cost from widening the geographical scope of trading. Restricting the program to large landholders drastically reduces transactions costs while only mildly reducing the amount of forest placed under protection.