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Conservation Priorities and Environmental Offsets: Markets for Florida Wetlands

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  • Daniel Aronoff
  • Will Rafey

Abstract

We introduce an empirical framework for valuing markets in environmental offsets. Using newly-collected data on wetland conservation and offsets, we apply this framework to evaluate a set of decentralized markets in Florida, where land developers purchase offsets from a small number of long-lived producers that restore wetlands over time. We find that offsets led to substantial private gains from trade, creating about $2.2 billion of net surplus from 1995–2018 relative to a historical conservation mandate. Offset trading also led to large differences in hydrological outcomes, driven by significant differences between restored and existing wetlands in terms of area and location. A locally differentiated Pigouvian tax on offset transactions would have prevented $1.3 billion of new flood damage while preserving more than two-thirds of the private gains from trade.

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  • Daniel Aronoff & Will Rafey, 2023. "Conservation Priorities and Environmental Offsets: Markets for Florida Wetlands," NBER Working Papers 31495, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31495
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    JEL classification:

    • L0 - Industrial Organization - - General

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