June 7, 2006
Conservation offers financial rewards for cattle ranchers, study finds
By Mark Shwartz
About 10 million acres of private grazing land in the United States have been lost to commercial development in the last decade, according to the U.S. Department of Agriculture, as suburban sprawl and rising real estate values induce more and more ranchers to sell or subdivide their property.
But according to a new study, cattle ranchers can actually increase their cash flowand hold onto their propertyby practicing sound conservation. Writing in the June 12 weekly online edition of the Proceedings of the National Academy of Sciences (PNAS), researchers from Stanford University and the University of Hawaii-Manoa conclude that long-term reforestation of pastureland can be good for the environment and the pocketbook by offering landowners the potential of earning nearly nine times more income than they would from traditional cattle ranching.
"In Hawaii, many ranchers are trying to find ways to keep control of their land," said Joshua H. Goldstein, lead author of the PNAS study and a doctoral candidate in Stanford's Interdisciplinary Graduate Program in Environment and Resources. "Many of them care about conservation and are not interested in selling their land for development, so there's great interest in finding new strategies to create more revenue from land management."
In the study, Goldstein and his colleagues focused on private grazing lands that once held large stands of koa trees, a species of Acacia that can grow more than 100 feet tall and is found only in the Hawaiian Islands. Koa wood was used by early Hawaiians to build canoes, but upland forestlands were restricted to spiritual leaders. "Koa still has important cultural significance for native Hawaiians," Goldstein said. "Unfortunately, only 10 percent of the original forests are intact today."
Koa forests began disappearing in the 18th century when Europeans introduced livestock and logging to the islands. Studies have shown that the demise of koa has had a detrimental impact on a number of ecological services, such as freshwater aquifers and biodiversity. "A large fraction of native Hawaiian biota is associated with koa forests, including endangered birds, the one native land mammal [the Hawaiian hoary bat], understory plants and other groups," the researchers wrote.
The PNAS study was conducted in the Kona region on the Big Island of Hawaii. "The uplands in Kona are a mosaic of pasture and forested lands of which 90 percent is privately owned and 70 percent is zoned for agriculture at the 3,500 to 5,500 feet elevation," the authors wrote. "Significant portions of koa forest were cleared to create pasture for cattle grazing, which remains a major economic use."
Using computer models, the research team compared several financial strategies designed to make koa reforestation economically attractive to Kona's cattle ranchers. Their analysis was based on a hypothetical 500-acre parcel of grazing land located at about a 5,000-foot elevation where koa grows well.
"Since many landowners own on the order of several thousand acres, this koa reforestation project would involve only a portion of their total land holdings," Goldstein noted. "From a business perspective, three key financial barriers had to be addressed: high up-front costs of establishing a forest; long time periods without revenue35 to 45 years before timber could be harvested; and potential risks and uncertainties that could change the value of the investment in the future."
The study revealed that at today's prices, a rancher who did no reforestation would earn $194 per acre raising cattle. However, those who undertook reforestation without cattle could earn $1,661 per acre if they combined timber harvests with federal subsidies through the Department of Agriculture's Conservation Reserve Enhancement Program (CREP), which pays landowners to protect and restore environmentally sensitive lands.
"CREP subsidies have been used in several states and are in the process of being introduced in Hawaii," Goldstein said. "Taken as a whole, CREP provides a highly valuable revenue stream to a landowner interested in koa forestry, because its substantial cost-share and rental payments stabilize the cash-flow stream."
Without a government subsidy, ranchers who participated in reforestation could earn $453 per acre, but they'd have to wait at least 35 years to harvest their first tree after spending more than $1 million in up-front costs"a viable scenario overall but with a problematic year-to-year cash flow," Goldstein said.
Integrating cattle into a koa forestry operation would provide a small amount of revenue beginning in year five, which would generally offset annual forest-management costs, the study found. Under this scenario, however, the landowner would face the likelihood of reduced timber value as the result of tree damage from cattle grazing. "That said, integrating cattle might be attractive to landowners wishing to maintain the lifestyle and other cultural values associated with ranching," the authors wrote.
The least successful strategy, according to the study, involved trading "carbon credits" to mitigate greenhouse gas emissions. The European Union has required companies to participate in carbon trading since 2005, but there is almost no market for it in the United States, which is not a signatory to the Kyoto climate agreement. In this scenario, the rancher would sell credits on the Chicago Climate Exchange to companies that emit carbon dioxide based on how much carbon is stored in the regenerating koa forest. The study found that without government subsidies, selling carbon credits actually results in a net loss of income for the rancher, who would end up losing $488 per acre through the reforestation project.
"This paper shows how conservation on private lands can be made profitable, given the right policy incentives for land use," said co-author Rosamond L. Naylor, senior fellow at Stanford's Freeman Spogli Institute for International Studies.
"The environmental movement has changed a lot over the past decade," said co-author Gretchen Daily, professor of biological sciences at Stanford. "There is a new vision inspiring and uniting people who would never have dreamed of working together in the past. It is a vision of making conservation mainstreameconomically attractive and commonplaceand doing so by creating incentives that align long-term societal well-being with short-term, selfish best interest."
Making conservation pay is a critical step toward encouraging restoration of private, working lands, the authors concluded. "Finding economically viable means of reforesting degraded pastureland is relevant far beyond Hawaii, particularly in the tropics," they wrote.
"The most exciting aspect to me is trying to see through the eyes of landowners and understand the opportunities and challenges they face in terms of advancing conservation land uses," Goldstein added. "This study recognizes that each landowner has different needs and values. What we've done is create a menu to see what fits with their interests and to try to find a strategy that works well for them."
Other co-authors of the study are James B. Friday, forestry specialist at the University of Hawaii-Manoa College of Tropical Agriculture and Human Resources; Pamela A. Matson, the Chester Naramore Dean of the Stanford School of Earth Sciences; and Peter Vitousek, the Clifford G. Morrison Professor of Population and Resource Studies at Stanford.
Financial support for the research was provided through an Environmental Venture Project grant from the Woods Institute for the Environment at Stanford and a National Science Foundation Graduate Research Fellowship.
"Business Strategies for Conservation on Private Lands: Koa Forestry as a Case Study," by J. H. Goldstein et al., is scheduled to be published the week of June 12 on the PNAS website, http://www.pnas.org. Photos are available from the Stanford News Service.