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Thursday April 12, 2001

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Using market forces to protect the environment

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By Tom McDermott

As we head into the summer with power shortages and rising oil prices looming over our heads, the environment has reclaimed its place in the forefront of our political discourse.

Promoting innovative methods to conserve natural resources has to be a critical policy initiative for President Bush. If he fails to strike the delicate balance between preserving the environment and protecting property rights, he will lose some of the crucial Democrat support he will need to win in 2004.

Market-oriented solutions give corporations the impetus to act responsibly. Tax incentives for research of more fuel-efficient cars that will actually appeal to buyers to get results. Selling pollution permits and allowing companies to exchange them freely is one way to get results.

Of course, existing environmental laws should be strictly enforced, but massive expansion of environmental bureaucracies and unreasonable restriction on the use of private land are not the answers.

It's so simple. Keep the whip, but make the carrot at the end of the stick bigger, and you'll see the mule get his ass in gear. Use the whip when he gets out of line, but always let him know that he will be rewarded. Without the carrot, why should he move at all? If he is just being beaten all the time, eventually he'll give up altogether and just stop.

One of the "carrots" that is offered to Arizona land owners is a conservation easement. This is an agreement that a land owner makes with a private, non-profit conservation group, like The Nature Conservancy. The owner agrees to set aside a portion of his land for conservation purposes. Usually this means no developing, no grazing, no dumping, no use of pesticides, etc.

The Nature Conservancy is entitled to enter the property and to conduct ecological research and it is granted the power to enforce compliance with the agreement.

In return the owners receive significant tax advantages. The easement "runs with the land," that is it is applicable against all future owners. Therefore the value of the property is usually lowered substantially. Accordingly, the owner receives significant property tax benefits and his capital gains taxes are lowered when he sells the land.

Conservation easements have the most significant benefits for land owners who have valuable properties but whose heirs cannot afford the exorbitant federal estate tax. An easement on the land would not only address environmental concerns, but would also help prevent the forced sale or government seizure of land that a family has held for generations.

Hard core environmentalists, however, never seem to be satisfied. They refer to groups like The Nature Conservancy as "ranch sympathizers."

On the one hand they're dead set against auctions of public land. OK, fine. But on the other hand they attack anything that gives people the tax incentive to advance some social good as a "risky scheme." What do they think happens when the government seizes private land to make up for the owner's delinquent taxes? Does the government send in teams of ecologists to help determine how the environment should be best protected?

Of course not. They sell it as soon as possible. Usually for a fraction of its real value and usually to some random company that can't begin to understand the emotional connection to the land the old rancher had before the IRS came in and took the land that's been in his family since Arizona was a territory.

Non-profit conservancy organizations are excellent at protecting our precious natural resources without stomping on the individual's right to use his property as he sees fit. While their solutions are far from perfect, they allow people to make their own decisions on how best to conserve their land.