Proecing he African Elephan: A Dynamic Bioeconomic Model of Ivory Trade G. Cornelis van Kooen Deparmen of Economics Universiy of Vicoria P.O. Box 1700, Sn CSC Vicoria, BC V8W 2Y2 Canada Email: kooen@uvic.ca Draf: May 26, 2006 Seleced paper presened a he American Agriculural Economics Associaion Annual Meeings a Long Beach, CA, July 23-26, 2006
ABSTRACT Inernaional rade in ivory is banned in order o proec he African elephan. The rade ban is suppored by some range saes, because i is seen as an effecive means for proecing a flagship species, bu is opposed by saes, mainly in souhern Africa, because populaions exceed he carrying capaciy of local ecosysems. Issues concerning he ivory rade ban are addressed in his paper using a dynamic parial-equilibrium rade model ha consiss of four ivory exporing regions and a single demand region. Resuls indicae ha a rade ban migh no be successful in mainaining elephan populaions, even if i leads o a sigma effec ha reduces demand and increases he marginal coss of markeing ivory. Resuls sugges ha he species will survive only if non-marke values are aken ino accoun. Surprisingly, however, he ineracion beween ourism benefis and marginal compensaion from rich counries can lead o he demise of elephans in some regions where his would no be he case oherwise. Finally, elephan populaions are even projeced o crash if range saes can operae an effecive quoa scheme, even one ha excludes poaching. In he final analysis, however, free rade in ivory and effecive insiuions ha ranslae numbers of elephans ino moneary paymens may be he bes hope for he elephan. Key Words: economics of elephan conservaion; economics of ivory rade; rade bans; carels and quoa Acknowledgemens: The auhor wishes o hank Peer Kennedy and paricipans a he 4 h Annual BIOECON Conference in Cambridge, UK, 19-21 Sepember for commens on an earlier draf of his paper, and Nigel Huner for helpful email discussions. 2
I. BACKGROUND Ivory has been a raded commodiy since a leas Old Tesamen imes King Solomon s ships brough back ivory from Africa (I Kings 10:22) and his palace was inlaid wih ivory (I Kings 22:39). Ivory was commercially exploied by he Romans in ancien imes and laer by Arab raders and Europeans.... Beween 1890 and 1900, nearly 3.7 million kg of ivory were raded in he London marke alone,... and some 60,000 elephans reached European markes every year during ha period (Blanc e al. 2002, p.15). Ivory expors from Africa had increased by 400% beween 1850 and 1875, bu losses in Wes Africa were paricularly high, wih he region dubbed he ivory coas for good reason (Fischer 2005). As human populaion expanded during he 20 h Cenury, elephans were increasingly confined o proeced areas. Beginning someime in he 1960s or early 1970s, speculaion grew ha a complex combinaion of commercial rade and human-elephan ineracions were causing a serious decline in elephan numbers. In Ivory Coas, for example, here were an esimaed 1790 savanna and 3050 fores elephans in 41 isolaed groups in 1984, bu his declined o approximaely 270 oal elephans in perhaps 20 isolaed groups by he early 2000s; numbers were repored o be declining a a rae of 300 poached and 90 legally killed elephans per year beween 1976 and 1984, wih poaching coninuing o he presen (Fischer 2005). Iain Douglas-Hamilon was he firs o compile daa on elephan range, numbers and rends in he 1970s and 1980s (Burrill and Douglas-Hamilon 1987; Douglas-Hamilon
1977-1979, 1993), bu he firs coninen-wide populaion esimaes became available in 1989 and are repored in Table 1 (ITRG 1989). 1 A comparison of firs and subsequen esimaes suggess ha elephan populaions in some areas may have fallen by half beween 1981 and 1987 (Said e al. 1995, p.1); researchers speculae ha he African elephan (Laxadona africana) declined in populaion from 1.2 million o 600,000 elephans in one decade, alhough he supporing evidence for his is sparse (Barnes e al. 1999; Blanc e al. 2002). The magniude of he esimaed drop in numbers is difficul o believe because of he large scale of killings his would have enailed. Trade in ivory became regulaed under he 1973 Unied Naions Convenion on Inernaional Trade in Endangered Species of Wild Fauna and Flora (CITES). CITES regulaes commercial rade in endangered species using a ranking scheme: Appendix I conains species banned from inernaional commercial rade; Appendix II liss species ha may be raded bu for which expor permis are needed (issued a he discreion of he exporing sae); and Appendix III includes species ha are hreaened and could become endangered in he fuure. Imporing counries agree no o rade in species (or pars of or producs from species) lised in Appendix I, and ensure ha proper expor permis accompany impors of species lised under Appendix II. Saes can apply sancions on species lised under Appendix III a heir discreion. Several modificaions have been made o CITES ha have had an impac on he saus of he African elephan. In 1981, a provision was added a New Delhi (Conference Resoluion 3.15) 1 Funding for populaion daabases was provided primarily by he U.S. Fish and Wildlife Service. 2
ha would permi ransfer of cerain populaions from Appendix I (no rade) o Appendix II (limied rade) for he purposes of susainable resource managemen, and, in 1985, Resoluion 5.21 provided for he sysemaic re-lising of species from Appendix I o II in cases where counries of origin could agree on a quoa sysem ha would enable counries o manage species susainably. There was no provision for exernal (hird-pary) verificaion/conrol as quoa was o be deermined solely by paricipaing saes. A he same ime, under Resoluion 5.12, a Managemen Quoa Sysem (MQS) was creaed for he African elephan. The MQS relied solely on managemen decisions aken by he producing counries, wih consuming (second-pary) saes agreeing o prohibi impors of ivory (and oher elephan producs) from hese counries unless accompanied by an MQS permi. There were no exernally enforced incenives for susainable use, wih mos saes basing heir quoas on expeced confiscaions of poached ivory. Since consumer saes could obain ivory from non-msq saes wihou quesion, and due o lack of border conrols on illegal ivory, public confidence in he MQS failed and, in 1989, he elephan was moved o Appendix I saus despie a populaion of around 600,000 elephans (Table 1), well above wha migh be considered a minimum viable populaion for survival of he species. 2 Five souhern African elephan range saes Zimbabwe, Namibia, Boswana, Malawi and Souh Africa have generally opposed he Appendix I lising, because hey have relaively 2 Soulé (1987) suggess ha 2000 animals are adequae o ensure survival of a large mammal species (alhough wih grea expense a species can recover even from small populaions), while Konoleon and Swanson (2003) use a minimum viable populaion of 500 for he Gian Panda. 3
large elephan socks and elephans have become a nuisance in some Parks. These counries lobbied unsuccessfully in 1990 and 1994 o down-lis heir populaions and re-open (limied) rade in ivory and oher elephan producs. While lifing he resricions on rade is unlikely o happen in he shor run, lobbying by he five souhern African counries resuled in a decision in June 1997 (based on Resoluions 3.15 and 5.21), o permi Boswana, Namibia and Zimbabwe o sell off nearly 50 ons of sockpiled ivory on a one-ime basis. This consiued less han 60% of he ivory ha hese counries had accumulaed as a resul of confiscaions from poachers, naural moraliy, culling and desrucion of problem animals. The ivory was sold o Japan in 1999 a a price of US$103 per kg. A COP12, in 2002, anoher one-off sale by Boswana, Namibia and Souh Africa was approved, bu ha sale had no ye been compleed by he end of 2004. These one-off sales have re-opened debaes abou how he African elephan is o be susainably managed, and wha role rade will play. Populaion daa presened in Table 1 sugges ha he ivory rade ban has had a leas some success. The rapid decline in elephan abundance ha is hough o have occurred prior o and during he 1980s appears o have been haled, and indeed may even have been reversed. However, he underlying daa for any such conclusion are no very good esimaes of elephan populaions are conenious a bes; few reliable esimaes are available before 1989, and even hose in Table 1 are caegorized according o wheher esimaes are definie, probable, possible or speculaive. Furher, he area surveyed in each of he four years varied, being lowes for he 1998 populaion esimaes. Thus, populaion rends are indicaive a bes. 4
The ivory rade ban remains conroversial. Criics allege ha endangered species migh be placed a risk by he perverse incenives ha a rade ban generaes. Banning rade makes elephan conservaion a less aracive aciviy, inadverenly promoing conversion of elephan habia o oher uses. In addiion, by reducing or enirely eliminaing revenues from elephan managemen and exploiaion, a rade ban migh undermine he incenive o manage he sock carefully and enforce propery righs o elephans and/or heir habia (Bule, van Kooen and Swanson 2003). Conversely, supporers of he rade ban argue ha enforcing propery righs and susainable harvesing regimes in (semi-) open access habias is difficul and expensive. Hence, rade may simulae illegal harvesing. In addiion, i is suggesed ha he legal rade may faciliae he laundering of illegal ivory producs. The purpose in his paper is o invesigae he effecs of he ivory rade ban on elephan socks compared o he siuaion where rade is permied. As long as rens from elephan exploiaion remain in place (so he marginal benefis of harvesing elephans and markeing ivory exceed he marginal coss), a rade ban is unable o preven some harves of elephans and he sale of ivory in inernaional markes. Inernaional poaching gangs will be able o capure some of he ren and marke ivory hrough a variey of channels. However, he marginal coss of providing ivory will likely be higher under a rade ban han under legal rade, while demand will be reduced because some poenial buyers will have a sigma agains purchases of ivory (Fischer 2004). Under legal rade, he marginal coss of providing ivory will be lower, while he sigma facor will no longer apply as buyers assume elephan populaions are being managed 5
susainably. A dynamic bioeconomic mahemaical programming model of ivory rade wih four African exporing regions and one global imporing region is developed o examine he issue in more deail. Africa is divided ino four regions because of differences in he size of heir elephan populaions, he insiuional and biological challenges o proecing elephan socks, he exen of poaching, and he imporance of elephans in aracing ouriss. The model is used in his paper o sudy he impacs of various insiuional arrangemens on economic well being and elephan numbers. In paricular, if propery righs o elephans can be clearly defined, here may be alernaive insiuional arrangemens ha lead o larger elephan numbers and a lower chance ha he African elephan becomes exinc. One possibiliy is a quoa regime, such as he MQS, bu wih sronger enforcemen. A regime ha permis sales of ivory bu also pays elephan owners according o he acual size of he elephan sock in a counry may lead o greaer holdings of elephans while providing owners wih revenues o police elephan herds agains poachers. Differen regimes are invesigaed o deermine wheher he rade ban is indeed he bes means o proec elephans. Resuls indicae ha neiher free rade nor a quoa sysem can effecively proec he elephan unless accompanied by conservaion paymens from rich counries o range saes or recogniion ha elephans provide imporan ourism benefis, or boh. A heoreical model of ivory rade is presened in he nex secion, while he mahemaical programming formulaions are described in secion III. How he programming model is 6
parameerized is he subjec of secion IV, while resuls of alernaive policy opions and views abou he effec of rade on demand and (legal and illegal) supply are provided in secion V. The conclusions ensue. II. IVORY TRADE MODEL We begin by posulaing a simple, saic spaial price equilibrium ivory rade model. The model is described wih he aid of Figure 1 he inernaional marke for ivory. The African coninen is he inernaional source of ivory, as producs from Asian elephans (Elephas maximus) are assumed o be sold only in he Asian marke and usually wihin he counry in which hey are found and (illegally) harvesed. Since he domesic African marke for ivory is small wih any ivory worked in Africa simply sold abroad (or sold domesically and smuggled abroad), ivory rade is assumed ake place beween Africa as he excess supplier and he res of he world. The African excess supply funcion is denoed p S in Figure 1, while he inernaional excess demand for ivory (denoed p D ) is he demand lef over afer local ivory supply (from Asian elephans) is aken ino accoun. The excess supply funcion under free rade equals he horizonal sum of he legal and illegal excess supply funcions. (An indicaor variable I is used o denoe he effec of he rade ban on supply and demand, wih I=0 indicaing free rade and I=1 a rade ban.) Under free rade, an amoun q* is raded a price P*. As a resul of poached ivory, marke equilibrium occurs a poin v raher han poin u (Figure 1), wih q* q L amoun of illegal African ivory sold 7
inernaionally. The global benefis of ivory rade are given by he sum of he consumer and producer surpluses area kvp* under he demand funcion p D (I=0), plus area xzp* above he p S (I=0) legal funcion. Assuming open access, he poachers supply curve, p S (I=0) illegal, is no equivalen o a marginal cos funcion; hence, poachers receive no rens. (An alernaive assumpion is considered in he rade ban siuaion.) Illegal (poached) ivory masquerades as legal ivory when here is free rade. Bu an ivory rade ban does no hal all rade in ivory, alhough i does have wo effecs: Firs, he poachers supply funcion shifs upwards as he ransacion coss of markeing ivory increase. While poachers always incur coss associaed wih illegal aciviies (e.g., avoiding ani-poaching parols), coss of illegal aciviies increase as he coss of finding buyers and avoiding ban-imposed cusom conrols rise. Second, a rade ban shifs he (excess) demand funcion inwards because he ban creaes a sigma associaed wih he purchase of hings made from ivory (Fischer 2004). Under a rade ban compeiive equilibrium occurs a w, alhough i would occur a y if here were no sigma effec or added markeing coss for poachers. Wha worries many environmenal groups is ha removal of rade resricions will reduce he sigma of buying and owning ivory, implying greaer numbers of elephans being harvesed (a equilibrium v raher han w). An alernaive o a rade ban is an effecive, enforceable quoa, wih quoa rading used o allocae harvess efficienly. In a perfec world, revenues generaed by such a scheme could be used o finance monioring and enforcemen. 8
Tusks confiscaed from poachers, or obained from animals ha died of naural causes or were culled, ener sorage. Since ivory has value and here are coss o wildlife programs, saes wih significan quaniies of sored ivory, such as in souhern Africa, will lobby o permi hem o sell socks, which is why CITES has permied some one-off sales. The exisence of socks complicaes he saic model in Figure 1. Along wih he fac ha elephans grow and reproduce, an analysis ha includes ivory socks is necessarily dynamic (since user coss of curren harvess on fuure populaions and harvess mus be aken ino accoun). Hence, a dynamic mahemaical programming approach is used. Anoher aspec no considered in he spaial price equilibrium model is he non-marke componen o ivory rade, namely, he elephan s role as a flagship species for aracing ouriss and he willingness of he inernaional communiy o proec elephans in siu, which is one reason for he ban on ivory rade. The ivory rade model needs o incorporae poenial paymens by rich (European and Norh American) counries o African saes on he basis of he numbers of elephans ha are reained in siu. To be effecive, however, paymens mus be made o hose wih propery righs o elephans and/or heir habia. I is he owners, wheher saes, individuals or communiies, ha need o have appropriae incenives o harves or proec elephans. Paymens o proec elephans will increase numbers beyond wha hey are currenly, or a leas possibly preven elephans from being added o he lis of endangered species. 9
III. MODEL FORMULATION Consider firs an idealized dynamic bioeconomic model in which he global ne benefis from ivory rade and elephan conservaion are maximized over ime. There is one ne consuming region and several regions ha produce elephans (range saes) and marke ivory. Iniially here is no poaching, and insiuions are such ha paymens from rich counries o range saes for elephan conservaion have he desired conservaion effec. The model is modified o include poaching and hen expanded o examine he failure of conservaion paymens, he poenial of a quoa regime, and he coss and benefis of an ivory rade ban. Compared o Fischer (2004), he advanage of he curren approach is ha i permis richer deail, alhough many of her resuls are confirmed. The model also permis counries (bu no poachers) o sore ivory, which hey will do under free rade as long as he expeced increase in price exceeds he coss of holding socks. Under a rade ban, sock holding is non-volunary. Kremer and Morcom (2000), and Bule, Horan and Shogren (2001), also consider he inerplay beween elephan harvess and ivory socks. They poin ou ha: (1) governmens can use sockpiled ivory as a hrea agains poachers hreaening o release ivory and drive prices low enough o sop poaching; and (2) i migh be possible for an agen o hoard sufficien socks o make i worhwhile for he agen o drive elephans o exincion. These researchers provide no evidence ha eiher of hese oucomes is likely, bu exincion of elephans dominaes conservaion in all he realisic scenarios hey examine and i never appears o pay for an agen o hoard ivory. 10
Our objecive is o maximize he discouned ne global benefis of selling ivory and conserving elephans over some planning horizon. I is given by he sum of consumer and producer surpluses from markeing and selling ivory, ivory sorage coss, elephan harves coss, he spillover coss elephans impose on he ecosysem (here aken o be landowners), benefis from ourism, and he off-sie preservaion benefis of keeping elephans in siu: q T j, N q j, Max N (1) [ ]. = = = d β p ( I, q) dq c( I, a) da + R( x ) k( I) h ss D( x ) + (1 I) B( x ) q, h 1 0 j 1 0 j 1 Here p d (I, q) is he inverse (excess) demand funcion for ivory; q is he quaniy of ivory a ime made available for sale on he inernaional marke by region j (of which here are N); I is an indicaor variable se equal o 1 when rade is prohibied and 0 oherwise; and c(i, a), where a is an inegraion variable, is he marginal cos funcion associaed wih he producion and markeing of ivory once elephans (denoed by x) have been harvesed (denoed h). Thus, he firs wo erms in expression (1) are he consumer surplus plus he quasi-ren accruing o ivory sellers. Noe ha he marginal cos funcion is no quie he same as he supply funcion, p S (I) in Figure 1, because i does no include elephan harvesing and opporuniy coss ha are aken ino accoun by he oher erms in (1). In expression (1), k(i) is he per uni cos of harvesing animals and s is a fixed cos of holding ivory socks (S). Given he imporance of elephans in aracing ouriss, which is of greaer relevance in some regions of Africa han ohers, R(x ) is a funcion linking elephan numbers o a region s ourism benefis. D(x ) is a measure of he damage elephans impose on he ecosysem, and B(x ) is conservaion or in siu benefis ha elephans provide a 11
ime, wih x = N x j, j= 1. The cos of harvesing elephans is no densiy dependen as elephans are quie large and assumed o be easily racked, bu he cos is higher when rade is banned and poaching occurs. The facor β=1/(1+δ), where δ is he social rae of discoun, is used o discoun fuure reurns. A any ime, he sock of ivory in a given region, S, will depend on he sock in he preceding period plus addiions o he sock from elephan harvess minus any sales of ivory. For convenience, i is assumed ha no socks of ivory are held ouside of he elephan range saes. Elephan harvess may be he resul of decisions o eliminae roublesome animals, cull animals because here are oo many for he paricular ecosysem, or simply harves animals for sale of ivory, as well as incidenal ake due o naural moraliy or confiscaions of illegal ivory. The sock equaion is given by: (2) S +1 = S + γh q, j, =1,..., T 1 (Ivory sock holding dynamics) where γ is a parameer ha convers elephans o ivory. Counries can sell ivory or hold i unil a laer period, bu sales of ivory canno exceed available socks in any period: (3) q S,. (Sales of ivory canno exceed available sock) In addiion o a sock consrain, an equaion is needed o describe he growh and harves of elephan populaions: (4) x +1 x = g(x ) h, j, =1,..., T 1 (Elephan populaion dynamics) 12
where g(x ) is he elephan growh funcion ha migh exhibi logisic or depensaional growh (van Kooen and Bule 2000, pp.184-189). I is discussed in greaer deail below. For each region, iniial (opening) socks of ivory and elephans need o be idenified: (5) S 0 = S j, x 0 = x j, j. (Iniial condiions) In addiion, non-negaiviy consrains need o be imposed: (6) q, S, x, h 0,. (Non-negaiviy) Several models are used o invesigae he effecs of poaching and differen insiuional arrangemens on elephan conservaion, helping deermine which policies and perspecives are likely o be he mos effecive in proecing elephans. Global Wellbeing wih No Poaching The firs quesion of ineres is: Wha are he consequences of free rade when here is no poaching? The following mahemaical program is used o examine he consequences for elephan conservaion of maximizing global welfare in his case: q Max, h q = D( x ) + B( x ) T j, N j, N d β p (0, q) dq c(0, a) da + [ R( x ) k(0) h ss ] q = 1 0 j 1 0 j= 1 Subjec o: (2), (3), (4), (5), and (6). Global Wellbeing wih Poaching Nex, consider he real-world case where elephan poaching and illegal ivory sales occur. I is assumed ha he decision maker maximizes benefis as before, aking ino accoun he 13
supply funcion of poachers, alhough i can affec his supply hrough ani-poaching monioring and enforcemen (Bule and van Kooen 1999). The supply of illegal ivory from region j a ime is assumed o be a funcion of he inernaional price p d p and ani-poaching effor E: =f j (E, p d ), where q p denoes sales of illegal ivory from poached elephans (wih poached elephans o be denoed h p in wha follows). While E is a poenial decision variable, i is lef as a subjec for fuure research, alhough i migh be possible o use simulaion analysis o examine he role of enforcemen (which is no done here). Raher, i is simply assumed ha illegal ivory is confiscaed a a consan rae (ξ) as a resul of fixed-cos ani-poaching programs. The mahemaical bioeconomic modeling program can now be wrien as: T Q N q j, Max N [ ] = = = d β p (0, q) dq c(0, a) da + R( x ) k(0) h ss D( x ) + B( x ) q, h 1 0 j 1 0 j 1 Subjec o: (3) and (5), plus: q j, p (2 ) S +1 = S + γh q + ξ j, =1,..., T 1 q j, (Ivory sock holding) p q j, (4 ) x +1 x = g(x ) h, γ j, =1,..., T 1 (Elephan dynamics) p p (6 ) q, S, x, h,, 0, q j, h j, (Non-negaiviy) p p p (7) q h ξ q, j j, γ, (Sales of poached ivory canno exceed ivory from poached elephans minus confiscaions) N p (8) Q = ( q + q ), j= 1 (Adding up) p d (9) q = f ( E, p (0, Q )), j j, j, (Supply of illegal ivory from each region) 14
Consrain (7) is required so ha sales of illegal ivory canno exceed ivory available from poached elephans; i is assumed ha illegal ivory is sold in he same period he poached elephans are killed and ha poachers do no sockpile ivory (alhough some of he poached ivory is confiscaed). Relaxaion of his assumpion is a opic for fuure research. Consrains (8) and (9) deermine he global price of ivory and he amouns of illegal ivory sold by each region. 3 The las erm in (4 ) indicaes he number of elephans ha poachers would harves. I is also assumed ha poachers do no hold ivory socks bu ha confiscaed ivory eners socks. African Welfare wih Compeiive Selling and Poaching Now consider he case where only he wellbeing of African elephan range saes is imporan. In ha case, we eliminae as a consideraion he wellbeing of ivory buyers. Furher, conservaion paymens for elephans held in siu are rarely if ever made, and cerainly no on he basis of oal WTP. One alernaive is ha conservaion paymens are paid (if a all) on he basis of he conribuion ha he las elephan on he coninen makes o preservaion benefis on he basis of marginal WTP. The modified program is hen: q Max, h q T N j, = = c(0, a) da + R( x ) + B '( x ) x k(0) h ss D( x ) 1 j 1 0 d β q p (0, Q ) Subjec o he same consrains as in he previous formulaion. In his case, because hey face a downward sloping WTP funcion, he range saes would 3 Given he assumpion underlying consrain (7), his implies ha illegal sellers have some noion or forecas of he price. Furher research is required ino alernaive formulaions, perhaps ones ha involve holding of illegal socks. 15
maximize he revenue from conservaion paymens by significanly reducing elephan socks. To avoid his, rich counries could simply declare ha hey would pay range saes a fixed amoun per elephan so ha B'(x)=B 0 0, where B 0 is a consan ha is zero if no conservaion paymens are made. An Ivory Carel wih Poaching Suppose ha he African range saes could form an ivory carel, maximizing heir overall wellbeing from sales of ivory, while somehow allocaing elephan harvess and ivory expors in a manner accepable o all counries. In ha case, an addiional efficiency condiion requires ha marginal coss of harvesing elephans and markeing ivory are he same in each region and equal o marginal revenue. Damage from elephans is ignored in his marginaliy condiion, bu no he marginal cos of harvesing elephans for heir ivory. The carel deermines how much ivory is sold on he marke in each period from each of he N regions, as well as how many elephans are o be harvesed in each region for heir ivory. The opimizaion program is: q Max, h q T N j, = = c(0, a) da + R( x ) + B '( x ) x k(0) h ss D( x ) 1 j 1 0 d β q p (0, Q ) Subjec o he same consrains as above plus: k(0) p (0, Q ) d (10) c( 0, q j, ) + Q + p (0, Q), γ Q d (Marginaliy condiion: MC j MR) Ivory Trade Ban wih Poaching Finally, consider he case of he ivory rade ban (I=1). In order o sudy he effec on 16
elephan herds in he various African regions, we ake he perspecive of he criminal gangs ha sell ivory illegally in inernaional markes. I is assumed ha hey maximize quasi-rens (producer surplus) from markeing ivory, bu ha hey canno form a carel. If hey were somehow able o exer marke power, hen less ivory will be sold han under he assumpions below and even less elephans will be killed. Hence, he rade ban case considered here migh be regarded as a worse-case, rade-ban scenario. q Max p, h p T N β q = 1 j= 1 p p q j, d p p (1, Q ) f (1, a) da k(1) h j 0 Subjec o: (4) and (7), wih (7) replacing (3), plus p (4 ) x +1 x = g(x ) j, =1,..., T 1 h j, (Modified elephan dynamics) (5 ) x 0 = x j, j (Iniial condiion on elephan numbers only) p p (6 ), x, 0, q j, h j, (Modified non-negaiviy) N p (8 ) Q = q (Modified adding up) j=1 In his model elephans are no ruly an open access resource, bu a derived demand. Illegal killing of elephans may sill occur under open access, however, if usks are illegally sockpiled, elephans are killed for bush mea and/or hides, or illegal killing is done by peasans simply o ge rid of roublesome animals. While socks of ivory are considered immaerial since only governmens are assumed o sockpile ivory, fuure research migh be able o separae illegal and legal sock holding, hereby enabling criminals o hold ivory socks as a hedge agains unforeseen fuure price changes, for example. 17
IV. DATA AND MODEL PARAMETERIZATION A major problem in implemening he forgoing models concerns he availabiliy of daa. Few daa are available and much of ha is based on local observaions in range saes (e.g., Menon 2002). The IUCN Species Survival Commission has racked elephan numbers for he pas decade and a half (ITGR 1989; Said e al. 1995; Barnes e al. 1999; Blanc e al. 2003), while he inernaional communiy has implemened Monioring he Illegal Kill of Elephans (MIKE) and he Elephan Trade Informaion Sysem (ETIS) o keep an eye on illegal aciviies exacerbaed by he rade ban. MIKE sared in Ocober 2001 and is managed by he CITES Secrearia hrough a Cenral Coordinaing Uni headed by a Direcor based in Nairobi, while ETIS is managed by TRAFFIC (hp://www.raffic.org/) a join program of he World Wildlife Fund and he World Conservaion Union (IUCN). MIKE represens an effor o monior illegal elephan killing in elephan saes by developing he capaciy of wildlife agencies o use heir ani-poaching parols and oher mehods for deecing carcasses, recording wha hey find and enering informaion ino a sandardized daabase. The agencies also underake o conduc populaion surveys on a wo o hree year cycle. ETIS is an inernaional monioring sysem o rack illegal rade in elephan producs (mainly ivory), bu i relies on individual counries o repor seizures. While ETIS has published ime series of seizure daa by counry ha could provide a saring poin for an analysis of he impac of species lising and rade on seizures (see Figure 3) (Milliken e al. 2004), progress on MIKE has been more limied because i is aking ime o ge he sysem up and running (Huner, Marin and Milliken 2004). 18
Wih regards o prices, Fischer (2004) repors ha ivory was rading for abou $150 per kg in he pre-ban period, wih price peaking a over $1,200 per kg shorly afer he ban s imposiion and hen seling a some $450/kg hereafer. In comparison, Kremer and Morcom (2000) cie Simmons and Kreuer (1989) for prices of uncarved elephan usks: $9.20/kg in 1969, $114.40/kg in 1978, and $145.20/kg in 1989. The only informaion abou quaniies raded perains o repored seizures of elephan producs. The firs year for which hese are repored is 1989, he year of he rade ban. From Table 2, he average number of annual seizures of illegal elephan producs (as hey crossed inernaional borders) increased by 120% afer 1989, alhough, as indicaed in Figure 3, here is no real discernable rend in he amoun of illegal ivory sold in he years following he rade ban, a leas based on repored seizures. I appears ha illegal aciviy coninues unabaed. Huner, Marin and Milliken (2004) use observaions on ivory carvers in various regions of Africa and Asia o esimae ha beween 6,433 and 16,185 African elephans (123 o 349 Asian elephans) are sill supplied illegally o he marke each year (Table 2). This implies ha 44.4-111.7 onnes of illegal ivory from African elephans sill ener he marke annually, or abou one-enh of wha was markeed (legally and illegally) under free rade. Given a dearh of addiional informaion, he following excess demand funcion is posulaed (van Kooen 2006): (11) p d (I=0) = 720 0.0005 q. According o (11), a a real pre-ban price of $150/kg, some 1140 onnes of ivory would be raded. Wha would be sold under a rade ban assuming he demand curve changes due o a 19
sigma effec? If he pre-ban demand funcion (11) coninued o describe he siuaion, he marke price of he ivory would be $664-$698 per kg. As noed, however, i is repored o be nearer $450 per kg. We assume ha he inercep on he pos-ban excess demand curve has shifed down by his difference, or by abou $220 (=$670 $450), so ha he no-rade excess demand funcion can be described by: (12) p d (I=1) = 500 0.0005 q. A a price of $450 per kg, only 100 onnes of African ivory would be sold inernaionally, well wihin he range esimaed by Huner, Marin and Milliken (2004) and indicaed above. On he supply side, he African coninen is divided ino four regions ha represen differen elephan subspecies he savanna elephan (Laxodona africana africana) and he fores elephan (Laxodona africana cyclois) and elephan economics. The fores elephan is difficul o view and is found primarily in Wes and Cenral Africa, wih populaions in Wes Africa raher small and insignifican in coninenal erms (Table 1). The savanna elephan is an imporan flagship species for he ourism indusry. While imporan in all saes of Eas and Souhern Africa, populaions in he laer region have hreaened he ecosysem carrying capaciy, so elephans have been culled and ivory sockpiled. Thus, while Kenya is concerned abou he adverse impacs of ivory rade, saes in Souhern Africa have lobbied o sell ivory. I is assumed ha, in addiion o he coss of harvesing elephans, here is a fixed cos plus a per uni cos of aking ivory ou of socks and bringing i o marke. The fixed cos represens he ransporaion and search coss (finding markes). Boh fixed and per uni coss are 20
higher when a rade ban is in place as ransacions are illegal. Consrucion of boh he legal and illegal regional supply funcions under rade and a rade ban is described by van Kooen (2006). The inercep and slope parameers for hese supply (marginal cos) funcions are provided in Table 3. Ani-poaching effor can affec he supply of illegal ivory. Unforunaely, here is lile informaion abou he effec ha law enforcemen has on he illegal supply of ivory. Milliken e al. (2004) provide wo measures of law enforcemen effor he Corrupion Percepion Index score (which for a region would be he average of he counry scores) and an index of enforcemen given by he oal number of in-counry seizures divided by he oal number of seizures (p.23). Along wih Milliken e al. s index of enforcemen, bu hen adjused for elephan populaions and normalized for Africa, he World Bank s (2005) Governance and Ani-corrupion indicaors are provided in Table 4 for each region. Wes and Cenral Africa have he wors scores, respecively, in erms of enforcing he ivory rade ban, and hese low scores accord wih he World Bank s low measures of performance relaed o governmen effeciveness, rule of law and corrupion. Eas Africa performs jus as poorly on he World Bank s indicaors, bu does relaively beer in he enforcemen of he ivory rade ban, perhaps because of he imporance of he elephan o he economies of Eas African saes. Saes in Souhern Africa are more prone o enforce ivory rade laws and are generally beer performers on oher measures as well, bu all saes in Africa lag well behind saes in Asia ha purchase elephans and counries of Europe and Norh America (Bule, van Kooen and Swanson 2004). I is assumed ha African 21
range saes can do beer in he enforcemen of illegal killing of elephans and rade in elephan pars. To describe he fecundiy, moraliy and growh characerisics of elephans, we specify he following simple linear funcion: 4 (13) x +1 = (1+r) x, wih x K j, where r is he growh rae in elephan socks and K j is he elephan carrying capaciy for ecosysems in region j. Se r=0.067 (Milner-Gulland and Leader-Williams 1992) and iniial elephan populaions equal o he elephan oals for each region in 2002 (Table 1). The carrying capaciy of each region is deermined from informaion abou elephan range and he proporion of elephan range ha is proeced. For he fores elephan, i is assumed ha unproeced elephan range has a carrying capaciy of 0.15 elephans per km 2, while i is 0.25 elephans per km 2 for proeced range. The carrying capaciy of open range is higher, so i is assumed o be 0.20 per km 2 for unproeced and 0.35 for proeced range in he case of he savanna elephan. Background informaion and carrying capaciies are provided in Table 5. The esimaed coninenal carrying capaciy of abou 974,000 elephans is lower han numbers exising in he early 1970s (some 1.2 million), bu elephan range has also decreased significanly since hen due o rising human populaions and encroachmen. 4 An alernaive is o employ he sandard logisics growh funcion: x +1 x = r x (1 x /K), where r is he inrinsic growh rae in elephan socks and K is he ecosysem s elephan carrying capaciy. However, for his discree form and he parameers used in his model, i leads o an immediae reducion in elephan numbers by half even wihou harvess. 22
Ivory socks are largely unknown, alhough Milliken (1997) esimaes ha here are some 462.5 onnes of verifiable and legiimaely held socks of ivory in Africa, and anoher 243 onnes of undeclared (perhaps illegal) ivory, or a oal of 705.5 onnes. These values can be updaed bu do no necessarily represen acual exan socks. Informaion is provided in rows 9-12 of Table 5, wih row 12 providing he sock levels used in he model. Furher deail is provided in van Kooen (2006). A consan rae of confiscaions of 5% is assumed, so ξ =0.05. The coss of holding ivory socks consis of he forgone opporuniy cos (given by he discoun raes) and a physical cos of holding ivory, which is assumed o be small, s=$0.50/kg each period. Milner-Gulland and Leader-Williams (1992) esimae poaching coss o be abou $180 per elephan; legal harvesing coss are arbirarily chosen $60. Average usk weigh has dropped significanly since 1970, probably because older animals wih larger usks were killed firs, so curren socks of elephans end o be much younger. Scully (2004, p.123) poins ou ha i ook 55 elephans o obain 1 onne of ivory in 1979, compared o 113 elephans around 1990 (p.123) a decline from 18.18 o 8.85 kg of ivory per animal. No only is usk size (and he age of elephans) declining, bu more are born wihou usks. Yacob e al. (2004) measured 31 usks of elephans in Erirea and found an average usk weigh of 8.7 kg, while Huner, Marin and Milliken (2004) repor ha, based on 7800 ivory seizures, he average usk weighs 3.68 kg. For whaever reason, he average number of usks per African elephan is 1.88. Because of he dispariy in esimaes and ha weighs have declined over ime, we choose γ=7.5 kg of ivory per elephan. 23
Bule and van Kooen (1996) assume a linear damage funcion, D(x)=dx, wih he consan cos imposed by elephans on he ecosysem, d, deermined by he amoun of forage ha an elephan consumes annually (which is equivalen o he consumpion of 4.7 cows or abou 36,500 kg of dry maer). This forage is valued a d=$165. Eas Africa (paricularly Kenya) benefis from wildlife ourism, wih he elephan considered o be a charismaic flagship species. The same is rue of Souhern Africa, bu probably o a slighly lesser exen. Bule, Horan and Shogren (2001) assume he following relaionship for ouris benefis: R(x) = 14.4 million ln(x). However, heir relaionship is for all Africa, so ha he oal ourism benefis peak a abou $900 million per year for he oal populaion of elephans. This is a large value compared o he esimaed gain o Kenya of $45 million in 1995 from wildlife ourism (Earnshaw and Emeron 2000, as cied by Bule e al. 2001). If his is more han ripled o $150 million, hen, based on 150,000 elephans in Eas Africa, we assume he following linear marginal ourism benefi funcion assuming furher ha marginal benefis are zero a he exan populaion: 5 (14) R (x) = 2000 0.0133 x. (Eas Africa) As described in van Kooen (2006), he following are assumed for oher regions: (15) R (x) = 1680 0.0056 x. (Souhern Africa) (16) R (x) = 200 0.0010 x. (Cenral Africa) 5 Le m be he verical inercep of R (x). Then, based on he formula for he area of a riangle, m = (assumed oal ouris-relaed benefis) (½ elephan populaion). The slope of R (x) is simply he negaive of m divided by he elephan populaion. 24
(17) R (x) = 267 0.0178 x. (Wes Africa) Lasly, i is necessary o deermine he benefis ha accrue as a resul of holding elephans in siu. These benefis accrue primarily o people in developed counries and represen heir annual willingness o pay o preserve elephan populaions in Africa. Assume here are 200 million households in Europe and Norh America and each is WTP some amoun annually o preserve elephans. Assume ha he marginal WTP funcion is linear: B (x)=a bx, and ha people are unwilling o pay o preserve elephans in siu beyond exan numbers. Consider hree cases ha are labeled Lo, Mid or Hi according o he amoun households are willing o pay each year for elephan conservaion. For he Lo scenario assume a=1500 and b=0.0022, so ha B(x=676,500)=$511.3 million wih each household conribuing $2.56/year on average. For he Mid scenario, assume a=3600, b=0.0053, so ha B(x=676,500)=$1222.6 million wih each household paying some $6.11 per year; and, finally, for he Hi scenario, assume a=5400, b=0.0079, so ha B(x=676,500)=$1845.4 million wih each household paying $9.23 per year. 6 Alernaively, i is assumed ha rich counries provide a fixed conservaion paymen of $75 per elephan in he Lo scenario, and $175 and $260 per animal in he Mid and Hi scenarios, respecively. These paymens amoun o a ransfer of abou 10% of oal benefis (as calculaed above) ha elephans provide rich counries. Unlike ourism benefis, conservaion paymens are based on oal elephans in Africa, regardless of he region in which hey are found. 6 See previous foonoe regarding he mehod of calculaion. Using he values in he ex, he marginal WTP funcion inersecs he abscissa a 692,307 elephans for he Lo scenario, 679,245 elephans for he Mid case, and 683,544 elephans in he Hi scenario. 25
V. RESULTS The oucomes of differen sraegies are examined using a series of mahemaical programs coded in GAMS and solved using he MINOS5 nonlinear solver, and he CPLEX quadraic programming solver (Brooke e al. 2005). The simulaions are for 200 years (periods), alhough daa are repored only for 50 periods. This is done o eliminae he end-poin effec : i is opimal o harves he enire sock of animals in he las several periods if hey have no ( salvage ) value beyond he end of he planning horizon. Given he richness of he model, i is possible o explore only a limied number of scenarios and variables. Since a major concern of animal welfare groups is he conservaion of elephans in he wild, he focus is primarily on he effecs of various scenarios on animal numbers. The Effec of Poaching in a Free-Trade Environmen Consider firs he case of free rade. The model can be solved by eiher maximizing global or African well being. The difference beween hese wo perspecives concerns he surplus accruing o consumers of ivory he firs erm in he objecive funcion (1). As indicaed in van Kooen (2006), he opimal populaion of elephans o conserve is slighly higher from he African as opposed o global perspecive, because he global decision maker would ake ino accoun he surplus accruing o consumers of ivory producs, hus selling more ivory and harvesing more animals. Only an African perspecive is considered below. I is argued ha poaching is he major problem of elephan conservaion. Would he 26
eliminaion of poaching benefi he African elephan? We eliminae poaching in he model by seing he confiscaion rae a 100% since any elephans aken by poachers would be confiscaed, here are no illegal harvess. A comparison of opimal elephan socks, harvess and sales of ivory under free rade wih and wihou poaching for discoun raes of 5% and 20% (and wih inclusion of ourism benefis) is found in Figure 3. Opimal elephan socks are slighly higher when a 5% discoun rae and free rade wih poaching are assumed han when here is no poaching, alhough he difference is very small (Figure 3a). The opimal elephan sock is jus under 550,000 elephans in boh cases. For a 20% discoun rae, however, he presence of poachers reduces opimal elephan socks from abou 250,000 o abou 300,000. When poachers are presen, saes ake ino accoun sales of illegal ivory by reducing legal harvess o such an exen ha illegal harvess nearly replace all sae-sancioned harvess, which fall o zero regardless of he discoun rae, alhough sales of legal ivory from sockpiles coninue (see Figures 3b, 3c and 4). Toal harvess are nearly he same wheher poachers are presen or no, alhough harvess in he 5% scenario are higher han hose in he 20% scenario (no shown), mainly because of he higher levels of harvesing early on in he laer case (as fuure harvess have lower presen value). Noe in Figure 3b he spike in legal and illegal harvess around he 10 h and 12 h periods, respecively, for he no poaching and poaching cases. This is due o he rapid depleion of ivory socks, which fall o nearly zero in he case of poaching and approach zero in he longer run in he no poaching case (Figure 3c). Surprisingly, poaching seems o have lile impac: in he absence of poaching, opimal 27
elephan numbers will be only very slighly higher han when poachers are presen. The key is earnings relaed o in siu socks. Because ourism benefis are significan, range saes simply adjus o he aciviies of poachers. In he firs few years of free rade, range saes sell off as much of heir sockpiled ivory as is opimal, wih he speed a which his is done direcly relaed o he cos of holding socks (see Figure 4). Once socks have been reduced, legal ivory is occasionally sold as range saes paricipae in he marke only o sell off any ivory socks hey may have accumulaed as a resul of confiscaions, and rarely kill elephans for ha purpose. Almos all ivory ha is sold comes from illegal harvess. Thus, when comparing he rade case wih and wihou poaching, range saes only lose o poachers he surplus associaed wih he sale of ivory, bu hey make up for i hrough ourism benefis and/or conservaion paymens from developed counries. Benefis of Tourism versus Conservaion Paymens Alhough no shown here, if counries receive paymens for preserving elephans in siu (and hey ake ino accoun he ourism benefis ha elephans provide), he effec of poaching on elephan numbers is nearly insignifican. In he absence of ourism benefis, conservaion paymens can preven elephans from going exinc, assuming ha appropriae insiuions are in place and he amoun ha rich counries acually pay depends on he choices elephan owners (presumably range sae governmens) make. The simulaion resuls do indicae ha, under free rade and in he absence of conservaion paymens and/or recogniion of he elephan s 28
conribuion o ourism, here is a race o he boom as i is opimal o drive he elephan o exincion (Figure 5). The rae of decline in elephan populaions is deermined by he (social) discoun rae. As indicaed in Figure 5a, a a discoun rae of 5%, i akes some 40 years for he elephan o disappear, bu i akes less han 10 years if he discoun rae is 20% (Figure 5b). Given ha real raes of discoun in developing counries end o be high (perhaps 20% or higher), his resul provides srong suppor for he possibiliy ha elephan populaions declined by half during he 1980s and ha he ivory rade ban prevened he oal demise of he species. The simulaion resuls in Figure 5 also indicae ha, in order o proec he elephan, i really does no maer wheher i is conservaion ransfers from rich counries o range saes or recogniion by range saes ha elephans conribue o ourism. Raher, as long as a meaningful link is made beween elephan numbers and heir non-marke value, i is opimal for counries o proec elephans and keep hem from going exinc. 7 In he case of ourism benefis, range saes will find i opimal o mainain more han 500,000 animals if a discoun rae of 5% is employed, and abou 300,000 if he higher rae of 20% is used. I is ineresing o noe ha, when conservaion paymens vary according o marginal WTP, opimal sock levels are lower han in he case where only ourism benefis are aken ino accoun. This is clear from Figures 5a and 5b, where he inroducion of conservaion paymens acually reduces he opimal sock level. Indeed, i is opimal for counries o reduce heir socks of elephans in he firs several periods so as o increase he oal ransfer from rich counries for 7 The link beween elephan populaions and non-marke benefis migh be meaningless if insiuions and governance srucures are lacking, a real problem in Africa (see Table 4). 29
in siu elephans (as he price increase offses he reduced numbers for which paymen is made). This is mos pronounced for he lower discoun rae (Figure 5a). This resul holds because (some) range saes recognize ha hey can influence he per animal conservaion paymen by manipulaing elephan socks. The alernaive opion is ha rich counries provide a fixed conservaion paymen per elephan. If a fixed conservaion paymen of $175 per elephan is provided, his has an enormous impac on he opimal sock of elephans, generally raising i above ha associaed wih a variable paymen based on marginal willingness o pay (Figure 6). Finally, jus because in siu values are aken ino accoun, his does no guaranee ha he elephan survives in all regions. In Figure 7, he following scenario is provided: Hi conservaion paymens, recogniion of ourism benefis and a low discoun rae. (See van Kooen 2006 for oher scenarios.) In his case, i is opimal o allow he elephan o go exinc in Cenral and Wes Africa. Noneheless, he good news is ha exincion can be avoided and heir long-erm survival ensured even when he fuure is heavily discouned if non-marke benefis are sufficienly large and such benefis are acually ied o animal numbers. In he absence of he non-marke benefi effec, he crucial quesion is: Can a rade ban miigae he species demise? Ivory Trade Ban The simulaion resuls indicae ha a rade ban on ivory may or may no be successful in conserving he African elephan. Regardless of he discoun rae used, for he supply-curve inercep parameer values found in Table 3, poaching will cause he elephan o go exinc in less 30
han weny years (see van Kooen 2006), despie he fac ha he demand curve has shifed inwards as a resul of he so-called sigma effec. Tha is, he sigma effec brough abou by he rade ban is no a sufficien condiion for proecing he elephan. Indeed, for he parameers of he illegal, rade-ban supply funcions given in Table 3, even an increase in he confiscaion rae from 5% o 50% is unable o proec he elephan. This is obvious from Figure 8 which shows he rising sockpile of ivory ha occurs in range saes i quickly comes o an equilibrium (indicaing exirpaion of he elephan), wih he equilibrium higher when poaching gangs use a lower discoun rae (which is unlikely). 8 Alhough no shown, i is possible o specify inercep and slope parameers for he poaching supply funcions (while mainaining he iniial equilibrium condiion) ha lead o rising elephan populaions. This suggess ha acions o conrol he inernaional movemen of ivory migh be more effecive han on-he-ground aemps o increase policing of poachers, alhough his needs o be invesigaed furher using daa from MIKE and ETIS (see Bule, Damania and van Kooen 2006). Whaever he case, if range saes and inernaional organizaions are no vigilan in monioring and enforcing a rade ban, i is unlikely o be effecive. One problem wih a rade ban is ha i leads o increasing sockpiles of ivory as a resul of ani-poaching enforcemen (confiscaions) and culling of animals. Since range saes are currenly unable o sell hese socks wihou permission, sockpiles will rise: In he curren simulaions, legally-held ivory sockpiles could rise by beween 5% and more han 20%. If he 8 Noice in Figure 8 ha he confiscaion rae is more imporan han he discoun rae. 31