Creating markets for habitat conservation when habitats are heterogeneous

"A tradable development rights (TDR) program focusing on biodiversity conservation faces a crucial problem defining which areas of habitat should be considered equivalent. Restricting the trading domain to a narrow area could boost the range of biodiversity conserved but could increase the opportunity cost of conservation. The issue is relevant to Brazil, where TDR-like programs are emerging. Current regulations require each rural property to maintain a forest reserve of at least 20 percent, but nascent policies allow some tradability of this obligation. Chomitz, Thomas, and Brandão use a simple, spatially explicit model to simulate a hypothetical state-level program. They find that wider trading domains drastically reduce landholder costs of complying with this regulation and result in environmentally preferable landscapes. This paper--a product of the Infrastructure and Environment Team, Development Research Group--is part of a larger effort in the group to understand the economics of conservation"--World Bank web site