4.0 Strengthening Incentives for Conservation

The importance of shared responsibility for the environment, rather than governments bearing all responsibility, is being increasingly recognized. For example, the recent "Managing the Environment" (Val Gibbons) report examining future directions for the Ontario government's environmental policies (Executive Resource Group, 2001) notes that: "the current leading thinking is that our complex environmental problems require more collective solutions including broader participation, changes in behaviour, and cooperation among all stakeholders and across jurisdictions." This report recommended a "place-based" approach to environmental management, which recognizes that the natural environment has its own ecological and biophysical boundaries, and emphasizes geographic convergences of water, land, and air, particularly within watersheds. It also concluded that: "Economic instruments also have an important place in the compliance tool kit. Many jurisdictions in the U.S. and Europe have gone beyond the pilot or experimentation stage in using economic instruments to increase environmental compliance."

Examples of such economic incentives include the agri-environmental programs in the European Union, which pay income losses and costs for participating farmers, and now cover 900,000 farms, about 20% of all EU farmland. Nature protection measures and maintenance of landscapes associated with these programs have been evaluated as highly positive (DGVI Commission, 1998).

Broaden Rural Water Quality Incentives

In many instances, the kinds of actions taken to improve rural water quality - creating vegetated buffer strips along streams, planting of trees and shrubs, excluding livestock access, controlling manure and field erosion - also help restore biodiversity and habitat connections. Public investments in these activities generally yield the greatest improvements in the environment at the lowest cost.

Provincial, federal, and municipal governments could renew and expand rural water quality programs.

Rural water quality programs are funded through federal Great Lakes RAPs programs, the provincial Healthy Futures for Ontario Agriculture Program, and municipal funding, with conservation authorities usually playing a key role in implementation. Within Carolinian Canada, programs are currently in place in Essex, Middlesex, Oxford, Waterloo, Brant, Niagara Peninsula, Hamilton, and Halton. Programs are being developed in several other areas.

One example of an effective initiative is the Rural Water Quality Program funded through a $1.5 million commitment by the Region of Waterloo, along with other partners. This program provides 50% to 75% of project costs for best management practices identified by farmers through their Environmental Farm Plan, including such actions as restricting livestock access to watercourses. Some projects such as stream buffer strips and fragile agricultural land retirement can receive a performance incentive for up to three years (see http://www.region.waterloo.on.ca/web/region.nsf/c56 ).

Appropriate and sustained funding in this area is a key need. Even though 63% of the phosphorus entering Lake Erie now comes from "non-point" runoff from agriculture and other land uses, only about 4% of clean-up funds are directed to these sources on the U.S. side of the basin (Baker, 1996), and the situation is similar in Ontario. Municipalities with a lower population base do not have the financial capacity to sustain effective programs on their own.

The provincial Healthy Futures for Ontario Agriculture program, which provided $22.7 million (as of 2001) for rural water quality projects, is scheduled to wind up in 2003 (see website http://www.gov.on.ca/OMAFRA/ english/hfoa/update.html). The lack of continuity of previous programs such as the Clean Up Rural Beaches program has hampered the programs' effectiveness. A long-term provincial commitment, together with expanded federal participation, is essential. Increased municipal funding for agricultural cost-sharing would also be an excellent "value-for-money" investment for municipalities to improve local water quality.

Land Retirement and Private-land Forestry Programs

Agriculture and Agri-Food Canada, a federal department, recently released its Agriculture in Harmony with Nature II Strategy (AAFC, 2001). Objectives within the Strategy include improving the conservation of natural biodiversity through research, education and awareness. It also proposes consultation with farm groups on better links between income support programs and food safety and environmental objectives, and may offer important opportunities for progress in this area. The new Agricultural Policy Framework being developed by the federal and provincial governments is to seek implementation of these concepts.

A Conservation Reserve Program for Canada

The federal or provincial governments could establish some form of conservation reserve program for private lands.

A wide range of reserve or set-aside programs are available in the U.S. to provide incentives for landowners to commit some of their lands to conservation uses (Vysatova and Greenberg, 2000). A Wetlands Reserve program purchases either permanent or 30-year conservation easements, or 10-year restoration agreements, to help farmers take agricultural lands out of production and restore them as wetlands. The Conservation Reserve program targets land with high erosion rates, riparian zones or other environmentally sensitive areas, and provides annual payments under a 10 to 15 year agreement based on an approved conservation plan. An interesting model for Carolinian Canada might be the Environmental Quality Incentives Program, which provides incentive payment and cost sharing for conservation practices within defined priority areas, including "watersheds, regions or areas of special environmental sensitivity or those having significant soil, water, or related natural resource concerns."

In addition to these federal programs, many States also sponsor reserve programs of some type, and most of these programs are popular with landowners and fully subscribed. The Reinvest in Minnesota Reserve Program, for example, has purchased nearly 4000 conservation easements since 1986 to protect and restore environmentally sensitive lands (see website http://www.bwsr.state.mn.us ). A joint federal/state Conservation Reserve Enhancement Program in Ohio targets the western basin of Lake Erie, and uses a basket of financial incentives to encourage landowners to enroll for a minimum of 15 years. The program expects to enlist 67,000 acres over the next 10 years with a mix of riparian buffers, wetland restoration, hardwood tree planting, and wildlife habitat creation (see website http://www.fsa.usda ).

A reserve program on a limited scale was undertaken in Ontario (and across Canada) from 1990-93 through the Permanent Cover Programs I & II, involving agreements of up to 15 years signed with Agriculture Canada, with administration provided by the Ontario Soil and Crop Improvement Association. About Ontario 1800 farmers participated, with projects to retire fragile lands, create stream and wetland buffers, and plant trees. While the program was popular with farmers and considered effective, it was not further funded (OMNR, 2001).

Ducks Unlimited Canada has developed a proposal for a $103 million national Conservation Cover Incentive Program which would provide a similar set of incentives in this country. This program would convert 170,000 ha of Ontario farmland to protected buffers along rivers and wetlands, essentially by paying farmers to take it out of production. Five federal departments are currently studying the Ducks Unlimited proposal, and it has already received support from some provinces (see website http://www.ducks.ca ) Such a federal initiative, perhaps coupled with provincial incentives targeted at the high-value lands of Carolinian Canada in a similar way to the Ohio program, could be a major boost towards achieving the Big Picture goals.

A similar proposal called Alternate Land Use Services (ALUS) has been developed in Manitoba, but is proposed for use across Canada through provincial Crop Insurance Corporations (Delta Waterfowl and Keystone Agricultural Producers, 2001). ALUS goes beyond a traditional set-aside program to provide payment to farmers for the active provision of ecological services such as endangered species recovery, wildlife or fisheries habitat enhancement, or water quality improvement. In essence, it seeks to broaden the range of products that farmers can produce and be compensated for.

A recent study of the economic justification for retiring marginal farmland in Ontario showed that gross margins were less than fixed costs in three of the five fields analyzed (Brethour et al, 2001), suggesting that set-asides to achieve ecological benefits might be possible with relatively small levels of incentive.

Support for Private Land Tree-Planting & Links to Climate Change Strategies

The Province and industry could undertake a significant role in assisting tree-planting on private lands.

To achieve the Big Picture vision, a massive program of restoring tree cover to selected parts of the Carolinian Canada landscape is necessary. Since the late 1800's, the Province has recognized that planting trees provides benefits to society and to the environment as well as the private landowner. In the past century, over 1 billion trees have been planted on private lands in this province, largely through Provincial and other afforestation programs (OMNR, 2001b).

However, due to expenditure constraints, by the mid-1990s long-standing Provincial programs such as Agreement Forests, Woodlot Improvement Act projects, and public tree nurseries were ended. From 1949 to 1993, provincial programs consistently planted more than 15 million trees/year, with only a few exceptions at slightly lower levels. Tree-planting peaked in 1972 at just over 30 million trees. But since 1997, tree-planting has plummeted to under 4 million trees/year (OMNR, 2001b).

Some conservation authorities continue to sponsor tree-planting programs, although on a reduced scale. Several private programs, such as Project Tree Cover, operated during the 1990s, but on a relatively small scale.

While it appears unlikely that the Province would restore its past programs in this area, it could take several steps to significantly increase tree-planting rates. Availability of good quality, genetically appropriate planting stock is one obstacle. A recent review of tree seedling production by private nurseries concluded that increased production could be achieved by the establishment of a central agency to coordinate forecasting of future demand, seed collection, and stock production and distribution in southern Ontario (OMNR, 2001c). This would help to overcome the reluctance of nurseries to produce stock for sale in several years without firm orders. A rolling loan system to help finance increased production was also suggested, along with quality control measures, increased public education and marketing, and development of MNR policies on private land forestry.

The cost of tree-planting is also a major constraint, since nursery stock is no longer subsidized by government. These costs could be addressed through several avenues. A part of federal and provincial spending to meet the Canadian commitment to the Kyoto Protocol could be directed to assisting private landowners with tree-planting in order to create future carbon sinks. Industry contributions could also be significant. Ontario Power Generation has started a program to fund tree and vegetation planting (http://www.opg.com/envComm/C_planting.asp), as utility companies in the U.S. have done. Currently dormant mechanisms such as the Trees Ontario Foundation could be re-activated to act as a conduit for government and industry contributions to support tree-planting.

Recent surveys of rural landowners show that they would respond to monetary incentives to encourage them to plant trees, and that owners of smaller properties are especially interested in entering agreements with local conservation authorities or other agencies rather than growing trees on their own (Environics, 2000; 2001a)

Both the federal and provincial governments could selectively remove tax disincentives for interested private landowners, for example by allowing the costs of tree-planting and forest management to be deducted from other income in calculating income tax.

Potential Future Income from Sustainable Forestry

Sustainable forestry could be promoted as a good source of income in the longer term for rural landowners.

Potential income from sustainable forestry by farm and non-farm landowners could be a major long-term economic incentive for replanting of Carolinian forests. Sustainable forest management practices allow both wildlife benefits and an economic return for landowners. But new tax incentives may be needed to encourage the long-term investment needed to achieve this goal.

Agroforestry is one approach which could contribute to increasing tree cover within selected areas of the Carolinian Canada landscape. This term includes maple syrup operations, nut tree and Christmas tree plantations, intercropping systems, farm woodlot management, and a variety of other similar activities. The Ontario Ministry of Agriculture, Food and Rural Affairs has a program to encourage agroforestry; more information can be found in their State of the Industry Report 2001 (see website http://www.gov.on.ca/OMAFRA/english/crops/facts/ info_state2001.htm ).

Some landowner organizations such as the Ontario Woodlot Owners Association are acting as a local information resource on sustainable forestry practices. Other innovative ideas could be explored such as timber cooperatives to purchase timber rights on private properties and manage forests sustainably. Forest certification also provides an opportunity for a competitive advantage to woodland owners. The Eastern Ontario Model Forest is currently working on a project to test the feasibility of forest certification for small woodlots in southern Ontario (Oatway et al., 2000).

In the United States, a series of financial incentive programs are in place to support sustainable forestry on private non-industrial lands (see website http://www.pinchot.org/pic/ farmbill/Programs.html). The Forestry Incentives Program provides up to 65% of the costs of tree-planting, stand improvement, and site preparation for natural regeneration. The Forest Stewardship Program provides support for developing forest stewardship plans, of which nearly 149,000 had been completed by 1998. The Forest Legacy Program funds the purchase of conservation easements on private forests. The Urban and Community Forestry program provides up to 50% funding for urban and community forestry projects, including some tree planting.

Property Tax Incentives

Farm Land Taxation Program

Few farmers subscribe to the CLTIP because the marginal increase from 75% to 100% tax reduction on a small part of their lands makes little difference to their overall tax bill. While non-farm landowners are provided an incentive to conserve natural areas and woodlands, the degree of incentive for active farmers is much less. Chronic low net farm incomes create market pressure to have as much land as possible under production.

Concerns have been expressed about the overlap and inter-actions among the three property tax programs, which causes confusion and hampers their effectiveness. A joint assessment of how the three property tax programs interact would be especially valuable, to ensure that the property tax system provides a real incentive for conservation for both farmers and rural non-farm landowners and to provide a on-window approach to applications. One option might be to modify the Farm Land Taxation Program to provide the 100% tax reduction on forests and other natural habitats on farms, but with eligibility contingent on completing an Environmental Farm Plan. This could encourage retention of woodlands and other habitats on farms.

A related concern stems from the shift from a provincial tax rebate system in the mid-1990s to the current tax reduction or exemption programs, which has the effect of shifting the cost onto municipalities. Part of a joint review of the programs could address how municipal concerns in this area could be fairly addressed.

Conservation Lands Tax Incentive Program

The CLTIP could be broadened to include other categories of natural lands and to provide increased incentives.

A recent review of the Conservation Lands Tax Incentive Program recommended that the program should be gradually broadened to incorporate all natural lands recognized as provincially significant, with extension to cover significant woodlands as a first step.

The Community Conservation Lands category is a priority to be reinstated immediately to fully exempt all natural lands and conservation easements held by land trusts and other conservation charities. Another possible addition is a category to allow municipalities to designate other lands at their discretion, so that regional Environmentally Sensitive Areas could be added if desired. Big Picture core areas and corridors could also be considered for eligibility for CLTIP applications.

A recent proposal for the Community Conservation Lands which would reinstate only a few Provincially-significant lands is a backward step, inadequate and counter-productive to conservation efforts (EBR Registry Number: PB00E6007).

A serious problem has also been identified with how property assessments are calculated on properties eligible under both this program and MFTIP, which has the effect of shifting most of the tax burden onto the residential portions of properties. This process needs to be modified to provide a stronger incentive for conservation. Closer coordination among the three tax incentive programs and with other conservation programs would also strengthen the effectiveness of the CLTIP in Carolinian Canada and elsewhere.

Managed Forests Tax Incentive Program

The MFTIP could be modified to encourage greater landowner participation, forest creation and better incorporate conservation objectives.

The Managed Forests Tax Incentive Program has also recently undergone an internal MNR review, as well as receiving recommendations for changes from other sources. Several proposed changes should help to encourage participation, such as extending the life of a management plan to ten years from the current five years, increasing the amount of open land (such as rock barrens, beaver ponds) allowed within the plan, and developing a revised stewardship planning document.

Within the Carolinian Canada region, additional improvements to specifically encourage tree planting within priority restoration areas and to provide specific forest management guidelines for Carolinian forests could be considered. The current size limitation of 10 acres for MFTIP also needs review, since this makes many Carolinian Canada woodlots ineligible. One possible approach could be the inclusion of 5 acres of existing forest and 5 acres of new tree- or vegetation-planting to meet the 10-acre minimum.

More broadly, under a provincial reforestation initiative, MFTIP could be used to encourage forest replanting by reconfigured the program to allow eligibility of expansion of forests to include newly planted areas under a management plan.

A special category of MFTIP lands oriented primarily to wildlife conservation and passive recreation could also be developed, with a simplified stewardship plan required for eligibility.

Incentives for First Nations

At this point, it would seem prudent for conservationists to continue to engage in discussions with individual First Nations about possible future partnerships or other incentives to assist them in conserving or restoring biodiversity on their lands. These discussions could include exploration of ways to support ecotourism or other compatible economic activities that would provide an economic return from protected natural areas.