Hedge Betting Climate Change to Preserve Public Lands

Envisioning a protected area as a portfolio of land parcel ‘assets’ may help public land managers plan for climate change.  

If you’ve ever heard the phrase, “don’t put all of your eggs in one basket,” then you are familiar with hedging bets.  The underlying assumption is that the future is unknown and that risk needs to be managed.  For example, a bluebird laying her eggs in the spring cannot predict how much food will be available for all of the chicks in the summer.  That’s why bluebirds lay eggs of different sizes – the larger eggs will rear larger chicks that are more likely to survive a stressful summer than normal-sized eggs/chicks.  

All federally-owned lands in the USA – National Atlas of the United States (wikiCommons). This map does not include state-owned lands (i.e. state parks).

But unlike the bluebird, we are able to predict future effects of climate change on protected areas under several possible scenarios, which can guide future protected area management.  Federal land managers have the monumental task of maximizing the public’s benefit from 640 million acres of protected areas with constrained funding (this 640 million acres doesn’t include state-managed protected areas).  New research led by SE-CASC Research Ecologist Mitchell Eaton aims to help managers decide where to invest, divest, and acquire lands under future climate change scenarios by using an economic approach.

“Modern portfolio theory recognizes the importance of both variation among investment assets and the impact of their correlation in determining portfolio performance under market uncertainty,” says Eaton.  “We treat land parcels as assets and future conditions as market uncertainty to identify optimal designs.  Increased expected benefits are normally accompanied by heightened risk of unwanted outcomes, and vice versa.”  

An example of how a protected area could be split into land parcel “assets” and assessed by the new model. Figure 3C from Eaton et al. 2019.

The theory argues that each asset’s risk and return should not be viewed alone, but should be evaluated by how it affects the overall portfolio’s performance.  For example, a protected area on the coastline is at risk from sea-level rise, but each parcel of land within that area will be impacted differently by new sea levels. Some parcels may go underwater, upland parcels may flood and become marsh habitat, and others may become dunes.  Eaton and colleagues’ model aims to evaluate how land parcel ‘assets’ interact with each other and identify optimal solutions that are agnostic of the degree that climate change will impact these areas.  Basically, the model hedges its bets against climate change.

“We hope that the concepts of portfolio evaluation, risk management vs. risk assessment, and trade-offs between decision benefits and risk help decision makers approach long-term investments and climate adaptation somewhat differently,” says Eaton.

The paper, “Spatial conservation planning under uncertainty: adapting to climate change risks using modern portfolio theory,” was published in Ecological Applications on 27 June 2019.  Lead author of the paper is Mitchell Eaton, a USGS Research Ecologist based at the SE Climate Adaptation Science Center and adjunct to NC State’s Department of Applied Ecology.  The paper was co-authored by Simeon Yurek, Julien Martin, and Fred A. Johnson from USGS, Zulqarnain Haider, Hadi Charkhgard, and Changhyun Kwon from the University of South Florida, and Bradley J. Udell from the University of Florida.

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