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Saturday, July 22, 2017

Economics Of Ivory

Last Saturday, Kenya destroyed its entire stockpile of elephant ivory, valued roughly at $110 million (Sh11.1 billion)
Last Saturday, Kenya destroyed its entire stockpile of elephant ivory, valued roughly at $110 million (Sh11.1 billion)

Last Saturday, Kenya destroyed its entire stockpile of elephant ivory, valued roughly at $110 million (Sh11.1 billion). To most economists, the idea of destroying something with so much value is anathema. But there are good reasons for a country – even one as poor as Kenya – to surrender its ivory wealth to the flames.

For starters, stockpile destruction fortifies the credibility of demand-reduction campaigns in East Asia, without which the poaching problem will never be solved. Demand reduction aims to weaken the market for the product by changing consumer tastes. As prices drop, so does the incentive for poachers to kill elephants.

When countries keep their stockpiles, however, they signal that they anticipate being able to sell ivory in the future.

Proponents of a regulated, legal international ivory trade argue that demand-reduction efforts can coexist with a limited legitimate supply. But this line of reasoning has a dangerous weakness: It assumes that a legal cartel – one proposed model for regulating supply – would crowd out illegal suppliers by providing ivory to the market at a lower cost.

This assumption is dubious at best. The quantities traded through a legal mechanism would be insufficient to flood the market and suppress the price. Indeed, with legalised trade undermining demand-reduction efforts, the price of ivory is likely to remain high, ensuring that poaching continues.

Some southern African countries argue that they should be allowed to sell their ivory in CITES-permitted, one-off sales to fund conservation efforts aimed at maintaining healthy elephant populations. But, aside from the low probability in some countries that the revenue would be directed to that end, it is not clear that much money would be made.

Under CITES regulations, governments are permitted to sell only to other governments. But what other governments are willing to pay may be as low as one-tenth of the illicit value. And even then, governments can sell only naturally accrued ivory, not what was confiscated from poachers or illicit dealers.

China and the United States are in the process of formulating bans on domestic ivory trade, so it is not clear which governments would be interested in purchasing African stockpiles. Vietnam and Laos are likely candidates. The possibility of the legal ivory trade shifting to poorly regulated markets calls for a concerted international response, spearheaded by African governments through coalitions like the Elephant Protection Initiative, together with countries such as China.

Preserving – rather than burning – stockpiles is the inefficient choice. Maintaining a stockpile is administratively and operationally expensive – and often pointless. Inventory management is labour-intensive and technologically demanding. The ivory also must be air-conditioned to prevent the tusks from cracking or becoming brittle (important factors for attracting higher prices).

Given the low probability of being able to sell ivory in the future, the cost of storing and protecting it is unlikely to be recouped. Meanwhile, criminal syndicates need only corrupt a handful of local officials to make off with the goods.

it sends clear messageS: Ivory belongs only to elephants; And jumbos are

worth more alive than dead


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