Towards conserving the rhino: an economic analysis

15 September 2015
Publication Type: Policy Brief
JEL Code: Q2, Q21, Q28

Populations of southern white (Ceratotherium simmum simmum) and black (Diceros bicornis) rhino are threatened by poaching to the extent that the survival of the species is in question. Debate has revolved around different ideological positions, with proponents firmly adopting different positions, either a pro-market approach (legalised trade) or an anti-market approach (no legalised trade). Ideologically-based debates rarely have constructive outcomes since each party is defending their argument based on an a priori position that is unlikely to be influenced by the other as that would imply the capitulation of an ideology in favour of the other. Our two years of research into the subject had as its objective a systematic and empirical (model-based) evaluation of whether the trade in rhino horn should be legalised or not.

We developed a system dynamics model that considered five components: rhino abundance, rhino demand, a price model, an income model and a supply model.  The model also considered impacts on game farm profitability of different policies.  We found that demand is insensitive to price, which is confirmed by earlier studies, but is instead strongly driven by income levels in consumer nations where rhino horn utilisation is a luxury good.  The specific characterisation of rhino horn as a price insensitive yet income-driven luxury good in consumer nations is important as that implies that demand can neither be reduced nor increased through price-based interventions.  Viewed from a strict demand perspective, demand can only be reduced through either a reduction in income in the consumer nations (which is unlikely and neither desirable), and/or behavioural effects leading to the reduction in the use of the product (which is highly desirable).

It is important to note that legalising the trade is a supply- and not a demand-side intervention though. Proponents of a legal trade implicitly argue that legalising the trade would flood the market with rhino horn, thereby increasing supply and driving down the price of rhino horn.  It is then argued that the lower price would discourage poaching.  We therefore modelled several supply-side alternatives.  First we modelled the effects of policies on poaching. We found that legalising the trade would not stop poaching since the cost-price ratio is much lower for poachers than for game farms.  Therefore, even if rhino horn prices were to fall, it is still optimal for poachers to continue poaching rhinos under a legal trade scenario since the returns are higher for poachers than for game reserves.  Furthermore, even if a poacher encountered a de-horned animal, because of the low cost price ratio, it is still optimal for the poacher to kill this rhino and take what remains of its horn.  A legal trade would therefore not have the desired effect of reducing poaching.

Second, we found that although a legal trade scenario boosted profitability for game farms significantly compared with a no trade scenario, returns were higher for the scenario that led to the extinction of rhinos compared to the returns that resulted from sustainable rhino populations.  This could therefore potentially lead to game farms switching from conservation to unsustainable exploitation.  This signifies very high risk for the rhino population.  This result was also observed in unpublished research findings of abalone stocks.  Abalone is similar to rhino horn in that it is a high value industry (in terms of volume rather than price), stocks are threatened and there is a strong illegal harvesting component.  However, the difference is that a legal trade is also permitted.  Lessons from the abalone industry may therefore also be applicable to rhino populations.  Wildlife authorities catch abalone poachers after they have harvested the abalone, confiscate the abalone and then sell the abalone on the legal market at a reduced price.  In this way, funds are raised for the wildlife authorities to continue patrolling efforts.  What the study foundwas that, because of the financial rewards from confiscations there is an incentive for wildlife authorities to focus on confiscations rather than the prevention of wildlife crime.  We therefore found that over the long term abalone populations are not conserved in spite of monitoring and patrolling by wildlife authorities due to the fact that a legal trade in abalone exists.  We termed this effect, observed in both the rhino horn as well as the abalone model, a “payment for extinction” effect, in that short term financial gains may be made at the expense of wildlife sustainability.

Policy implications

Based on the likely “payment for extinction” effect linked to legalising price-insensitive luxury goods whose demand is driven by income and behaviour and its supply by i) short-term financial gains for game farms, and ii) where the price-cost ratio for poachers is lower than for game farms we would not recommend that a legal trade in rhino horn be pursued at the present time.

That policies and conservation efforts would focus on improved management, protection and breeding of rhinos in both private and public game management areas.

Effort towards educating the user nations be increased to affect a behavioural change.

Improved policing of game management areas using technologies such as drones and remote sensing linked to much better law enforcement and steeper penalties.

Research Brief 42
1 September 2015