Development offsets for ecosystem services in a rural residential development context: issues for the Murrindindi Shire application

Rural residential development could have a positive or negative effect on the supply of ecosystem services. In most cases, the effect tends to be negative. One way of managing the impact is through a market based instrument. In this paper we present a development offset MBI as a way of cost effectively managing the ecosystem service impact of development in the Murrindindi Shire, Victoria. In this paper we note that design of the instrument is critical to the success of any MBI, including development offsets. Key development offset design issues discussed in this paper include defining what is traded (the metric), facilitating trades in a thin marketplace with high transaction costs, and ensuring the offset is commensurate with the impact.Rural residential development, development offset,, market based instrument, design, Environmental Economics and Policy,

Putting Theory into Practice: Market Failure and Market Based Instruments (MBIs)

The use of market-based instruments (MBIs) to provide and protect ecosystem services has gained significant attention in Australia. Despite their popularity, MBIs are not appropriate for the provision of all ecosystem services. Rather, MBIs must be carefully designed given the ecosystem service outcomes desired, while meeting the needs of participants. In this paper we detail the importance of a robust theoretical structure to underpin the selection and design of an MBI. In particular, we demonstrate the role of identifying and analysing the nature of the market failures present, and their implications for instrument design. Our conclusions are illustrated using several regional MBI case studies.Market Based Instruments (MBIs), ecosystem services, conservation

Improving NRM Investment through a policy performance lens

Choosing a mechanism to encourage landholders to change their land management in order to deliver environmental outcomes is a complicated process. Careful instrument selection may count for little if uptake and adoption are insufficient to meet performance targets. Similarly, investors may require assurance that the proposed investment will deliver the stated goals. In order to reduce the uptake uncertainty facing policy makers we evaluate and describe several possible methods to guide and frame adoption targets. We conclude that referring to past adoption experience of a wide range of mechanisms offers the best approach to setting feasible adoption targets for future mechanisms. We call this adoption points of reference. This approach is tested by application to mechanisms focusing on delivering water quality improvements in GBR catchments. We conclude that the points of reference approach is appropriate and useful but should be supported by processes designed to incorporate the impact of heterogeneity and local knowledge and an emphasis on improving the accuracy of future data.adoption targets, NRM investment, reasonable assurance, water quality,

Increasing uptake of improved land management practice to benefit environment and landholders: insights through a transaction cost lens

Transaction costs, related to either investigating improved land management practices (ILMP), engaging in adoption support programs for these practices and/or implementing changes on-ground, create barriers to ILMP adoption. Perceived and actual transaction costs have long been hypothesised as a potential barrier to grazier adoption of ILMPs in catchments to the Great Barrier Reef. Applying a framework derived from transaction cost theory, we assess this hypothesis. Through semi-structured interviews of a sample of participants in two ILMP programs, we find that ILMP adoption support program characteristics have a large influence on perceived and actual transaction costs of landholders seeking to engage in ILMP programs or adopt ILMPs. The importance of establishing and nurturing relationships between landholders and extension officers was also highlighted as critical to reducing landholder transaction costs. The degree to which relationships reduce transaction costs demonstrates the importance of fostering landholder leadership in ILMP program design as well as targeted extension in supporting adoption

Motivators and barriers to adoption of improved land management practices. A focus on practice change for water quality improvement in Great Barrier Reef catchments

To protect and improve water quality in the Great Barrier Reef, the Queensland Government's Reef 2050 Water Quality Improvement Plan targets that 90% of sugarcane, horticulture, cropping and grazing lands in priority areas be managed using best management practices for sediment, nutrient and pesticides by 2025. Progress towards this target is insufficient and variable across catchments and industries. The motivation to adopt improvements in management practices is heavily influenced by social, economic, cultural and institutional dimensions. In this paper we synthesise the literature on how these human dimensions influence decision making for land management practice and highlight where future investment could be focussed. We highlight that focussing on —1) investigating systems to support landholder decision making under climate uncertainty (risk); 2) generating a better understanding of the extent and drivers of landholder transaction cost; 3) understanding if there are competing ‘right’ ways to farm; and 4) improving understanding of the social processes, trust and power dynamics within GBR industries and what these means for practice change— could improve practice change uptake in the future

Valuing ecosystem services in complex coastal settings: An extended ecosystem accounting framework for improved decision-making

What gets measured gets managed is an axiom common to the business world that also applies to the management of environmental assets and processes. But what is the most adequate way to measure ecosystem value to optimise ecosystem management? In this paper, we unpack three valuation frameworks often applied in understanding ecosystem services and their benefits: 1) the Ecosystem Services framework, operationalised by the United Nations System of Environmental Economic Accounting - Ecosystem Accounting (SEEA-EA) framework; 2) value-centric approaches operationalised by the Total Economic Value framework; and 3) First Nations Peoples (FNP) frameworks, which seek to capture values from FNPs’ perspective. By assessing the strengths and weaknesses of these value frameworks for managing the World’s largest reef ecosystem—the Australian Great Barrier Reef—we construct an extended SEEA-EA valuation framework tailored to complex coastal settings. The significance of our approach is the inclusion of the whole range of benefits from all coastal and marine uses and users and therefore the integration of non-market and FNP values into the more traditional market-based valuation approach. Assessments that jointly consider multiple values originating from these three different frameworks are more likely to produce sustainable management outcomes than more restrictive approaches

Understanding power, social capital and trust alongside near real-time water quality monitoring and technological development collaboration

We report on qualitative social research conducted with stakeholders in a local agricultural knowledge and advice network associated with a collaborative water quality monitoring project. These farmers, advisors and researchers allude to existing social dynamics, technological developments, and (more general) social evolution which is analysed against a novel analytical framework. This framework considers notions of power, social capital, and trust as related and dynamic, forming the basis of our contribution to knowledge. We then probe the data to understand perceived impacts of the collaborative project and social interaction associated with this research project, which involved cutting edge automated and frequent water quality monitoring that allowed for near real-time access to data visualisation displayed via a bespoke mobile or web ‘app’ (1622WQ). Our findings indicate that a multi-faceted approach to assessing and intervening based on consideration of multiple social dimensions holds promise in terms of creating conditions that allow for individual and group learning to encourage changes in thinking required to result in improved land management practice

Scrutinizing the impact of policy instruments on adoption of agricultural conservation practices using Bayesian expert models

Policy instruments—such as regulation, financial incentives, and agricultural extension—are commonly applied by governments to promote sustainable agricultural practices and tackle ecosystem degradation. Despite substantial investment, little data are available to gauge the impact of evolving policy mixes. We constructed a Bayesian network model to explore relationships between pol-icy instruments, contextual factors, and adoption. Applying a series of scenarios, we present examples of how different instruments influence adoption and how their effectiveness is shaped by contextual factors. Scenarios highlight that the effect of policy instruments is often modest, and constrained by diverse practice and population characteristics. These findings allow us to reflect on the role of policy instruments, and the conditions necessary to support practice change. For example, our findings raise questions about the role of financial benefits versus financial capacity, and highlight the potential importance of concepts such as mental bandwidth in shaping both motivation and capacity to adopt

Factors that influence transaction costs of environmental policy : an analysis of development offsets

New Institutional Economists define transaction costs as the costs to define, establish maintain and exchange property rights. This definition, one among many, enables the consideration of the cost to create, use and move between institutions (Marshall, 2013; McCann, 2013). For a policymaker, transaction costs are the cost of time and effort invested in researching the problem, creating, implementing, administering, monitoring and enforcing the policy. For an individual engaged with or affected by the policy, transaction costs are the cost of time and effort invested in learning about and interacting with the policy. Transaction costs of the policymaker have been reported to range from 1 to 110 per cent of the government payments for farm payment schemes (Rorstad et al., 2007). For the private landholder, transaction costs have been shown to be up to 15 per cent of the total cost of being involved in a policy (Mettepenningen & Van Huylenbroeck, 2009). Despite the extent of potential transaction costs to the government and private parties, transaction costs are rarely measured or included in policy planning or evaluation. Where transaction costs have been measured, the focus has been on environmental policies that involve government contracting private landholders to supply environmental outcomes over time (for example, Agri-Environmental Schemes). With a few exceptions, the focus has been on the transaction costs incurred by the government. There is even less information about what influences the scale of these transaction costs to either party to an environmental policy. Focusing on an environmental policy which operates to generate terrestrial conservation through the allocation of property rights and the facilitation of trade, the aim of this thesis is to address the gap in understanding about the factors that influence the scale of transaction costs to all parties in an environmental policy. The environmental policy focused upon is a development offset. Development offsets (referred to as offsets) are a form of environmental policy that allows development to impact on the environment provided that impact is mitigated on the development site, on another site (third-party offset) or in non-physical ways such that there is no net loss in the supply of environmental goods and services (Gibbons & Lindenmayer, 2007; Moilanen et al., 2009; Norton, 2009; ten Kate et al., 2004). Development offsets are explained in detail in chapter three. In chapter four the organisational economics literature and its critics as well as empirical measurement studies are reviewed to develop an understanding of what factors could influence the scale of transaction costs of all parties to an environmental policy. This review aids in forming a number of research questions which are presented in chapter five. These questions are investigated through semi-structured interviews with a number of informants involved in two offset applications occurring in Queensland, Australia (chapter six). Through the case study analysis, in chapter seven, it is revealed that the transaction costs of all parties to an offset are affected to some degree by the influencing factors that were revealed in the literature review. However some factors had a greater effect on transaction costs than others (policy design and asset specificity). Further, some parties appeared to bear greater transaction costs than others (offset buyers and the policy administrator). Whilst some factors are inevitable in an offset scheme (for example, site specificity), it is highlighted that policy rules and processes can reduce the transaction costs of buyers and the policy administrator. One potential transaction cost reducing design component is the more formalised inclusion of intermediaries in offset transactions. The role of intermediaries and how they can reduce transaction costs of offset buyers and sellers is explored in detail in chapter eight