Developing a benefit transfer database for NRM issues in Queensland

1. Developing a benefit transfer database for NRM issues in Queensland John Rolfe and Jill Windle Central Queensland University AGSIP 13 – Resource Economics

2. Resource Economics • Three key areas of focus • Production economics – The costs of making changes • Valuing community preferences – Benefits of making changes • Market based instruments – Best tools for generating incentives AGSIP 13 – Resource Economics

3. Project team for valuing community preferences • Main researchers • Jill Windle (CQU) • John Rolfe (CQU) – project leader • Funded by • AGSIP = state allocated funding for agricultural issues under the National Action Plan for Salinity and Water Quality AGSIP 13 – Resource Economics

4. Background to study • Know very little about: • Private costs of providing NRM outcomes • Public benefits of better NRM outcomes • AgSIP #13: • Private (farm level) costs – modelling • Private (farm level) costs – revealed (MBIs) • Public benefits • Assessing environmental values • Nonuse values are important as well as use values • Remote as well as local communities have preferences for regional improvements • Cannot always collect primary data – need to use Benefit Transfer AGSIP 13 – Resource Economics

5. Justifying NRM funding • Know very little about the private costs of improving NRM practices • (Although modelling and other work is helping to address this) • And almost nothing about the community preferences/public values for improving NRM • Investments in NRM are rarely made in an economics framework • Funding allocations in a policitical framework • Some focus on effectiveness by CMAs/NRM groups AGSIP 13 – Resource Economics

6. The use of benefit estimates • Focus is on estimating public benefits of better NRM outcomes • Could then be compared to: • Private (farm level) costs – modelling • Private (farm level) costs – revealed (MBIs) • Public benefits will include: • Nonuse values are important as well as use values • Remote as well as local communities have preferences for regional improvements AGSIP 13 – Resource Economics

7. The issues in using specific studies for benefit transfer • Most studies focused on particular issues, not designed to transfer to other situations • Values may be sensitive to characteristics • Populations involved • The way the tradeoffs are framed • The scope at which the issue is pitched • The scale of the tradeoffs AGSIP 13 – Resource Economics

8. The need to develop a database of values • Focus was to develop a template of public values for NRM improvements • NRM groups and government could then access to make summary assessments of benefits • Starting point for evaluation of investments • Few previous studies available • Most designed for specific circumstances • Not necessarily easy to transfer AGSIP 13 – Resource Economics

9. The data collection in this study • Primary data collected to develop template • Technique used was Choice modelling • Non-market valuation technique • Assesses values held by communities and public • Data collected in a survey questionnaire • This study – 3 survey formats – 1300 surveys AGSIP 13 – Resource Economics

10. Focus of study • Identify the importance of non-use values • Identify the values for improvements in 3 key areas of the investment plans • Healthy vegetation • Healthy waterways • Healthy soils • Identify sensitivity to regional issues • Identify sensitivity to framing issues AGSIP 13 – Resource Economics

11. Use and non-use values • Asked to rated a series of questions representing use and non-use values - From 1 most to 5 (least important) • Percentage of respondents scoring values with a “1” or”2” AGSIP 13 – Resource Economics

12. Survey design AGSIP 13 – Resource Economics

13. Regional areas AGSIP 13 – Resource Economics

14. Regional choice set example AGSIP 13 – Resource Economics

15. AGSIP 13 – Resource Economics

16. Summary of annual values AGSIP 13 – Resource Economics

17. Latent class model Coefficient values for attributes by different respondent classes AGSIP 13 – Resource Economics

18. Values over time in the Fitzroy basin AGSIP 13 – Resource Economics

19. How to use results • A related project involved running a competitive tender to improve vegetation management in the Fitzroy • Auction process run in mid-2006 • About $200K committed in payments to landholders • Is it possible to demonstrate that this investment is worthwhile? • Fitzroy population values vegetation in good condition at $4.48 per 1% • Brisbane population (state-wide) estimates are $7.69 per 1% AGSIP 13 – Resource Economics

20. Outcomes of bid process in FBA AGSIP 13 – Resource Economics

21. Results of competitive tender • Agreements signed over 13,647 ha with landholders • About 0.21% of Fitzroy Basin • FBA biodiversity Tender cost $180,000 for 2 years = $90,000 for one year • Values from just Fitzroy and Brisbane populations = $255,473 AGSIP 13 – Resource Economics

22. Estimating values AGSIP 13 – Resource Economics

23. What are the implications for salinity management? • ‘Healthy soils’ and ‘healthy waterways’ have community values • Use values are not as important as non-use values to wider population • Investments for productivity worthwhile? • There is not much difference in values between regional and state populations • Bulk of values derived from major centres • Not much justification on benefits side for ‘regional specific’ policies AGSIP 13 – Resource Economics

24. Implications for salinity investment • The estimated values are reasonably modest • But are annual values for 15 years • Not all salinity projects to improve soils and vegetation will be justified with these values • But value estimates are very broad without ‘specific issue’ context AGSIP 13 – Resource Economics

25. The importance of option values • Previous work by Rolfe and Windle (AJARE 2005) has estimated option values for water resource development • Shown to be significant • Enough to dampen the viability of extensive development • The assessment of option values / dealing with risk are key issues for salinity AGSIP 13 – Resource Economics

26. Getting some perspective • Focus here is on improving the investment decision • At the broad level at least • More complex when we go to the case study level • But many groups are not even making cost-effective allocations, let alone efficient ones AGSIP 13 – Resource Economics

27. Comparing priority setting with a benefits index AGSIP 13 – Resource Economics

28. Looking to the future • Starting to fill information gap on costs and benefits of achieving NRM targets outlined in regional plans • Economic information for impact assessment and cost benefit analysis • Choice modelling evaluation survey designed for application of benefit transfer – results can be transferred to Qld catchments not directly surveyed. • Results are a good start but still very general – challenge is to now get more specific AGSIP 13 – Resource Economics