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

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

AGSIP 13 – Resource Economics 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 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 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 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 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 Survey design SurveyRegion/catchment area Population sampled NRM improvements Regional surveyS.E. QueenslandBrisbaneSoil Water Vegetation Four separate regional surveys Murray DarlingToowoomba Mackay WhitsundayMackay FitzroyRockhampton Statewide surveyS.E QueenslandBrisbaneSoil Water Vegetation Four regional areas included in one survey Murray DarlingToowoomba GBR – coastal areasMackay GBR – inland areas Fitzroy longitudinal survey FitzroyBrisbaneWater Vegetation One regional surveyRockhampton

AGSIP 13 – Resource Economics Regional areas

AGSIP 13 – Resource Economics Regional choice set example

AGSIP 13 – Resource Economics

Summary of annual values

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

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

AGSIP 13 – Resource Economics 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 Outcomes of bid process in FBA

AGSIP 13 – Resource Economics 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 Estimating values Rockhampton and Fitzroy Basin 1 Brisbane Population 2 193,7221,508,161 Average household size No of households 77,489457,018 Survey response rate 72%50% Valid households 55,792228,509 Household value for an improvement in 13,647ha $0.43$0.74 Total value - $/year $23,991$169,097 Total value - $/year $193,087

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

AGSIP 13 – Resource Economics 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