Upload
daquan-ellick
View
221
Download
2
Tags:
Embed Size (px)
Citation preview
Assessing Tradeoffs Between Cane
Production and Water Quality
Peter Donaghy
DPI&F
John Rolfe, Judith Wake
CQU
Overview
Increasing interest in market-like mechanisms to manage natural resources
Give farmers financial incentives to produce environmental outcomes as well as normal production
Design and take-up are crucial issues Case study dealing with cane farmers in
Sandy Creek catchment
Market based instruments
Extensively used in US Developing interest and application in
AustraliaBushTender in Victoria
Range includes competitive tenders, offsets, cap & trade, eco-labelling, tradeable development rights, baseline & credit, mitigation banking
Key economic advantages
MBIs work by structuring incentives in more appropriate ways and allowing competitive pressure to operate Pressure to provide services at lowest cost Competition between participants means
more efficient allocation of resources Process also reveals opportunity cost
information and addresses problems of asymmetric information in NRM
Asymmetric information
Government/NRM bodies know what are priorities for environmental protection
Farmers know how to manage land and what costs of changed management are
Neither group has good access to information held by other side
Need a negotiation process to find best solution
Why is design important?
Many MBIs involve the setting of property rights and exchange mechanisms so there is certainty and confidence in tradeEg rules for allocating funding under a
conservation tender If the ‘rules’ are not appropriate, then
may result in perverse outcomesOften good to test this first
What we did in this project
Designed some ‘trial’ cane farms Held 3 workshops with groups of cane
farmers Asked farmers to submit bids for
different conservation actionsRiparian buffer stripsFertiliser reductionsConversion to minimum till
Contract details
Described voluntary agreements Contracts with local NRM body 5 year agreement Annual payments each year Payments for farmers to perform
agreed management actions Simple monitoring process
Why conservation tenders?
Negotiates fairly with growersDoes not involve more regulationRecognises existing property rights
EfficientGets better outcomes for government
spendingLets farmers find most efficient way of
meeting the outcomes
Flexibility of a tender system
Focus is on growers suggesting things they might do to achieve conservation outcomeIn exchange for payments
Different growers might suggest different actions
Our workshops
Gave each farmer a ‘trial’ farm Farms were all much the same
Five different soil types5 x fallow, 5 x plant, 5 x 1st ratoon, 3 x
2nd ratoon, 2 x 3rd ratoonHouse, access roadsRiver on one side, creek on the other
Riparian grass strips
Asked farmers in workshops to indicate on their property map where they would create grass stripsCould put them on river or creekCould make them any width
Had to add up areas of different soil types; 4 small squares = 1 hectare
Had to fill in a bid sheet
Bidding cardDate ________________________Round ________________________Property ________________________
Soil Type Hectares Involved
Non calcic brown (Pioneer)
Yellow podsolic (Marian)
Grey clay (Brightly)
Soloths (Kinchant)
Sand
Amount of money needed (each year for 5 years) $ ___________________
Performance of a round
Each farmer identified a buffer strip on a map
Identified area of cane that would not be grown
Identified amount of money required We assessed environmental benefits of
each buffer strip Identified most cost-effective bids Awarded prizes to three best bids
Riparian Filter Strip Bids
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Bid Number
$/H
a
Group 1 Group 2 Group 3 Expert panel
How we assessed bids Designed our own metric in a spreadsheet Four main components
Environmental Benefit Indices Area of each soil type Width of buffer zone Stream type
Metric ranked bids based on their potential to achieve water quality improvement
Compared this to $ bids
Variation in Opportunity Cost
Grass filter strip bids varied from $97/ha to $3,563/ha
Large variations in grower opportunity costs. 10 cheapest – 163ha for $37,64510 dearest – 127ha for $348,313
Variation facilitates cost efficiencies
Regression Analysis of Bids Coefficient Std. Error Significance
Constant -118890.966 24911.123 .001
Non calcic Brown (Pioneer) 1570.052 561.571 .017
Yellow Podzolic (Marian) 6576.558 985.499 .000
Grey clay (Brightly) 1199.198 694.511 .112
Soloths (Kinchant) 5151.576 1165.339 .001
Sand -5959.870 1950.584 .011
Age 761.516 280.196 .020
Years in area -758.044 314.536 .035
Area of cane farmed 66.699 34.221 .077
Off farm income 6452.019 11136.002 .574
% off farm income -713.525 273.310 .024
Balance prod and env 6930.531 4207.391 .128
Interest in being paid 959.220 4023.138 .816
Preferred agency 644.013 3444.284 .855
Round -3595.498 6726.095 .604
Property type 8328.346 3035.536 .019
Group 8288.303 3892.936 .057
Property area 327.738 113.638 .015Adjusted r2 = .96
Average Bid Value SummariesManagement action Average bid from
Expert panelAverage bid from cane
farmers
Establishing grass filter strips $1,083 /ha $1,387 / ha
Reducing fertilizer applications (N and P) by 50%
$290 / ha $727 / ha
Adoption of minimum tillage $128 / ha
Using a legume crop as a ‘green fertilizer’ at least every 5 years
$529 / ha
Who Are the Experts?
Farmers bids reflect additional factors other than farm productivity
Social, demographic and farm characteristics influencing bids
These factors not apparent from farm productivity models
Conclusions
Wide variation in opp costs between cane growers both within and across management actionsReflects heterogeneity of
farms/farmersCost effective to focus on growers
with lower opportunity costs Ineffective nature of fixed rate
approach (eg. devolved grants)
Conclusions
Results provide insights into factors other than farm production that affect bid formulation. Farmers views different to panel of experts!!
Process skills farmers to participate in the real deal!!
Contract design including monitoring and enforcement important
Construction of metric is difficult, limited to available data and crucial to process