Transcript Presentation Title, Arial Regular 29pt Sub title, Arial

Maximising benefits from MDB water resource
management
Jeff Connor, Onil Banerjee,
Darla Hatton MacDonald, Sorada Tapsuwan,
Mark Morrison*, Anthony Ryan
What are economics requirements of the MDBA plan?
• Basin water management that:
• optimises: economic, social and environmental outcomes
(objective 3c, purpose 20d)
• Maximise net economic return to the Australian community
(objective 3d(iii))
• Achieve efficient and cost effective water management and
administrative arrangements (objective 3g)
Climate Adaptation as an Opportunity
But wait, there’s more…
economics (all) analysis for the plan have:
• Act on the basis of the best available scientific knowledge
(21.4.b)
• Have regard for the national water initiative (21.4.c.i)
Climate Adaptation as an Opportunity
To an economist that sounds like BCA
A superficially simple concept
Benefits > Costs ?
Practice challenges:
• Some benefits aren’t traded, don’t have an obvious price.
• The level of some benefits and costs, especially non-market
environmental benefits, from change are uncertain
• Some benefits and costs are incurred on very different and
even inter-generational time lines.
Climate Adaptation as an Opportunity
Are economist up for BCA?, will it help?
Objectives:
• Assess prospects for estimating meaningful non-consumptive
use values and public good externality costs for MDBA plan
BCA
• Assess prospects to utilize benefits estimates in ways that
inform the dialogue on MDB water resource management
Climate Adaptation as an Opportunity
Benefits come for multiple capitals
Social
Social
welfare
welfare
Built
capital
Natural
capital
Natural
capital
Build capital
Trade-off
curve
Trade off curve
Trade off curve
with improved
institutional institutional
capital
Trade-off
curve
with enhance
capital
Climate Adaptation as an Opportunity
Ecological function as capital
• cost of increasing allocation
= eroded natural capital ability to provide ecosystem services;
• ·thresholds involved:
• with steeply increasing, often irreversible damage to capacity to
provide valued ecosystem services;
• Some built natural capital substitution possible (e.g. water
treatment)
• Often costly in capital, energy etc.
Example:
• irreversible time delayed impacts of Mallee clearing
• = loss of natural vegetation salinity regulation capacity
• Built capital substitute $300 M in salt interception infrastructure
Climate Adaptation as an Opportunity
Can we value it? Yes we can!
At the margin
Some Related Market Possibilities,
not so hard but not do yet:
• Travel cost
• Simple zonal models, more site types
• (regulated v. natural flow based values, north v. south)
• Treatment and damage cost
• Water quality process modeling linked to treatment and damage
costs (Salinity, BGA, salt water intrusion)
• inclusion of thresholds
• consider energy and carbon for built capital substites
Climate Adaptation as an Opportunity
Can we value it? Yes we can!
Hedonic real estate and regional growth studies
• Relate real estate value or regional growth to local
environmental attributes, all else equal
• Success internationally, in Australian capital cities
• Struggling in regional Australia; ways forward
• “environmental quality” indices accounting for things that
determine human vs. ecologically value;
• better understand complementarity v. substitutability of natural
and built capital
Climate Adaptation as an Opportunity
Can we value it? Yes we can!
• Stated preference
• From individual to population WTP – what
population for regional assets?
• Discounting estimates – the individual versus
social time preference perspective
• Better understanding non-use versus use
values in stated preferences
• Do people really understand and honestly
answer the questions?
Climate Adaptation as an Opportunity
Do people really understand and
honestly answer the questions?
Ignorance
Error
Irrelevance
Untopicality
Distortion
Taboo
Incompleteness
Inaccuracy
Vagueness
Climate Adaptation as an Opportunity
Uncertainty
Probability
Absence
Ambiguity
Benefits Transfer
Extrapolating benefit values from existing (site specific) studies to
new sites
• Point studies (direct transfer without adjustment)
• Transfer with value functions (adjust for population, site
attribute differences
• Meta-studies (statistical generalisation from multiple studies)
• Challenges
• Even a few studies to general is from
• Studies in like (attribute) terms
Climate Adaptation as an Opportunity
Adding it all up?
Total Economic Value
Use Values
Direct Use
Value
Goods &
services that
are directly
consumed
Extractive Use:
urban water,
irrigation,
mining use
Non-extractive:
tourism,
recreation &
aesthetics
Non-Use Values
Indirect Use
Value
Functional
benefits
enjoyed
indirectly
Option
Value
Potential
direct or
indirect use
value of
resource in
the future
Positive Ecosystem Services:
Aboriginal cultural values,
social relationships
Negative Externalities:
Greenhouse emissions
related to pumping &
infrastructure
Climate Adaptation as an Opportunity
Quasi-Option
Value
Expected new
information
from avoiding
irreversible
losses
-Native flora and
fauna
-Ecosystem
services
- Ecosystems
Bequest
Value
Value of
leaving use and
non-use values
to future
generations
- Iconic
landscapes e.g.
Red gum forests,
Coorong
-Native flora and
fauna
-Way of life
preserved
Existence
Value
Value from knowledge
of future existence
-Iconic landscapes
- Native flora and
fauna
If we value it, does it help?
Yes: if we do it in a multiple capital, ecological dynamics
framework
Answers questions:
What are costs of no change?
Where are critical thresholds, costs of crossing them?
Climate Adaptation as an Opportunity
The ultimate value proposition
Where ever the MDBA Plan lands …
MAXIMISE BENEFIT THROUGH INSTITUTIONAL INNOVATION
Social
Social
welfare
welfare
Built
capital
Natural
capital
Natural
capital
Build capital
Trade-off
curve
Trade off curve
Trade off curve with improved institutional capital
Trade-off curve with enhance institutional capital
Climate Adaptation as an Opportunity
Maximise benefit through institutional innovation
•
•
•
•
•
•
•
Build risk management strategies, not false certainty
Build support culture of hedging
Facilitate trading
Allow dam shares and carry-over
Flexible linked local / national environmental water holder
Conjunctive ground and surface, spatial temporal mngt
More sophisticated water products (options etc.)
Climate Adaptation as an Opportunity
Questions and follow up
Dr Jeff Connor
Group Leader
Natural Resource Economics and Decision Science
CSIRO Ecosystem Sciences & Water for a Healthy Country
[email protected]
CSIRO
Climate Adaptation as an Opportunity