Transcript Suggested criteria for rankings

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Public and private benefits
and choice of environmental policy instruments
Context
 Policy aims to influence the behaviour of
people to generate positive externalities or
avoid negative externalities
 For example, changes in land management
to increase environmental benefits or
decrease environmental costs
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Public and private benefits
 “Private benefits” relate to the landholder
making the decisions (internal)
 “Public benefits” relate to all others
(external)
 neighbours, downstream water users, city
dwellers interested in biodiversity
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Each dot is a set of
land-use changes
on specific pieces
of land = a project.
Which tool?
• Incentives
• Extension
• Regulation
• New technology
• No action
Lucerne
Farm B
Public net benefits
Possible projects
0
Current
practice
Lucerne
Farm A
Private net benefits
Forestry in
water
catchment
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Alternative policy mechanisms
for seeking changes on private lands
Category
Specific policy mechanisms included
Positive incentives
Financial or regulatory instrumentsA to encourage
change
Negative incentives
Financial or regulatory instrumentsA to inhibit change
Extension
Technology transfer, education, communication,
demonstrations, support for community network
Technology change
Development of improved land management options,
e.g. through strategic R&D
No action
Informed inaction
AIncludes
polluter-pays mechanisms (command and control, pollution tax, tradable permits,
offsets) and beneficiary-pays mechanisms (subsidies, conservation auctions and tenders).
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Simple rules
for allocating mechanisms to projects
A
B
Public net benefit
1. No positive incentives for
land-use change unless
public net benefits of
change are positive.
2. No positive incentives if
landholders would adopt
land-use changes without
those incentives.
3. No positive incentives if
costs outweigh benefits
overall.
F
0
C
E
D
Private net benefit
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Simple rules
A
B
Public net benefit
4. No extension unless the
change being advocated
would generate positive
private net benefits (the
practice is ‘adoptable’).
5. No extension where a change
would generate negative net
public benefits
6. … 10. see web site
F
0
C
E
D
Private net benefit
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Simple public-private framework
Public net benefit
Positive
incentives or
technology
change
Technology
change
(or no action)
Extension
No action
0
No action
(or extension or
negative incentives)
No action (or
flexible negative
incentives)
Negative
incentives
Private net benefit
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 That was based only on simple rules
 The following slides account for additional
complexities
 Costs of learning/transition
 Lags to adoption
 Partial effectiveness of extension
 Transaction costs
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Lag to adoption if no incentive (years)
Lag to adoption
30
25
20
15
10
5
0
0
5
10
15
20
25
30
Private net benefit ($/ha/year)
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Extension
Public net benefit ($/ha/year)
100
Extension
50
0
-100
-50
0
50
100
Private net benefit ($/ha/year)
Extension has learning costs, and reduces, but doesn’t eliminate, the lag to adoption
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Positive incentives
can speed adoption that would have occurred eventually
Public net benefit ($/ha/year)
100
Positive
incentives
Lag is long enough
to be worth paying
incentive
50
0
-100
-50
0
50
100
Private net benefit ($/ha/year)
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New map for positive incentives
and extension
Public net benefit ($/ha/year)
100
Positive
incentives
Extension
50
No action
0
-100
-50
0
50
100
Private net benefit ($/ha/year)
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Technology change
can move a project
Public net benefit ($/ha/year)
100
Positive
incentives
Extension
50
No action
0
-100
-50
0
50
100
Private net benefit ($/ha/year)
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BCR ≥ 1
100
Public net benefit ($/ha/year)
Positive
incentives
and/or tech
change
Tech
change (or
no action)
Extension
50
No action
0
-100
-50
0
50
100
No action (or
flexible negative
incentives)
No action
(or extension or
negative incentives)
-50
Negative
incentives
-100
Private net benefit ($/ha/year)
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BCR ≥ 2
This version is more targeted
100
Public net benefit ($/ha/year)
Even if public
benefits are high,
incentives or
extension are
only selected
over quite narrow
ranges of private
benefits.
Positive
incentives
or technol
change
Technology
change
(or no action)
Extension
50
No action
No action
0
-100
No action
(or extension or
negative incentives)
100
50
0
-50
No action (or
flexible negative
incentives)
-50
Negative
incentives
-100
Private net benefit ($/ha/year)
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Implications for public programs
 Choice of policy tool matters greatly
 Depends on individual situation of
environmental assets
 Case-by-case
 Choice of assets to protect and policy tool
should be made jointly
 Best projects have private net benefits close
to zero
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Implications for public programs
 Are we getting it roughly right in
environmental programs?
 In many cases, no
 Over-used policy tools
 Extension, small temporary grants
 Under-used policy tools
 Technology change
 Tightly targeted larger grants or regulation
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Acknowledgements
 Affiliations of the INFFER team




University of Western Australia
Department of Primary Industries, Victoria
North Central Catchment Management Authority
Future Farm Industries CRC
 Other key funders
 Australian Research Council (Federation Fellow Program)
 Department of the Environment, Water, Heritage and the
Arts (CERF Program)
 Department of Sustainability and Environment , Victoria
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