AGSIP 13 – Resource Economics John Rolfe and Jill Windle Central Queensland University Developing...

AGSIP 13 – Resource Economics

John Rolfe and Jill Windle

Central Queensland University

Developing a benefit transfer database for NRM issues in

Queensland


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


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


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


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


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 – modellingb)Private (farm level) costs – revealed (MBIs)

• Public benefits will include:a)Nonuse values are important as well as use valuesb)Remote as well as local communities have

preferences for regional improvements


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


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


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


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


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”

0102030405060708090

100

Use value Option value Bequestvalue

Existencevalue

Quasi-optionvalue

perc

enta

ge

Brisbane

Toow’mba

Mackay

Rockh’ton


Survey designSurvey Region/catchment

areaPopulation sampled

NRM improvements

Regional survey S.E. Queensland Brisbane SoilWater Vegetation

Four separate regional surveys

Murray Darling Toowoomba

Mackay Whitsunday Mackay

Fitzroy Rockhampton

Statewide survey S.E Queensland Brisbane SoilWater Vegetation

Four regional areas included in one survey

Murray Darling Toowoomba

GBR – coastal areas Mackay

GBR – inland areas

Fitzroy longitudinal survey

Fitzroy Brisbane Water Vegetation

One regional survey Rockhampton


Regional areas


Regional choice set example


Summary of annual values Soil Water Vegetation

$ value of each 1% improvement

Brisbane – South East Queensland

Regional model 3.05 3.42 3.01

Statewide model1 5.34 4.99 7.69

Toowoomba – Murray Darling


Mackay – Mackay Whitsunday


Rockhampton – Fitzroy Basin


Pooled models


Statewide model 4.64 6.62 4.54


Coefficient values for attributes by different respondent classes

Latent class modelLatent class model

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

Class 1 24%

Class 2 17%

Class 3 39%

Class 4 20%

coef

fice

nt

Soil

Water

Veg


Values over time in the Fitzroy basin

00.5

11.5

22.5

33.5

44.5

5

2000 2001 2002 2003 2005 2000 2001 2005

Brisbane Rockhampton

$ p

er 1

% i

mp

rove

men

t

0

0.02

0.04

0.06

0.08

0.1

0.12

$ p

er 1

km i

mp

rove

men

t

Vegetation Waterways


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%


Outcomes of bid process in FBA


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


Estimating valuesRockhampton and

Fitzroy Basin1 Brisbane

Population2 193,722 1,508,161

Average household size 2.5 3.3

No of households 77,489 457,018

Survey response rate 72% 50%

Valid households 55,792 228,509

Household value for an improvement in 13,647ha

$0.43 $0.74

Total value - $/year $23,991 $169,097

Total value - $/year $193,087


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


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


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


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


Comparing priority setting with a benefits index

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

1 11 21 31 41 51 61 71

$/T

BS

3

0

0.5

1

1.5

2

2.5

3

3.5

Lev

el o

f P

rio

rity

Relative bid value Priority assigned


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 John Rolfe and Jill Windle Central Queensland University Developing...

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