Debt-for-conservation swaps Is there a case for a new economic incentive for biodiversity conservation in North Australias savanna landscapes? Romy Greiner, River Consulting, Townsville Allyson Lankester, JCU, Townsville 28 th October 2005 Research funded by Qld Department of Natural Resources and Mines, administered through Burdekin Dry Tropics Board

Concept and terminology Premise: Countries or enterprises with high levels of debt are likely to exploit natural resources at above long-term optimal levels in order to meet short-term debt servicing obligations and remain solvent Aim (international): Provide funds for nature conservation programs in third world countries while simultaneously reducing their international debt Nested concept: Debt-for-environment Debt-for-nature Debt-for-conservation

International application Involves exchanging debt by a country (payable in foreign currency) for a commitment by that debtor country to use local currency for an agreed purpose Investor purchases the debt at less than face value from creditors and redeems it in the debtor country in local currency at a higher price in exchange for the cancellation of the foreign debt Investor funds projects which enhance existing government policy or add value First implemented in 1987 (between Conservation International and Bolivia) Since then swaps >US$1 billion with over 30 countries

Principal mechanism

Relevance for Australia? Reliance on off-reserve (on-farm) biodiversity conservation across savanna landscapes Productivity increases in grazing systems due to intensification: fencing; watering points; Bos indicus type cattle; feed additives and enhancers Trade-off between production and biodiversity conservation Rapidly rising land values and increasing farm debt – specifically in North Australia Probability that farm debt will become an issue for graziers in the foreseeable future and cause additional intensification pressures, causing loss of remaining on-farm biodiversity hotspots

HTW/RMP Australian Grazing Property Index (real terms) Herron (2005), RMP (2005); The index is for grazing properties >2000 hectares

Farm capital value and debt for beef producers in central north Queensland ABARE/MLA (2005)

Farm income for beef properties in central northern Queensland and Atherton Tablelands ABARE/MLA (2005)

Beef price 1981/82 – 2009/10 ABARE (2005); MLA (2005) dressed weight equivalent; price (real) in Australian dollars; f ABARE forecast; p ABARE projection

Stakeholders in debt-for-conservation swaps (1)

Stakeholders in debt-for-conservation swaps (2)

Details of design proposal (1)

Details of design proposal (2)

Policy mix targeted at different landholder groups and biodiversity values

In summary Debt of grazing properties is looming problem Opportunity for new partnerships Debt-for-conservation swaps could usefully complement existing suite of incentive mechanisms Highly targeted - biodiversity conservation - family farms - significant debt, significant contributions Issues - willingness to participate - transaction costs - bundling - buying time

Your thoughts, please!