1. Public and private benefits and choice of environmental policy instruments

2. 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

3. 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

4. Possible projects
Each dot is a set of land-use changes on specific pieces of land = a project.
Lucerne
Farm B
Lucerne
Farm A
Which tool?
Incentives
Extension
Regulation
New technology
No action
Current
practice
Forestry in
water
catchment

5. 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).

6. Simple rules for allocating mechanisms to projects
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.

7. Simple rules
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

8. Simple public-private framework

9. 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

10. Lag to adoption

11. Extension
Extension has learning costs, and reduces, but doesn’t eliminate, the lag to adoption

12. Positive incentives can speed adoption that would have occurred eventually
Lag is long enough
to be worth paying
incentive

13. New map for positive incentives and extension

14. Technology change can move a project

15. BCR ≥ 1

16. BCR ≥ 2 This version is more targeted
Even if public benefits are high, incentives or extension are only selected over quite narrow ranges of private benefits.

17. 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

18. 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

19. Acknowledgements Affiliations of the INFFER team Other key funders
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