Introduction

There is a risk that native vegetation conservation in NSW will go the same way as dairy industry reform - the impacts on farm businesses and, in this case farm ecosystems, will only become apparent after the event.

Real outcomes are not measured in terms of areas protected, seedlings planted or the length of fencing erected. These are measures used by agencies to justify spending on conservation programs and to appease urban voters. The measures say nothing about improvements in ecosystem function or farm business performance. They do not provide insights into incentives needed to deliver self-perpetuating conservation activities as opposed to activities which are ad hoc, too small to make a difference and which are tied to short term funding arrangements.

This first article examines the problems of under-investment in native vegetation conservation and sets out the ‘theory’ behind the native vegetation conservation issue. Later articles will discuss the importance of conservation on private land and the apparent lack of an analytical framework for assessing the impacts of conservation options, including problems relating to the goal of ‘sustainability’.

Under-investment in native vegetation conservation

Current conservation and re-vegetation efforts fall well short of the mark in many Australian farming areas. Some scientists are advocating the revegetation of 30-50% of farms in catchments where salinity is a major problem.

In the past 18 months, approximately 71,000 ha of private native vegetation in NSW has been subject to conservation management agreements at a cost of $7.78 million to the state government (or about $109 per hectare). This money has been spent on fencing, management and tree planting in areas set aside under conservation management agreements. This represents around 1.4% of the total area under private native regrowth forests in NSW which Mott (1996) estimates to be around 5.2 million hectares. It represents a much smaller fraction of the 84.6 million hectares under agricultural production in the Murray-Darling Basin (a substantial proportion of which is in NSW).

Socially desirable and ecologically useful levels of native vegetation conservation on private land cannot be achieved while the social benefits of conservation are ignored and the private costs of meeting those benefits remain uncalculated. The distinction needs to be drawn between the various ‘goods’ which flow from conservation activities as these have critical policy ramifications for achieving higher levels of conservation. In broad terms, these goods can be partitioned into:

1. Private goods (or private costs and benefits) - these are the costs and benefits from conservation which occur within the boundary of the farm business. They can include the cost of fencing off vegetation or the benefits of improved and sustained productivity from ameliorating or avoiding salinity. There are markets for these ‘private goods’ and their value is readily measured in dollar terms.

2. Public goods - these are not owned by private individuals and there are no clear ‘property rights’ or market mechanisms to trade any rights. Farmers with native vegetation on their farms supply these goods free of charge (for example, the positive effects of vegetation on air and water quality) and in general, farmers cannot exclude the public from enjoying them. Placing a dollar value on these goods is challenging and economists have devised methods for estimating what the public is willing to pay to retain these goods, so providing a valuation of their worth to society (though many would argue these valuations are questionable).

3. Externalities - refer to the impacts of native vegetation management on other individuals. For example, clearing vegetation may have impacts on neighbouring farms. The impacts might be negative (eg. contributing to salinity) or positive (eg. less harbour for feral animals such as foxes). Externalities may extend beyond neighbouring farms. Water quality in the entire catchment may be reduced as a result of over-clearing and salinity problems often appear some distance from the areas cleared. The point about externalities is that those impacted negatively are not compensated for their loss and those impacted positively do not pay for the benefits they receive.

Together, these later two categories provide a measure of the ‘social’ value placed on vegetation conservation. It is the social value which, when balanced against the private value of conservation, provides insights into how the costs of conservation should be shared and how much investment in conservation is sensible in light of the likely benefits to be derived.

Market failure

The crux of the private versus social goods issue is that the area of native vegetation conserved by a private individual (say a farmer) may not be optimal in a social context.

That is, the farmer may have weighed up the costs and benefits of conservation and estimated how much native vegetation to retain but in doing so, has not fully accounted for the desires of society in general, nor any externalities that might occur. The result is under-investment in native vegetation conservation from a broader social perspective.

The concepts of ‘stewardship’ and ‘duty of care’ are a part of this issue, but in a practical sense, the farmer must trade-off these goals against the need to run a profitable business. Because the links between farm management options, conservation, ecology and business performance are tenuous at best, under-investment in resource conservation is likely.

In economic terms, this is often referred to as ‘market failure’. The markets in which farmers operate may not reflect the value of public goods and externalities, so they fail to provide a level of native vegetation conservation which is socially optimal.

The sticking point is that some members of society are of the opinion that farmers should account for public goods in their decision making. This demonstrates a lack of understanding of the costs involved and overestimates our knowledge of the links between farm management options and ecological performance. Uncertainty about the effects of conservation on future business performance reduces the incentives for farmers to conserve larger areas of vegetation. This is exacerbated by short-term financial imperatives. Those advocating greater farmer investment in conservation also need to be aware that past government policies encouraged and often demanded the removal of public goods (ie. native vegetation) from private land.

Yet, the notion that farmers should pay seems to have percolated into the regulatory environment in NSW as a by-product of a general leaning toward regulation, rather than by design. A worrying aspect of the current approach is that there are few resources available to explore more fully who bears the costs and benefits of native vegetation conservation and who can afford to pay.

Some work has been carried out to try and come to grips with this issue. In Victoria and NSW, Lockwood et al (1998) examined native vegetation conservation on farms and found that more conservation-oriented regimes would produce a net cost for many farmers and that these economic costs are a major barrier to conservation. Yet when societal costs and benefits were added to the equation, even with significant government investment, the result was a net economic benefit from more conservation. This is important information in determining who bears the costs, who benefits, who should pay, how incentives might be devised to raise conservation levels and how alternative conservation options rate in terms of their private versus public affordability.

The role of government

Market failure is viewed as a trigger for government intervention. The Government’s role is one of correcting market failure by introducing mechanisms to shift the level of (say) native vegetation conservation towards what society views as the optimum.

Governments have a number of mechanisms at their disposal to achieve this aim including:

Creating property rights and markets (eg. tradeable water allocations) to ensure natural resources are used in an economically efficient manner;

Introducing cost-sharing systems to encourage conservation;

Setting up arrangements where those who suffer negative externalities are compensated. Compensating farmers for the negative externalities (eg. feral animal harbour) they suffer from public conservation areas like national parks is notably absent from the debate;

Imposing charges or taxes to discourage activities which create negative externalities or provide subsidies or tax breaks for positive externalities;

Setting up funds and arrangements for the development of dedicated conservation areas;

Legislating and regulating to curtail certain activities (eg. land clearing).

With respect to native vegetation management on farms in NSW, regulation has been the preferred instrument, initially via SEPP 46 and currently through the Native Vegetation Conservation Act.

Cost-sharing arrangements to create private reserves on farms have also been used, but the primary instrument to meet social expectations about native vegetation conservation appears to be the Regional Vegetation Management Plans, being devised by Regional Vegetation Management Committees. The community consultation process on which these plans are based has revealed a preference amongst landholders for self-regulation, stewardship, education and incentives, yet early indications are that ‘command and control’ regulation will play a lead role.

While regulation may preserve what is left, it will do little to encourage the vast amount of re-vegetation which is required to address major environmental problems in some areas. It also may limit the scope for modifying plans as we learn what works and what doesn’t on a regional basis.

There is also the paradox that over-investment in government regulation in response to perceived market failures may actually promote other market failures. This occurs where regulators consider that the impact of their regulation is costless. In the case of native vegetation, regulation may impose costs on private landholders . Unless these costs are accounted for, over-regulation is a real danger. At present, it seems doubtful that the Regional Vegetation Plan process will account for the costs of any additional regulation.

The question that needs to be examined is whether a revamped regulatory approach based on community developed plans will provide the best social outcomes? To date, the regulatory path has been a spectacular failure in terms of expanding the area of native vegetation.

It is possible that Regional Vegetation Plans will impose a range of restrictions on farmers which have an unknown cost and where the ecological outcomes are uncertain and perhaps unmeasurable. It is almost certain that the community committees devising these plans simply do not have the resources or the capacity to grapple with these issues in such a short time-frame.

Take home message

A real concern with the native vegetation conservation process in NSW is that the costs and benefits of Regional Vegetation Plans will only become apparent after they have been implemented.

Providing the right environment for sufficient native vegetation conservation on private land to address major ecological problems will take much more work than plans based on community consultation alone. As identified by commentators such as Binning and Young (2000), well designed programs take time to develop, often in excess of ten years.

Unless both the private and social impacts of vegetation management options are considered, there is a significant risk that a regulatory approach will dominate and that the total level of conservation will be smaller than could be achieved with incentives to make conservation affordable and which demonstrate positive ecological links to the farm business. An over-investment in regulation may impose significant costs on private landholders.

The current suite of performance measures for evaluating conservation programs will do little to convince farmers to protect more native vegetation on their farms. The measures say virtually nothing about ecological or farm business performance, so will not enter into key farm management decisions which impact on native vegetation.

Some commentators have stated that providing the right mix of tools to achieve conservation requires an understanding of environmental objectives, using transition arrangements to address distributional impacts and using good judgement. Yet good judgement alone is not enough - it must be supported by equally good analysis.

References

Binning, C. and Young, M. (2000), Native Vegetation Institutions, Policies and Incentives, Synthesis Report to Land and Water Resources R&D Corporation and Environment Australia National Program on Rehabilitation, Management and Conservation of Remnant Vegetation, Canberra, December.

Lockwood, M., Walpole, S. and Miles, C. (1998), Economics of remnant native vegetation conservation on private property, LWRRDC research report 2/00, Canberra, October.

Mott, I. (1996), Land Use Change and Forestry - Did the National Greenhouse Gas Inventory Committee get it right? Australian Forest Grower, Vol. 19, No. 4, special lift-out section.