generalised example from North Central CMA

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Guiding Principles
SUSTAINABILITY the rate and consequences of
natural resource use are understood and
addressed guilt free
EFFICIENCY better outcomes for a given level of
effort or investment waste free
EQUITY fairness from both investor and landholder
perspectives envy free
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Key Drivers for Trial

• to contribute to broader based efforts to better
  quantify biodiversity priorities and outcomes
• to improve targeted participation in conservation
  management on private land in a demonstrably
  cost-effective manner

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Why try a new approach to public investment in
private land native vegetation ?

• Victoria has mature support programs
• (e.g. Land for Wildlife, Trust for Nature),
  however
• many existing participants have practical
  limits
• we are not engaging some important landholders
• we need to more convincingly demonstrate
• the return on investment

gt we need better resolution of cost-sharing
given a diverse range of views on public
/ private benefit gt we need better ways to
align individual actions with complex
regional NRM priorities
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Why an auction approach?

• Asymmetric (hidden) information between buyers
  and sellers is a key impediment to creating
  effective markets
• landholder best knows opportunity and service
  costs
• community governance groups (agency / regional
  authority) best placed to express public
  preferences and identify appropriate actions

• Auctions are a mechanism we can employ to
  reveal hidden information and make
  mutually-acceptable, cost-effective deals with
  landholders to better manage natural resources.
• Auctions require effective sharing of
  information

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Traditional information relationships
vegetation / habitat condition ?
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Required characteristics of an assessment
approach to Native Vegetation Quality

• provide a sufficiently reliable and repeatable
  measure that can be a surrogate for naturalness
• indicate direction, nature and amount of
  potential change
• allow comparison between different vegn types
• combine quality and quantity to calculate net
  outcomes
• can be undertaken relatively easily and quickly
• can enable exchange of information in an easily
  understood way

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Vegetation / Habitat Condition

• one Habitat Hectare
• one hectare of native vegetation which
  retains the average characteristics of a mature
  and apparently long-undisturbed stand of the same
  vegetation type
• Requires a reference point or benchmark for
  mature, natural condition for each
  vegetation type
• Offers a common currency for quality /
  quantity with each assessment providing a
  baseline and guidance on what is lacking / what
  could be improved

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Habitat Score Components/Weightings

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A pragmatic balance

• Ignored
• Intuitive (personal knowledge)
• Generic Habitat Index (hab
  ha)
• Individual habitat
  attributes
• Use of
  habitat by species

on-ground decisions
scientific research
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BushTender information relationships
THREATS
CONDITION current habitat service
BIODIVERSITY SIGNIFICANCE endangered, vulnerable,
depleted, rare
BIODIVERSITY SIGNIFICANCE conservation
status landscape priority
MGT. OUTCOME action to secure and/or improve
habitat service
MANAGEMENT
BIODIVERSITY BENEFIT (significance X mgt.
outcome) / cost
COST
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Scoring estimated level of habitat service
secured and/or improved
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Biodiversity Significance Score
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BushTender Trial parameters

• Trial focused on biodiversity values (multiple
  benefits options being considered in current MBI
  pilot)
• Landholders tender bids for
• management services that maintain or improve
  native vegetation beyond the level required by
  duty of care and currently permitted uses
• Scope of trial
• 2001/02 Northern Victoria (2 areas)
• 400 000 for landholder payments - 3 yr
  agreements
• 2002/03 Gippsland (3 areas)
• 800 000 - 3 or 6 yr agr. /- on-going protection

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• Landholders experience
• Site Visit
• advised on significance of vegetation types /
  species / locations
• can witness an assessment of quality
• discuss quality issues / mgt. options relative
  importance (score) of outcomes
• agree on proposed mgt. commitments
• Following visit, receive by mail
• map of sites
• summary of significant values
• draft mgt. plan agreement
• Return a sealed bid (total ) by mail
• If successful, receive by mail
• agreement to sign and return
• reporting / payments monitoring
• If unsuccessful, receive by mail
• advice on how close other options

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Biodiversity Benefits Index
current Biodiversity Significance Score
Habitat Services Score /

• Index used for objective discrimination between
  bidders based on conservation preference,
  price and habitat services being offered - a
  value for money measure

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BushTender Results2001/02 Northern Victoria

• Site
• assessments Auction Successful
• 115 properties 98 bidders 73 bidders
  74
• 148 bids 97
  bids 66
• 223 sites 186 sites 131 sites
  70
• area 3840 ha 3160 ha
  82
• Broadly similar result for 2002/03 Gippsland.

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Bid Diagram for Northern Victoria Gippsland
trial areas
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Agreement Types - Gippsland trial

• Successful contract type
• Three years 2.5
• Three years plus 10 years protection 0
• Three years plus permanent protection 0
• Six years 49
• Six years plus ten years protection 28
• Six years plus permanent protection
  20.5

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Some observations on the Trial
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An engaging process

• easier to get participation than some expected
• participants were reasonably representative
• similar on-farm income
• more likely to be a member of a landcare group
• ( but 18 were not currently members of
  any group )
• more likely to have participated in other
  environment programs ( but 35 had no involvement
  in previous 3 yrs )
• similar for successful
  unsuccessful bidders
• landholders appreciated the process / opportunity
• of participants, over 80 rated the site
  assessment process as good or very good
• of non-participants, 78 rated the approach as a
  good idea

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An efficient cost-effective process
In comparison to a fixed price approach, 25
more biodiversity improvement for the given
budget - also some landholders with
services of interest unlikely to have accepted
lower price
Very reasonable transaction costs, primarily due
to efficient assessment high conversion
rate e.g. 1 site ass./day, 74 lead to offers,
95 accepted Direct comparisons to other
approaches are difficult (outcomes of other
approaches not as well quantified) but appear
favourable
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Finding the balance? biodiversity
scientific detail AND practical simple
delivery to landholder
limited scientific understanding AND
inclusion of important concepts
investing in avoidance of damage to existing
assets AND active improvement of the
condition of existing assets
AND creation of new assets (i.e.
revegetation)
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Finding the balance? economics
desire for a strong focus on landholder
accountability for outcomes AND the
variable degree of control that is possible over
natural resource outcomes (opted to score service
according to estimated outcomes but base
management agreements on inputs)
allowing flexibility in pricing (for
landholders) AND control of overall
expenditure (by investor)
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Finding the balance? engagement
supporting building on existing engagement
AND engaging new landholders
investment based on the best biodiversity
outcomes AND investment based on
attitudinal change
matching landholder commitments AND
apparent capabilities
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Opportunities for learning

• During assessment
• landholders learn about the nature and condition
  of their assets and the relative priorities of
  actions
• Government gains some new information about
  distribution and condition of assets

• End of auction round
• landholders learn about place in market
• Government learns about market behaviour
  including amount of participation, relative costs

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Opportunities for learning cont.

• Between rounds
• non-participants could learn about the nature and
  benefits of the mechanism
• unsuccessful bidders could reconsider their bids
• Government could refine methods of preferencing
  (e.g. science - more sophisticated models
  measures economics - accommodation of any
  inherently different costing scenarios for
  particular assets)

• During management agreements
• landholders learn about results of actions
• Government learns about compliance and about how
  appropriate were the estimates of outcomes

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Guiding Principles
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