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Exploring the Cost Effectiveness of Land Conservation Auctions and Payment Policies

17 Pages Posted: 1 Sep 2008  

Jeff Connor

Government of the Commonwealth of Australia - Land and Water

John Robert Ward

CSIRO (Commonwealth Scientific and Industrial Research Organisation)

Brett Bryan

affiliation not provided to SSRN

Abstract

This article evaluates the cost-effectiveness of the Catchment Care Australian conservation auction. It provides evidence of auction cost effectiveness, and estimates cost savings from two discrete components: (i) the opportunity cost revelation incentive provided by the auction mechanism, and (ii) the improved environmental targeting capacity that results from development of a scientifically based environmental benefits assessment capacity. Results show that there are potentially very large returns associated with the latter component that have been overlooked in the literature.

Additionally, transaction costs involved with administering the case study conservation auction and the prior non-auction payment policy are compared. We find that the administration costs for the auction were greater than or equal to those associated with the prior policy. Estimates of relative cost effectiveness across policies are shown to be sensitive to the methods of comparison. In this case study, there is inelastic supply of the last units of environmental benefit. This inelasticity results in large estimated auction comparative cost advantage when the benefit metric is the estimated cost required to achieve auction aggregate environmental benefit. Estimated benefit of the auction is much less when measured as environmental benefits attainable with alternative payment policies subject to the auction budget constraint.

Suggested Citation

Connor, Jeff and Ward, John Robert and Bryan, Brett, Exploring the Cost Effectiveness of Land Conservation Auctions and Payment Policies. Australian Journal of Agricultural and Resource Economics, Vol. 52, No. 3, pp. 303-319, September 2008. Available at SSRN: https://ssrn.com/abstract=1261005 or http://dx.doi.org/10.1111/j.1467-8489.2007.00417.x

Jeff Connor

Government of the Commonwealth of Australia - Land and Water ( email )

GPO Box 1700
Canberra, Australian Capital Territory 2601
Australia

John Robert Ward (Contact Author)

CSIRO (Commonwealth Scientific and Industrial Research Organisation) ( email )

41 Boggo Rd
Dutton Park, Queensland
Australia

Brett Bryan

affiliation not provided to SSRN

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