Incentivising Farm Dam Enhancement: Barriers, Motivations, and Market Potential in Australian Grazing Systems

Abstract

Enhanced farm dams—managed to limit livestock access and restore vegetation—offer significant environmental benefits, including improved water quality, increased biodiversity, and reduced greenhouse gas emissions. However, the uptake of these practices remains low, largely due to high upfront costs and the absence of incentive mechanisms to reward the delivery of public goods. This study uses a double-bounded dichotomous choice contingent valuation survey to estimate livestock farmers’ willingness to accept (WTA) payments for farm dam enhancement under a hypothetical incentive program aligned with Australia’s carbon credit market. Based on responses from 356 cattle farmers in Victoria and New South Wales, 80% of participants were willing to participate in a scheme for some level of payment, with a mean WTA of AUD $1,370 per dam per year. Willingness to participate was higher among farmers facing dam management challenges, motivated by environmental stewardship, and operating smaller farms. Carbon credit revenues from methane abatement under typical conditions (AUD $128-$324 per dam per year) are insufficient to meet the average WTA. Strategies to increase financial feasibility include bundling farm dam enhancements within whole-of-farm carbon methodologies, reducing transaction costs through aggregation, and providing complementary public subsidies (e.g., biodiversity credits). These approaches and efforts to build trust and reduce perceived risks will be critical to scaling farm dam restoration through environmental markets.

Keywords: agri-environmental scheme, carbon farming, Agriculture, rural, Sustainable farming, regenerative