maximising benefits from mdb water resource management
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Maximising benefits from MDB water resource management. Jeff Connor, Onil Banerjee, Darla Hatton MacDonald, Sorada Tapsuwan, Mark Morrison*, Anthony Ryan. What are economics requirements of the MDBA plan?. Basin water management that: - PowerPoint PPT PresentationTRANSCRIPT
Maximising benefits from MDB water resource management
Jeff Connor, Onil Banerjee, Darla Hatton MacDonald, Sorada Tapsuwan,Mark Morrison*, Anthony Ryan
Climate Adaptation as an Opportunity
What are economics requirements of the MDBA plan?
• Basin water management that:
• optimises: economic, social and environmental outcomes (objective 3c, purpose 20d)
• Maximise net economic return to the Australian community (objective 3d(iii))
• Achieve efficient and cost effective water management and administrative arrangements (objective 3g)
Climate Adaptation as an Opportunity
But wait, there’s more…
economics (all) analysis for the plan have:
• Act on the basis of the best available scientific knowledge (21.4.b)
• Have regard for the national water initiative (21.4.c.i)
Climate Adaptation as an Opportunity
To an economist that sounds like BCA
A superficially simple concept
Benefits > Costs ?
Practice challenges:• Some benefits aren’t traded, don’t have an obvious price.
• The level of some benefits and costs, especially non-market environmental benefits, from change are uncertain
• Some benefits and costs are incurred on very different and even inter-generational time lines.
Climate Adaptation as an Opportunity
Are economist up for BCA?, will it help?
Objectives:
• Assess prospects for estimating meaningful non-consumptive use values and public good externality costs for MDBA plan BCA
• Assess prospects to utilize benefits estimates in ways that inform the dialogue on MDB water resource management
Climate Adaptation as an Opportunity
Benefits come for multiple capitals
Natural capital
Build capital
Socialwelfare
Trade off curveTrade off curve with improved institutional capital
Natural capital
Build capital
Socialwelfare
Trade off curveTrade off curve with improved institutional capital
Natural capital
Build capital
Socialwelfare
Natural capital
Build capital
Socialwelfare
Trade off curveTrade off curve with improved institutional capital Trade off curveTrade off curve with improved institutional capital
Built capital
Natural capital
Trade-off curveTrade-off curve with enhance institutional capital
Social welfare
Climate Adaptation as an Opportunity
Ecological function as capital
• cost of increasing allocation = eroded natural capital ability to provide ecosystem services;
• ·thresholds involved: • with steeply increasing, often irreversible damage to capacity to
provide valued ecosystem services;
• Some built natural capital substitution possible (e.g. water treatment)
• Often costly in capital, energy etc.
Example: • irreversible time delayed impacts of Mallee clearing • = loss of natural vegetation salinity regulation capacity• Built capital substitute $300 M in salt interception infrastructure
Climate Adaptation as an Opportunity
Can we value it? Yes we can!
Some Related Market Possibilities,
not so hard but not do yet:
• Travel cost • Simple zonal models, more site types
• (regulated v. natural flow based values, north v. south)
• Treatment and damage cost • Water quality process modeling linked to treatment and damage
costs (Salinity, BGA, salt water intrusion)
• inclusion of thresholds
• consider energy and carbon for built capital substites
At the margin
Climate Adaptation as an Opportunity
Can we value it? Yes we can!
Hedonic real estate and regional growth studies• Relate real estate value or regional growth to local
environmental attributes, all else equal• Success internationally, in Australian capital cities• Struggling in regional Australia; ways forward
• “environmental quality” indices accounting for things that determine human vs. ecologically value;
• better understand complementarity v. substitutability of natural and built capital
Climate Adaptation as an Opportunity
Can we value it? Yes we can!
• Stated preference• From individual to population WTP – what
population for regional assets?
• Discounting estimates – the individual versus social time preference perspective
• Better understanding non-use versus use values in stated preferences
• Do people really understand and honestly answer the questions?
Climate Adaptation as an Opportunity
Do people really understand and honestly answer the questions?
Ignorance
Error Irrelevance
TabooUntopicality
Incompleteness
Inaccuracy Uncertainty Absence
Vagueness Probability Ambiguity
Distortion
Climate Adaptation as an Opportunity
Benefits Transfer
Extrapolating benefit values from existing (site specific) studies to new sites
• Point studies (direct transfer without adjustment)
• Transfer with value functions (adjust for population, site attribute differences
• Meta-studies (statistical generalisation from multiple studies)
• Challenges • Even a few studies to general is from
• Studies in like (attribute) terms
Climate Adaptation as an Opportunity
Adding it all up?
Total Economic Value
Use Values Non-Use Values
Direct Use Value
Indirect Use Value
Option Value
Quasi-Option Value
Bequest Value
Existence Value
Goods & services that are directly consumed
Extractive Use: urban water, irrigation, mining useNon-extractive: tourism, recreation & aesthetics
Functional benefits enjoyed indirectly
Potential direct or indirect use value of resource in the future
Expected new information from avoiding irreversible losses
Value of leaving use and non-use values to future generations
Value from knowledge of future existence
Positive Ecosystem Services:Aboriginal cultural values, social relationshipsNegative Externalities:Greenhouse emissions related to pumping & infrastructure
-Native flora and fauna
-Ecosystem services
- Ecosystems
- Iconic landscapes e.g.
Red gum forests, Coorong
-Native flora and fauna
-Way of life preserved
-Iconic landscapes- Native flora and fauna
Climate Adaptation as an Opportunity
If we value it, does it help?
Yes: if we do it in a multiple capital, ecological dynamics framework
Answers questions:
What are costs of no change?
Where are critical thresholds, costs of crossing them?
Climate Adaptation as an Opportunity
The ultimate value proposition
Where ever the MDBA Plan lands …
Natural capital
Build capital
Socialwelfare
Trade off curveTrade off curve with improved institutional capital
Natural capital
Build capital
Socialwelfare
Trade off curveTrade off curve with improved institutional capital
Natural capital
Build capital
Socialwelfare
Natural capital
Build capital
Socialwelfare
Trade off curveTrade off curve with improved institutional capital Trade off curveTrade off curve with improved institutional capital
Built capital
Natural capital
Trade-off curveTrade-off curve with enhance institutional capital
Social welfare
MAXIMISE BENEFIT THROUGH INSTITUTIONAL INNOVATION
Climate Adaptation as an Opportunity
Maximise benefit through institutional innovation
• Build risk management strategies, not false certainty • Build support culture of hedging• Facilitate trading• Allow dam shares and carry-over• Flexible linked local / national environmental water holder• Conjunctive ground and surface, spatial temporal mngt• More sophisticated water products (options etc.)
Climate Adaptation as an OpportunityCSIRO
Questions and follow up
Dr Jeff Connor
Group Leader
Natural Resource Economics and Decision Science
CSIRO Ecosystem Sciences & Water for a Healthy Country