Analytical framework

Several preliminary issues addressed in this chapter underpin the Commission’s assessment of the impacts and effectiveness of current regulations and other options for bringing about desired environmental outcomes. Section 2.1 explores potential benefits from, and the beneficiaries of, native vegetation and biodiversity. Section 2.2 discusses the notion of socially-optimal levels of native vegetation and biodiversity.

Possible reasons for private under-provision of environmental services are outlined in section 2.3. Section 2.4 considers a potential role for government intervention, and includes a discussion of the rationale for increased conservation effort on private land. Finally, in section 2.5, some conceptual issues relevant to apportioning costs of conservation effort are explored.

2.1

Benefits of native vegetation and biodiversity

This inquiry is not asked to assess the benefits of native vegetation and biodiversity conservation as such — in other words, the Commission has not been asked to conduct a full cost-benefit analysis of current regulatory arrangements. Nonetheless, the nature and causes of the environmental problem policy-makers are seeking to rectify should be understood before assessing the effectiveness and efficiency of existing regulatory regimes in promoting environmental objectives (chapters 5–7) and, indeed, whether there may be less costly approaches (chapters 8–9).

As noted in chapter 1, the Commission is required to assess legislation (in Australian Government, State and Territory jurisdictions), the ‘primary purpose of which is the regulation of native vegetation clearance and/or the conservation of biodiversity’ (box 2.1).

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Box 2.1 Defining native vegetation and biodiversity

Native vegetation is defined differently in different jurisdictions (box 3.2) but typically is defined to include naturally occurring local vegetation (in some cases defined as vegetation that existed before a certain date), including in some jurisdictions native grasses and aquatic vegetation. The definition of terms such as ‘remnant’, ‘regrowth’, and ‘thickening’ is more contentious (see appendixes B–J).

The United Nations has defined biodiversity as:

… the variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems. (United Nations Convention on Biological Diversity, Article 2, 1992)

An almost identical definition is used in the Australian Government’s Environment

Protection and Biodiversity Conservation Act 1999.

Potential benefits of native vegetation and biodiversity that have been suggested in the National Framework for the Management and Monitoring of Australia’s Native Vegetation (NRMMC 2001) and by various commentators are outlined in box 2.2.

Box 2.2 Potential benefits of native vegetation and biodiversity

Native vegetation

• Fodder; food; seeds; wildflowers and plants; medicines; timber, including for fencing and firewood; shade; shelter; honey production; pollination and pest control services

• Tourism, recreation and visual amenity

• Habitat for native fauna

• Soil and water protection (eg prevention of salinity, soil erosion or acidification)

• Biodiversity

• Carbon sinks and/or storage

• Climate

• ‘Existence’ and ‘option’ values

Biodiversity

• Health of ecosystems — their ability to maintain and regulate atmospheric quality, climate, fresh water, marine productivity, soil formation, cycling of nutrients and waste disposal

• Resilience of ecosystems — their ability to respond to and recover from external shocks such as drought, flood, and climate change

• Cultural values

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• not all native vegetation in all locations will deliver all or even some of these benefits to the same degree; and

• in some cases, the link between native vegetation and the potential benefit is reasonably straightforward (for example, the provision of shade, fodder), though, as discussed below, not always easily measurable (for example, visual amenity). In other cases, such as the link between native vegetation and biodiversity and climate, the nature of the connection is very complex and not fully understood. For example, what levels and/or types of native vegetation and biodiversity are required to deliver healthy genetic, species and ecosystem diversity? Perrings et al. (1992, p. 201) observe:

… the problem of biodiversity conservation … requires neither the preservation of all species, nor the maintenance of the environmental status quo. Indeed, the rationale for focusing on biodiversity conservation is precisely for the creative evolution of ecosystems subject to stress from economic activity.

In the absence of a clear understanding of biodiversity functions, in practice, native vegetation and biodiversity policies often seek to preserve all current species or all existing native vegetation or even to restore native vegetation to levels thought to have existed in the past. Such approaches, which seek to preserve a ‘snapshot’, are likely to fail because ecosystems are dynamic and will change over time. Hence, a key issue to be resolved for policy intervention designed to promote biodiversity, is sensibly defining what that means in practice.

It is also feasible that some of the listed benefits could be provided from sources other than native vegetation, possibly more efficiently and effectively. For example, shelter and shade, timber and firewood, carbon sequestration, and prevention of soil erosion, could be provided by non-native vegetation. Prevention of soil erosion and degradation may also be facilitated via application of low-impact farming techniques such as minimum-till cultivation. For example, Pannell (2003) suggests that in future, salinity in Western Australia may be prevented efficiently by planting deep-rooted, perennial crops. Graham Davies (sub. 9) made a similar point.

Who benefits?

Some of the potential benefits generated by native vegetation are so-called private goods — that is, the benefits are captured by property owners or leaseholders. Native vegetation can provide a range of inputs to the production process (for example, fodder for stock, timber for fencing, reduced soil erosion), which improve agricultural output yields or product quality, as well as services (for example,

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native vegetation may be harvested by landholders as a commercial crop in its own right (including timber, seeds, oils, wildflowers).

Some benefits, such as visual amenity, prevention of soil and water degradation, habitat for fauna that provide pest control and pollination services, may accrue to a landholder but are also likely to extend to neighbours and people residing in the region; visual amenity and recreation benefits may accrue as well to visitors to the area. Benefits of protection of habitat, carbon sequestration and biodiversity will extend still more widely to all in the community, possibly globally. Many eco- system services and non-use or ‘existence’ benefits, almost by definition, accrue to those who are ‘off-site’.

As discussed below, it is precisely because individual landholders (or their children) cannot capture all of the benefits of native vegetation and biodiversity — that is, because of the ‘public good’ characteristics of some benefits or because of the inherent uncertainty that attaches to them — that they will tend to provide less than is considered desirable from the wider community’s perspective (box 2.3).

Box 2.3 Externalities and public goods

Externalities refer to situations where the actions of an individual affect the welfare of one or more other individuals and where those effects are not the result of a market transaction or bargain between the parties. These ‘spillover’ effects may be positive or negative. If they have a positive effect, it may be desirable to encourage more. If the impact is negative, social welfare may be improved by a reduction in the harmful activity. Externalities arise because of the infeasibility of payments to encourage positive spillover effects or to discourage negative spillovers. Where external effects are confined to a relatively small area or a small number of individuals, they can be ‘internalised’ in a variety of ways without government intervention. For example, neighbours can negotiate, local communities can form ‘clubs’, firms can integrate. Where very large numbers of people are affected by externalities, private solutions may not be feasible. The high costs of negotiating solutions and the problem of ‘free- riding’ (that is, some people not paying their share), are two possible reasons.

Public goods may be considered a special type of externality where equal amounts are available for consumption by everybody in the community simultaneously (it may be valued differently by different individuals). Because consumption of the public good (or bad) is ‘non-rivalrous’ (consumption by one person does not affect the amount available to others), and ‘non-excludable’ (people cannot be prevented from consuming the good (or bad)), private provision is likely to fall short of the social optimum because payments for services cannot be enforced.

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