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Associated off-farm economic values of saving water and restoring pressure in the Great Artesian Basin

Dr John Rolfe, R&Z Consulting
Australian Department of the Environment, Water, Heritage and the Arts, August 2008

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Executive summary

The Great Artesian Basin (GAB) is a resource that yields both public and private benefits to society. To address high rates of water usage and wastage, the Commonwealth and State governments introduced a Great Artesian Basin Sustainability Initiative, with phase 1 between 1999 and 2004, phase 2 between 2004 and 2009, and Phase 3 still to be agreed. The analysis provided in this report has focused on identifying and valuing the non-farm benefits associated with the GABSI. There are several key conclusions to be drawn from the work.

  1. There is a range of different benefits associated with the improved management of the GAB. These benefits span a number of different issues, covering economic, environmental and social interests.
  2. The benefits of improved management will accrue to both land managers (on-farm benefits) and other groups in society (off-farm benefits). Most on-farm benefits, such as improved stock water access and reduced mustering costs, are direct use benefits. There are three broad categories of off-farm benefits:
    1. Direct use benefits, such as those enjoyed by recreation users,
    2. Indirect use benefits, such as a potential reduction in greenhouse gas emissions and
    3. Non-use benefits, particularly those relating to protecting the asset, maintaining ecological and biodiversity assets, and maintaining cultural heritage.
  3. There are four main groups in society who enjoy the benefits of improving the management of the GAB:
    1. Land managers, who can gain additional direct production benefits,
    2. Residents in the GAB, who can enjoy the direct, indirect and non-use benefits involved,
    3. Visitors to the GAB who can enjoy recreation benefits,
    4. Other people in Australia who may have significant non-use values for continued protection of GAB assets.
  4. An economic framework is appropriate to evaluate whether the investment of public funding in the bore capping program is justified. The appropriate test is that the public investment contributes to net social benefit.
  5. It is expected that the level of private benefits will be larger than the level of private costs involved. Some level of net private benefit is required to generate landholder involvement, and may be a necessary engagement cost for the program.
  6. To ensure there are overall net benefits, the off-farm benefits should also exceed the offfarm costs involved, with the latter almost exclusively comprised of public investment in the program. Under this approach, the assessment framework can be narrowed to a test of whether the public investment is generating enough off-farm benefits for the program to pass a benefit cost test.
  7. The key categories of off-farm benefits associated with the protection of the GAB can be summarised as follows:
    • Direct use values for recreation and tourism
    • Option values (maintaining the asset for future use and non-use purposes by avoiding excessive use and wastage)
    • Biodiversity protection values (incorporating quasi-option, bequest and existence values) for both native biodiversity and the removal of weeds and pests.
    • Cultural heritage protection values for both aboriginal and early settlement interests
    • Ecosystem services for reduction in greenhouse gas emissions
  8. Most or many of these benefits are not traded or costed in traditional markets, so nonmarket valuation techniques are needed to assess values. No valuation studies directly relevant to the GAB could be found.
  9. A benefit transfer process has been used to evaluate similar non-market valuation exercises and to extrapolate values to the GAB case study. A limited number of other source studies has been identified that provides some indication of potential values for non-farm benefits. Key categories and estimates of benefits are shown as follows:
Valuation issue Estimated annual value Estimated annual value
Direct use values for recreation and tourism At least $0.5 Million per annum
Option values (for both future use and nonuse purposes) Some subset of $100 Million per annum (likely to be less than $20 Million per annum)
Biodiversity protection values for native biodiversity Some subset of $123.6 Million per annum (likely to be less than $41M per annum) for 12 major spring groups of unique ecosystems, plus $5.8 Million per annum for one endangered species
Biodiversity protection values for removal of pests and weeds Value included in estimates of biodiversity benefits
Cultural heritage protection values Significant, but lack of data does not allow assessment
Ecosystem services: reduction in greenhouse gas emissions Approximately $1.14 Million per annum in cost reductions to meet emission targets if the reduction in greenhouse emissions is accounted for in national targets and trading caps.
  1. The non-farm benefits of improving the management of the GAB may be as high as approximately $68 Million per annum, but the deficiency of suitable primary studies in the benefit transfer exercise means that this estimate has to be treated with caution.
  2. The only approach to achieving more accurate assessments of the non-market values associated with off-farm costs and benefits would be to undertake a dedicated study on the region.
  3. A number of knowledge gaps have been identified as a part of this study. These occur in two main groups:

Gaps in technical knowledge about management impacts

Gaps in knowledge about values of management impacts

  1. Any consideration of further investment in GABSI would benefit from appropriate studies to address technical gaps in knowledge and non-market valuation studies to estimate values of off-farm benefits in key categories.
Cover of Associated off-farm economic values of saving water and restoring pressure in the Great Artesian Basin

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