LDC New Incentives Report | Page 36

such that they could be exchanged for any market-based incentive scheme to be successful to bring about land management change. There also needs to be a market place or facilitator through which those that supply a good and those that wish to buy the good can find each other at low cost( or at least at a cost that does not erode all the benefits from the exchange).

Table 6 Market failures and what this means for incentive mechanisms in the BBB

Property rights are not excludable

Property rights are not divisible

Land managers cannot exclude beneficiaries from the positive outcomes from land management change( reduced sediment on the GBR). At the same time, land managers have clearly defined and excludable rights surrounding cattle production. There is no incentive for the provision of good land management beyond the private benefit

At present, land managers cannot profit from the different types of services generated from land management( sediment reduction, biodiversity, carbon acquisition, etc)

Government provision of a financial payment to the supplier of sediment reduction begins to overcome this lack of property right.

Property rights would need to be better defined for a trading-based scheme. Investing here could facilitate trading frameworks in the future

Tools which provide information about environmental benefit exist in different forms for different services. Progressing a tool to calculate the sediment benefit from ground cover and gully remediation could progress divisible property rights which could then facilitate trading into markets for different services( credit trading) and better grant investment in the short term

Transferable property rights

Once property rights for the environmental benefits of land management change are resolved the transaction costs of exchange may be reduced, which can assist with property right transferability

Information

Potential sellers need to know what they can produce, how to produce it, who is demanding it and what it will cost to produce it. Buyers need to know who can produce what and the value of different land management actions in different parts of the landscape through time. This information is difficult to produce with scientific certainty. Information costs also exist due to the fact that success of management actions can only be measured ex-poste( afterwards) but the cost of management change occurs up-front.

Extension-style incentive schemes can assist in filling initial information gaps( on ground and to policy makers) of what actions generate what sediment reduction benefits.

More information is needed on cause and effect of land management and sediment outcomes. This is needed to support financial payments and any trading schemes proposed in the future.

Policy makers may also have a role in reducing information costs for market participants to facilitate exchange.

To address the market failure that drives the continuation of land management practices that accelerate erosion, it is recommended that the LDC:

� apply a suite of complimentary incentives to encourage adoption of improved practices; � Collect data on land condition, land management, landholder characteristics and the effectiveness of actions on-ground; and � Rigorously evaluate the uptake and impact of incentives.

SEE RECOMMENDATIONS 3A, 2 and 4 in Section 4.

34 | Landholders driving change: Exploring new incentives