Apx Table C. 6 Strengths and challenges for implementation of subsidies and grant style incentives
Strengths
� Well known and understood � Flexible. Can be used for big and small projects
� Recipients usually provide some level of in kind and / or financial contribution to the project
�
Challenges
� Flat rate usually does not reward innovation
� Does not take advantage of heterogeneity of landscapes and landholders and therefore potential for gains from trade and efficiencies
� Very unlikely to engage those that have not engaged before
� Usually one off so does not support change over time
� Requires extensive information by the NRM body to know the right rate to pay
� Is not often accompanied by monitoring and compliance so often no accountability or reportability
C. 2.2
Stewardship payments
Stewardship payments are payments made to a landholder for carrying out actions that maintain current NRM values or that improve NRM outcomes on their properties. These payments are based on the premise that the landholder would be providing a public service and the level of the fee paid reflects this. The main benefit of a stewardship payment is that they can address more than one problem at a time( for example, address biodiversity and water quality outcomes concurrently) as well as passive management actions( for example, the retention of native vegetation). Stewardship payments are a clear way of acknowledging the public benefits from a private landholder’ s actions. A challenge of stewardship payments is deciding on the correct level of payment. Determining eligible activities can also be difficult, as payment should only apply to activities that exceed the landholder’ s“ duty of care”, a concept that can be hard to define.
One way to overcome these challenges is to use a competitive process such as an auction or a tender to allocate the stewardship payment. Through the competitive process, landholders are asked what work they would be willing to conduct on their property( supported by some form of management plan for this work to be conducted over a number of years) and what price they would be willing to accept to conduct this work. A fixed budget is then allocated out to landholders based on which landholders‘ bid’ offers the best value for money( ecological outcome and cost). A competitive tender cannot guarantee the extent of change but caps the cost of the incentive. A well designed and implemented competitive tender not only reveals the cost for landholders to change but can achieve greater environmental change for a fixed budget compared to a fixed price scheme. For example, the results of the BushTender trial were compared to a fixed price scheme to reveal that for the same budget, a fixed price scheme would generate 25 % less biodiversity compared with the competitive tender approach( Stoneham, Chaudhri, Ha, & Strappazzon, 2003).
There are a number of factors that need to be in place for a competitive tender to realise its potential. This incentive approach is best used when there are many sellers( so there is competition), when there is heterogeneity across properties and bidders( if all sellers are the same then a market will be no more beneficial than a fixed price scheme) and when a benefit index can be developed through which bids are assessed and ranked. Competitive tenders are not costless to
Landholders driving change: Exploring new incentives | 83