How do you choose the best market-based incentive?
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Market-based incentives can be very useful in encouraging landholders to participate in natural resource management. While not appropriate for every NRM situation, when used properly to target specific problems, they can be very effective.
12 questions to answer before selecting a market-based incentive
A market-based incentive will perform best if you put careful thought into selecting the right one and tailoring it for the specific situation. So, before choosing a market-based incentive, try to answer the following 12 questions:
1. What is the NRM problem that needs addressing?
Determine the specific problem(s) in your region, assign priorities, and establish whether spending money on the problem(s) will lead to improvement.
For example, is overgrazing resulting in water quality problems on a property? If so, you might offer the landholder an incentive to solve the problem by fencing the water source or improving the property’s water infrastructure.
2. What are the objectives?
In most cases, the objectives will not only concern NRM—you may also have social and economic objectives that you need to achieve. These objectives may conflict. For example, economic efficiency in an auction for conservation contracts may conflict with the desire to engage landholders.
Acknowledge conflict if it exists and allow flexibility in the incentive program.
3. What is the current management situation?
Look at how properties in the target area are currently managed and identify possible actions that could help achieve NRM objectives. For example, changes in land management (such as the adoption of more efficient irrigation systems) may reduce salinity problems.
4. Who are you targeting?
Your chosen incentive must be designed to positively affect the behaviour of the targeted individuals or groups. Find out what your target group needs in order to participate, and try to meet those needs by tailoring your incentive.
For example, you may want to encourage changed grazing practices, but landholders may be concerned that the changed practices will hurt them financially. In this case, your incentive package should aim to clarify the benefits of changing grazing practices.
5. What actions are the responsibilities of individual landholders?
Landholders should not be paid to undertake actions that are required by legislation. For example, it's expected that landholders revegetate their properties to gain private benefits such as soil retention, windbreak, and shelter for stock.
However, revegetation may also contribute to an area's biodiversity. This public benefit element of revegetation may warrant the use of incentives to encourage its establishment.
6. Can your group and the local community design and deliver the incentive?
Identify the availability of skills, funds and community willingness in the planning stages. A community that pays low rates, for example, may not be willing to accept a rate rebate as an incentive, but might be willing to enter into an environmental stewardship contract.
7. How many potential participants are there?
The number of people participating in an incentive can affect its success. Incentive mechanisms that rely on competition to generate an NRM benefit at the lowest economic cost, such as competitive tenders, are more appropriate to situations with greater numbers of participants.
8. Is the problem contained in a particular area or is it widespread?
The scale of the problem will affect which incentive you choose. When a problem extends beyond regional boundaries, such as the spread of an invasive species, you will need to cooperate with other groups.
9. How much control over the process will you need to exert?
Some incentives require more control than others. For example, a weed spread by watercourses may need to be tackled by the upper catchment before trying to deal with it in the lower catchment. In this situation, directed grants and subsidies may be best.
10. How much biophysical information is available on the problem?
The amount of scientific knowledge available should inform your incentive choice. To avoid an unintended environmental loss, you should consider the environmental impacts of an activity. Remember, the cane toad was intentionally introduced into Australia to control the cane beetle, and is now one of our worst feral pest species.
11. Is there a set funding timeframe?
The answer is probably 'yes', because some regional NRM bodies are not guaranteed funding for longer than a few years. Some incentives need longer time frames to operate than others, so consider this when choosing your incentive.
12. Is the incentive mechanism likely to be acceptable to the community?
An incentive is more likely to succeed if the community accepts it. The successful Burdekin Dry Tropics' Landscape Linkage project, which trialled the use of market-based incentives among regional landholders, used workshops to find out whether landholders would be willing to participate in auctions.
For more comprehensive answers to these and other questions, refer to the following guide:
Related topics
- What incentive mechanisms are available for NRM change?
- How do you design a competitive tender?
- How do you design metrics?
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Last updated 07 January 2009