Market Based Instruments (MBI’s) are delivery tools that use market like approaches to positively influence the behavior of people. MBIs can be used to put a cap on a resource, encourage people's participation in an existing market and create markets where they don’t currently exist.
Some of the more common types of MBI include:
Why is the SA MDB NRM Board interested in MBI’s?
The SA MDB NRM Board’s interest in MBI’s stems from the Board’s desire to positively influence and assist the community to invest, and be involved, in best practice natural resource management. Involvement from the community in NRM covers all areas and could be thought of as the community’s time, labour or knowledge or even a financial contribution.
MBI’s are a method of giving a positive reward for proactive involvement in natural resource management. They are another ‘string to the bow’ adding to the more traditional forms of encouragement and assistance in NRM, such as incentives and grants.
MBI’s alone cannot achieve an improved environment, however the use of MBI’s within a suite of measures targeting environmental issues can, improve flexibility for participants; support creativity and innovation; increase ability to undertake action over the long term; address market failures (i.e. where the market does not favour the protection of remnant vegetation etc) and allow clear transparency of the decision making process.
What involvement in MBI’s does the SA MDB NRM Board currently have?
Currently the SA MDB NRM Board undertakes a range of projects that are not necessarily branded as Market Based Instruments but are firmly supported by MBI Theory.
BushBids – an environmental stewardship program for the Eastern Mount Loftys, is an auction based approach to providing landholders with incentives and stewardship payments to be able to undertake on-ground works such as weed and pest control, fencing and revegetation. This project started in 2006 as part of the Australian Government funded Biodiversity Hot Spots Programme. To date Bushbid's protects 72 sites (approximately 2000 hectares) across the Eastern Mount Lofty’s under ten year management agreements.
Water Allocation Plans – There are several Water Allocation Plans for the SA MDB region. These plans are based on a cap and trade approach, where the resource is measured, allocated, capped and then the ability to transfer or trade is made available through structured processes. Water Allocation Plans are strongly supported by regulatory and legislative principles, the cap and trade approach is the positive influence, encouraging a sustainable use of water, within the program.
Local Government Community Grants – Based on a tender approach Local Governments are annually supported by the SA MDB NRM Board. Council's tender their services for a variety of environment and natural resource management projects. The decision making system behind the allocation of funds is clearly communicated and flexibility is available to participants, particularly around innovative ideas.
SA MDB NRM Boards Designer Carrots Proiects
The Board was successful in January 2008 in attracting two Designer Carrot Seed Money grants provided by the Australian Government's, Market Based Instruments Capacity Building Programme.
1. Growing the Carrot – MBI Workshops for NRM Boards
Project Summary
The Growing the Carrot MBI Workshops for NRM Boards aimed to significantly build the capacity of regional organisations to utilise MBI’s for improved natural resources management outcomes. The workshops addressed a major skills and knowledge gap where regional staff have little, if any, practical experience in conducting MBI’s or in analysing their existing regional investment programs and delivery methods for opportunities where MBI’s would likely lead to improved NRM outcomes for the funds invested.
The knowledge and skills gained by regional planning staff under this project will enable them to design and implement new MBI initiatives targeted to the program areas where they are most likely to be successful.
To achieve this aim this project had the following objectives:
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To build understanding within NRM Board staff across four NRM regions of MBI’s as tools for more effective NRM investment. The regions being South Australian Murray Darling Basin (SA MDB), South East (SE), Adelaide & Mt Lofty Ranges (AMLR) and Northern & Yorke (NY).
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To share experiences of the few existing MBI systems which have been trialled in South Australia amongst the regional NRM boards.
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To tap into new and innovative MBI methodologies and projects happening interstate that are of relevance to South Australia.
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To identify the best opportunities for MBIs to deliver improved NRM outcomes amongst existing programs run through the NRM Boards.
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To utilise the knowledge gained and the expertise accessed to design actual MBI tools that can be implemented by the NRM Boards.
Workshop results
A two day workshop was held at Victor Harbour on the 19th and 20th of June 2008. This workshop showcased a number of examples of MBIs occurring across the state and involved the top experts in SA regarding MBI delivery. 26 participants from the combined NRM Boards of the SA MDB, South East, Northern York and Adelaide Mount Lofty Ranges attended the workshop along with experts and implementers of MBIs.
Participants from the day cited the following as questions they would like to have answered regarding MBIs.
- What does it cost?
- How MBI implementation might shape policy
- What have previous pitfalls been?
- How do we value ecosystem services for protection?
- How do MBI’s fit with policy tools (other than biodiversity)?
- Are we using MBIs now and can we demonstrate that?
- Network & contacts for future regional effort?
- For Researchers to understand the practical challenges for NRM Boards?
To allow increased access to the information from the workshops the presentations have been collated and podcasts of snippets from the presentations are also available below. Further information on Market Based Instruments is available from the Designer Carrots Website along with the Designer Carrots MBI forum.
The presentations from the day included:
Patrick O’Connor, O’Connor NRM – What are the MBI choices? (481kb)
Darla Hatten-MacDonald, CSIRO – An overview of MBIs and where they can be used
Andrea Cast, CSIRO – ‘Cost’ of an MBI, a thinking session (153kb)
Dr John Ward, CSIRO - Measuring participation in MBI and incentive schemes for multiple benefit conservation procurement (1.1mb)
Patrick O’Connor, O’Connor NRM – Principles of Metric design (49kb)
Michael Garrod, Adelaide Mount Lofty Ranges NRM Board – Catchment Care Tender Trail, developing an auction process for biodiversity and water quality gains (1.8mb)
Patrick O’Connor, O’Connor NRM – BushBids, an environmental stewardship program for the Eastern Mount Lofty Ranges (1.9mb)
Kate Esser & Todd Berkingshaw, Greening Australia SA – Southern Flinders Tender, a project summary (1.2mb)
2. Critical Landholder and Service Provider Constraints to Biodiversity Auction Implementation
Project Summary
The conservation of biodiversity assets and processes on privately owned land requires willing landholders with capacity to manage for conservation, knowledge of appropriate actions and resources to undertake necessary maintenance and improvement works. Reverse auctions are a type of MBI, which have been shown to be an effective method of establishing value for money conservation agreements on private land in different parts of Australia. However, reverse auction trials and projects to date have almost universally demonstrated that determining the price for undertaking conservation works is the biggest challenge for landholders. To be able to extend the use of biodiversity auctions into parts of the country where landholders have limited knowledge of the costs of undertaking conservation actions, and/or limited access to service providers and contractors to price and undertake the works, it is necessary to understand some of the constraints to auction implementation from a landholder, service provider and programme perspective.
To achieve this aim this project has the following objectives:
Objective one: Examine landholder price-setting strategies – Price setting has been identified as a critical factor affecting landholder participation.
Objective two: Examine the availability and quality of advice on prices for easily quantified components of conservation actions (eg. fencing, labour) – The availability of contractors and the quality and consistency of information provided by contractors and consultants.
Objective three: Examine the availability and consistency of advice on less easily quantified costs – less easily quantified costs include opportunity costs for forgone income, costs to cover risk for future management, taxation and social security implications etc.
Objective four: Develop recommendations for design of reverse auctions to overcome price-setting constraints
Objective five: Communicate lessons on when price-setting constraints may limit effectiveness of reverse auctions to NRM stakeholders in South Australia and interstate
Project Results:
Work on this survey is currently underway. Once the results are analyzed a case study document and full report will be added to this website.
For More Information On Market Based Instruments