Red-Tailed Black Cockatoo

E.2 Environmental Economics

Interesting prospects exist for the application of the developing field of environmental economics to the conservation of the RTBC. Economic figures are available for agricultural and woodlot land uses, and harvesting of RTBCs (macrorhynchus) is about to commence in the Northern Territory. These figures, and those that may be collected in future, give the prospect of a more adequate comparison of economic costs and benefits than is often the case.

There are two, fundamental decisions that have to be made about environmental economics:

should economic measures be applied at all?; if so
which measure(s)?

The article attached (‘Birds Are Not Biros’) urges caution in the application of economic techniques.
If a more sanguine approach is adopted, a range of techniques could be tried to capture the value of the RTBC, some of which are:

Willingness To Pay/Willingness To Accept (WTP/WTA): people are interviewed and ‘bids’ collected to establish $ values for the ability to ‘see’ or ‘enjoy’ a species etc., or to accept compensation for its loss.
Travel Cost Method: a measure of time and expenditure outlayed to participate in various recreational pursuits.
Opportunity Cost: value sacrificed (e.g. firewood or agricultural land) of maintaining species/habitat.
Replacement Cost: value of replacement habitat/species, e.g. land swaps and trade-offs yield a surrogate value for the land in question.

Measures are compared by either:

Benefit-Cost Analysis: all techniques are compared on $ values and net benefit arbitrates; or
Cost-Effectiveness Approach: $ economic values lost are compared to social/environmental benefits of preservation (not usually measured in $ terms).

Examples of results from the application of these techniques are:

EASTERN BARRED BANDICOOT (Vic): $34 million WTP to ensure its survival

LEADBEATER’S POSSUM (Vic): $40-103 million WTP
(Jacobsson et al. 1995)

GRIZZLY BEAR/BIGHORN SHEEP (USA): $21-24 per person WTP (1983) for option to observe or
know exist. (in Pearce et al. 1990)

OVENS/KING RIVERS (Vic) RECREATION VISIT: $16/per group travel benefit exceeded cost
(Sinden 1990)

HELL’S CANYON (USA): BCA yielded higher net benefit from preservation, rather than for damming
and electricity generation (largely due to rapidly rising recreation benefits over time - $900,000 current
annual value if future benefits brought forward).
(in Tietenberg 1992)

Possible Questions
1. Can RTBCs be successfully valued economically?
2. If so, what techniques could be used to measure their economic value?
3. What figures might be returned?
4. How might these RTBC figures compare with other land uses in the region?
5. How do discount rates affect how we value the future? What should the RTBC discount rate be?

Further Reading
Dixon et al. 1988. Economic Analysis of the Environmnetal Impact of Development Projects. Earthscan, London.

Jacobbson et al. 1995. Survey Methods of Valuing the Conservation of Endangered Species. 39th Annual Conference Australian Agricultural Economics Society. University of WA, Perth.

McAllister, D. 1982. Evaluation in Environmental Planning . MIT Press, Cambridge.

Pearce et al. 1990. Blueprint for a Green Economy. Earthscan, London.

Rogers, M., Sinden, J. 1993. The Safe Minimum Standard for Environmental Choices: Old-Growth Forest in NSW. 37th Annual Conference of Australian Agricultural Economics Society. University of Sydney, Sydney.

Sinden, J. 1990. Valuation of the Recreation Benefits of River Management: A Case Study in the Ovens and King Basin. Office of Water Resources, DCE, Melbourne.

Stone, A. 1991. Valuing Wetlands: A Contingent Valuation Method Approach. 35th Annual Conference, Australian Agricultural Economics Society. University of New England, Armidale.

Tietenberg, T. 1992. Environmental and Natural Resource Economics. Harper Collins, New York.

To download the "Birds Are Not Biros" article go to E2.pdf