An empirical examination of the gains in cost-effectiveness from the use of multiple environmental outcome conservation tenders

The production and consumption of environmental goods and services are subject to many of the problems associated with public goods. Due to their non-rival and non-excludable nature, incentives for individuals to invest in their production are often absent. To address this market failure, government agencies have used a number of policy mechanisms to procure the supply of environmental outcomes on behalf of society. Recently, conservation tenders focussing on private land have been a favoured policy instrument used by many government agencies to purchase environmental outcomes in the public interest. The majority of these environmental tenders have focussed on a single environmental outcome. It is contended in this paper that multiple environmental outcomes tenders can be more cost-effective than single outcome tenders as decisions are based on information regarding a wider set of environmental outcomes – a more complete picture. Tenders that focus on more than one outcome capitalise on economies of scope in the production of environmental outcomes, as well as incorporating synergies and trade-offs into decision making. In this paper the results from a synthetic analysis of the benefits derived from running multiple-outcome tenders are compared to single outcome tenders, to empirically estimate potential cost-effectiveness gains. The baseline policy of running a multiple-outcome tender is compared to three alternative policy options: running a single outcome tender, running three single outcome tenders simultaneously, and running three single outcome tenders consecutively. Results indicate that significant cost effectiveness gains can be made by running a multiple-outcome tender compared to the three policy alternatives. These results are analysed, and advantages and limitations of applying multiple-outcome tenders in the field are discussed.