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

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  • Edwards, Claire
  • Eigenraam, Mark

Abstract

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.

Suggested Citation

  • Edwards, Claire & Eigenraam, Mark, 2011. "An empirical examination of the gains in cost-effectiveness from the use of multiple environmental outcome conservation tenders," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100545, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare11:100545
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    Keywords

    Environmental Economics and Policy;

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