Loving, Losing and Living With Our Environment

David Pannell

School Of Agricultural and Resource Economics,
University Of Western Australia, Crawley, WA 6009

Abstract

1. The messages of this paper are as follows.

2. When it comes to protecting the environment, love is not enough.

3. Money is not enough either, particularly if we spend it unwisely.

4. Living with some environmental degradation is the best option.

5. We need to prioritise and plan based on good science and economics.

6. We need to invest in creating innovative new solutions to environmental problems.

Introduction

This is a broad-ranging paper in which I attempt to pull together some of the lessons which have arisen from new research and analysis over the past four years. It brings together consideration of natural ecosystems, social issues, economics, physical science, commercial agriculture and politics.

For the purposes of this paper, I consider the environment to have two elements which are inter-dependent, but distinct: (a) natural ecosystems and their elements (habitat, native species, biodiversity) and (b) natural resources consumed by people or used by people in earning their income (particularly land and water).

One thing I am not going to do is focus on the impacts or the costs of environmental degradation. For one thing, we all know already that they are large; the numbers continue to get bigger and more distressing. But more importantly, I believe it is unhelpful to focus too much on the costs. They can mislead us about the nature of the problem and distract us from the appropriate responses.

The focus of the paper is land degradation, and particularly salinity. I have maintained this focus, although much of the paper is relevant to environmental issues more generally.

The paper is structured around a number of key messages, which form the section headings through the remainder of the paper.

1 Love is not enough

Since the early 1990s, the most prominent and by far the best resourced government response to environmental problems in Australia has been through programs like the National Landcare Program and later the Natural Heritage Trust. These are complex and multifaceted programs, but the essence of their aim is to tap into and support the conservation ethic of good-hearted people, and to strengthen that ethic where possible. Subsidies for environmental protection have been provided but they have been small relative to the true costs borne by participants, and so the programs have really been about people taking voluntary action and making generous sacrifices for the good of the broader community.

In South Australia in 2000, over 70,000 volunteers were involved in environmental projects through government programs. Clearly, this constitutes a considerable success story. The programs have raised awareness of environmental issues to new levels, and mobilised many volunteers into action.

Increasingly, however, it is recognised that the total scale of this response is not sufficient to address some of the serious environmental problems we face. Earlier general critiques of the assumptions and expectations of the Landcare program (e.g. Curtis and De Lacy, 1997 ; Lockie and Vanclay, 1997 ) are now supported by empirical evidence about the limited extent of change in land management which has actually occurred (e.g. Kington and Pannell, 2002 ; Curtis et al., 2000 ).

If environmental management was a high jump competition, we would not even be clipping the bar, but passing right underneath it. Furthermore, the apparent height of the bar has been rising, as new empirical evidence (e.g. George et al., 1999 ) and computer modelling studies (e.g. Campbell et al., 2000 ; National Land and Water Resources Audit 2001 ; Stauffacher et al., 2000 ) emphasise that the task at hand is even more substantial than previously thought. We are starting to appreciate that it was actually a pole vaulting contest all along, but we have not provided the competitors with poles.

Is it conceivable that a scaled up Landcare/NHT program might be able to convince more people to change their land management, and convince all of the existing participants to change by much more than they already have? Predicting what people will do is certainly difficult. Before the collapse of the South Sea Company in England in 1720, Isaac Newton was heard to say,

'I can calculate the motions of the heavenly bodies but not the madness of the people.'

Nevertheless, there is now a wealth of empirical evidence on the factors that influence farmers' adoption of innovations (see reviews by Feder and Umali 1993 ; Feder et al. 1985 ; Lindner 1987 ; Pannell, 1999 ; Pannell, 2001c ), and it includes some very clear-cut messages. Unfortunately, responding to these messages is often not straightforward. We can identify the conditions necessary to achieve adoption of an agricultural innovation but it remains difficult to meet the conditions.

In the case of land management for land and water conservation, there are many factors which have contributed to lower adoption than desired. However, in my judgement the single factor which has been most decisive and most neglected is cost. If the cost of change is low enough, low intensity programs like Landcare and NHT can make a real difference. We could all point to examples where this has occurred. On the other hand, where the cost of change is very high and greatly outweighs any private benefits from the change, the outcome is usually not hard to predict. The focus on "people issues" and "social processes" in Landcare/NHT has resulted in a complacency about the issue of cost, at considerable cost to the environment of Australia.

A related issue is "burnout". Love does not necessarily last forever, particularly if the object of our love is unresponsive, and the environment, of course, can be cruelly fickle. There is a widely observed increase in Landcare burnout amongst previously committed farmers and farmer groups (e.g. Frost et al., 2001 ) and also among some Landcare professionals. Marsh (2001) , considering the plight of Landcare facilitators who are now observing the raising of the high jump bar to pole vault heights, notes

"These developments put serious pressure on people already working in difficult, unsupported circumstances. It is important to critically evaluate Landcare, but it is also important not to devalue effort that has been expended in good faith, or lose human capacity at the individual and community level that has been built by the Landcare movement. It is also essential for Landcare to move on, in the light of a new understanding of the problem and what is required to address it. This is often more difficult than it seems."

I have argued elsewhere ( Pannell, 2000 ) that there are some ethical imperatives for government to move on, beyond the well established Landcare/NHT approach. For one, greater effort is needed to provide honest and competent information to landholders about the costs and benefits to them of the available management responses. For another, government has an ethical imperative to have environmental policies which are effective. A policy that relies on farmers complying voluntarily with ethical principles that they may or may not agree with will not be effective.

2 Money is not enough either, particularly if we spend it unwisely

One outcome of the growing appreciation of the scale of the problem has been the emergence of proposals for dramatically increased funding. The most prominent has been that of the National Farmers Federation and the Australian Conservation Foundation (based on an analysis by Virtual Consulting Group and Griffin NRM, 2000 ), which appears to have influenced Toyne and Farley (2001) . The NFF/ACF proposal's bottom line cost of $65 billion over 10 years has been widely publicised. While I am very sympathetic to the idea that the government should make a greater contribution towards protecting the environment, it is most unfortunate that this proposal should be the vehicle for pursuing it. Some might be prepared to excuse its manifest and manifold failings on the grounds that it is purely a political device, but in the present context, where we desperately need a more rational, logical and scientifically sound policy ( Pannell, 2001a, 2001b ), flawed proposals need to be criticised.

The core problem with the proposal is that it considers only the cost side of the equation and ignores the benefits. In other words, it is based on an assumption that all environmental degradation is worth fixing, so all we need to do is quantify the costs of the required measures and then seek them.

In reality, there is great variability in:

• the environmental, social and economic values at stake

• responsiveness of the environment to management

• the real cost of implementing treatments

In many of the locations which would be treated at considerable expense under the NFF/ACF plan, the values at stake are not high enough, or the environment is not sufficiently responsive to management or the real cost of management is too high, so that living with and adapting to some environmental degradation is, on balance, the best strategy for the community. For salinity, in particular, it is very easy to spend very large amounts of money in ways which generate little or no benefits. We have done just that with "large" amounts of money in the NHT program. I sincerely hope that we will not proceed to do it with "extremely large" amounts in some future program.

To properly weigh up the benefits of the land-use changes advocated in the NFF/ACF proposal, we would need to consider not only their direct costs but also their indirect costs (e.g. reduced runoff of fresh water in some catchments), the effectiveness of the changes, the value of the degradation avoided, the timing of the benefits and costs, and the alternative uses of those funds. The alternative uses include: other methods of achieving the same outcomes (e.g. engineering methods are likely to be more effective than perennial plants in some cases), other environmental problems which may be more pressing or more amenable to management, and development of new technologies for environmental management rather than relying on direct subsidies.

A determination to prevent all environmental degradation at any cost only makes sense if one is willing to overlook the potential alternative uses for these enormous sums of money, including improved services for people with mental and physical disabilities, health services, poverty alleviation, education, and so on. Of course the environment can and should hold its own in the allocation of resources, but one cannot sustain an argument that it should take precedence over all other uses of public funds. By unrealistically proposing to prevent or repair all land and water degradation, the NFF/ACF proposal sidesteps one of the most pressing needs of good environmental policy, which is that it prioritises well, based on sound science and economics.

3 Living with some environmental degradation is the best option

Prevention might be better than cure, but it is not necessarily better than living with the disease. The side effects of preventative medicine might do more damage than the disease itself. Tradeoffs of this type are an everyday reality in medicine, and they are also highly relevant to decisions about the environment. In particular, much of the forecast salinisation of land is not technically avoidable without changes in land use which are so large and costly that they would be judged by most people to outweigh the resulting benefits, which are often partial and long delayed. Two case studies illustrate the point.

Case Study: Wanilla, SA

Table 1 shows several systems of perennial vegetation analysed by Stauffacher et al. (2000) for Wanilla Catchment on the Eyre Peninsula of South Australia. All six scenarios involve establishment of perennials on well over 50 per cent of land in the catchment. Similarly dramatic changes in land use are envisaged by Stirzaker et al. (2000) for the Murray Darling Basin and by Campbell et al. (2000) for Western Australia.

Despite the massive scale of intervention involved in these management scenarios, their expected impacts on salinity are very modest. For example, the last column of Table 1 shows the forecasts of Stauffacher et al. (2000) for the Wanilla catchment. Strategies involving establishment of perennial vegetation on very large proportions of agricultural land (not just the land threatened with salinity) would prevent, at best, 10 per cent of land from going saline within a 20-year time frame. Under most of the scenarios, radical and costly changes in land use over large proportions of the catchment would prevent salinity on just two or three percent of the catchment.

Table 1: Low-recharge land use scenarios for Wanilla Catchment, Eyre Peninsula, South Australia

Source: Stauffacher et al. (2000) cited in Hajkowicz and Young (2000)

Not surprisingly, the economics of these strategies is highly adverse, with no strategy achieving the break-even benefit:cost ratio of 1. Table 2 (sourced from Hajkowicz and Young, 2000 ) shows the benefit:cost ratios for all the strategies, calculated in two different ways.

The second column includes only agricultural benefits, while the third column factors in additional impacts on infrastructure, primarily roads. In this catchment, the predominant impacts of salinity are on agriculture.

According to Read et al. (2001) , this is the most common situation around Australia. There are some catchments where the off-farm benefits of treatments for protection of public assets such as nature reserves would be very large, but these are the exception rather than the rule.

Table 2: Economic performance of the six dryland salinity management scenarios in the Wanilla Catchment, Lower Eyre Peninsula, over the twenty year period (2000-2020)

Source: Hajkowicz and Young (2000)

Case Study: Merredin, WA

In around 50 towns of Western Australia, and some towns of other states, dryland salinity is a threat to buildings, roads, gardens and railway lines. Interestingly, hydrologists recommend that the most important and effective treatment for preventing salinity damage within town sites is reducing recharge within the town site, and/or enhancing discharge in and around the town by engineering treatments, such as pumping ( Matta, 1999 ; Dames and Moore - NRM 2001 ).

In most cases, benefits from revegetation of surrounding farmland will be insufficient and/or too slow to prevent major damage to town infrastructure.

For towns such as Merredin (260 km east of Perth) which have fresh water piped to them for domestic use, the problem is worsened by the release of this imported water into the ground from garden irrigation systems or septic tanks.

A number of towns have been subjected to hydrological studies to identify systems of intervention which would be needed to reduce the impacts of salinity, and for six of them, detailed economic analyses of these interventions have been conducted by consultants.

Some of the actions recommended by the consultants are cheap and could be taken up immediately (e.g. appointment of "Water Wise" coordinators to provide advice to businesses, householders and builders).

Nevertheless, preventing the rise of groundwaters in most of the towns will require expensive engineering works, particularly pumping.

In some of the towns, the cost of the recommended works is so high that it outweighs the potential salinity damage costs which would be avoided, implying that living with the salinity damage may be more economically efficient than attempting to prevent it.

This is apparent in Table 1, which shows a summary of the economic analysis for each of the six towns. The costs shown are total costs over 30 or 60 years, discounted to present values using a 7% discount rate.

Table 3: Summary of economic analyses of salinity management for six towns in the Rural Towns Program

Source: Dames and Moore - NRM (2001)

The final column shows an estimate of the net benefits of strong intervention in the towns, based on an assumption that it would result in prevention of all costs listed in the third column. In four of the six towns, the economics of the engineering interventions studied are adverse. The two towns with positive results, Brookton and Corrigin, have the advantage of being able to make some valuable use of the pumped water. Even in Katanning, which is probably the most salt-threatened town in Australia, the costs estimated for disposal of pumped saline water into lined evaporation ponds is so high that costs more than offset the benefits from salinity prevention. Given that it is difficult to economically justify lined evaporation basins to protect the extreme example of Katanning, it seems unlikely that this approach could pay off in any less extreme cases.

Care is needed in interpreting the result that engineering works for salinity prevention are not economically viable in several of the towns. It does not imply that the town's infrastructure should be left to deteriorate without any response. Rather it implies that it is cheaper to allow groundwaters to rise and then to repair the damage caused, than to attempt to prevent that damage. Money would be spent on repairs, but in three of the towns, the cost of repairs would be no more than 25 percent of the costs of preventing the damage.

The results highlight the importance of cheap disposal of saline pumped water, and should encourage investigation of potential safe and cheap alternatives. The positive economic results for Brookton and Corrigin suggest that making good use of the water may be the key to making the engineering systems economically viable. It may be that continuing advances in desalination methods will make the pumping option attractive in more towns.

The Merredin town site is currently the subject of a major trial involving pumping of groundwater, desalination of a proportion of the water with the resulting fresh water substituting for piped water from Mundaring Dam, and disposal of saline effluent in a lined evaporation basin outside the town. Although prospects for a full-scale version of such a system to be viable in Merredin currently appear poor, much will be learnt in the trial that may improve those prospects either in Merredin or other towns.

Living with salinity

Even with major interventions, continuing salinisation of resources will occur in Australia. For example, damage to key rivers will continue for many years (centuries in some cases) even if large-scale revegetation programs are implemented ( Hatton and Salama 1999 ). If large-scale changes to farming practices are made immediately, salinisation processes already under way will take many years to reach equilibrium. Water which has been added to groundwaters over the past decades will continue to discharge over steadily larger areas in coming decades.

Therefore, regardless of what we might wish, we have no choice but to attempt to find ways to live with salinity. Farmers in Australia with large areas of salt-affected land are already trialing and implementing farming systems based on salt-tolerant plant species. These farmers are viewing saline land as a potentially productive resource, and are attempting to develop new ways to make use of it. There are a number of "halophytic" plants that will grow on saline land, and some are suitable for livestock forage. Lambs grazed on saltbush are said to have an enhanced flavour, which may provide marketing opportunities. Livestock industries are likely to be the major users of salt land, but a number of opportunities exist to develop new commercial uses for salt water:

• Saline aquaculture is attracting growing interest. A number of farmers are already stocking salty dams with yearling trout.

• Saline water can be used for electricity generation, algae (eg. for agar, b -carotene, pigments, or fish food), seaweed and, if it is not excessively saline, irrigation water.

• There is potential to process saline water to extract valuable salts and minerals, including magnesium, bromine, potassium chloride.

Where water resources are salinised, desalination as a form of "living with salinity" is an option which appears to warrant further investigation. The economics of desalinisation are more likely to be favoured if the water can be desalinated locally and substitute for water piped over long distances. Further, if prevention of salinisation of a water resource catchment involves very high costs, desalination may again be a cheaper method to obtain fresh water. I suggest that this option deserves serious consideration and investigation for Adelaide's water supply. Desalination may well form part of the best integrated strategy for providing fresh water to the city.

Other types of engineering methods to adapt to salinity may also be more efficient than salinity prevention. These potentially include engineering works for flood mitigation, and replacement of damaged infrastructure with structures designed to better withstand salinity.

4 Prioritise and plan based on good science and economics

Regardless of possible arguments about the merits of extremely large budgets being allocated to buy a comprehensive solution to land and water degradation in Australia, the reality is that funding available will never be sufficient for a comprehensive solution to all environmental problems. Therefore, the need to prioritise alternative investments in the environment is unavoidable.

It is worth asking whether the alternative investments are approximately as attractive as each other (in which case prioritisation can safely be somewhat rough and ready) or whether the alternatives are very different in their net benefits (in which case "getting it right" is extremely important). The answer is that they are extremely different. Three factors contribute to the great variability in attractiveness among possible investments in environmental conservation:

1. Great spatial variability in the ecological, social and economic values of the assets at risk from environmental degradation, with small areas having extremely high value, and large areas having relatively low value. The extraordinary concentration of high community values into small areas is a feature of the results of one element of the National Land and Water Resources Audit, which, at the time of writing, is not yet released.

2. Great spatial variability in the responsiveness of the environment to management. The Audit has, for example, categorised Australia's catchments into different groundwater flow systems, broadly grouped into local, intermediate and regional systems, which have dramatically different degrees of responsiveness to treatments ( National Land and Water Resources Audit, 2000, 2001 ).

3. Overlaid on the other two sources of variability, there is great variability in the real cost of implementing the changes in land management needed to prevent land and water degradation. For some issues in some regions, the costs are very low, or even negative (where sustainable new land uses are actually more profitable than traditional land uses). In other cases, the changes required for effective protection of the environment would drive landholders rapidly to bankruptcy. A related but additional issue is variation in the capacity of individual landholders to respond, even if the response would actually be in their interest ( Barr et al., 2000 ). Apart from the direct costs of implementing treatments, some treatments themselves have adverse off-site impacts which need to be factored in, and these too vary spatially. For example, establishing trees in high rainfall regions of the Murray Darling Basin may reduce fresh run-off and actually increase river salinity, at least in the short- to medium-term before groundwater effects are realised ( Heaney et al., 2000 ). In other parts of the Basin this issue does not arise or is not so serious.

The combination of these issues means that a small minority of locations should receive the very highest priority for funding, while for most regions, the case for funding is very much weaker. For maximum benefits overall, public investment in on-ground works would need to be somewhat concentrated into a minority of the area, rather than spread thinly over most of it. There have been processes of prioritisation and targeting involved in the government programs to date, but the recent scientific, social and economic information to emerge indicates that the targeting should ideally be much narrower than it has been.

Note that I am not saying that environmental degradation is only occurring on a small minority of locations. Identifying areas suffering degradation is not the basis for a sound process of prioritisation. It constitutes only one out of a number of elements of a sound process.

The State Salinity Council of Western Australia has over the past 18 months developed a "Framework for Investment in Salinity Management" which is intended to deal with all three elements outlined above. The framework was strongly endorsed by the state's Salinity Taskforce ( Frost et al., 2001 ) and will be trialed in 2002. There is not space to describe the framework in detail, but I will present the six principles which underlie the process which has been developed.

1. The top priority public investments are those which generate the greatest public benefits per dollar of public investment. Whether protection of a particular asset falls into this "top priority" category depends on the costs of preventative treatments, the effectiveness of the treatments and the values of the assets. "Values" include social and environmental values, as well as economic values.

2. Direct financial assistance to landholders to undertake salinity action should be strategic and should not exceed the public benefits that result. (i.e. focused on priority areas with high value and high probability of success)

3. Where the priority is high and net public benefits are sufficient, Government should be prepared to take strong action to ensure protection of the asset (e.g. Compensation or structural adjustment, regulation, monitoring to ensure achievement).

4. Where the public priority is low but there are extensive private assets at risk, the public investment should be aimed at industry development (i.e. profitable systems to prevent or contain salinity or to adapt to saline land and water.)

5. Inevitably, a targeted investment strategy in salinity management will result in an unequal distribution of investment across the state . Over time, funding priorities will change as new information becomes available and programs adapt, goals are met and new challenges arise.

6. Government must fulfill its statutory obligations for land, natural resources and functions (such as research) when it sets its priorities for investment in salinity action.

The framework is a laudable attempt to deal with a very difficult issue, and could be of great benefit to other states and the commonwealth if used to evaluate possible investments under the National Action Plan for Salinity and Water Quality, or the second phase of the Natural Heritage Trust.

Some of the lessons which have come out of the development of this framework include the following:

• Application of the framework is information intensive and has a high requirement for scientific and economic input.

• It is important to know what we don't know. For example, of the states, only WA has detailed knowledge of the biodiversity at risk from salinity ( Dillon and Lewis, 2001 ), thanks to a substantial investment in biological surveys in WA since the 1996 Salinity Action Plan. Collecting further information is one of the investment options.

• Some investment options need to be prioritised/planned at the state or national level, not the regional level (e.g. R&D).

5 Invest in creating innovative new solutions to environmental problems.

A message which is often put across is that we know what to do - we just have to make it happen. I'm not quite sure what is intended by such comment, but it seems to imply that we already have available suitable technologies for managing the environment. In a purely technical sense, it might be close to the truth.

But in a realistic and practical sense, it could hardly be further from the truth. The problem, as I argued earlier, is cost. Landholders are expected not only to bear the up-front costs of land use change, but also to forego the income from their traditional commercial enterprises on that land.

The simple reality is that the existing options for bringing perennials into very large commercial farming systems across most of Australia are so unprofitable that it will not happen on anything like the scale we need. Not even if we factor in local salinity benefits, salinity credits for external benefits, greenhouse credits and biodiversity credits will we make the current options attractive to landholders in many, and probably most, regions.

Apart from hotspots, the only real hope to prevent the majority of predicted land degradation in Australia is to develop perennial-based farming systems which are at least as profitable as existing farming systems. If we fail to do this, we are inevitably going to be living with a lot more environmental degradation.

Unfortunately, this understanding has been almost entirely absent from the policy thinking in Australia. The amount of funding allocated to efforts to create viable new management options has been a disgracefully small percentage of the environmental budget. It appears to have been assumed that suitable technologies are already available ( Pannell, 2001b ).

The attractions of greatly increasing the level of public money targeted to development of new farming systems based on profitable production of perennials include the following.

• Scientists believe that substantial improvements in the range and scope of profitable perennials are achievable. The current paucity of profitable perennials reflects a low investment in development rather than intractability of the task.

• Some of the benefits we seek are probably only achievable if profitable perennials become available (e.g. diffuse benefits such as avoidance of flood risk, protection of remnant native vegetation on farms, watertable control in regional flow systems).

• Where subsidies for perennials on farms are used, any improvement in the profitability of perennials would allow a reduction in the subsidy which needs to be provided. Less costly perennials increase the area over which economic policy instruments could be beneficial.

• In the case of woody perennials, profitable options will attract private sector finance to meet the establishment costs, which are beyond the means of many farmers.

Of course, the challenges involved in creating a new perennial-based industry are formidable. The tasks required vary from one case to another, but for shrubs, for example, they would include screening of plant species, identifying potential products, developing harvesting and processing technologies, conducting market research, establishing marketing bodies, obtaining finance, and establishing perennials over large areas.

For perennials pastures, the technical challenges of development are probably less, but the reliance on livestock to convert plant biomass to marketable products may be seen as a weakness. So this strategy involves delays and uncertainties. Nevertheless, it appears to be the only prospect for preventing many of the impacts of salinity.

As I said earlier, we are starting to appreciate that the game we are in is pole vaulting not high jumping, but we have not provided the competitors with poles. We had better start work on making the poles.

Conclusion [1]

The politicisation of the environment since the early eighties has certainly raised the level of resources available, and helped to increase awareness of the issues.

Unfortunately this politicisation has also meant that decisions about environmental management occur in a sphere where it is difficult for them to be anything other than superficial, whimsical, poorly informed, subject to pressure groups and unresponsive to changed information or changed circumstances.

The big environmental issues that we care about involve complex combinations of scientific/technical aspects from many different disciplines, as well as social, economic and ethical dimensions. In my judgement, the political and bureaucratic processes which drive environmental policy have done a fair job of dealing with the social, economic and ethical dimensions, but an extremely poor job of the scientific issues.

Profound implications of latest research are missing from the policies, either because the research is not known, or its implications are unrecognised, or the implications are politically unpalatable.

I suspect that part of the problem is the low scientific literacy of politicians and some bureaucrats. Another part is that the issues are intrinsically complex, and even few scientists are on top of the range of technical knowledge needed to design sound policy.

For example, in salinity alone, the perfect policy maker would need a working knowledge of hydrology, agronomy, engineering, soil science, ecology, geology, psychology, sociology, economics, and practical farm management.

For those of us who love the environment, who care about losing it, and wish to continue living with it, the challenge in the future is to ensure that the limited environmental budget is spent in ways which will have the greatest possible net benefit.

For the biggest of issues, like salinity, the key in my view is to stop treating the natural environment and natural resource conservation as being separate from the commercial activities which drive most of the daily lives of people.

We need to make it so that the best available land use systems for commercial production are also environmentally friendly.

Only in that way will we be able to focus the public funding for the environment into the truly critical hotspots, rather than spreading it thinly, like vegemite across an enormous piece of toast.

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[1] This paper was presented to the Getting It Right conference, an initiative of The Government of South Australia, Adelaide, 11-12 March 2002, Productivity Commission, Melbourne.