Economic perspectives on managing agricultural chemical waste
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Economic perspectives on managing agricultural chemical waste. Jeff Bennett Crawford School. Agricultural chemical wastes: What’s the problem?. Environmental contamination, health impacts Impacts beyond the farm gate Contamination, aesthetics, ‘waste’ of resources

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Agricultural chemical wastes what s the problem
Agricultural chemical wastes: wasteWhat’s the problem?

  • Environmental contamination, health impacts

  • Impacts beyond the farm gate

  • Contamination, aesthetics, ‘waste’ of resources

  • Property rights are not well-defined

  • Market alone will not generate a socially optimal level of pollution control and recycling of containers

What s the solution
What’s the solution? waste

  • Complete definition of property rights with enforcement – provide for a decentralised market solution?

  • Problems of transaction costs

    • Large numbers of ‘buyers’ each with small benefits

    • High costs of defining and enforcing rights

External collective action
(External) collective action? waste

  • ‘Top-down’, centralised process

  • Regulatory approach:

    • Statutory controls on actions

    • Compulsory recycling

    • Taxes/subsidies

    • Prosecution/criminal conviction

  • Also subject to transaction costs

    • Enforcement (the ‘chemical police’)

    • Ignores the relative costs and benefits of action with a ‘one-size-fits-all’ approach

    • Inflexible and inefficient

Or internal collective action
OR (internal) collective action? waste

  • Collective action can come from within the community rather than imposed by government

  • ‘Bottom-up’, decentralised process

  • Relies on voluntary action of individuals

  • Flexible – match actions to circumstances

  • Lower costs of coordination

  • Enforcement is decentralised

Incentives waste

  • But what is the incentive for voluntary involvement?

  • ‘Free-rider’ behaviour is problematic

  • Ostrom’s Nobel Prize (in 2010) was for identifying circumstances where voluntary action can work to provide ‘collective goods’

  • Works best with small homogeneous groups to maximise peer group pressure to comply

Rural examples
Rural Examples waste

  • LandCare

    • 6000 Landcare and Coastcare groups nationwide

  • Volunteer rural fire brigades

  • Bush Heritage Australia

    • 32 reserves; 947,000 ha

  • Australian Wildlife Conservancy

    • 20 sanctuaries; 2,775,000 ha

  • Healthy Rivers Australia

  • Mixed model
    Mixed model waste

    • All examples rely on a mixture of external and internal collective action

    • Question of determining the optimal mix to maximise net benefit (outcomes less costs of action and coordination)

      • Overall regulatory structure – rule of law

      • ‘Threat’ of external regulatory action

      • Internal ‘organisation’ on an industry level

      • Local voluntary coordination

    Shifts to external collective action
    Shifts to external collective action waste

    • Tendency to the ‘external’ end of the spectrum when voluntary action looks ‘inadequate’:

      • Eg water entitlements for the environment (CEWH)

      • Eg CFA/RFS expenditure after severe bushfires

      • Eg Flood ‘levy’

    • OR when voluntary actions look ‘successful’

      • Eg LandCare

    Crowding out
    ‘Crowding Out’ waste

    • Beware ‘crowding out’ of voluntary actions

    • Misses the spontaneous innovation and flexibility of decentralised action

    • Gains the burdens of centralised cost structures and inflexible operation

    • Opens the incentive to avoid the regulation and more transaction costs

    General policy directions
    General policy directions waste

    • Lever volunteer action with tax advantages (deductions for costs associated with environmental protection), conditional grants ($-for-dollar grants to match funds raised privately) etc to increase incentives for action (and decrease free riding)

    • Don’t throw money or regulations at the problem without careful consideration of the impacts and avoid crowding out

    Agricultural chemical waste
    Agricultural chemical waste waste

    • A regulatory base for chemicals:

      • Supply and use restrictions

      • Eg Approval processes for release, ‘ChemCert’ training and accreditation and OH&S rules in use

      • High cost, external collective action on the basis of the expected high costs of misuse that are so avoided.

    DrumMUSTER waste

    • Scheme for returning used chemical drums

    • Voluntary for product suppliers

    • Chemical users have access only for drums supplied by participating suppliers

    • Funded by a levy on drum sales (4c per litre/kg)

    • Funds used for collection facilities and activities (local councils provide collection points)

    • Over 16m containers collected since 1999

    • Levy allows a lowering of the costs to users in returning their drums (‘local’ drop-off – greater convenience) and so increases the probability of return

    • DrumMUSTER provides a combination of private good (removal of ‘rubbish’) and environmental public good (aesthetics, contamination)

    The extent of public good benefit
    The extent of public good benefit their drums (‘local’ drop-off – greater convenience) and so increases the probability of return

    • Studies of other types of recycling indicate a community ‘willingness to pay’ for recycling

    • ‘e-waste’ and household waste in Brisbane

    • Choice Modelling used to test levels of support for alternative recycling schemes

    • Allows the estimation of the public good benefit

    • Engagement with DrumMUSTER supports these results – chemical users willing to support suppliers who participate despite the cost

    Conclusions their drums (‘local’ drop-off – greater convenience) and so increases the probability of return

    • Agricultural chemical waste management requires collective action

    • An opportunity to use decentralised, voluntary (internal) collective action

    • Offers lower transaction costs and greater flexibility

    • Be cautious of expansion of policies that impose centralised (external) collective action … ‘crowding out’