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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:What’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?
  • 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?
  • ‘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?
  • 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
  • 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
  • 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
  • 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
  • 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’
  • 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
  • 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
  • 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.
  • 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
  • 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
  • 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’
DrumMUSTER provides a useful example of a voluntary initiative that is cost effective and achieving environmental goals
  • What else could be done through leveraging of internal collective action rather than imposing external regulations?