Biodiversity publications archive

Reimbursing the future: an evaluation of motivational, voluntary, price-based, property-right, and regulatory incentives for the conservation of biodiversity

Biodiversity Series, Paper No. 9
M.D. Young, N. Gunningham, J. Elix, J. Lambert, B. Howard, P. Grabosky and E. McCrone
CSIRO Division of Wildlife and Ecology, the Australian Centre for Environmental Law, and Community Solutions
Biodiversity Unit, Department of the Environment, Sport and Territories, 1996
ISBN 0 642 24429 4

Chapter 2: Threats, instruments and mechanisms

This chapter first summarises the relationship between fundamental and underlying causes of threats to biodiversity values and the nature of associated threatening processes, and then identifies the instruments and mechanisms used to deal with these issues. Both international and national experiences are drawn upon. This is necessary in order to provide the background against which to develop this report.

Throughout this report we stress the need for a new framework which will overcome existing antagonism between those who seek to attribute blame for biodiversity loss and those who feel they bear that blame unjustifiably. This new framework is developed around the notion of constructive partnerships among policy makers, those most affected by biodiversity policy, and those who seek to conserve it. The current suite of biodiversity problems are often a direct consequence of decisions made by people other than the immediate land managers. Those who manage and use Australia's natural resources seek recognition that the whole community must take responsibility for the causes of biodiversity loss and the processes and outcomes for biodiversity in Australia. Amongst other things, this new framework needs to recognise that much of the knowledge required to address Australia's biodiversity problems rests with the people who use it on a daily basis, while the power to do anything about it often rests with those who have no immediate contact with the problem.

Within this context, we will consider the nature of problems faced in conserving biodiversity and ensuring its ecologically sustainable use. More particularly, we outline the factors that may ultimately threaten biodiversity values, and we identify the current causes of those threats. These factors of influence are developed sequentially from what are termed:

Finally, we provide an overview of the nature of the instruments and mechanisms being used to reduce threats to biodiversity and to encourage its ecologically sustainable use in Australia and in other countries seeking to develop off-reserve strategies for conservation. More details of the range of approaches being used in Australia and overseas can be found in Appendix 1.

Whilst the direct actions (threatening processes) are the most visible causes of biodiversity loss, it is also important to identify the underlying and fundamental causes of biodiversity loss (see Table 2.1). As observed by the OECD,20 policies that attempt to conserve biodiversity without addressing the underlying pressures that cause biodiversity loss cannot succeed in the long run. As long as the pressures remain, the incentive to engage in activities inconsistent with biodiversity conservation remains.

2.1 Fundamental causes

Most of the fundamental causes of biodiversity loss are highly sensitive, complex and deeply embedded in the ethical, cultural and institutional arrangements that determine the nature of Australian society. Taking a broader international view, the OECD21 suggests that the fundamental causes of declines in biodiversity values include:

These causes are not easily rectified, nor do many opportunities remain for further development which do not impact on the environment. However, one fundamental cause that is more easily addressed is a general lack of knowledge about the role of biodiversity in maintaining ecosystem functions, its role in maintaining ecological processes and the options that it preserves for future society.

The National Biodiversity Conservation Strategy notes that one of the greatest barriers to biodiversity conservation is our acute lack of knowledge about many of the species and ecosystem processes. Because of this lack of knowledge, we may well lose attributes without ever knowing that we had them. Some of our land use and management practices have not yet been fully evaluated in terms of their impact on the environment, so their impacts on biodiversity values remain unknown. As well as not knowing what we have, in many cases, knowledge about how to manage what is left is deficient. Generally, there is a paucity of knowledge and guidelines about ways to maintain biodiversity values in off-reserve areas.

Table 2.1: Fundamental causes, underlying causes and threatening processes
Fundamental causes --> <-- Underlying causes --> Threatening processes --> Outcome
Population Market failure Ecosystem & habitat loss Species extinction
Population growth Property-righ failure Ecosystem & habitat decline Lost ecological function
Inequality Institutional deficiency Direct species loss Lost ecological community
Economic growth Political dificiency Gene loss  
Poverty Information failure   Loss of value
Knowledge deficiency   Climate change Loss of options

2.2 Underlying causes

Underlying causes of biodiversity loss arise from the failure of markets to value all biodiversity considerations, incomplete specification of property rights, poor institutional arrangements, failure to distribute information, inadequate resources allocated to biodiversity conservation, and a general lack of awareness of the value of biodiversity. Often the gap between market and social values is not known.

Another underlying cause is the repeated economic pressures placed upon those who derive income directly from our marine and land based resources. For many – and perhaps most – farmers in an environment where terms of trade are and have been declining for a significant time, there is no money left to maintain biodiversity. Often the awareness and the will to act is present, but in many cases financial pressure places rural businesses in a position where survival is necessarily the first priority. Consequently, expenditure to address land degradation and to protect biodiversity may in the short term be reduced.

A further range of causes arise from what economists call perverse policy effects. These are the indirect effects of policies designed to achieve other objectives. Some of these are caused by policies under Australian control but some, such as international trade policies, are very difficult for Australia to deal with on a unilateral basis. Others, like our taxation policies, resource pricing policies, and land development policies, are within our control and are clearly part of the terms of reference of this report.

One example of a perverse policy effect, which has now largely been removed, is the range of taxation concessions offered to farmers to encourage them to develop land for agricultural purposes without consideration of its effects on biodiversity. During the 1960s, for example, double depreciation arrangements coupled with an ability to carry forward tax losses in perpetuity meant that land clearance – called 'land development' – was a highly profitable strategy for high-income tax payers to pursue, even though in pre-tax terms the venture was financially unviable.22 Another example is the arrangements used to allocate and charge for opportunity to use irrigation water. As illustrated in our case study on the Macquarie Marshes, some arrangements prevent landholders from conserving biodiversity values even though that may be their preferred strategy.

2.3 Threatening processes

Five direct threatening processes are identified in the National Biodiversity Conservation Strategy as being most likely to lead to declines in biodiversity values in certain circumstances. These are:

Associated with these threats are:

For the purposes of this report, and particularly the consultations that were conducted with community groups, we have found it useful to group these threatening processes into broader generic groups that better reflect the issues that were raised out of the cases studies. We grouped threatening processes under the following classifications:

They were chosen because they are useful indicators of activities which alter ecological processes and which may lead ultimately to an irreversible decline in biodiversity values. These classifications help to emphasise the importance of ecosystems and in situ conservation, as well as the protection of individual species. They are also useful because they compare neatly against definitions of biodiversity. It is appropriate to discriminate between the types of threatening processes because this facilitates understanding of the physical processes and the targeting of policies to address them.

2.3.1 Ecosystem and habitat loss

The consideration that differentiates problems associated with direct habitat loss from other processes is the fact that it is sudden and, essentially, irreversible. The relative importance of the factors producing biodiversity loss are not fully understood, but it is clear that vegetation clearance and associated change in land use are one of the main actions that cause declines in biodiversity values. The impact of clearing on the extent of particular ecosystems are well known.23 For instance, the original extent of subtropical rainforest between Lismore and Bangalow in northern NSW was over 75,000 ha. By 1900 it had been reduced to about 300 ha scattered over 10 remnant areas.24 Much of the clearing of native vegetation in Australia occurred in response to incentives from government programs. Although some habitat loss is a necessary part of economic development, it is now possible to ensure that any further loss is planned in ways which minimise the threat of species loss or the loss of ecological communities.

At the international level, it is estimated that habitat destruction accounts for about one-third of animal extinctions; species introduction accounts for the loss of another third and non-sustainable hunting for the final third.25 However, the loss of plants is primarily due to habitat loss, as is the loss of diversity among birds (it accounts for perhaps three-quarters of the threats to birds).26 Not only have vast areas of forest and woodland been cleared in Australia since European settlement, but significant marine habitat loss has also occurred as a result of dredging, land reclamation and bottom trawling in some fisheries.

Two of the major problems that arise from clearing for agriculture are that the remaining uncleared areas are highly fragmented and isolated from other remnants, and that the clearing is undertaken selectively. Fragmentation occurs when an area of vegetation is split and surrounded by development, leaving smaller isolated areas of vegetation no longer capable of maintaining the suite of processes and species found in the original landscape. Opportunity for movement between the fragments is restricted. Often when a fragment is created, it harbours more species than it will be able to support in the long term. Moreover, as landscapes become more fragmented the size to edge ratio increases, with the consequence that the probability of damage from external effects, such as from species introduced from other countries and other parts of Australia, increases.27

The remaining remnants are an unrepresentative sample of the original vegetation; the network of National Parks, Nature Reserves and remnants on private lands are a poor example of the original vegetation as the native vegetation was cleared preferentially on the basis of soil type. Some woodland types have been reduced to only a few per cent of their original areas. Soil resources have been affected by salinity, erosion, and water-logging as a result of excessive clearing and resultant changes to local water balance. Because remnant vegetation is so vulnerable to effects of land degradation, the future of remaining biodiversity values is dependent on measures to combat land degradation and achieve sustainable agricultural practices.

In marine and estuarine areas, many of the causes of habitat loss result from urban development and siltation. The main processes involve infill of wetlands and salt marshes and loss of seagrass beds.

2.3.2 Ecosystem and habitat decline

Changes to habitat and declines in ecosystem productivity, while less likely to be irreversible in the short term, also reduce biodiversity values. In all cases, the key indicator is a change in the composition of the vegetation towards a new state that tends to favour some species at the cost of others, such that the ecological community ultimately becomes less diverse. Direct causes of adverse vegetation and/or ecosystem change include:

The problem is best seen as a continuum. However, the direct causes of vegetation change and ecosystem loss can be usefully classified into two broad categories: those that have only localised on-site effects, and those that have significant off-site effects. In many cases, off-site effects are compounded in their complexity by the fact that they often come from non-point sources that are difficult to manage. A characteristic of many non-point source problems is that, whilst the general source of the problem can be identified, it is usually very difficult to allocate responsibility in a way that enables the efficient and equitable management of the problem. Examples include:

In marine and estuarine areas, habitat and ecosystem decline occurs as a result of the processes of disturbance and pollution. Habitats are disturbed particularly through the processes of dredging and bottom trawling for fish. Serious ecosystem decline can also result from oil spills.

2.3.3 Direct species loss

There are many types of biodiversity loss which result from direct attacks on species. Some commercial fish species in Australia have experienced a recent decline which is most likely attributed to overfishing. These include the southern bluefin tuna, southern sharks, gemfish and orange roughy.28 Other potentially vulnerable species are those, such as sharks, which are slow growing, have a low reproduction rate, are highly migratory and school during the mating season.29

Another cause of direct species loss is the introduction of exotic species from another area or country. Sometimes this introduction is unintended, as was the case with the importation of mice or the European wasp. In other cases, the introduction is planned and designed to improve international competitiveness, as was the case with the cane toad in Queensland. Almost always, the adverse effects of the introduction were unintended. In some cases, the introduction of foreign species has been beneficial and, as illustrated by the introduction of the cactoblastis moth to control prickly pear, invaluable in maintaining biodiversity. However, when there are no natural predators for the introduced species and when native species do not have the defences necessary to compete with introduced plants, mammals, birds, insects and diseases, biodiversity problems arise which can be direct and devastating in their effect on native flora and fauna. Species introduction is a serious problem for our inland waterways, where introduced species like the European carp compete with local fish.

The number of introduced animals in Australia is difficult to estimate and, for our micro-flora and marine ecosystems, poorly understood. We do know that at least 25 exotic mammals have established feral populations in Australia.30 Domesticated cats that have escaped into the wild have become one of the most successful and widespread feral animals, contributing to the extinction of a significant number31 of Australian animals. One estimate has suggested that the feral cat population could be between 5.6 million and 18.4 million, with a best estimate of 12 million.32 Rabbits now cover over half of Australia, with their population being dependent on climate, parasites, predators and the significant array of control measures being used. Rabbits have a drastic effect on native vegetation, and compete with native fauna for limited food resources. This competition can also be even more direct; rabbits have been known to take over the burrows of native animals such as bilbies and bandicoots, which interferes with the native animals' breeding cycles.33 In some areas, foxes and wild pigs pose significant problems for Australian wildlife, particularly its small mammals.

Introduced birds also compete with native species. The common starling, for example, is a major agricultural pest that competes with native birds for food and nest sites such as those found in tree hollows. The best known species of introduced fish are probably the brown trout, the rainbow trout and the European carp. The European carp actually thrives in adverse water conditions and, by disturbing mud, further contributes to water quality problems.

Introduction of non-native plants has also occurred on a large scale; exotic plant species now account for around 15% of all Australia's flora.34 These introduced species sometimes carry diseases to which native flora is susceptible.

Not all forms of change are adverse from all perspectives. For example, while the result has been a significant change in vegetation composition and ecosystem function, the provision of water for livestock production has probably favoured many kangaroo populations and, also, a significant number of bird species.35 But this in turn can cause biodiversity threats. Increases in numbers and the spread of native species to areas where they were previously unknown can cause adverse effects as serious as those posed by exotic species if they start to compete with species with which they did not previously overlap. Similarly, the accompanying introduction of livestock may have adverse consequences on rare plant species not represented in the reserve system.

Another causal agent of direct species loss is, of course, the killing of fauna or harvesting flora for commercial purposes. Sometimes this killing is intended; the koala population in south-eastern Australia suffered severe population decline since European settlement, partly because of the previous trade in koala furs. In other instances, species suffer as a by-product of commercial or recreational activities. Duck shooting can lead to the accidental shooting of rare and already endangered duck species. The use of trawling methods in fishing can kill a large number of untargetted species. Approximately four to six times the weight of prawns is caught as 'by-catch' in the prawn fishery in northern Australia. This by-catch is often discarded.36 Little is known of the environmental impacts of trawling, but possible effects include the reduction of fished and non-fished species, removal of organisms attached to the sea floor, and changes in food webs such as increased populations of scavengers.37

2.3.4 Gene loss

The last and most subtle set of actions are those that can result in the gradual erosion of the genetic diversity that is necessary to provide opportunities for species to adapt to change. If a species is to survive changes in its environment, it needs to maintain a wide selection of genetic traits as a type of life insurance against unknown future developments. There is strong evidence that the northern hairy-nosed wombat (Lasiorhinus krefftii) has lost significant amounts of genetic diversity38 as a result of habitat loss and degradation. There is one remaining colony of 65 individuals in central Queensland.

Plant breeders use knowledge of genetic diversity to improve crop productivity by selecting genetic traits that have commercial advantages. Reduction in the genetic attributes of a species often results from selective breeding and selective use, this type of emphasis can have unexpected results. For example, there appears to be a reduction in mature size of King George whiting (Sillaginodes punctata) which has been attributed to their protection on the basis of a minimum size.39

Another problem is that a commercially bred species can be a threat to native species. This has occurred with salmon farming in the northern hemisphere, which is leading to change in the stock of native salmon. The problem arises from the development of salmon for fish farms that are very productive and fecund. Some of these salmon escape from the farms and threaten native species that cannot compete with them; alternatively, native species lack resistance to diseases that the introduced salmon carry. A similar problem can be seen in Australia, with the introduction of the Pacific oyster that is now said to be changing the genetic stock of the Sydney rock oyster.

2.4 What Australia is doing

This section outlines the instruments and mechanisms that are being used in Australia to ameliorate the above threats and causes of loss of biodiversity values. As shown in greater detail in Appendix 1, the Commonwealth Government, all State and Territory Governments, local governments and many non-government organisations are contributing a great deal to the conservation of Australia's biodiversity. Moreover, in recent years all levels of government have begun to give greater attention to the conservation of biodiversity in landscapes used for purposes such as agriculture, forestry and urban development. There are also many international agreements that assist with the conservation of biodiversity.

2.4.1 Institutional arrangements

International agreements

Australia is party to a number of international agreements concerning the protection of biodiversity. Some of these take biodiversity as their central theme; others have important indirect effects on this issue. The most important series of international measures concerning biodiversity conservation were the outcome of the United Nations Conference on Environment and Development (UNCED), also known as the Earth Summit, which took place in June 1992. This summit, amongst other things, produced The Rio Declaration, Agenda 21 and the Convention on Biological Diversity.

The Rio Declaration set out twenty seven principles for the promotion of sustainable development. Most importantly from the aspect of biodiversity, these included assertions that nations have a right to development, but only if this equitably meets developmental and environmental needs of present and future generations (principle 3), that sustainable development requires that environmental protection must constitute an integral part of the development process (principle 4) and that there is a need to reduce unsustainable patterns of production and consumption (principle 8). Because the Declaration has been accepted by more than 150 governments, it has the potential to be incorporated into customary international law, which can be binding on governments.

Agenda 21 is an action plan which was formulated to assist nations in the adoption of environmental protection measures. Chapter 15 of the Agenda states that countries should implement this action plan by, amongst other things, undertaking studies on biodiversity conservation and sustainable use of biological resources, taking action wherever necessary to conserve biodiversity through in-situ conservation, or if this is not possible, ex-situ programs in the country of origin, and promoting international and regional co-operation in furthering scientific and economic understanding of the importance of biodiversity.40

The third document, the Convention on Biological Diversity, was signed by 157 countries during the Summit itself, and came into force on 29 December 1993. It has since been ratified by many countries. It provides a framework for global action to conserve and sustainably use biological diversity, taking as its primary aim the conservation of the maximum possible biodiversity for the benefit of present and future generations and for its intrinsic value (Article 1). The Convention affirms that States have sovereign rights over their biological resources, but it also emphasises that they have responsibility for conserving their biodiversity and utilising their resources in a sustainable manner. The Convention requires signatory parties to commit, among other things, to:

The Convention requires the adoption of national strategies, plans or programmes for biodiversity conservation, and the creation of a system of protected areas, or areas where special measures need to be taken to conserve biodiversity. Australia is also party to a number of other international agreements which impact upon the conservation of biological resources. These include:

It should also be noted that the General Agreement on Tariffs and Trade (GATT) has been argued by some as having negative implications for biodiversity. Because GATT aims to reduce trade barriers, it may reduce concerned countries' ability to use trade measures to influence inter-governmental policy on issues such as the oceans, atmospheric pollution, wildlife trade and biodiversity conservation.

Australian strategies and objectives

With the Commonwealth Government, State Governments and local governments all working towards improved conservation of biodiversity, the situation is constantly changing. This section may not, therefore, be all-encompassing, but rather is designed to provide an overview of strategies and objectives currently in place.

National objectives

The Prime Minister of Australia, in his Environment Statement in December 1992 committed the Commonwealth, as an objective of the National Biodiversity Conservation Strategy, to the progressive establishment, in co-operation with the States and Territories, of a comprehensive, adequate and representative system of protected areas by the year 2000. The initiative is administered by the Australian Nature Conservation Agency as the National Reserves System Co-operative Program (NRSCP).

National strategies

The Commonwealth Government, in co-operation with States, has taken the lead in developing a number of strategies, which include:

In 1989 the Commonwealth Government's contribution to the National Soil Conservation Program was utilised to create a ten year program to be known as The Decade of Landcare. Landcare is a term used by both State and Commonwealth programs which are aimed at involving the community in land conservation planning and the development and adoption of sustainable farming practices at the local level. Landcare groups are local groups of people, mainly composed of land users in rural areas, whose primary aims are to tackle land degradation and develop more sustainable land management practices. Community components of the National Landcare Program (NLP) offer assistance for group activities that involve community groups, landholders and local government. The nature conservation elements of NLP include Save the Bush, One Billion Trees, and Water Watch.42

The Save the Bush program, is funded through the Australian Nature Conservation Agency to assist in State efforts to preserve remnant vegetation. This program provides Commonwealth grants to community organisations and local councils to support initiatives that assist to maintain biodiversity. The One Billion Trees programs is another Commonwealth program, although much of it is administered by Greening Australia. It aims to plant 400 million trees and produce another 600 million trees through natural regeneration and direct seeding.43 Waterwatch provides a national focus for community group involvement in the monitoring of water quality in a coordinated catchment based fashion.44

The Department of the Environment also operates a scheme that provides for salaries to employ Environment Resource Officers in each State Local Government Association. These officers serve to translate DEST programs to local government and provide feedback from the local government level to the Commonwealth Department. Funding for these positions is evaluated annually.

State strategies

Apart from the statutory draft Flora and Fauna Guarantee Strategy (1992) in Victoria, as yet there are no formal State biodiversity strategies, but other States are in the process of developing them, and some States have vegetation or revegetation strategies. Each State does have its own National Parks Service (or equivalent with varying name) which is responsible for administering gazetted conservation areas, and in some instances voluntary off-reserve conservation easements and management agreements. They also have responsibility for protecting endangered species and, in some cases, for assessing the likely impact of development proposals on biodiversity values. As well as the National Park agencies, other government agencies are responsible for the management of State Forests and other areas of Crown Lands such as roadsides.

Regional strategies

Some government programs provide for regional administration. For instance, Queensland's Management of Riverine Vegetation program includes legislative guidelines that have been developed on a regional basis, in recognition of the wide variety of stream and catchment types State-wide. This approach allows local land management practices to be addressed. In South Australia, the State Revegetation Strategy aims to establish regional plans to incorporate revegetation and management of existing vegetation into land management plans.45 Bioregional management plans are not widely used in Australia, but one example is the plan established for the Great Barrier Reef Marine Park. This management plan is consistent with internationally established guidelines for marine protected areas.46

Local strategies

In some instances, Local Conservation Strategies are prepared by local councils and communities. Depending upon the priorities of the community, the strategies may or may not relate to the conservation of biodiversity on either public or private lands. In relation to agricultural land, the strategies have been most effective in providing a planning framework whereby planning powers deal with the effect on nature conservation of urban development proposals. Some strategies have also proposed rating incentives to maintain conservation values of broadacre agricultural land. Many local government organisations use tree clearing ordinances that require landholders to obtain permission to remove a tree. Many forms of land use with potentially adverse effects on biodiversity, like the construction of a feed lot, require planning approval.

Commonwealth actions
Institution building

The creation of institutions specifically designed to deal with biodiversity conservation will in themselves create incentives, through education and increased awareness of the issues. The Biodiversity Unit within the Department of the Environment, Sport, and Territories is a good example. The Australian Nature Conservation Agency also has a major role to play in administering the implementation of incentive mechanisms and in conserving biodiversity generally. It should also be noted that the National Biodiversity Council was established in November 1994 by a group of scientists with the aim of advocating scientifically based policies and mechanisms for the conservation of biodiversity and stimulating informed public discussion about issues that affect biodiversity values.

Government research

Whilst the Department of the Environment, Sport and Territories and the Australian Nature Conservation Agency routinely fund research on biodiversity conservation, funds are limited and no biodiversity R&D corporation exists in Australia. R&D corporations, under the direction of the Minister of Primary Industry and Energy, such as the Land and Water Resources Research and Development Corporation (LWRRDC), are paying increased attention to the importance of biodiversity conservation. The Australian Nature Conservation Agency's Save the Bush and LWRRDC jointly fund research on remnant vegetation, both contributing $300,000 for this research (K. Maxwell, pers com.). Such mechanisms provide a financial incentive for researchers to study biodiversity problems. CSIRO has a multi-divisional biodiversity program. Its Division of Wildlife and Ecology and its Division of Entomology have over 100 scientists working on biodiversity related issues. Australia's many universities are making a similar contribution.

Government programs

The Commonwealth Government runs a range of programs including those mentioned in detail elsewhere such as Landcare, and others like the Commonwealth Coastal Action Program, the National Reserve System Cooperative Program, the Ocean Rescue 2000 Program, and the Endangered Species Program. As well, Australia has 12 sites that have been designated as biosphere reserves by UNESCO, and an action plan for implementing the national biosphere reserve program has been approved.47

A biosphere reserve contains a protected core of undisturbed representative terrestrial and/or coastal environments and one or more surrounding 'buffer zones' in which experimental work and other human activity can be carried out.48

Aboriginal Assistance Programs are a good example of government programs that indirectly assist biodiversity conservation. Under the National Parks and Wildlife Conservation Act 1975, the Australian National Parks and Wildlife Service (now known as the Australian Nature Conservation Agency (ANCA)) can assist Aboriginal people in managing their land for conservation purposes. ANCA also runs the Contract Employment Program for Aboriginals in Natural and Cultural Resource Management (CEPANCRM). Finally, an investigation of the feasibility for the voluntary inclusion of appropriate Aboriginal and Torres Strait Islander land and marine estates into a protected area system is currently being undertaken by the Australian Nature Conservation Agency.

Although the Commonwealth and States have made a commitment to a national comprehensive, adequate and representative system of reserves to be in place by the year 2000, they have not yet agreed a plan of action or a timetable for achieving that goal.

Monitoring systems and information

The use of environmental information as a means of creating environmental objectives has produced national responses such as the Environmental Resource Information Network (ERIN) and the National Resource Information Centre (NRIC). The State of the Environment reporting process that is underway will also create information systems on the environment, as well as provide a set of environmental indicators that can be monitored.

2.4.1 Motivational instruments

Community groups

Community support of conservation policies is vital for successful implementation. Encouraging attitudinal change and the adoption of an ethic of conserving nature on private land is therefore an integral part of any efforts to introduce incentives to conserve biodiversity.


The Landcare program was initiated as a result of Prime Minister Hawke's 1989 Environment Statement, and forms a central part of the Commonwealth Government's efforts to achieve sustainable management of Australia's natural resources. It includes the Save the Bush program, and the One Billion Trees program. The Save the Bush program seeks to assist in the protection, management and investigation of remnant native vegetation located outside national parks and reserves. The aim of the One Billion Trees program is to help re-establish and maintain native trees and vegetation for the purpose of natural resource management and biodiversity conservation.

According to Cameron and Elix,49 Landcare reflects our history of restricting government intervention to ameliorate land degradation to the encouragement of voluntary activity and the provision of extension services. Landcare has been a particularly successful program in gaining support from landholders. It provides opportunities for joint activities and community involvement by invoking a sense of responsibility for land, water and vegetation conservation. It also provides an avenue for the dissemination of environmental information. These factors, coupled with the fact that Landcare objectives are broad and lacking targets, create the possibility of incorporating biodiversity conservation measures into the program. Indeed, many Landcare groups already incorporate biodiversity very effectively.

Other community groups

The Australian Trust for Conservation Volunteers organises Landcare and conservation groups through its Echidna Package Program.50 Volunteers are provided for conservation projects on both public and private lands. EarthWatch has had success in combining research and ecotourism world-wide by packaging volunteer projects in the same manner.

The Victorian National Parks Association has 102 Friends of Parks groups and 11 Friends of Flora and Fauna groups involved in the conservation of particular species. The Threatened Species Network has involved the community in many 'Friends of X Species' groups, which sometimes work to protect species found on private land.51

Schemes such as Save the Bush and Land for Wildlife are having an influence on community attitudes to the importance of biodiversity conservation. In Victoria, Land for Wildlife is run by the Department of Conservation and Natural Resources and the Bird Observers Club of Australia. As a result, targeted extension projects aimed at areas of high priority for flora and fauna conservation are being created. For example, landholders in North-East Victoria have formed 'The Superb Parrot Action Faction.'52

Accreditation schemes

The Australian Tourism Industry Association gained international recognition when it introduced a Code of Environmental Practice in 1990 which covers all sectors of the tourist industry. In 1992, the Ecotourism Association of Australia produced a code of practice for ecotourism operators. The codes of practice are binding neither on the industry nor travellers. An accreditation scheme designed to improve the ability of eco-tour operators to convey information on biodiversity operates in Victoria and includes courses run by the Victorian Tourist Operators Association (VTOA), the Victorian Department of Conservation and Natural Resources, and by the Australian Nature Conservation Agency.53 An Australian National Ecotourism Accreditation Scheme is being developed by the Commonwealth Department of Tourism.54


Awards include the National Landcare Award for Nature Conservation, which is sponsored by ANCA. The Banksia Environmental Foundation presents the Banksia Awards each year, which recognise individuals and corporations for their environmental achievements in such categories as Rural Community Groups, Land Management, and Resource Conservation and Waste Minimisation Management. In South Australia, the Ibis Awards recognise excellence in both farm business management and nature conservation.

Product eco-labelling

Non-government organisations operate private labelling programs in Australia and overseas. For instance, The World Wide Fund for Nature (WWF) carries out licensing arrangements with companies wishing to use its Panda symbol. The Australian Conservation Foundation also has a corporate sponsor program, where companies' entire operations are endorsed, and a 'green leap' program to congratulate poor environmental performers for improvements which they make. An Earth Trust logo scheme is to commence operations in Australia soon. Standards Australia has made substantial efforts to start an environmental labelling scheme, but has met strong industry resistance to this concept. The extent to which biodiversity conservation is a criterion determining eligibility for eco-labelling varies across the various programs.

Promotion of biodiversity

Involving the community and increasing public awareness through education is recognised in the Convention on Biological Diversity (article 13) and National Biodiversity Conservation Strategy. The Australian Nature Conservation Agency also notes the power of education and awareness in promoting biodiversity conservation and promotes a variety of activities. One of its proposed goals for the Biosphere Reserve Action Plan55 is to develop education packages for primary, secondary, and tertiary levels. Ecotourism represents another conduit for influencing resource user behaviour by enhancing awareness and appreciation of biodiversity. The National Ecotourism Strategy56 includes education and interpretation as elements of ecotourism and outlines an education package.

2.4.2 Voluntary instruments

Voluntary programs

Voluntary programs are generally favoured over binding contractual arrangements or compensatory measures as a mechanism for conserving biodiversity on private property. Most States and Territories operate voluntary schemes to protect specific habitats or to restrict farming practices. Some examples are indicated below.

New South Wales

Wildlife Refuges and Wildlife Management Areas can be proclaimed on private land if considered suitable by the NSW National Parks and Wildlife Service and voluntarily accepted by the landholder. In return, technical assistance is sometimes provided. The scheme has lacked active promotion in recent years, but is currently being revitalised.

Northern Territory

Joint Management Agreement and Protected Area Management Scheme Agreements have been established to encourage conservation of wildlife on Aboriginal land. The duration of such agreements may be fixed or indefinite, and there are provisions for financial assistance, advice and signs if required.


Queensland ran a simple voluntary agreement system known as Fauna Sanctuary which aimed to protect habitat by attaching a restriction to a land title. However, these restrictions could be revoked by a subsequent owner, and no financial assistance was available. The Fauna Sanctuary scheme has been replaced by the Nature Refuge and Conservation Agreement Schemes which are implemented under the Nature Conservation Act 1992. The State is also trialing a Land for Nature scheme based on Land for Wildlife in Victoria. The scheme has been under trial in south-eastern Queensland since March 1993.

South Australia

Landholders may nominate land as a Private Sanctuary to manage wildlife in its natural habitat and can retract from this nomination by submitting a letter to the Minister of Environment and Natural Resources. There is no financial gain for the landholder, but the program is effective in identifying and linking landholders with similar interests.


A Land for Wildlife program will be based on the Victorian scheme but has not yet been formally launched. Under the National Parks and Wildlife Act 1970, private landholder consent can enable private wildlife sanctuaries to be proclaimed after evaluation and approval by the Parks and Wildlife Service. In addition, the landholder can elect to enter into a voluntary agreement to implement a management plan. Conservation covenants can also be applied voluntarily, but once entered they are permanently binding on the property title unless the Minister revokes them. This may occur under circumstances where the land is no longer capable of fulfilling the original purpose of the covenant.


Land for Wildlife is run by the Department of Conservation and Natural Resources and the Bird Observers Club of Australia which is a community-based organisation. The scheme's objectives are to encourage private landholders to conserve flora and fauna and habitat by fostering attitudinal change and the adoption of a conservation ethic. The scheme does not involve landholders entering into agreements with the government, but it does provide a framework for the support of voluntary management of wildlife habitat on private land. In addition, there is the Botanic Guardians Scheme which promotes voluntary participation in managing threatened plant populations.

Land Management Co-operative Agreements are also available under the Conservation, Forest and Lands Act 1987. These have been used mainly for agreements with landholders to grow trees. Although no direct payment is made to landholders, these agreements can include grants and loans. It is possible for the agreements to lead to the creation of a covenant that restricts future development and land use options under the Wildlife Act 1975. No specific financial assistance is provided, but help is given in preparing a management plan.

Western Australia

Under the Conservation and Land Management Act 1984, landholders can apply to manage private land as a timber reserve, National Park, or Nature Reserve, the aim being to provide total protection for flora and fauna values. At the time of writing Western Australia is proposing to introduce a scheme similar to the Victorian 'Land for Wildlife' program.

2.4.3 Regulatory instruments

Habitat protection legislation

Most States have legislative controls aimed at protecting native vegetation on private land. Clearing controls vary from State to State in their design and application. No State has totally banned clearing of native vegetation, but stringent controls exist in South Australia, Victoria and Western Australia. Recently both Queensland and New South Wales have also announced tighter controls, reflecting a continuing trend to tighten native vegetation clearing regulations. Both the Commonwealth Government and State Governments are involved with fisheries management.

New South Wales

The New South Wales government has recently introduced the Native Vegetation Protection and Management State Environmental Planning Policy (SEPP 46) in a bid to improve the management of native vegetation. Apart from exemptions, the SEPP 46 requires consent of the Director-General of Land and Water Conservation for the clearing of native vegetation. The exemptions include the clearing of regrowth of less than ten years of age; cutting of no more than seven trees per hectare per year for on-farm uses; and clearing of up to two hectares per year for any contiguous land holding in the same ownership. The Policy does not apply where approval is already required under existing legislation or environmental planning instruments. The policy applies over the whole State. Applications for clearing require a Vegetation Management Plan (VMP). This plan is to indicate the areas intended for clearing and the management of remaining native vegetation in the future. Property Management Plans or Whole Farm Plans can be used as the basis of the VMP.57


Draft Tree-Clearing Guidelines for leasehold and other Crown land in Queensland were announced in March 1995. The guidelines have suggested a different extent of clearing restrictions for different vegetation types. The draft guidelines have led to some degree of panic clearing as land managers attempt to clear as much land as possible before the guidelines are formalised. The introduction of the State-wide guidelines over the top of a community consultative process to introduce regional controls has also upset many land managers.

In Queensland a Management of Riverine Vegetation (Non-Tidal) program operates. The Water Resources Amendment Act 1993 requires a permit to be obtained to clear vegetation, to excavate or to place fill in a non-tidal watercourse. Large penalties apply, and a comprehensive program of Riverine Protection Education is concurrently under way in the community, commencing with an attitude survey.58

South Australia

Broadacre clearing is effectively prohibited in South Australia under the Native Vegetation Act 1991 (and previously under the Native Vegetation Management Act 1985). The 1991 Act was introduced as a response to greater acceptance of clearing reductions by the community, and also in an effort to cap compensation payments under a previous scheme. The Act provides incentives and assistance to landholders to preserve and enhance native vegetation, applications for clearing licences are not automatically entitled to compensation.


Tasmania has no comprehensive mechanism in place to control clearing of native vegetation.


Critical habitat for threatened species and ecological communities can be determined under the Flora and Fauna Guarantee Act 1988 in Victoria. The Native Vegetation Retention Planning Control program was introduced in Victoria in 1989 as part of an overall package of measures to reduce broad scale clearing of native vegetation. The program requires a permit under the Planning and Environment Act 1987 before any clearing of an area greater than 10 ha, is undertaken. The Catchment and Land Protection Act 1994 also has some capacity towards implementing native vegetation controls. Under this Act, land use practices can be restricted in designated areas.

Under the Victorian Flora and Fauna Guarantee Act 1988, action statements are required following the listing (on scientific grounds) of taxa, communities, and potentially threatening processes. The statements set out conservation objectives and management issues that cover the management of marine, freshwater, forest and land habitats. They are concise documents that set out achievable conservation objectives. Although action statements are a legislative requirement, they rely on the goodwill and assistance of landholders.

Western Australia

On the 17 May 1995 the WA Minister for Primary Industry announced a new government policy on clearing and management of native vegetation that was to take effect immediately. The policy contains a mix of regulation, education, industry development, rebate and grant. Regulations applying to restrict clearing include:

Financial incentives that provide for education, industry development and, infrastructure and management to protect remnants include a subsidy for fencing off areas of remnant vegetation, waterways and wetlands as part of the Remnant Vegetation Protection Scheme. Landholders that receive funding under the scheme enter into a 30 year management agreement to maintain the remnants and have a "memorandum of understanding" attached to the land title to retain agreed actions with future landholders. Land with attached "memorandum of understanding" is registered with the Valuer General and is eligible for council rate rebates.

Species protection legislation
Terrestrial flora and fauna

Endangered flora are protected in all States and Territories. Similarly, a permit or licence is required in all States and Territories to take, kill, trade, or export protected fauna – these licences are usually issued for a short period of time with no guarantee of renewal. The Commonwealth's Endangered Species Protection Act 1992, although it does not have wide ranging application, requires Recovery and Threat Abatement Plans to precede Commonwealth actions which endanger listed species.


Commonwealth fisheries within the Australian fishing zone are managed under the Fisheries Management Act 1991. The Australian Fisheries Management Authority (AFMA) has the responsibility for the management of fisheries under Commonwealth jurisdiction, which extends from the three mile to the 200 mile limit of Australian waters. Marine habitat is generally protected through input controls for commercial fishing, and more recently through management incentives. Fisheries can be closed for periods for recruitment purposes, and fishing equipment that is particularly destructive to the habitat can be banned from use. If licence conditions are not met and habitat is unduly destroyed, licences can be revoked. Under the new Fisheries Management Act 1994 in NSW, fishery rights (shares) are also held for set periods. Recreational fishing in all States is regulated by restricting the type of gear that may be used and the setting of bag limits. Many of Australia's fisheries are currently implementing management plans to involve fishers in decisions. Further stakeholder involvement is guaranteed in NSW under the Fisheries Management Act 1994.


Zoning can occur by way of State Environmental Planning Policies (SEPPs) and Local Environmental Plans (LEPs). These policies do not generally prohibit activities or development proposals, but ensure that impact assessments are carried out. LEPs are prepared by local government and can result in land zones that prohibit activities which are detrimental to the area's habitat value or other nature value. Australia's marine resources are protected to some extent by the designation of marine protected areas within which certain practices like trawling or fishing are prohibited. In some areas, all forms of use are prohibited and boats may not enter without special permission. It should be stressed that marine and terrestrial protected areas are not representative or comprehensive. Not only does the reserve system require expansion, but it also needs to be complemented by off-reserve conservation management.

Legal liability

Legal liability can apply to natural resource damage, environmental damage, non-compliance with environmental laws, or non-payment of taxes, charges and fees. Liability incentives operate on one level by encouraging compliance in order to prevent legal action. If liability insurance is available and premiums reflect individual performance, then an incentive to avoid damage also arises out of the effort to obtain the lowest premium.59 Individual director liability is another option that could be extended to biodiversity considerations. These penalties can be further enhanced by introducing the capacity for people to take action against a person, company or agency on behalf of a class of people.

2.4.5 Property right based instruments

Easements, covenants and management agreements

Contractually binding management agreements are not as prevalent in Australia as voluntary arrangements. Regulatory agreements only operate in some States. Even voluntary management agreements that offer financial incentives are not widespread in Australia, probably because of the funding requirements of such agreements.

New South Wales

Conservation Agreements are made under the NSW National Parks and Wildlife Act 1974. They are initiated by NSW National Parks and Wildlife Service after identification and assessment of values, but are entered into with the consent of the landholder. The agreements are in effect covenants as they run with the land title and bind subsequent owners. The agreements can contain terms that restrict land use, require landholders to carry out activities, permit access to specified persons, or require the landholder to contribute towards the cost of management.

Northern Territory

In the Northern Territory binding management agreements can be entered into with landholders, allowing government assistance for the protection and conservation of wildlife on private land.60


Under the Nature Refuge and Conservation Agreements Scheme, refuges can be created on private land at the request of the landholder. A binding management plan is agreed upon which then runs with the title or lease. The purpose of the refuges is to provide indirect protection of flora, through the maintenance of habitat, and to provide protection to fauna specified in the management plan. No financial assistance is available, but management advice and technical support is provided.

South Australia

Heritage Agreements under the Native Vegetation Retention Act 1991 are entered into independently of clearing applications and are available to landholders who want to better care for native vegetation. They also apply to coastal waters. The Conservation Area Scheme, operated under the National Parks and Wildlife Act 1970, provides for compensation for financial hardship resulting from the protection of wildlife or habitat. The conservation areas are leased by the State, with the lease payments representing the financial compensation.61


Conservation covenants can be entered into under a recent amendment to the Tasmanian National Parks and Wildlife Act 1970. These covenants can be initiated at the request of the landholder, or as a result of an application by the landholder for a timber harvesting plan. As at 1994 no conservation covenants had been implemented. The effectiveness of the covenants is limited by the lack of a compensation funds for covenants arising from private forestry operations and also by the lack of resources available to prepare general conservation covenants.62 Conservation covenants could be utilised in conjunction with Private Wildlife Sanctuaries and the Land for Wildlife program.


In Victoria, regulatory agreements between local authorities and landholders are required, in some cases, under section 173 of the Planning and Environment Act 1987 before a planning permit will be granted. These regulatory agreements can lead to the registration of the conditions on the title in the manner of a covenant. However, Section 173 powers have been rarely used for biodiversity conservation purposes.

The Victorian Conservation Trust Conservation Covenant Program is an example of a statutory covenant (Conservation Trust Act 1972) whereby entry into the agreement is voluntary. The covenant is registered on title and binds all future owners. The aims of the program are to conserve areas on private land which are ecologically significant, of natural beauty, or of historical interest, and to conserve wildlife and native plants. Public authority management agreements (Flora and Fauna Guarantee Act 1988) are a powerful means of achieving protection of biodiversity in cemeteries, roadsides and other public land areas.

Western Australia

Western Australia is currently developing a nature conservation covenanting initiative.

Withdrawal of property rights

In Western Australia compensation may be paid for the loss of use or enjoyment of land which contains rare flora. For example, when an owner is prevented from collecting or taking a rare plant, compensation may be paid under the Rare Flora Protection on Private Land program.63

Reimbursement for incremental costs

The financial assistance applicable as part of many of the voluntary management schemes offered by the States and Territories is sometimes provided on the costs of material associated with the work required. For instance, payments are made under the Victorian Action Statement Program, and 50% of fencing costs are paid under the Conservation of Native Vegetation on Private Land scheme in Western Australia.64

Ownership rights

Many management options for the sustainable use of natural resources hinge on the allocation of property rights. The separation of resource control rights or the strengthening of unclear rights may create incentives for resource owners to maintain their asset. The Forest Service of Victoria has developed a draft Bill which advocates the separation of tree and land ownership, in an effort to encourage commercial tree planting on private land.65 One of the underlying tenets of the 1992 Convention on Biological Diversity is that the benefits of using genetic resources should be equally distributed among all who help conserve them.66 According to the OECD,67 two mechanisms can be used to capture economic rents embodied in wild genetic resources. Prospecting agreements are one mechanism, or property rights can be strengthened where the resource is privately owned.

Use rights

A large portion of Australia's agricultural and pastoral land is held under lease. Although leasehold tenure provides the opportunity for greater control over land use, it has been suggested that the lease conditions have worked against land management practices commensurate with the conservation of biodiversity.68 Efforts have been made in South Australia to overcome perverse lease incentives through new pastoral legislation introduced in 1989. Pastoral lease terms of 42 years have a provision for an extension of 14 years to take place every 14 year period. The extension (but not the remainder of the lease's term) is dependent upon the leaseholder demonstrating ecologically responsible management of the property. Lease conditions can be changed by the government at each extension on the basis of a review and monitoring of the condition of vegetation on the property.

Tradeable salinity rights and water entitlements

At the State level, a system of tradeable salinity rights was introduced by the Murray Darling Basin Commission in 1992. Capital works that 'manage salt entering the river system and enhance river flow' gain 'salt credits.'69 These credits are tradeable between States and the Commonwealth, but are not freely tradeable by industries or individuals. Legislation is in place in South Australia, Victoria, NSW and Queensland for tradeable water entitlements, but permanent trades between States have not been permitted. The merits of the proposed systems are still being debated, with arguments over whether the entitlements should be freehold title or the property rights remain with the States, and also how entitlements can be allocated so as to maintain environmental values.70

Individual transferable fishing quotas

Individual Transferable Fishing Quotas have been implemented in Australia. The Southern Bluefin Tuna fishery, for example, introduced a system that provided individuals with rights to harvest a given quota of stock. The sum of all quotas represented the Total Allowable Catch (TAC) which was theoretically equivalent to the maximum sustainable yield for the species. Difficulties in estimating the maximum sustainable yield, and the TAC, meant the system has been unsuccessful at maintaining stocks.71 A slightly different system proposed under the NSW Fisheries Management Act 1994 provides individuals with tradeable 'shares' in the fishery. These shares entitle the holder to a percentage of the TAC. This allows for annual changes to the TAC in line with scientific data concerning the maximum sustainable yield. Shares are also held for set periods that roll-over after a review, or have phase-out periods, for investment security as well as environmental security. Allowing shares to be bought and sold means that fishers can more efficiently set their level of involvement in the industry.

Transferable development rights

Conceptually, transferable development rights could be used in situations where biodiversity is threatened by a non-point source process, but we have been unable to identify an example of their application. In effect, they would be very similar to the 'bubble' approach which treats non-point source pollutants in a region as a single polluting entity. This method is used by the WA Environment Protection Authority in the Kwinana Industrial Area, where Sulphur dioxide emission permits are traded within a bubble area.

2.4.6 Priced based and financial instruments

Removal of perverse incentives

In the context of biodiversity conservation, a perverse incentive is any incentive that induces behaviour that results in loss of biodiversity or creates a threat to biodiversity conservation. Often perverse incentives occur because the government has intervened in the market to secure social or economic ends without fully understanding or considering their implications for biodiversity conservation. Examples may include taxation advantages for clearing native vegetation and below cost irrigation water pricing.

Perverse incentives within Australia's agricultural sector are generally lower than in other OECD countries, in terms of aggregate support as measured by the Producer Subsidy Equivalent, an index of perverse incentives.72 In 1990 Australia's overall agricultural support was 11%, compared to Japan's 68% and the EU's 48% and an OECD average of 44%. Industries where levels of protection in Australia are still high include sugar and a variety of irrigation industries where water is still supplied at concessional prices, and the native forest logging industry, where timber is supplied at less than full cost. In the past, it has been argued that drought policy has encouraged land degradation, including the loss of biodiversity values. Recent changes to drought policy at both the State and Commonwealth level are making farmers more self reliant in a way that may reduce threats to biodiversity values in times of social and environmental water shortage stress.


There are a wide range of grants available in Australia, but very few go beyond providing funds for the encouragement of sustainable land use. Although not directly targeted to the conservation of biodiversity, schemes with criteria relevant to biodiversity include Landcare, Tree Victoria, Land Protection Incentive Scheme (Victoria), Community Salinity Grants (Victoria), Salt Action (NSW), the Tasmanian Soil Management Assistance Fund and National Estate grants. There has been criticism directed towards the lack of funding that Australian grants provide.73 Further, where grants do not operate within a legislative or policy framework, they remain dependent upon the will of the landowner rather than on ecological criteria.

One grant scheme which has close links with biodiversity conservation is the Save the Bush program (STB). This operated originally as the National Tree Program from 1982 as a revegetation program which was replaced in 1989 by the One Billion Trees (OBT) and the STB programs as part of the Prime Minister's Statement on the Environment. STB funds are disbursed to the community and local governments, State and Territory Governments, and research institutions. In addition, funds are used for the provision of education and information services.

Charges and levies

Charges, levies and the setting of prices to fund biodiversity management are used by State conservation departments, but are generally limited to park-entry fees, camping fees and other user fees within National Parks and conservation reserves. Park fees are usually set at a level that provides funds for maintenance and the upgrading of facilities. They are not generally directed to the conservation of biodiversity and would usually be insufficient to protect reserve biodiversity values. The Great Barrier Reef Marine Park Authority uses environmental pricing by charging a $1 visitor fee to passengers on commercial vessels visiting the Marine Park. In 1989 the NSW government established a levy in the related environmental field of polluted waterways. A Special Environmental Levy (SEL) was introduced as a financing mechanism at a rate of $80 per household per annum. Due to perceived accounting irregularities, the SEL was abolished in 1993 and the program has since been financed through 'user pays' charges.74

Tax policy75
Income tax

The existing taxation arrangements that provide an incentive for landholders to undertake landcare activities are set out in sections 75B and 75D of the Income Tax Assessment Act 1936. Under these provisions, full deductibility in the year of expenditure is available for land degradation control. On land used for primary production, land degradation expenditure can be claimed for controlling pests and weeds, fencing out degraded areas, fencing out areas identified in an approved management plan, and building levee banks and drainage works necessary to address land degradation problems. Expenditure on environmental protection is limited to pollution control and prevention and does not extend to include the protection of biodiversity. Furthermore, allowable measures include activities that may not conserve biodiversity, such as the construction of dams and irrigation channels.76

Proposals to amend the current tax legislation so as to specifically include provisions for biodiversity conservation, and to incorporate deductions for expenses incurred in maintaining the conservation works, have been suggested. Tax relief remains primarily an aid to owners of cleared land, or those undertaking basic land protection works, whilst landholders with original native vegetation receive few concessions.77 Tax provisions also do not extend to hobby farmers and other people who own native vegetation. Colman et al.78 note that any tax related incentive favours those with larger land holdings, and who are in the higher income tax brackets. As Hodge states 'the value of the incentive is determined by some factor quite unrelated to the desirability of the outcome.'79


A deduction for cash contributions to a non-government conservation organisation is available for all organisations listed on the Register of Environmental Organisations. The availability of tax deductions for the donation of land with conservation value is a major incentive for landholders, and such provisions have the potential to significantly contribute to the conservation of biodiversity on private lands. Presently, deductions can only be claimed for donations of land in Australia, under section 78 of the Income Tax Assessment Act 1936, if the land has been owned for less than twelve months, or if the land is of national cultural heritage significance and is accepted by the National Trust. This provision does not yet apply to areas of natural heritage significance. The possibility of a deduction being available for the donation of a conservation easement or covenant under current Australian tax legislation has not yet been tested. Nevertheless, one interpretation of the requirements under section 78 and the definitions of 'property' and 'asset' in section 160A and the Treasurer's statement of 26 June 1992, would be that a deduction is allowed.

Capital gains tax

It should be noted that the mere creation of a conservation covenant triggers some extremely complex capital gains tax considerations in Australia, involving the creation and disposal of an asset (sections 160M (6), (6A), (6B), (7) and 160R of the Income Tax Assessment Act 1936). Given the complexities raised, perhaps the most effective use of conservation easements and covenants as incentive mechanisms could be achieved if a capital gains tax exemption applied.

Land tax and property rates

Land tax is an annual State tax and is generally assessed on the unimproved value of land. In relation to the conservation of biodiversity, this means that cleared and developed land is ordinarily assessed at the same rate as land retaining a cover of native vegetation. Some States do, however, adjust the unimproved value of the land by a factor that approximates the land value to the commercial worth of the property. Although rate reductions apply in some States for land with high conservation values, it is worth noting that most States also provide land tax exemptions for primary production land, thus reducing the effectiveness of any conservation incentives for primary producers. A key consideration with rate reduction schemes is the issue of who pays for the reduction. Whenever local rate income is reduced, the local community pays, whilst if a State government pays a rebate, the State as a whole pays for the benefit.


Cross-compliance measures have not been commonly used in Australia in the past, due to the perceived administrative complexities and the low level of assistance given to Australian agriculture. More recently, however, cross-compliance like arrangements are being introduced which require farmers to prepare management plans as a precondition to the receipt of drought assistance. Increasingly, environmental conditions are becoming a mandatory part of such plans. Under the Environment Protection (General Amendment) Act 1994 in Victoria, an opportunity now exists for the Environment Protection Authority to issue 'accredited licences' to companies that adopt an accredited environment management system. These licences provide companies with greater scope to manage their own environment performance and can also include licence fee reductions.80 As an underpinning principle of ESD, the conservation of biodiversity should form an integral part of required management plans or systems.

Environmental performance bonds

Environmental performance bonds require operators to post a security deposit or a bond prior to operation. They are best suited to situations where there is one source of potential environmental damage and that damage can be reasonably estimated. Bonds are used for land rehabilitation by the mining industry, companies producing hazardous wastes, and as a permit condition for aquaculture. Bonds have been used by the Great Barrier Reef Marine Park Authority and in South Australia, where oyster farmers must either contribute to an industry fund or deposit a bank note or securities. Under the new Fisheries Management Act 1994 in NSW, aquaculture permit holders must provide security by way of cash or a bank guarantee on a per hectare basis.

Commercialisation of wildlife

Rights to harvest and/or use Australia's flora and fauna vary considerably between States in their detail and economic sophistication. In all cases use rights are underpinned by a mixture of regulatory, economic and social incentives. A permit or licence is required in all States and Territories to take, kill, trade, or export protected fauna. These licences are usually issued for a short period of time with no guarantee of renewal, and they can be cancelled when people abuse licence conditions and regulations. Fees are usually charged which offer a means to recover administrative costs, but rarely cover the costs of maintaining biodiversity values.

The Australian wildflower industry represents a major commercialisation of native flora. The Wildlife Protection Authority of the Australian Nature Conservation Agency administers the Wildlife Protection (Regulation of Exports and Imports) Act 1982 which controls the export of protected Australian native plant material. An export licence is required before any protected plant material can be exported. According to the industry review, if the material is bush picked (rather than cultivated) then a State management program must also be in place. The Western Australian program holds that commercial harvesting of protected flora must be sustainable at the level of the individual plant, the species, and the ecosystem in which it occurs.

A major issue regarding the commercialisation of native flora is the loss of control over the exploitation of Australian germplasm. Despite formal controls (including the Convention on Biological Diversity), obtaining native plant material for breeding is apparently not difficult either with proper documentation or by smuggling. Smuggling and illegal trade are also a problem in ensuring the conservation of Australian fauna, especially for some bird species.

Environmental business

Most States in Australia have developed strategies for ecotourism that at least recognise the importance of natural resources and the role ecotourism can have in conserving these resources. Nevertheless, as yet there are few examples of ecotourism funding the conservation of biodiversity in Australia, and fewer still examples of direct incentives to conserve biodiversity 'off-reserve'. In fact, it has been argued that the broader tourism industry, rather than merely the small operators generally involved in ecotourism, should bear responsibility for such funding. The Northern Territory uses a Tourism Marketing Duty to raise funds to promote tourism in the NT.81 The duty is levied on the cost of accommodation at a rate of five per cent. Similar schemes could be used to fund and promote the conservation of biodiversity.

Corporate contributions

Corporations often make significant contributions to enhance their corporate image and publicise their commitment to nature conservation. Such contributions can be an important source of funds and at the same time create incentives to conserve biodiversity. Landcare Australia Ltd and Greening Australia have a role in seeking sponsorship for conservation activities, while the World Wide Fund for Nature conducts its own corporate sponsorship program designed to assist in nature conservation research and information dissemination. Animal sponsorship schemes are another way of raising funds. Identification with individual animals could be extended to identification with species, ecosystems, or bioregions.

Environmental funds

Environmental Funds have been established by private, non-profit organisations so that they can use voluntary land use control techniques to conserve areas of ecological, recreational or historical value. They use methods such as direct purchase, land donations and exchanges, and covenants. The Victorian Conservation Trust, the NSW National Parks and Wildlife Foundation and the Australian Bush Heritage Fund all operate as Environmental Funds. Most Environmental Funds in Australia are in their infancy, and thus do not yet have sufficient capital to instigate a revolving fund. But future use of revolving funds looks certain, as the Australian Bush Heritage Fund intends to operate such a mechanism. One of the actions proposed as a result of Victoria's Draft Flora and Fauna Guarantee Strategy was to establish a revolving fund as part of the Victorian Conservation Trust. However, the extent of donation to such funds is currently limited by stringent controls on the granting of tax deductibility to non-government conservation organisations.

Biodiversity prospecting contracts

In line with the Convention on Biological Diversity, Australia has taken action to reaffirm its rights over its biological resources, while at the same time facilitating access to other contracting parties. Australia hopes to share in any commercial benefits arising from a research institute's interest in a chemical from a Western Australian shrub which showed promise against Human Immune-deficiency Virus (HIV). The Western Australian Conservation and Land Management Act 1984 was amended in 1993 to allow the patenting of unmanipulated naturally occurring organisms.

2.5 What the world is doing

Many of the Australian approaches to the conservation of biodiversity are also being used elsewhere in the world. Most countries have a dedicated conservation network and many have also begun to develop off-reserve strategies for conservation. As indicated in Appendix 1 there are a number of approaches undertaken in other countries that may have potential for use in Australia. A summary list of some of these options is included below.

2.5.1 Regulatory instruments

Legal Liability

The USA has adopted natural resource damage liabilities as part of its environmental legislation, allowing class actions to be taken. This is not possible in Australia. Individual director liability is another option that could be extended to biodiversity considerations.

2.5.2 Property right based instruments

Management agreements
Regulatory agreement

A good example of a regulatory agreement is the Potentially Damaging Operations (PDO) on Sites of Special Scientific Interest (SSSI) in the United Kingdom. An SSSI is designated on the basis of the quality of existing habitat types (grasslands, wetland etc) in each region. Under the Wildlife and Countryside Act 1981, the Nature Conservancy Council can offer a landholder a management agreement after the landholder has provided notification of an intention to undertake PDO on an SSSI. If the landholder refuses the offer and the site is considered too valuable to lose, the NCC can gain a one year moratorium in which to make another offer. If this is again refused (which is not usually the case) the NCC cannot stop the PDO unless if relief is sought under the 1949 National Parks and Access to the Countryside Act for the compulsory purchase of the land. This avenue is rarely pursued.

Incentive agreements

Within the European community, landholders receive compensation if they agree via a management agreement, to maintain features of the landscape. For example, the United Kingdom has introduced voluntary management agreements through the Countryside Stewardship program, which provides 10 year agreements that cover management and capital costs required to conserve wildlife habitats. The United Kingdom also operates the Environmentally Sensitive Areas Scheme (ESA) with similar 10 year agreements. Payments are on a per hectare basis.

Easements and covenants

In the USA, tax benefits are also possible if easements are donated to an agency or conservation organisation. Easements or covenants can be acquired by organisations other than government institutions. They are particularly attractive when no action is required for their maintenance. In the USA there are covenants called 'dedications' that preserve land from expropriation by government agencies, in and around zoned protected areas.

Positive action

Economic incentives to encourage positive action for biodiversity conservation are applied in some countries. In the USA non-government organisations have recently begun paying landholders to conserve particular species. Defenders of Wildlife introduced The Wolf Reward Program in 1992, which pays $5,000 to private landholders if wild wolves successfully raise a litter of pups on their land. In Scotland, the Goose Management Scheme, run by the Scottish Natural Heritage Commission, pays farmers per head of Greenland White-Fronted Goose recorded on their land over a 12 month period. Farmers in the Peak District Dales in the United Kingdom are paid on the basis of the number of wild flower species found in their meadows.82

Withdrawal of property rights

Even where compulsory acquisition of land is available, compensatory measures are favoured to help reach voluntary agreements. In Finland it is possible to exchange land as an alternative to cash compensation in such cases.83

Reimbursement for incremental costs

Conservation organisations in the USA often compensate landholders. Ducks Unlimited pay farmers to conserve waterfowl habitat, and the Defenders of Wildlife's Wolf Compensation Fund compensates for the effects of wolf predation on livestock. In France, hunters pay into a fund to compensate farmers against the damage done by game. In such cases, reimbursement is for incremental costs, so that expected net profit from the land is similar to that obtainable if the desired practice has not been adopted.

Ownership rights

Communal ownership has been recognised for some time as a viable alternative to private or State ownership. In Papua New Guinea, customary community-rights over land and forest resources have been formally recognised. Customary land-tenure systems often specify who may use, inhabit, harvest, collect or hunt from the forests.

Use rights
Transferable development rights

Tradeable development rights have been applied as part of comprehensive management plans in New Jersey's Pinelands and Montgomery County. In both cases, development rights operate in conjunction with zoning restrictions so that landholders who own valuable habitat can trade with landholders in zones of land of lesser biological importance. The use of transferable development rights is also allowed under the Resource Management Act 1991 in New Zealand, and opportunities exist for their application in Australia.

It has been suggested that transferable development rights can be used to conserve biodiversity on an international level. In this scenario, a country would sell development rights over critical habitats to international environmental foundations and developed country governments.

2.5.3 Price based and financial instruments

Tax policy
Income tax

In Finland the forest taxation system has been reformed, so that tax which was previously based on estimated yield per hectare is now only payable on actual proceeds from timber sales. No tax is paid if the forest is not under commercial use and perverse incentives such as tax exemptions for draining off peatland have been removed.


In the USA a deduction is specifically provided for the monetary value of a conservation easement. The example of the James River Corporation was recently referred to in the New York Times, when the corporation donated an easement to American Farmland Trust and the Nature Conservancy and in return received an $8 million tax deduction (the diminution in property value resulting from the easement).

Life income gifts

Through the use of Life Income Gift schemes it is possible for donors of conservation land to receive another benefit besides a tax deduction. These schemes operate in the USA for donors over 50 years of age. In return for the donation of land (or cash or securities), the donor receives an annuity from the land trust. Hence the trust obtains the conservation land (and calculates the annuity in line with average life expectancies in the hope of making a gain on the difference between the value of the land and the annuity payments made) and the donor obtains a guaranteed income stream in addition to the tax deduction. Life Income Gift schemes are not possible under current taxation provisions in Australia.

Capital gains tax

In Australia, donating a covenant or simply donating land will attract Capital Gain Tax (CGT). In the United Kingdom, exemption from CGT is available for gifts of Heritage Property (in this case taken to mean land of scenic, historic or scientific interest) as long as the recipient agrees to abide by a management plan. Full CGT liability applies for any breach of the management plan. A similar scheme has recently been recommended in Canada to allow CGT exemption for all donations of ecologically sensitive land made in perpetuity to all levels of government and charitable organisations.

Tax credits

Costa Rica runs a transferable reforestation tax credit scheme under which landholders receive a tax credit for keeping their land forested or for returning land to native species cover. To overcome the problem of tax credits being of little value to landholders who do not have a tax liability, these forest landholders can sell their tax credits to wealthier landholders. Recommendations for the use of transferable conservation tax credits have also been made in the USA.

Tax credits to entice polluting industries to move to specially zoned industrial areas have been tried in some countries, including recent schemes in Turkey. As a method of conserving biodiversity, it should be noted that, if such tax credits are maintained after the desired zoning has occurred, they become a subsidy for polluting industries and can create "perverse incentives".

Rate relief

Three sophisticated rate relief programs operate in the USA which could provide a basis for the expansion of programs in Australia. They are:

Pure preferential taxation, which enables landholders to have their land assessed at 'current use' rather than at market value. No penalty applies for the conversion of land to non-eligible use at a subsequent stage;

Deferred Taxation, which is the same as pure preferential assessment except that rates are deferred so that if the land is converted to a non-eligible use, the previous savings must be repaid plus interest. This type of program operates in New Jersey and Massachusetts; and Restrictive Arrangement, whereby current use value assessment is only granted if the landholder enters a contract that restricts land-use development for a period up to 10 years. This type of program operates in California.

Tax rebates are available in Canada under the Ontario Conservation Land Tax Reduction Program. The rebate is up to 100% of eligible property tax on wetlands, areas of natural and scientific interest, and escarpment natural areas, but is conditional upon landholders entering into a long term management agreement. Landholders who cease to maintain conservation land in its natural state must repay an amount equal to the total rebates received in the previous 10 years, plus 10% interest.

A differential land-use tax program also operates in Germany. Land is classified into categories on the basis of environmental benefit (eg. from natural forest to industrial site). A charge is applied if a landholder changes to a more environmentally destructive land use and the charge increases as more steps of environmental downgrading are transgressed.

Debt-for-nature swaps

A debt-for-nature swap usually involves a government or private organisation agreeing to purchase another country's debt on the secondary debt market. In exchange, the country may have to introduce specific actions aimed at conserving biodiversity, relinquish certain ownership or use rights over an ecologically significant area or habitat (ie. attach a conservation covenant), or cease policies that create perverse incentives. The usual international debt swap has limited application for Australia, however it is possible to consider a domestic application of debt-for-nature swaps. A secondary market could be created from the sale by banks of their farm mortgage income streams. Once again, if NGOs are prepared to write-off some of the debt in return for a conservation covenant, they would be able to seek out farms with serious repayment problems and areas of significance for the conservation of biodiversity. This debt would also carry the highest discount. This arrangement may be satisfactory from the banks point of view as they would be off-loading their riskiest debt. In return, NGOs would be picking up conservation easements at discount prices.

Revolving funds

In Norway, a concept called the right of pre-emption is used. This allows a government agency to pre-empt a sale of land once a buyer and seller have been established. Thus, if the government is concerned about conserving biodiversity on a block of land, it can override the sale between willing buyer and seller and purchase the land itself. It must however pay the same amount as the willing buyer was prepared to pay. The agency can then attach an easement and lease or on-sell the land to the original buyer. The lease payments can be calculated in such a way as to reduce the cost of maintaining such a scheme.

In the Luangwa Valley of Zambia, a revolving fund is used for charging concession fees, selling wildlife products and other commercial ventures. The money is then directed towards managing the natural resources of the area. In the Cross River National Park of Nigeria, a revolving credit fund provides money at low rates of interest provided the money is invested in activities that are compatible with the park.

Commercialisation of wildlife

If clear and enforceable property rights and obligations are created for wildlife with commercial value, then it can be argued that an incentive (for those holding the property rights) will exist to maintain the species and their habitats. At the same time funds will be generated, some of which could be used for further conservation measures. The CAMPFIRE program in Zimbabwe is a good example of efforts to commercialise wildlife. Nevertheless, there are concerns that commercialisation is not sustainable in the long term. It is held that it encourages illegal use, giving rise to black markets and smuggling operations. With an emphasis on export markets, rather than conservation, it is argued that it would be difficult to control the industry as critical population levels are approached. Furthermore, commercial utilisation could threaten the genetic diversity of a species as people select for those animals or plants that maximise short-term profits.


Hypothecation can be achieved by issuing shares to local people and paying them 'dividends' from income gained from entrance fees and the sale of usufructual permits within protected areas. This will provide an incentive not to encroach into the protected area or take flora and fauna from it. A similar approach has been developed in France, where a contractual agreement operates between the communes within a park area and other interested organisations so that they share the economic benefits of the park.

Offsetting arrangements

One innovative use of offsetting arrangements, which could be adapted easily to biodiversity conservation measures, has been suggested in relation to CO2 reductions. Forest compacts (voluntary contracts) could be entered into whereby a developed country provides financial and technological resources to a developing country in exchange for policy reforms, conservation and investment programs that would lead to a specified target of forest preservation. The developed country is then entitled to the CO2 reduction credits that arise from maintaining the forest.

Mitigation banking

Mitigation banking allows for offsetting to occur on a local level and is synonymous with wetlands conservation. It involves offsetting the damage that would result from a project by restoring or protecting another area. In this way a reserve is established of restored or artificially created wetlands. Private or public entities could purchase shares of the reserve to offset further unavoidable wetland losses associated with development projects. Mitigation of wetlands is undertaken in the USA, but no processes yet extend the mechanism to real banking, where landholders or developers could deposit, borrow, sell, purchase and withdraw wetlands credits.


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37. Zann, L.P. (1995) 'Our sea, our future.' In Major findings of the state of the marine environment report for Australia. Great Barrier Reef Marine Park Authority, Department of Environment, Sport and Territories, Canberra, p1-112.

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42. Commonwealth Department of the Environment, Sport and Territories (1995) I can do that! – with a little help. Commonwealth of Australia, Canberra.

43. Cameron, J. and Elix, J. (1991) Recovering ground: A case study approach to ecologically sustainable rural land management. Australian Conservation Foundation, Melbourne.

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45. Sustainable Resource Management Committee (1994) Draft report in preparation for the Standing Committee on Agriculture and Resource Management. Unpublished.

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48. Hooy, T. and Shaughnessy, G. (eds) (1992) Terrestrial and marine protected areas in Australia 1991. Australian National Parks and Wildlife Service, Canberra.

49. Cameron, J. and Elix, J. (1991) Recovering ground: A case study approach to ecologically sustainable rural land management. Australian Conservation Foundation, Melbourne.

50. Preece, N.; van Oosterzee, P. and James, D. (1995b) Biodiversity and Ecotourism: Strategy for integration. Draft Report for the Biodiversity Unit. Department of Environment, Sport and Territories, Darwin.

51. Victorian Department of Conservation and Natural Resources (1992) Draft flora and fauna guarantee strategy: Conservation of Victoria's biodiversity. Department of Conservation and Natural Resources, Melbourne.

52. Max Kitchell (1995) Personal comment.

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55. Parker, P. (1993) Biosphere reserves in Australia: A strategy for the future. Written for the Australian National Commission for UNESCO as a report for the Australian Nature Conservation Agency. Australian Nature Conservation Agency, Canberra.

56. Commonwealth Department of Tourism (1994) National ecotourism strategy. Australian Government Publishing Service, Canberra.

57. New South Wales Department of Land and Water Conservation (1995) Planning guidelines for native vegetation protection and management in NSW. Department of Land and Water Conservation New South Wales, Sydney.

58. Sustainable Resource Management Committee (1994) Draft report in preparation for the Standing Committee on Agriculture and Resource Management. Unpublished.

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60. Sustainable Resource Management Committee (1994) Draft report in preparation for the Standing Committee on Agriculture and Resource Management. Unpublished.

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65. Max Kitchell (1995) Personal comment.

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74. Commonwealth Department of Finance (1994) In pursuit of Australia's environment and resource use goals: The potential role of economic instruments. Issues for Discussion, Department of Finance, Canberra.

75. Caveat: the Australian taxation provisions described in this section have been simplified and should not be considered adequate for taxation planning purposes.

76. Commonwealth Department of Finance (1994) In pursuit of Australia's environment and resource use goals: The potential role of economic instruments. Issues for Discussion, Department of Finance, Canberra.

77. Robert Begg (1995) Personal comment.

78. Colman, D.R.; Crabtree, R.; Froud, J. and O'Carroll, L. (1992) Comparative effectiveness of conservation mechanisms. Department of Agricultural Economics, University of Manchester.

79. Hodge, I. (1991) 'Incentive policies and the rural environment.' Journal of Rural Studies (7) 4:373-84.

80. Victorian Environment Protection Authority (1994) 'Victoria's environment protection system: Innovative approaches and economic instruments.' Environmental Economics Update (Environment Protection Authority, NSW) 4:1-6.

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