Targetting Incentives for Policy: Linking Bio-Economic Modeling to On-Ground Outcomes

Environmental policy has assumed a high profile in Australia with recent policies addressing aspects of land degradation (National Heritage Trust and the National Action Plan), forest management (Regional Forests Agreements) and climate change (programs administered by the Australian Greenhouse Office), among others. These policies are often based on relatively little information about the likely benefits to be generated or cost borne. In this paper, the issue of policy development is directly addressed using a case study of wetland policy. The desirable scale of the policy response to environmental issues is informed by the development of the notion of threshold policy analysis. The suite of policy options that should be adopted is dependent on the scale and type of change desired from the policy. The degree of irreversibility and notion of environmental impact thresholds also affects the choice and timing of alternative policy options. Timing of policy is therefore a function of quasi-option values – the value of postponing a decision to obtain more information.