‘Shopping’ for the GBR – it’s a question of benefit, cost AND feasibility
Prioritisation of catchment management projects using cost-effectiveness can increase the outcome several fold
A clear quantifiable objective is critical to making wise investment decisions
A graphic display of cost-effectiveness helps to evaluate trends and aids in decision making
If you had to decide which projects to fund to improve the quality of water flowing off agricultural land, which would you choose? The cheapest projects? The projects that promised to improve water quality the most? The projects least likely to fail?
There are many ways policy makers approach the problem of project selection but new research from CEED has demonstrated (again) that framing your choice based on cost-effectiveness is the best way to go. Indeed, the cost-effectiveness framework we have developed can provide solutions that are much more efficient than other approaches that only look at cost or benefit alone.
To demonstrate this, we applied our cost-effectiveness prioritisation to catchment management projects being used to improve water run-off flowing out to the iconic Great Barrier Reef.
The Great Barrier Reef is under threat from agricultural run-off from the adjacent coastline. The water carries sediment, nutrients and chemicals, all of which degrade the reef in various ways. The government is investing resources in changing land management by supporting landholders who are proposing projects on their land such as fencing, improving machinery or planting vegetation along waterways. This is particularly important now that the GBR has experienced its worst ever bleaching event; with good water quality being crucial for recovery. However, there isn’t enough money to fund all projects. So, how do you choose (prioritise) the best projects?
Framing your decisions using cost-effectiveness is something most of us do whenever we visit a supermarket. There are lots of products you can buy in a supermarket, but we all have limited family budgets. Experienced shoppers know to select products that reliably deliver the greatest benefit for the cheapest price. Simply choosing the cheapest product isn’t always the best strategy because sometimes low cost items are unhealthy or of mixed quality. Being stingy isn’t always the best strategy when your family’s health is at stake. The situation is similar for prioritising projects to protect the Great Barrier Reef.
When it comes to different catchment management projects, we collected data on the cost of each project, the expected benefit (in terms of reducing the sediment load in agricultural run-off) and the feasibility that this benefit will be realised. Cost-effectiveness is simply the benefit divided by the cost (where expected benefit equals the benefit multiplied by the feasibility – the chance the project will work).
Many conservation programs choose their projects by prioritising threats, locations or species. In a sense they are comparing benefits – the expectation that a specific threat will be addressed, or an area fixed up or a species saved – without including the costs or the feasibility of specific actions in their decision process. Sometimes we use just one criterion: cost, species richness, or project reliability. All of those one-criterion selection methods are inefficient.
To demonstrate the value of our approach we populated our cost-effectiveness framework with 295 catchment projects that have been implemented along the coastline adjacent to the Great Barrier Reef. This allowed us to compare the cost-effectiveness of individual projects and enabled us to determine which subset of projects would achieve the best outcomes in terms of a reduction in sediment (we used a six-step process, see the box ‘Six steps to cost effectiveness’). We were also able to compare this cost-effectiveness approach with other prioritisation approaches that focussed on area, benefits or costs alone.
Our framework gave us up to four times better returns on investment for our small example-dataset, than when projects were chosen in order to minimise cost, or maximise benefit. In reality, there are many more projects across a larger area that have to be decided on, and even larger differences are likely between different prioritisation strategies.
In addition to highlighting the projects that would give the best return on investment, the framework is easy to use and generates simple graphical outputs to help with project selection. Our approach is a very simple, fast and transparent way to help decision makers avoid common mistakes.
At the same time it enables them to see the options quickly and put them into the larger picture. The main output of the framework is a graph that shows the ranking of options according to their cost-effectiveness. It can also highlight the best projects for specific characteristics and puts a spotlight on the differences between the general cost-effectiveness of a spatial location or targeted industry – in our case-study cattle grazing or sugar cane in different subcatchments.
Because the process is simple, anyone should be able to apply it. Indeed, anyone who can shop well has what it takes to prioritise cost-effectively. All you need is the shopping list (a quantifiable objective), and information about your options (cost, benefit and feasibility) to get started.
Six steps to cost effectiveness
The cost-effectiveness framework involves six steps.
1. Define the conservation objective
Define a quantifiable objective. Most conservation projects have to use a stressor-based objective. In this case the current policy goal is to reduce sediment runoff from adjacent catchments to the GBR by 20%, by 2020. The objective for this prioritisation exercise was to maximise reduction of sediment exported from any reef sub-catchments for a given budget.
2. List management projects
What are the specific actions being proposed to meet the objective? The researchers obtained a subset of projects funded by the Australian Government’s Reef Plan (2008–2013) to reduce sediment runoff from two of the most widespread land-uses, grazing and sugarcane. Every project comprises one or more actions proposed at a specific property.
3. Estimate the benefit of actions
What is the expected benefit of each of these actions? The benefit of implementing each action was the estimated annual reduction of sediment runoff at the catchments river mouth, scaled by the area each action covers.
4. Calculate the cost of actions
What is the cost of each of the proposed actions? The researchers obtained information about the total cost, Ci, of each action that was funded in any year between 2008 and 2013 from the relevant NRM group as part of the Reef Plan program.
5. Estimate feasibility
What is the feasibility of each action? The feasibility of each action, Fi, takes operational, social, and political factors into consideration, and is independent of action costs (Joseph et al, 2009).
6. Calculate the cost-effectiveness of each action
The final step is to determine the cost effectiveness of each action, CEi, to indicate the relative priority for investment. The cost-effectiveness of each action is defined by the equation:
Cost effective actions deliver the greatest outcome for a specific objective (here the maximised annual sediment reduction) per every dollar spent. The objective is to maximise the reduction in run-off sediment. To achieve this we invest in the most cost-effective actions until the budget is spent. This will ensure that the largest amount of sediment will be reduced in total.
Not only does ranking by cost-effectiveness deliver the best outcome under a specific objective for a fixed budget—it can also deliver a pre-determined outcome for least cost.
This framework follows a standard approach applied in economics that has only been applied to conservation in recent years. CEED developed an application of this approach for managing threatened species called the Project Prioritisation Protocol (see Joseph et al, 2009). Here the approach is applied to prioritising catchment management projects.
More information: Jutta Beher email@example.com
Beher J, HP Possingham, S Hoobin, C Dougall & C Klein (2016). Prioritising catchment management projects to improve marine water quality. Environmental Science & Policy 59: 35-43. http://www.sciencedirect.com/science/article/pii/S1462901116300296
Joseph LN, R Maloney & HP Possingham (2009). Optimal allocation of resources among threatened species: a project prioritization protocol. Conservation Biology 23:328-338. (And see Decision Point #29)