Farming the environment

Fiona Dempster

I grew up in a leafy, riverside suburb in Perth. My childhood was spent catching tadpoles, snorkelling and bushwalking in the tall Karri forests: nature galore! 

After a Bachelor of Science in Natural Resource Management, I spent a few years working at the Western Australian Department of Planning and Infrastructure. The approach to information gathering often used by land use planners frustrated me. Stakeholder workshops, drawing lines on maps, sorting through masses of public feedback didn’t fit with my need for information to be sorted and collated in a transparent, rational manner. I left the Department to do my PhD in environmental economics, completing in 2011 a thesis that explored the behavioural and market drivers of individual decision-making for drinking water supplies.

Continuing in a postdoctoral position with Professor David Pannell at the Centre for Environmental Economics and Policy, University of Western Australia, most of my research has focused on providing policy-makers with accurate information on the most efficient way to deliver environmental outcomes. 

I’ve been funded through two Federal Government programs: the National Environmental Science Program and the ARC Centre for Excellence in Environmental Decisions. Both were collaborative efforts with ecologists, economists and policy-makers. I also spent a large amount of time working with both state and Federal Governments’ land management agencies in the Bushfire and Natural Hazard CRC. In the first round of the CRC our focus was evaluating the return on investment from prescribed burning. In the second round we responded to the land management agency’s issue of easily accounting for non-market, intangible, values in benefit cost analysis. We collated a large number of estimates on environment, health and community values in an easy-to-use decision tool.

There are some common learnings across all the projects I have worked on, which also translate to on-farm decisions. 

Farmers make decisions every day on what to invest in, given a limited budget – rates of fertiliser, which crop to grow, investing in new technology, spraying insects and weeds, livestock stocking rates. Several factors determine the ranking of these investment choices: benefit, cost, time to payoff, risk of success, available labour, animal welfare, family commitments and personal interest, amongst others. Most farmers are very good at rationally weighing up these factors to arrive at a decision that maximises their utility, be it profit, life satisfaction etc, using a metric or calculation only known to them and their business partners. 

Many of these factors used in ranking on-farm choices are also needed in the prioritisation metric we advocate for ranking environmental projects. Our research shows that with a tight budget, poor metrics (or a failure to properly consider these factors) resulted in environmental losses of up to 80% – not much better than completely random, uninformed project selection. (1)

Another commonality across my work is knowledge that people care about intangibles, like rare flora and fauna, water quality, recreational amenities, and are willing to pay for the maintenance and improvement of them. Our farm is located on a typical broadacre cropping property. Large, open paddocks, with few trees. We’re fortunate to have the occasional patch of pristine native vegetation. In the absence of an easy to access platform for selling these environmental intangibles, I hadn’t considered capitalising on this research learning in our business. 

In the lead up to the AFI Roundtable I wondered where else natural capital could fit in our farm business. Some services that natural capital provide, such as increased soil carbon and pollination, are beneficial to production. Some, such as visual amenity, are important for wellbeing. Could natural capital also provide its own income stream? 

Curious, I did a bit of online research and was surprised by the demand from corporate agriculture for ecosystem service type investment – for example, Carlton & United Breweries have committed to a 25% reduction in carbon emissions across their entire supply chain by 2025. Sustainable accredited canola exported to the European Union renewable energy market is probably the largest, longstanding example in Australia. The National Farmers’ Federation have recognised the opportunity that ecosystem services income could play in farming business income, targeting a net benefit from ecosystem services of 5% of farm revenue by 2030.

Natural capital income as a percentage of farm revenue makes sense as a strategy to diversify your income, which helps to buffer against poor seasons for other commodities. In our own business there are similarities in the contribution livestock make to a predominately cropping enterprise. (2)

Overall, my view is that as an industry, we should start making it happen. The Roundtable helped to tease out a number of barriers, some that could be overcome with government policy or R&D: a consistent framework for measuring ecosystem services (there’s at least one new government backed research program to achieve it); providing funding to farmers to subsidise their time in managing an ecosystem service, as it’s a largely foreign area for many; and subsidising the upfront cost of baseline measurement, such as soil tests and biodiversity assessments.

Dr Fiona Dempster (nee Gibson) is an AFI Research Fellow and an applied economist with The University of Western Australia. With her family she operates a 5,200-hectare crop and livestock operation in Mingenew, Western Australia. Her expertise is in designing decision tools for environment and agricultural management, valuing ecosystem services and identifying the adoption drivers of management practices in agricultural landscapes. Fiona joined the GRDC Western Panel in August 2017. Fiona is an active member of Mingenew Irwin Group, the Australasian Agricultural and Resource Economics Society and many other voluntary groups in her community.

1. Pannell, D & Gibson, F (2016), The environmental cost of using poor decision metrics to prioritize environmental projects, Conservation Biology, 30, 2, pp. 382–91.

2. Rogers, A, Kragt, M, Gibson, F, Burton, M, Petersen, E & Pannell, D (2015), Non-market valuation: usage and impacts in environmental policy and management in Australia, The Australian Journal of Agricultural and Resource Economics, 59, 1, pp. 1–15.