The challenge of participation

Market-based instruments (MBIs) cover a range of approaches designed to harness market forces, or provide incentives, to deliver improved environmental outcomes. MBIs rely on market signals to positively influence behaviour.

MBIs provide a framework for a willing exchange between buyers and sellers, based on the premise that each participant will benefit. However, a fundamental challenge for MBIs is the challenge of participation. Many market-based approaches are new and land managers may be reluctant to participate until they have more knowledge and confidence about the benefits.

Although it is important to get enough participants in an MBI create competition, over-subscription can also be a problem. For example, over-subscription to a conservation tender may result in high-quality bids being unsuccessful—an experience that may discourage land managers from future involvement.

The aim is to optimise participation. There are no rules for what constitutes an optimal level of participation. However, three questions are fundamental to ensuring the right level of participation.

• What should be included in the MBI program or design to optimise participation of target land managers?
• How should the MBI be communicated and delivered to ensure optimal participation?
• Who is most likely to participate and can they deliver the desired outcomes?

The what: MBI characteristics

The selecting of an MBI is determined by the NRM issue and the economic and institutional context of the issue. However, once a particular approach is selected, informed and careful design of the MBI is important to ensure appropriate levels of participation.

The most important design criterion is that land managers see some real personal—or commercial—value in their participation. The larger the expected financial return relative to effort or costs, the higher the rate of participation. When designing and implementing MBIs, consider factors that will influence its ‘adoptability’:

• The less time and effort required by land managers at each stage of the MBI process, the more likely they are to participate. The MBI must be clearly communicated, the rights and obligations of all parties must be transparent and the capacity of land managers to deliver on their obligations must be known. Submitting a bid can be quite an onerous process. Providing advice and assistance to land managers can help to ensure the success of the program.
• Flexibility is an important consideration. Wherever possible, land managers should have flexibility to tailor proposals to best meet their own needs and to fit within their existing business structure. MBIs should not be overly prescriptive about the methods for achieving outcomes. Allowing land managers to be innovative about the synergies between their businesses and environmental outcomes can yield positive and cost-effective results.
• Land managers may perceive that participating in an MBI is a financial risk or consider that a lengthy and complex MBI process constitutes a risk. They may also perceive that future policy or ‘rule’ changes may diminish the value of their participation. It is important for the MBI process to create confidence that risks are reasonable and manageable.
• Research suggests land managers sometimes prefer short-term contracts; investors prefer long-term contracts. In some instances, the duration of contracts will be negotiable. For land managers reluctant to commit to, say, a permanent covenant, a fixed-term contract may be a useful first step in building confidence about a more lasting arrangement.

MBIs need to have credibility among the land managers targeted for participation. For example, if the MBI has been trialled successfully, preferably within the land managers’ own community, and the body organising the MBI is reputable, it is easier to establish confidence in the process.

MBI processes should be clear and transparent, and land managers should feel confident they can negotiate with the managing organisation, and can have ready access to technical advice and assistance throughout the process.

MBIs must be implemented by the right organisation. Organisations that already have the trust of their stakeholders are better placed to manage MBIs. Stakeholders need to be confident that managing organisations have the capacity to monitor agreed actions and associated environmental changes and to enforce outcomes as required.

The how: communication

Good communication is vital to the success MBIs. Clear and specifically targeted communication reduces the risk of misinformation. Key considerations include the following:

• Detailed knowledge of the target land managers is vital.
• Direct contact with land managers must be effective. This can include one-on-one contact with individual land managers, or seminars and workshops to engage with groups. Direct contact is important at the awareness-raising stage to ensure the MBI process is understood. Direct contact at more complex phases of the MBI, such as site visits when land managers are developing bids, is also effective.
• If direct contact is not possible, networks such as Landcare and formal industry bodies may be a persuasive and low-cost option for communication with land managers[1]. Advertising in local or industry media is also effective. Direct mail-outs also work well, particularly for those land managers who are difficult to reach, for example hobby farmers and land managers who have off-land occupations.
• If a similar MBI has been trialled elsewhere, land managers benefit from seeing the outcomes demonstrated and by talking to participants. Where an MBI involves bidding and transaction processes, workshops that demonstrate mock applications are an effective way of showing how the processes works. This activity also tests likely levels of participation and trade and can provide useful information for developing a successful structure for the MBI.

The who: targeting land managers

Targeting land managers

Determining the land managers who are most likely to participate in an MBI and their capacity to deliver the desired outcomes are important to the success of an MBI program. For example, the participants could be narrowed to:

• a certain industry or commodity group such as croppers or irrigators that can actually deliver the required actions
• land managers in a particular location or landscape type such as stream or river frontage, wetlands or extensive remnant native vegetation
• specific cultural groups, such as Indigenous land managers.

There is some (limited) evidence that suggests ‘early adopters’ of MBI process have common characteristics, including:

• participation in previous incentives programs, or past experience in working with government or non-government NRM programs
• are younger and have dependent children
• have good business and computer skills
• are owners of their land, rather than tenants
• have bought their land within the last two years, and have fewer time and resource constraints.

However, these predictors should be used with caution. Depending on the NRM issue and the location, the predictors may have little or no value in helping to target the MBI message.

Increasing the knowledge of MBIs among non-participating land managers can also be seen as an investment in future MBI participation. But remember that in targeting communications, the goal is to optimise participation, rather than to maximise it.

A framework for participation

Based on research on the adoption of new and more sustainable land management practices, the likelihood of a land manager participating in an MBI is affected by three key factors:

• social, cultural and personal values
• recognising the benefits of profitability and sustainability that can flow from participating in an MBI
• demonstrating, or trialling, both the MBI and any changed land management practices that may result from participation.

Table 1 translates these factors into an MBI context and shows their importance at different stages of MBI implementation. More ticks indicate greater importance. The table shows that all three factors are important when land managers consider the merits of participating in an MBI in detail. Practical land management considerations, including sustainability considerations, are important in the adoption phase and beyond.

Table 1: Factors influencing participation in MBIs

Careful consideration of the issues raised here should assist more successful implementation of MBIs by optimising participation.

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[1] Note this method is somewhat limited because it only reaches land managers actively engaged with these groups.