Attribute (metric): A characteristic or property of a metric.

Auction: See Conservation auction or tender.

Banking: Entails saving emissions permits for future use.

Beneficiary pays: Principle based on the beneficiaries of an action, often the community at large, paying for the NRM outcomes. The other principle is polluter pays, where those who are inhibiting NRM outcomes are required to pay.

Benchmark: A point of reference for a measurement. Attribute values in a metric may be relative to a benchmark for the attribute, for example vegetation condition for a plant community relative to a desirable state for that community.

Bid: An offer to buy or sell property rights depending on the market context.

Cap-and-trade scheme: An administrative arrangement and type of quantity-based MBI in which total pollutants or emissions are set a total limit or ‘cap’. Permits or quotas are allocated to liable parties and should not exceed the cap limit. Trading of permits is allowed to enable the market to determine how to meet the emission reductions or targets at least cost to the economy. Cap and trade schemes create a market for emissions permits. Cap and trade schemes are also known as emissions trading or emissions allowance trading schemes.

Carbon sequestration: Refers to capturing carbon—in a carbon sink, such as the oceans, or a terrestrial sink such as forests or soils—so as to keep the carbon out of the atmosphere.

Compliance offsets: See Offsets.

Conservation auction or tender: A price-based instrument used to competitively allocate or fund conservation actions by providing landholders with incentives based on the opportunity cost of undertaking the actions. It involves a competitive process that provides landholders an opportunity to access financial incentives to protect, manage and provide environmental outcomes/services through the establishment of contractual agreement. An organisation (generally government) typically purchases environmental actions/outcomes through bids obtained from landholders. They are also known as auctions or competitive tenders.

Contractual arrangements: A legally binding instrument outlining the promises or agreement between parties. Covenants are a type of contractual arrangement which is attached to title deeds of ownership and limit an owner’s right to use or trade their property.
 
Costs and benefits: Public costs and benefits are those that accrue to the community in general. Private costs and benefits are those incurred by individuals. For example pollution that impacts on water quality is a public cost that arises from an activity (e.g. fertiliser use) that produces a private benefit.

Covenants: See Contractual arrangements

Delphi technique: A structured method for obtaining expert opinions through more than one round of questioning individual experts. After the first round, individual experts are able to adjust opinions in the light of the opinions and justifications of other experts. The process aims to achieve a consensus representing the ‘correct’ answer.

Duty of care: A statutory or common law requirement on resource users requiring that they take particular steps to prevent environmental harm that could arise from their actions.

Ecosystem services: The fundamental life-support services provided by natural ecosystems, without which human civilization would cease to thrive.

Eco-labelling: Labelling of products in a way that identifies a link between the product and increased ecosystem sustainability.

Environmental offsets: See Compliance offsets.

Externalities: Occur when the activity of one person has an inadvertent impact on the well-being of another person. Many aspects of environmental degradation, such as air pollution, global warming, loss of biodiversity, and contamination of water bodies, are viewed as externalities of economic transactions.

Grants: A price-based instrument designed to send positive price signals to a group or individual through the provision of fixed-rate subsidies for undertaking a specified action. They are also known as devolved grants because typically an organisation (e.g. government) ‘devolves’ funds to another smaller organisation (e.g. regional NRM group) to run its own grants scheme.

Heterogeneous/heterogeneity: The degree of difference between individuals or firms that could otherwise be viewed as a uniform group. For example, a group of farmers may have widely differing areas of remnant vegetation thus displaying heterogeneity with respect to native vegetation retained.

Indicator: A measurable representation of a process or entity which may be difficult to measure; for example, the presence or absence of a plant or animal may be an indicator of some environmental condition..

Information asymmetry: A situation of incomplete knowledge between two parties such as the lack of important information about ecosystem production processes, or the information needed for efficient management is being held by only one party. Imperfect information is a type of market failure and affects decision making, contributing to sub-optimal NRM outcomes. For example, landholders know the costs (but not benefits) of undertaking management actions on their property while government holds information on the environmental benefits of that action (but not on the costs).

Information failure refers to a situation where individuals lack information about a good exchanged in a market that may impede their ability to properly interact in the market. It is one type of information asymmetry, and is considered a form of market failure since the efficient operation of markets is dependent on full information made available to all buyers and sellers.

Market-based instruments (MBIs): Policy tools that encourage behavioural change through the use of market signals rather than through explicit directives or regulations. MBIs need to be supported by appropriate regulatory and institutional frameworks. They are also known as market mechanisms or market incentives for achieving environmental outcomes.

Market failure: Situation where markets are not able to provide the efficient level of production and consumption of goods and services, including natural resources or ecosystem services. There are a number of causes of market failure, including where production or consumption activity has an indirect effect on other activities that is not directly reflected in market prices (an externality). Information asymmetry is one cause of market failure.

Market friction: Anything that prevents an established market from working more efficiently. In the context of MBIs, it is a type of policy instrument aimed at removing obstacles to market formation and improving and facilitating the smooth operation of existing markets. These include enhancing the information available to the market and reducing transaction costs.

Market power: The ability of a firm to affect the price of a good or service in a market. It is typically associated with the existence of a monopoly, cartel, or other situation involving barriers to entry, etc where supply to the market is restricted in order to increase price and profits (while reducing overall public net benefits).

Metadata: Data about data. Metadata describes the data; for example, nitrogen concentration in a water sample (data) has associated metadata including location, timing, and method of sampling.

Metric: A measure of what is bought and sold in the market. In the context of MBIs for NRM, it is the important unit by which an environmental good or benefit can be measured and compared in the process of evaluating alternative actions or purchases.
Metrics are typically used to quantify changes in the quality and quantity of an environmental or NRM attribute (e.g. water quality) and are underpinned by accurate and robust biophysical data.

Multi Criteria Analysis (MCA): Describes any structured approach used to determine overall preferences among alternative options, where the options accomplish several objectives. Desirable objectives are specified and corresponding attributes or indicators are identified. Environmental, social and economic indicators can be combined through quantitative analysis (through scoring, ranking and weighting) of a wide range of qualitative impact categories and criteria.

Natural resource manager/management (NRM): This refers to regional and State managers of natural resources/ environmental assets.

Natural resource management outcomes (NRM outcomes): Improvements in the natural resource or environmental asset, as a consequence of changed management practices. These are also termed environmental outcomes.

Negative price instrument: In the context of NRM, these include taxes and charges on emissions/pollutants which send a negative price signal to emitting/polluting entities to discourage or limit the extent of such actions.
 
Offsets: A positive activity or action taken to counterbalance or compensate for negative environmental impacts from an approved activity or development that cannot otherwise be avoided or minimised. An offset activity may be located within or outside the geographic site of the impact activity and should be supported by a regulatory and legal framework. In the context of NRM, offsets are used to address environmental degradation issues where they are also known as compliance offsets or environmental offsets.

Compliance or environmental offsets are a type of quantity-based MBI that allows a regulated party to undertake an action that creates pollution or reduces ecosystem services if they also undertake (or purchase from another) a separate action that reduces pollution or increases ecosystem services by at least the same amount. They are typically used to meet part of the environmental regulatory requirements imposed on new developments.

Policy intervention: Any act by a government to influence private actions. This may be through regulatory, suasive or market-based approaches, or through the direct provision of goods and services.
 
Positive price instrument: In the context of incentives for achieving NRM outcomes, these include grants and subsidies (including those delivered via conservation tenders) that send a positive price signal to landholders to encourage change in behaviour and the adoption of improved management practices.

Power: Is the statistical chance of detecting a change or outcome if one occurs

Probity: Uprightness, honesty, integrity and conscientiousness. The principles to achieve probity are those of ‘good process’: impartiality and fairness, consistency and transparency of process, confidentiality and security, dealing with conflicts of interest, and accountability.

Property rights: Rights that govern the use and ownership of a resource, such as with the use and ownership of land. Property rights should be: well defined; freely transferable; enforceable; and secure over the long term. The lack of a clear definition and allocation of property rights is one of the main reasons why a market may not exist for a desired ecosystem service.

Public goods: Goods or services that possess the characteristics of being non-excludable and non-rival in consumption, which mean they are unlikely to be supplied by the private sector. Many environmental goods and services can be classified as public goods or exhibit public good attributes. It is often difficult to define clear property rights for public goods.

Regression analysis: Statistical analysis methods which calculate the value of a dependent variable (response variable) from other independent variables (explanatory variables).

Regulatory approaches: Policy instrument aimed at directly influencing changes in behaviour by introducing regulations over the conditions of resource use and penalties for parties not complying with the stated provisions. They are also known as command and control approaches.

Scenario: A description of the potential projected course of action and consequent outcomes. Scenario testing can be used to test a metric by comparing the metric results to expected or intuitive results from a range of possible situations.

Sensitivity analysis: Analyses how the variation in the output of a metric (or model) can be apportioned to different sources of variation and allows an analysis of the uncertainty associated with combining different input variables (attributes).

Suasive approaches: Policy instrument aimed at changing an individual or firm’s perceptions and priorities about the environment through information provision, education programs and social recognition and pressure schemes. Suasive measures have the benefit of better informing people about the implications of their actions and are more effective when used to complement other economic and regulatory instruments to achieve desired NRM outcomes.

Threshold: A point at which relatively rapid change occurs from one (ecological or environmental) condition to another. In nature, few relationships show constant change in one thing (attribute) in response to another. Rather, they mostly show points or zones at which marked change in one attribute occurs in response to a small additional change in one or more influential factors.

Transaction costs: The costs associated with making an economic exchange, such as collecting information or searching, bargaining and enforcement costs.

(1) This glossary of terms draws information presented in Mackenzie, J and Davies, D. 2007. Building Capacity for Market Based Instruments: Scoping Study Project. Market Based Instruments Capacity Building Program, National Market Based Instruments Pilot Program and the National Action Plan for Salinity and Water Quality. Department of Natural Resources and Water, Brisbane.