Designing, testing and implementing a trial dryland salinity credit trade scheme

Abstract

This article describes implementation and outcomes of a credit trading trial focussed on dryland salinity in Victoria, Australia. In lieu of extant specified property rights, participants were invited to agree to obligations to provide groundwater recharge credits in exchange for pecuniary compensation. Participants were able to meet their obligations to supply groundwater recharge credits through land management actions resulting in monitored outcomes consistent with contractual obligations to reduce recharge. Alternatively, those in deficit were provided the option to obtain sufficient credits through market exchange. Surplus transferable recharge credits were produced by those participants who exceeded their own contractual obligations through improved land management. The paper describes the process of contract design and implementation. The trial involved a design and testing phase and an on-ground implementation phase. We describe composite methodologies deployed in the design and testing of alternative policy instruments and institutional arrangements, conducted prior to implementation. These involved community consultation, an attitudinal and behavioural survey, experimental economics and the development of a transparent and credible monitoring protocol. The conclusions drawn as a result of this analysis provided an empirical basis to implement the on-ground trial phase. Results of on-ground implementation are described. Finally, the methods and results of a Benefit Cost Analysis (BCA) of the on-ground trial implementation are outlined. The BCA accounted for salinity damage reduction, forgone river flow, carbon sequestration, production benefits and costs. The result of BCA was an estimated net benefit.