Estimating the opportunity costs of biodiversity protection in the Brigalow Belt, New South Wales

Abstract

The New South Wales Government recently introduced the Native Vegetation Conservation Act to protect the native grassland and woodland of the state. The Act protects biodiversity by preventing farmers from clearing such vegetation on their properties but, as a consequence, reduces farm incomes and land values. An economic model of the relationship between land value and percentage of farm in native vegetation is integrated with an ecological model of the relationship between species lost and percentage of the farms in native vegetation. The integrated framework is applied to estimate the opportunity costs of the Act for one important agricultural area of the state, the northern part of the Brigalow Belt South Bio-Region. If all the vegetation were protected, the reduction in land value would be at least 14.3%, which is an opportunity cost of at least $148.5 m for the area. Both the benefits and costs of biodiversity protection must be accounted for, so risk simulations are then combined with benefit-cost analysis to compare the benefits of biodiversity protection to these costs.