Private transaction costs of participation in water quality improvement programs for Australia's Great Barrier Reef: Extent, causes and policy implications

Abstract

The direct private cost to landholders of participating in programs that result in improved farming activities (IFAs) is generally well understood. However, the private indirect or transaction costs, such as the cost of a landholder's time and the expense to learn about IFAs and apply for assistance to implement these changes on‐farm, are not so well understood. Where these have been studied, they have been shown to be extensive. We assess the extent and causes of private transaction costs incurred by sugarcane growers participating in the Australian Government's Reef Rescue scheme which pays farmers to adopt environmentally beneficial farm management practices. Utilising a mail‐out‐mail‐back survey of 110 growers, we found that the average total transaction cost per farm of participating in the program was AU$8389. The average total transaction costs per farm as a percentage of the average funding provided was 38 per cent. We also assessed which type of improved farming activity (soil, nutrient, pest or water management) generated the greatest transaction costs and how landholder characteristics such as bounded rationality, opportunism and social connection impacted on the extent of transaction costs.