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ANPR350/450 – Sheep Management ____________________________________________ 5-1 ©2009 The Australian Wool Education Trust licensee for educational activities University of New England

5. Managing for Economic and Resource Sustainability

H.Haszler, N. Reid Ed. D. Cottle

Learning objectives On completion of this topic you should have an:

• Appreciation of the background to the current focus on sustainability in Australia and elsewhere

• Introduction to sustainable management practices • Understanding of the key economic principles associated with sustainability • Understanding of spillover effects from farms • Introduction to how government can promote sustainability

Key terms and concepts Economic sustainability, externalities, competitive market, public and private goods, precautionary principle.

5.1 Introduction This topic covers sustainable farm practices on individual farms to sustainability related policies from a national perspective. Sustainability is the capacity to continue indefinitely (Oxford English Dictionary, 2009). In the conservation and development literature, however, sustainability means the simultaneous capacity to produce and meet present human needs while conserving the natural resource base (Anon., 1980). The Brundtland Report (WCED, 1987) restated the concept with explicit reference to future generations as the beneficiary of the present generation’s conservation activities: the capacity to produce and meet human needs without affecting the capacity of the resource base to support future consumption and production. From these semantic foundations, many definitions of sustainable development emerged (Pearce et al., 1989), with various differences in meaning and emphasis. In Australia, the Council of Australian Governments (COAG, 1992) endorsed the concept of ‘ecologically sustainable development’ (ESD) with an explicit emphasis on life-support systems:

using, conserving and enhancing the community’s resources so that ecological processes, on which life depends, are maintained, and the total quality of life, now and in the future can be increased

Common to most sustainability definitions is the need to consider (Young, 1992): (1) the effects of current development on the future; (2) the importance of maintaining a healthy biosphere; and (3) improving human welfare now without compromising similar opportunities for future generations (intra-generational and inter-generational equity). Ecology, economics and society thus form the three pillars of the trans-disciplinary science of sustainability (Young, 1992; Di Castri, 1995; Strange and Bayley, 2008). The reason that sustainability has become the dominant liberal development paradigm for a generation is the policy direction that it affords all human endeavours: the desirability of optimising the (1) environmental integrity, (2) economic efficiency, (3) social justice, and (4) political acceptability of one’s actions, (5) while operating (preferably well) within the limits of regulatory compliance. In order to operationalise sustainable development, core sustainability objectives and guiding principles have been developed. For instance, the COAG’s (1992) core objectives of its ESD strategy were:

5-2 ___________________________________________ ANPR350/450 – Sheep Management ©2009 The Australian Wool Education Trust licensee for educational activities University of New England

1. To enhance individual and community well-being and welfare by following a path of

economic development that safeguards the welfare of future generations; 2. To provide for equity within and between generations; and 3. To protect biological diversity and maintain essential ecological processes and life-

support systems. The guiding principles for ESD were (COAG, 1992): 1. Decision-making processes should effectively integrate both long and short-term

economic, environmental, social and equity considerations (the principle of intragenerational and intergenerational equity);

2. Where there are threats of serious or irreversible environmental damage, lack of full scientific uncertainty should not be used as a reason for postponing measures to prevent environmental degradation (the precautionary principle);

3. The global dimension of environmental impacts of actions and policies should be recognised and considered (‘think globally, act locally’);

4. A strong, growing and diversified economy enhances the capacity for environmental protection (‘it’s difficult being green when you are in the red’);

5. Maintaining or enhancing international competitiveness in an environmentally sound manner is important;

6. Cost-effective and flexible policy instruments should be adopted, such as improved valuation, pricing and incentive mechanisms; and

7. Decisions and actions should provide for broad community involvement on issues which affect them.

Table 5.1 Comparison of definitions of sustainable agriculture or livestock production.

Sustainable farming practices or systems:

Sustainable agriculture

Sustainable agriculture

Sustainable livestock production

Conserve agricultural resource base for future generations

+ + +

Are profitable + + + Are increasing production

+

Meet human needs in terms of quantity and quality of food and fibre produced

+

Minimise use of non-renewable resources

+

Minimise off-farm environmental impacts

+ + +

Are ecologically resilient

+

Enhance biodiversity + + Are becoming more water use efficient

+

Enhance producer satisfaction, motivation and adaptive capacity to change

+

Are continuously improving in terms of achieving all of above

+


Source: adapted from Reeve (1990), SCA (1991) and Mason et al. (2003). Different sectors of the economy have developed sustainability definitions for particular land uses and industries. For agriculture, three definitions are compared in Table 5.1. The common elements to all three are the requirement for primary production to (1) be profitable, (2) conserve the agricultural resource base, and (3) have minimal negative impacts on the off-farm environment. Farmers and graziers can be regarded as the original conservationists. The supporting argument is: What grower in their right mind would damage their resource base and their principal means of future wealth? While the logic is impeccable, the global history of desertification and collapse of civilisations due to environmental failure (Dregne, 1983; Diamond, 2005) means that agricultural sustainability is far from assured, raising questions about the ability of primary producers to conserve soil and water resources despite the best intentions. While there are many agricultural systems that have persisted for centuries or millennia, most of these underpin steady-state economies not subject to overpowering external pressures (Diamond, 2005). In contrast, modern agriculture both in developing and developed countries is beset with rapid changes in the decision-making environment and massive external social, economic and ecological pressures. While western agriculture has been remarkably successful in feeding a rapidly growing global population in the past 40 years, there have been opportunity costs and problems along the way (Tilman et al., 2002). Worldwide, 24% of global land area declined in climate-adjusted net primary productivity (NPP) over the period 1981–2003, as assessed by remote sensing of the normalised difference vegetation index (Bai et al., 2008). Only 16% registered an improvement. Degrading areas were mainly in Africa south of the equator, south-east Asia and southern China, north–central Australia, the Pampas and swathes of boreal forest in Siberia and North America. Overall, the environmental performance of agriculture has improved in OECD countries since 1990, but with significant variations within countries and widespread increases in on-farm energy use and water use and declines in wild species and ecosystem diversity (OECD, 2008). The problems include degradation of soil, water and air, both on and off-site, declining primary productivity, the non-target impacts of agricultural pesticides, undesirable changes in vegetation due to overuse (logging, grazing etc.), over-harvesting of wildlife and fish populations, over-extraction of water resources, introduced plant and animal pests, human-induced climate change, the deforestation and drainage of wetlands, and loss of habitats and biodiversity (Dregne, 1983; Williams and Chartres, 1991; McNeely et al., 1995; Industry Commission, 1998; Williams et al., 2001; Diamond, 2005; Millennium Ecosystem Assessment, 2005a,b; Mooney et al., 2005; Steinfeld et al., 2006). Given agriculture’s mixed report card for land and water management, this topic addresses the principles of sustainable sheep production. What rules-of-thumb, indicators and technologies can sheep producers rely on to safeguard their land and water natural assets, and therefore their business? The concept of sustainability is discussed in terms of the three ‘E’s (ecology, economics and social equity). This means sustaining, if not enhancing, the farm’s natural resource base, external environment, profits, and human and social capital. A series of sustainability principles with respect to each component of extensive and general sheep production systems are summarised. Rules-of-thumb or ‘indicators’ for sheep producers to use in the paddock and farm office to ensure sustainable profitable production in a wide range of environments are outlined. Social and technical tools and technologies to aid sheep managers achieve sustainable land and water use from farm to catchment scale are described. Although the focus and bias is Australian, the ecological and economic principles and indicators proposed transcend political and biogeographical boundaries, and should be tested wherever livestock are extensively grazed.

5.2 Paddock indicators for sustainable livestock production

How can a sheep producer tell if their management is maximising pasture productivity and enterprise profitability? A biophysical solution is presented in this section in the form of six key paddock indicators for maximising pasture rainfall use efficiency and net primary productivity. A complementary set of economic indicators for maximising farm profit is suggested in section 5.3. Rainfall use efficiency (RUE) is critical to best-practice farming (Price, 2006; Gardiner and Browne, 2009). Primary producers should make maximum use of the rainfall and solar radiation that falls on their properties to maximise plant productivity and profit. Every farm, paddock or enterprise has a production function that measures the relationship between inputs and outputs (Figure 5.1). All else being equal, practices that are more efficient at utilising rainfall will be more productive because a


production function that maximises RUE (Q, in Figure 5.1) will lie above one that does not (Q* in Figure 5.1) over the range of possible input–output combinations. This being the case, maximising RUE maximises the amount of production that can be achieved from a given suite of inputs or, conversely, minimises the amount of other inputs required to achieve a given level of output. Practices that maximise RUE maximise profitability because they minimise the volume and cost of purchased inputs that are necessary to achieve a given level of production. The drivers of productivity, profitability and sustainable NRM are the same conditions that maximise RUE. In terms of precipitation, this means maximising the RUE of plant production across the property by maximising the infiltration of rainfall into the soil, minimising runoff, deep drainage and evaporation from soil and plant surfaces, and maximising the amount of soil moisture transpired by productive crops and palatable pasture plants. Livestock producers in the high rainfall and wheat–sheep zones of eastern Australia can achieve this in a practical way by observing six key paddock indicators.

Figure 5.1 Relationship between production functions and the prices of inputs and outputs. The functional relationship (Q) between the volume of inputs (i) and the volume of output for a particular farm product is Q = f(i). All farmers are faced with a production function similar to this for each of their enterprises. Q* = q(i) is the production function for a less efficient producer. For a given level of inputs (I), Q gives a higher output (O) than Q* (O*). Source: Heady (1952). Indicator 1. Maximise ground cover Ground cover in the form of pasture biomass and dead and detached litter is important in terms of minimising runoff and erosion, and acting as mulch once rainfall has entered the profile, minimising evaporation of soil moisture from the soil surface. For minimising soil erosion in higher rainfall regions (>500 mm per annum in regions with winter-dominant or uniform summer–winter rainfall), 70% ground cover is the generally specified target (Abel, 1997). Nevertheless, in perennial pastures in higher-rainfall temperate districts, >95% ground cover is usually achieved away from tree cover (e.g. the Northern Tablelands of NSW; Reid et al., 2006b). However, in conservatively grazed semi-arid woodlands, much less than 70% ground cover is usual in sparsely vegetated interspaces between denser patches of vegetation (Ludwig and Tongway, 1995). Indicator 2. Maintain litter at 2 t/ha or more Up to 500 mm of soil moisture can evaporate from bare soil over 1 year (Lloyd, 2005). A litter depth of 12 mm on the soil surface is equivalent to 2 t /ha of litter. This quantity of litter limits the temperature gradient across the soil surface, reducing evaporation of soil moisture by an average of 1.04 mm/day over 1 year on the North-West Slopes of NSW, compared with no litter (Murphy, 2002). This quantity of litter is also important in terms of soil health, because when incorporated in the soil as organic matter, it improves soil structure, permeability and water-holding capacity, provides food for soil decomposers, and its breakdown is a source of plant-available nutrients. Murphy (2002) found that at litter levels <2 t/ha, evaporation of soil water increased rapidly, whereas at levels >2 t/ha, there was little increase in plant-available soil water.

Inputs

Output

Q = f(i)

Q* = q(i)

I

O*

O


Indicator 3. Maintain 1.5–3.0 t/ha of green dry matter If the use of photosynthetic radiation is to be maximised, a biomass of green dry matter (GDM) of at least 1.5 t/ha is desirable in all seasons and locations. While a few classes of livestock can maintain weight on lower quantities of GDM (Bell, 2006), high levels of animal performance, rapid pasture regrowth after defoliation or rain and good soil health require between 5 and 15 cm of retained pasture height (equivalent to 1.5–3.0 t GDM/ha) (Pearce et al., 1965;Brouweret al., 1999;Bell, 2006). Maintaining this biomass is important through winter when solar inputs are at a minimum and soil temperature is a major factor limiting plant nutrient availability from the soil (Brown, 1976; Croker and Watt, 2001). Retention of this amount of GDM means that even small rainfall events can be efficiently converted into photosynthate and biomass. Traditional cropping practices dependent on bare weed-free fallows are associated with high losses of incident rainfall to evaporation, deep drainage or runoff. ‘Pasture cropping’, ‘no-kill cropping’ (APCC, 2008) and other farming rotations in which green manure crops and under sown ley pastures are used to minimise the time that ground is left without green plant cover, all have advantages over fallows in terms of maximising conversion of photosynthetic radiation and soil moisture into organic matter. Indicator 4. Maintain a diverse pasture sward If pastures are to utilise and make maximum use of all incident rainfall, a variety of functional types of plants are likely to be more successful at maximising plant productivity and RUE than just one or two species (De Deyn et al., 2009). Does this conflict with Scott’s views in topic 4? In grass-dominated pastures, observations suggest that 3P grasses should constitute ≥60% of the sward (Kemp, 2007b). In pastures in which soil nitrogen is limiting, active legumes are important in order to provide N for high grass productivity. Depending on the restrictions set by the regional climate, soil and plant species, the pasture should ideally include a mix of summer and winter-active species and year-long green plants. A mix of palatable annual and perennial grasses and forbs are important to fill the gaps between the 3P grasses and legumes, maintain photosynthetic efficiency, and prevent weeds from proliferating. In terms of RUE, tall woody vegetation (trees and shrubs) is important, providing a safety net of deep roots to capture moisture and dissolved nutrients that leak below the pasture root zone, and redistributing cations in the form of litter at the soil surface to avoid topsoil acidification in higher rainfall environments (Noble and Randall, 1998; Graham et al., 2004). Woody perennials in some systems also contribute browse or edible fruits for livestock and fill seasonal shortfalls in pasture-based feed. Indicator 5. Maintain 30% of the landscape under tall woody vegetation for shelter The shelter provided by trees and shrubs impacts on plant and animal productivity in various ways. The reduction in wind speed across farmscapes reduces excessive evapotranspiration of soil moisture, the wind-chill experienced by livestock in cold weather, wind erosion, and sand-blasting and wind damage to sensitive crops and pastures (Sheahan, 1998; Gillespie, 2000; Bird et al., 2002; Cleugh 2003). Trees and shrubs provide shade, reducing the impact of heat stress on livestock growth, fecundity and mortality in hot weather (Thwaites, 1967; Blackshaw and Blackshaw, 1994; St-Pierre et al., 2003). Trees and shrubs are also important for reducing deep drainage below pasture root zones (Raper, 1998). Tree cover of 10–20% is sometimes suggested as a suitable woody vegetation target for Australian farms (Campbell et al., 1990; Reid and Bird, 1990; Schmidt, 1997). However, a target of 30% of tree and shrub cover in farmscapes in the wheat–sheep and high rainfall zones may be more appropriate to provide the multiple benefits of reduced wind-run and improved hydrology without detracting from production. Walpole (1999) found that farm income was maximised at 34% wooded cover on grazing and mixed farming properties on the Liverpool Plains, NSW. Raper (1998) reviewed the limited empirical evidence for mitigating deep drainage through reforestation with trees and shrubs in the 600–900-mm p.a. rainfall zone of south-western Australia. Plantings amounting to 8–14% of cleared area had no impact on deep drainage relative to pastures, whereas valley plantings of about 35% of cleared area were suitable for mitigating deep drainage. By induction, 30% retention or reforestation of the least productive parts of farms as shelterbelts, timber belts and small woodlots should result in less groundwater rise and dryland salinity, as well as other benefits such as shade and shelter, soil erosion mitigation and biodiversity benefits, without severely affecting farm income (McIntyre et al., 2002). Considerable research shows that trees at medium to high density reduce herbaceous production beneath and within the root zone (Scanlan and Burrows, 1990; Scanlan 1991; Scanlan et al., 1992). However, this work does not attempt to integrate the impact of the woody vegetation at a landscape scale on overall farm and livestock productivity, nutrient cycling, soil health, hydrological balance or other ecosystem service benefits.


Indicator 6. Maintain optimal soil health The productivity and profitability of grazing systems is determined by maintaining an adequate quantity of highly digestible, nutritious pasture that enables grazing animals to approach their genetic potential. Maximising RUE and plant productivity depends on optimal soil health (i.e. a biologically productive soil with good structure, adequate plant nutrients and no toxicities or other constraints to plant production). It also depends on eliminating soil limitations to plant growth where it is economic to do so. Soil health can be improved by maintaining pasture and litter biomass and ground cover above the thresholds specified above (Indicators 1–3), in order to maintain high soil carbon and organic matter levels, and reduce soil crusting. Soil health can also be improved in many other ways. Common soil limitations in the northern grains region of inland eastern Australia that can be rectified economically include declines in soil structure, fertility and organic matter, as well as excessive acidity, sodicity, salinity, and specific nutrient deficiencies and cation imbalances (Dang et al., 2007). Management options include choice of appropriate crop and pasture cultivars, various crop and pasture rotations, reduced and no-tillage systems, controlled traffic, and soil ameliorants (e.g. gypsum, lime) and fertilisers.

5.3 Property planning Property planning is the process of making and evaluating farm management decisions (Gardiner and Browne, 2009), and requires four roles of the producer: a (1) visionary role (i.e. working out what the business is aiming to achieve); (2) leadership role (e.g. deciding the enterprise mix and production intensity); (3) management role (e.g. allocating resources to achieve short to medium-term business objectives; and (4) monitoring role (evaluating the outcomes of management decisions against planned targets). Property planning aims to provide farmers with the methods and information to ascertain whether existing farm production is optimal for maximising profit and productivity, and whether their NRM will achieve personal goals. Property planning starts from the premise that everything about the existing management of the farm is negotiable. No two farms are the same in terms of size, soils, topography or land capability, and all farm managers are different in terms of their goals, aspirations, preferences and management styles. Therefore each farmer will have their own unique optimal solution for their farm’s enterprise mix. Property planning should be holistic, principle-based, strategic and integrated. Holistic means that the entire farm business and decision-making environment (social, economic, ecological, cultural, political and regulatory) should be weighed up at the time that decisions are planned and implemented. If problems are not correctly identified or fully understood, it is unlikely that the right solution will be found. Property planning should be based on sustainability principles rather than the specific attributes of particular enterprises or environments. The six key paddock indicators for maximising plant RUE apply equally to any form of primary production and any environment, from temperate high-rainfall pastures to arid rangeland. However, they may be more readily achieved in some environments than others. Farm decision making should be strategic: problems should be dealt with in order of priority, starting with the factor most limiting farm profitability and farmer well-being (Butterfield et al., 2006; Pattinson, 2007).

Minimising Pollution from Agricultural Land • Retain buffer strips (at least 10 metres each side) with natural vegetation along waterways. • Prevent stock having access to stream or storage banks. • Encourage landholders to adopt basic soil conservation management and ensure the maintenance of a

vegetative cover on the land. • Ensure fertiliser application does not take place directly to streams or storages. • Control the use of agricultural chemicals and ensure they are not applied directly to streams and buffer areas, but

rather applied in places and ways that ensure their retention onsite. • Require animal wastes from dairies or other intensive congregation zones to be treated using wetland pollution

control ponds or other appropriate technologies. • Ensure landholders understand the impacts of the use of fire in agricultural areas on water quality and potential

soil erosion. • Maintain or provide wetlands in the catchment as pollution control zones to be part of the sediment, nutrient and

pollutant trapping system. Source: IC, 1998, p 281.


Integrated decision making means that people, profits, production and NRM all need to be considered in making farm decisions. Each decision should aim to make people happier, which in broad terms means the farmer working less and making more profit. How can a farmer tell whether their farm is as profitable as possible? First, they can be guided by what they see in their paddocks. NRM and the six key paddock indicators that determine maximum RUE are directly linked to farm productivity and profitability. Thus, environmental management is directly linked to maximising farm profit and farmer welfare. Second, they can be guided by their own farm economic data. Profit is maximised when the marginal revenue of an extra unit of production equals the marginal cost per unit of production (MR = MC). In simple terms, this occurs when marginal product is equal to the ratio of input price to output price. So if a farmer receives $200 per tonne for wheat and is paying $1,000 per tonne to apply urea, they should expect to produce at least 5 kg of wheat for each additional 1 kg of applied urea. In practice, the financial data required from successive farm tax returns is the annual total costs (TC) and total income (TI) of the farm business, the trend in TC/TI in recent years and the change in real total costs (ΔRTC) from year to year. The rate of change in TC and TI is equal to MC and MR, respectively. The trends in TC/TI and ΔRTC determine whether a producer is maximising profit under existing management and moving towards or away from optimal (Table 19.5). The trend in TC/TI indicates whether costs are rising faster than income or vice versa in real terms. If costs are rising faster than income, the ratio of TC/TI increases over time and the producer’s management is moving the business away from optimal. In other words, the business is moving away from profit maximisation on the generalised production function in Figure 5.1. If the trend in TC/TI is steady over time, the business is maximising profit under the current management settings. (The appropriateness of the current settings for the enterprise mix can be determined from the state of the six key paddock indicators, described earlier.) If TC/TI is declining over time, the business is moving towards the optimal input–output combination for profit maximisation in Figure 5.1. ΔRTC places the farm business on the production function in relation to the point of maximum profitability, and indicates whether the producer is trying to increase or reduce production, determining the direction of movement along the production function. Rising real total costs imply that producers are purchasing more inputs and moving to the right along the production function. If TC/TI is increasing and ΔRTC is positive, the business is already over-producing and continuing to increase production, thus moving further away from profitable production. Table 5.2 The implications for farm production and profitability of trends in the ratio of a farm’s total costs to total income (TC/TI) and change in real total costs over time (ΔRTC). Trend in ΔRTC Negative Positive

Trend in TC/TI

Rising Implies business is reducing production and moving away from optimal

Implies business is increasing production and moving away from optimal

Falling Implies business is reducing production and moving toward optimal

Implies business is increasing production and moving toward optimal

Source: Gardiner and Browne (2009). To illustrate the use of these indices, consider the last 18 years of ABARE economic data for farms principally running beef cattle on the Northern Tablelands of NSW (Table 5.3). Over this period, TC/TI has increased from 0.79 to 0.83 and ΔRTC per farm has increased from $145,000 to $168,000 per year. This means the average New England beef producer is generating less profit due to overproduction and has moved further away from sustainability than in 1990–94. A typical Northern Tablelands property generates 1104 t CO2-e/year of greenhouse gas pollution (Eady and Ridout, 2009), which is not currently paid for by either producers or consumers. At a mid-range price of $20 per tonne of CO2-e (Garnaut, 2008), the New England beef industry would face an additional annual environmental cost of $22,000 per farm for carbon pollution if agriculture were to be eventually included in a carbon pollution reduction scheme. Data from a range of other farming and grazing regions (from the early 1990s to the mid 2000s) and for Australian agriculture as a whole (from the late 1960s to the mid 2000s; Table 5.3 and Figure 5.1) suggest that the farm sector has been increasing production and becoming less profitable as a result. Australian farm survey results (ABARE, 2009) show that more than 80% of Australian farms do not make sufficient profit to pay the producer a reasonable wage and dividend to invested capital. Most Australian


farmers are, in fact, producing beyond the point of maximum profit, in territory where MR < MC. Clearly, there is a simple solution for fixing most of Australia’s land degradation problems. Table 5.3 Relationship between the TC/TI ratio, ΔRTC and change in Australian farm profitability for all agriculture and for farms in selected regions and enterprises. See the text for definitions of TC/TIratio and ΔRTC.

Enterprise Period TC/TI RTC Trend in TC/TI ΔRTC Change in

Profit

All agriculture 1966–70 2003–07

0.70 0.86

$24.1 billion $29.8 billion Rising Positive –$5.2 billion

Beef-dominant farms, NSW Tablelands

1990–94 2003–07

0.79 0.83

$145,000 $169,000 Rising Positive –$7,000 per

farm

Sheep-dominant farms,Australia

1990–94 2003–07

0.90 0.94


farm Mixed farming,NSW North-West Slopes and Plains

1990–94 2003–07

0.81 0.85


farm

Cropping,NSW North-West Slopes and Plains

1990–94 2003–07

0.72 0.79


farm

Queensland Pastoral zone

1990–94 2002–06

0.94 0.99


farm Queensland South-West and Western Pastoral

1990–94 2002–06

0.73 0.81


farm

Source: adapted from ABARE (2009).

5.4 National resource policy Seventy years ago Australian agricultural policy was focussed on expanding the nation’s agricultural production and exports. This was part of Australia’s general post-war reconstruction effort. Back then agriculture contributed over 80% of Australia’s exports. Increased farm exports were seen as essential to finance the imports of capital equipment needed to “tool-up” for the post World War II surge of immigrants. In those earlier years, agricultural policy was dominated by marketing and stabilisation schemes for major and minor commodities – including wheat, milk, eggs, sugar and rice. These schemes together with fertiliser subsidies, cheap irrigation water and tax write-offs for land clearing, for example, all encouraged increased farm production through more intensive use of the environment. Some of this intensive use has proved – with hindsight – to be unsustainable. Opening up marginal wheat country in WA was hailed as a triumph of technology. What had been relatively sparse grazing land could suddenly support both cropping and grazing. Today, dryland salinity has taken over much of this country, and some the country is so degraded the best, most economical, solution may be to simply abandon it. In a statement on post-war rural policy for Australia, Prime Minister Chifley listed both land and water conservation as policy issues. But the conservation was for the purpose of increased production. Apparently, the issue of environmental externalities or spillovers (see below) arising from the use of land and other environmental resources for commercial agriculture was not high on the policy agenda. Nor had the issue yet become a matter of general and popular public debate. Rachel Carson’s controversial Silent Spring (1963) helped make it that. In a brief introductory scene-setting chapter entitled “A Fable for Tomorrow”, Carson wrote:

"In the gutters under the eaves between the shingles of the roofs, a white granular powder still showed a few patches: some weeks before it had fallen like snow upon the roofs and the lawns, the fields and streams. No witchcraft, no enemy action had silenced the rebirth of new life in this stricken world. The people had done it themselves."[p. 4]


Her basic message was that the use of pesticides in commercial agriculture and elsewhere could have significant, long-lasting and adverse spillover impacts on the environment and human health. Carson was writing principally about chlorinated hydrocarbons, such as DDT, and organic phosphates. In Victoria, the use of DDT in some agricultural applications began to be phased out from 1962. But it was not until 1987 that all agricultural applications of DDT were banned (Pers. Comm., Chemical Information Services, Department of Natural Resources and Environment, August 2001). Now agricultural output and input subsidies are largely gone and in Australia, as in other countries, the community demand for environmental services has been growing. As incomes have risen, particularly in the developed countries people have been able to meet their basic needs for food etc with a declining share of their incomes. The result is that there has been enough “spare money to go around for the environment”. As part of the growth in demand for environmental services, the community at large has claimed increasing “ownership” of environmental resources. In Australia, landowners are now likely to be called stakeholders and to face increasing controls over use of the environmental resources they once commanded largely at will. A number of critical agenda-setting reports and policy decisions based on them have helped make sustainable development the significant public policy issue it is today. At a world level, key reports and conferences have included: • 1961: Rachel Carson’s (1963) Silent Spring – helps elevate concept of adverse environmental

spillovers to public debate; • 1972: United Nations Conference on the Human Environment (Stockholm) – international

agreement on the urgent need to respond to environmental deterioration (UN, 2002); • 1972: The Limits to Growth by Meadows et al (1974) for the Club of Rome – concludes that

then current growth rates of population, industrialisation, food production and resource depletion are unsustainable;

• 1987: Our Common Future, the report of the Brundtland Commission (1990) established by the General Assembly of the United Nations – puts “sustainable development” firmly on the international agenda; 1992: United Nations Conference on Environment and Development (Rio de Janeiro) – puts human beings at the centre stage of concerns about sustainable development and agrees that protection of the environment and social and economic development are fundamental to sustainable development (UN 1992);

• 2002: World Summit on Sustainable Development (Johannesburg) – reaffirms the international commitment to sustainable development and its three pillars – economic and social development and environmental protection – especially the central role of agricultural development as a means of reducing poverty (UN. 2002);

• 2006 – 2007: An Inconvenient Truth – the world “roadshow”, book and film by former US Vice-President Al Gore that lifts climate change to an accepted significant threat.

• 2012; United Nations Summit on Sustainable Development in Rio de Janeiro - ? In Australia’s case key documents and decisions in relation to agriculture until 2007 include: • 1989: Our Country Our Future: Statement on the Environment, by the then Prime Minister Bob

Hawke (Hawke, 1989) – outlines broad policy principles and a package of environmental measures, including the Landcare program;

• 1992: Council of Australian Governments (COAG) endorses objective of Ecologically Sustainable Development (ESD) for agriculture and other sectors with significant interrelationships with the environment;

• 1997: Intergovernmental Agreement on the Environment (IAGE) – to facilitate a coordinated approach to the environment by the three tiers of government, federal, state and local;

• 1997: Natural Heritage Trust established – to provide a framework for additional investment in the natural environment and effectively to achieve ESD in agriculture;

• 1997: A Full Repairing Lease: Inquiry into Ecologically Sustainable Land :Management by the Industry (now Productivity) Commission – proposes inter alia the imposition of a legal duty of care on natural resource owners, managers and other users (IC, 1998);

• 2000: National Action Plan for Salinity and Water Quality – to motivate and enable regional communities to use coordinated and targeted action to tackle dryland salinity and to improve water quality;

• 2001: NHT funding increased by $1.3 billion, lifting total funding to $3 billion;

5-10 __________________________________________ ANPR350/450 – Sheep Management ©2009 The Australian Wool Education Trust licensee for educational activities University of New England

• 2007: Prime Minister Howard’s $10 billion 10 point water plan involving a Commonwealth take-over of states and territories water powers in relation to the Murray- Darling Basin. Legislation to create the Murray-Darling Basin Commission was passed in the form of the Water Act of 2007. In March 2008, Premier John Brumby indicated that the Victorian government would participate in the program, in return for $1 billion to upgrade irrigation and continue water security for Victorian farmers.

• 2008: Until 2013, the Australian Government was investing $2.25 billion through ‘Caring for our Country’ across six national priority areas, including sustainable farm practices

The Club of Rome was criticised for not recognising the negative economic feedbacks that help to maintain system stability. For its part, the Brundtland Commission’s report can be credited with establishing “sustainable development” as a major issue and a topic of common debate. One of the central lessons of this brief review of the growth to prominence of the notion of sustainable development is that it can take a very long time between, first, realising there is a problem, second, identifying its causes and, third, resolving it and dealing with its aftermath. Meanwhile, the damage continues. Clearly, there has been a profound swing in the agri-environmental policy pendulum signifying a substantial shift in property rights. That shift has occurred against the backdrop of several serious threats to Australia’s natural land resource base. The past damage and current threats to Australia’s terrestrial biodiversity are at least partly due to some commercial farming activities. What has happened more recently in international and national agricultural policy in this area? The definitional conundrum In principle, the problem of and definition of sustainability is to find or define the path of economic activity that maximises net wellbeing to the present and all future generations, while taking account of current and future resource levels and future technological change that will alter the way resources can be used, the disasters that might affect the Earth (massive volcanic eruptions adding to the greenhouse effect), the substitution possibilities between physical capital (iron ore and ecosystems) and man-made capital and so on. Since the future is unknown, it is impossible to solve the optimal path in an exact way. That is why there have been many definitions of sustainable development depending on the context(Pearce et al. 1989). For instance physical scientists are more likely to define sustainability in terms of preserving particular environments etc. whereas economists tend towards more general definitions. It is impossible to define sustainable development in any analytical sense that is devoid of all values and implicit trade-offs that will end up favouring either the current or future generations. The concept of sustainable development helps to emphasise that measured GDP is only one very partial indicator of wellbeing The “Iron Lady”, former British Prime Minister Margaret Thatcher stated:

No generation has a freehold on the earth. All we have is a life tenancy – with a full repairing lease. (Industry Commission, 1998)

If the present generation repairs all the degradation for which it is responsible and leaves the same stock of capital it inherited and technological progress advances at an increasing rate, then the capital base bequeathed to the next generation should provide a larger income than was available to the present generation. So “fully repairing the lease” will have effectively penalised the present generation for the benefit of its children. Discussion of the meaning of sustainability often centres on the issue of intergenerational equity(in terms of economic viability and international competitiveness of industries). Humankind’s production activities also create man-made capital which includes both the built environment – buildings, roads, factories and their embodied technology – as well as human capital – our knowledge acquired through education and experience. Man-made capital can substitute for natural capital. Sustainability can be viewed in terms of constant flows of real income derived from a constant stock of capital. The capital base can be defined to include only natural

ANPR350/450 – Sheep Management __________________________________________ 5-11 ©2009 The Australian Wool Education Trust licensee for educational activities University of New England

capital but is now most commonly broadly defined to include both natural capital and man-made capital. This latter definition recognises the possibility of substituting man-made capital for natural or physical capital. The substitutability between natural and man-made capital is not a constant, but depends on the type of capital and the state of knowledge and technology. One of the important characteristics of natural capital is that much of it has the characteristics of a public good (nobody owns; non-excludable - nobody can be prevented or excluded from consuming the good; non-rival – can be used over and over again by many people)as opposed to a private good (someone owns; excludable – customer has to pay; rival – once consumed it’s no longer available to anyone else). The public good character of much natural capital means it will tend to be overused and that overuse will create negative externalities, e.g. the tendency to overgraze public land.

5.10 Promoting sustainability Moving to more sustainable development is likely to involve substantial costs to some people and societies. There is no “one size fits all” approach to sustainable development. Multi-faceted approaches to suit particular circumstances are needed. Where society does not wish to redistribute income, it is usually best to leave the market to do its work. However, market failure can occur and there is a potential role for governments to intervene to bring about a more efficient outcome. In the area of environmental economics, externalities of spillovers are the most pervasive source of market failure (see Module 10). The land-intensive nature of farming and grazing operations makes it useful to distinguish between on-site and off-site (spill over onto adjoining farm land, into waterways and onto public roads) effects of resource use in agriculture. You could argue Government intervention should be focused on off-site effects of resource use as there is no public policy issue where a farmer incurs all the (short term?) costs and all the benefits from his actions. However, it is not as simple as that. The ESD Working Group on Agriculture (ESD 1991) quotes Williams:

“…. Land degradation is often the result of a failure to examine the whole farming system in the context of the hydrological or nutrient cycle in which it is cast. Progress towards sustainable agricultural practices will only be made while the implications of these practices are viewed and examined as part of the regional ecosystem. Agricultural scientists [and economists] must think beyond the farm gate to see how the farm is integrated with the catchment and the landscape as a whole.”

This systems perspective becomes especially important in the context of preserving biodiversity. In the case of biodiversity even a whole-of-catchment area farm will be connected to a larger system because flora and fauna move about. Economic sustainability principles We focused above on sustainability from an individual property perspective. On a broader level, sustainable development has been motivated partly by concern for the world’s poor and rests on five commonly accepted – but sometimes implicit – propositions: • Human beings and their economies exist and operate as an integral part of the Earth’s

ecosystem, as summarised in Figure 5.2 below; • Unless we ourselves “kill” the Earth, humankind is almost certain to continue beyond the lives of

all of us now alive on the Planet, so we will need to leave something for our children and those that come after them;

• Humankind’s activities – especially population growth and the overzealous pursuit of economic growth – have the potential to cause permanent, irreversible degradation or depletion of the Earth’s natural physical assets and ecosystems;

• Other things constant, the more of the Earth’s resources we use now, the less that will be available in future;

• It is in our power as human beings to ensure that we leave an adequate bequest for future generations.


Figure 5.2 describes a system that is closed for all practical purposes except for the external inputs of solar energy and light. Human beings interact with the natural ecosystem through the circular economic system. People provide their labour and other talents for production and consume what they and others produce for pleasure and to stay alive. Figure 5.2 The economic system and the environment. Source: Adapted from Tietenberg (1988).

Human production activities rely on extracting various resources from the Earth’s natural life support system. In addition to the air we must breathe and the water we must drink, the extracted resources include raw materials such as iron ore and also plants that we use for food and medicine. Our production and consumption activities create waste that has to be absorbed by the ecosystem. In addition to air and water, the ecosystem also provides other direct environmental services. These services include enjoyment and recreation in the environment. These services can be destroyed by excessive or inappropriate use just as a mine can be depleted of its minerals. The reason why sustainability is an issue is that our extraction activities use up some of the Earth’s scarce natural capital assets and we don’t know the future. Scarcity and uncertainty are the fundamental issues that link the propositions underpinning the sustainability debate. The role of economics The issue of scarcity makes economics useful both in the study of wool markets and in the study of sustainability. Available resources and productive capacity of individual economies and the world as a whole are scarce relative to the wants of people, even in developed countries. Are all your wants satisfied? If so, you are a member of a happy minority. The more the Earth’s resources are used to meet today’s wants, the less there is available for future generations unless the resource is 100% renewable. Economics is a social science concerned with the study of human behaviour, particularly how people and societies can best use scarce resources to make valuable products and how these are distributed among different individuals and groups. Society's scarce resources include labour, capital, land and other natural resources, all of which have both quantity and quality aspects. The term "products" means both goods and services and include tangible items that can be held and/or directly bought and sold. They also include intangible items such as the value of unspoilt bushland or a pristine river environment. The ultimate objective of economic activity is consumption. There is little point in producing something that nobody wants.

Firmsdo

Production

Householdsdo

Consumption

Outputs

Inputs

Economic System

Natural Life Support System

Air, Water, Wildlife, Plants Energy, Raw Materials,Amenities, and

all Natural Assets

“Extraction”

“Residuals”

Sun


The rules (taught in MBAs) for pricing jumbo jets, cars, fizzy drinks and hamburgers, etc. are all based on the economics outlined in this topic. Economics rests on two foundation stones:1) existing production technology, and 2) consumers’ choices in the marketplace. Economics provides a logical framework for analysing:

• How producers and consumers make choices designed to maximise their wellbeing; • The interactions between the producers (supply) and consumers (demand) sides of the

market; and • The economic efficiency of resource allocation resulting from the free operation of the

market and of the impacts of any government intervention designed to improve or alter market outcomes.

Provided society is prepared to accept the initial distribution of income – the interactions of consumers and producers in free competitive markets will result in an efficient allocation of society's scarce resources. The competitive market is said to be efficient in an economic sense because it satisfies the maximum feasible level of consumers' wants at least cost. Some forms of intervention The existence of spillovers or externalities associated with mankind’s interactions with the environment (discussed in Module 10) provides the central economic justification for government action to promote sustainable development. Spillovers or externalities occur when the actions of individuals or firms impose costs or benefits on others but the individuals or firms are neither charged for the costs nor rewarded for the benefits they create. This is very relevant to the carbon tax debate.

• Actions that impose uncompensated costs are said to create negative externalities • Actions that impose unrewarded benefits are said to create positive externalities.

Pollution taxes The “polluter pays” approach is now well accepted and pollution taxes (e.g. carbon) that equate private and social costs of resource use are one of the most obvious means of dealing with externalities. With a pollution tax the government needs to assess the costs of the pollution and charges the producer a tax equal to the unit cost of the pollution. In some cases it will be appropriate to set the tax at some fixed amount. In other cases the tax might be better set as a proportion of the price of the output, the production of which is causing the pollution. Once estimates of the cost of the polluting activity have been determined, pollution taxes are relatively easy to administer and deliver revenue to government. Research subsidies Just as a pollution tax would be aimed at negative externalities, so subsidies would be used to support activities that generate positive externalities. Industry R&D provides an obvious case where subsidies might be used to correct for positive externalities. R&D is a costly activity and firms and individuals engaging in R&D cannot reap all the benefits of their research because the knowledge gained through R&D has public good characteristics. From a public policy perspective, the problem is that without government assistance, private firms will under invest in R&D compared to the optimum level for society as a whole. A subsidy on R&D helps to bring costs and returns for individuals and firms into better balance and results in more R&D and its benefits. Research or information related externalities are particularly important in agriculture where most firms are SMEs and too small to consider any substantial research effort. That is the economic reason for the existence of so many Commonwealth rural R&D corporations. Subsidised research can be addressed at providing information for government, producers or consumers. Distortion-free economy Government policies can cause unsustainable resource use. For example, subsidies on fertiliser and farm chemicals may lead to their overuse so that they leach into neighbouring land and the water system. The first solution to the problem of salinity caused by excessive use of irrigation water is to make sure water prices to farmers are not subsidised. And if tax policies provide


incentives for excessive land clearing in general or excessive clearing of sensitive country, then it is best to start with reforming the tax system. Property rights Creating clear property rights to resources and uses of the environment helps internalise the costs and benefits of resource use decisions. For example, making the entitlements for carbon emissions tradeable means that after the first allocation of the entitlements they will end up with the firms and countries that are least able to use ameliorative technologies to control emissions. Firms which cannot afford high tech solutions will find it advantageous to buy emission entitlements from firms which can afford to use them. The same principles apply to tradeable water entitlements and catch quotas in fisheries. • Direct regulation In general, direct regulation is usually the economist’s last choice. It can be difficult to frame the required regulations, there are costs in implementing and monitoring adherence to them. Often government regulators will not prosecute offenders vigorously enough and regulations need to change to keep pace with technology.

5.12 Summary It is impossible to define “economic sustainability”, “sustainable development” or even “ecologically sustainable development” in any analytically satisfactory way because all definitions require the exercise of values in some form or other. The work-around definitions used seem to rely on the notion that even if sustainable development can’t be defined perfectly, “We’ll know it when we see it”. The use of work-around definitions is consistent with the precautionary principle and the problem of irreversibility – according to which policy actions should not wait until the perfect definition is found. The goal of sustainable development is to achieve inter-generational and intra-generational equity in the streams of income flows from the use of the Earth’s stock of capital resources, defined to include both natural and man-made capital. It is scarcity and uncertainty that make sustainable development a policy issue. Optimal resource use in the face of scarcity is the central focus of economics. Economics provides four key lessons in regard to sustainability: First, Informed consumers and producers acting in their own self-interests – which can include altruism –and responding to the prices generated in competitive markets with clear established property rights and no distortions, offer the best prospects for achievement of economically sustainable resource uses and therefore the achievement of continuing sustainable industries. This conclusion applies to wool and all industries. Second, the public good nature of natural resources creates externalities – or unpriced costs and benefits – in their use. In the presence of externalities resource use is not optimal from a community perspective. Consequently there are grounds for government action to correct for externalities and so optimise resource use. Third, there is a variety of actions that can be taken to correct for the market failure arising from the existence of externalities. These include pollution taxes, regulations, setting of standards, and the creation of clear property rights where these are weak or do not exist. Finally, there is no “one size fits all” approach to sustainable development because the problems and issues vary in their extent and nature from case to case.


Readings The following readings are available in e-reserve:

1. Australian Farm Institute, 2005, 'Collapse' - Analysis or Advocacy, Occasional Paper, May. 2. Ecologically Sustainable Development Working Groups, 1991. Final Report - Agriculture.

AGPS, Canberra. Read the summary. 3. Industry Commission, 1998, ‘Executive Summary’, in A Full Repairing Lease. Inquiry into

Ecologically Sustainable Land Management. Report No. 60. Commonwealth of Australia, Canberra.

4. (ASEC) Australian State of the Environment Committee (2001), Australia State of the Environment 2001: Independent Report to the Commonwealth Minister for Environment and Heritage, CSIRO Publishing, Melbourne.

5. The Impact of a Carbon Price on Australian Farm Businesses: Sheep Production June 2011 Australian Farm Institute

6. Paltridge N (2002) Biodiversity in Agriculture and Agroforestry A Discussion Paper A report for the RIRDC/L&W Australia/FWPRDC Joint Venture Agroforestry Program

7. Sarah Anderson, Kim Lowe, Kathy Preece and Alan Crouch (2001) Incorporating Biodiversity into Environmental Management Systems for Victorian Agriculture: A discussion paper on developing a methodology for linking performance standards and management systems. ISBN: 0 7311 4842 8

8. Quentin Farmar Bowers & Ruth Lane (2006) Understanding Farmer Decision Systems That Relate To Land Use School of Global Studies, Social Sciences and Planning RMIT University

9. Moll, J., Crosthwaite, J., Dorrough, J., Shea, D., Shea, R., Moxham, C. & Straker, A. (2007) Farm businesses can profitably manage biodiversity, A paper to the conference Biodiversity Balancing Conservation and Production - Case Studies from the Real World, Launceston, 26-28 June 2007

10. Jim Crosthwaite, Bill Malcolm, Jim Moll & Josh Dorrough (2008) Future investment in landscape change in southern Australia, Landscape Research, 33:2, 225-239

11. Jim Crosthwaite, Jim Moll, Josh Dorrough and Bill Malcolm (2009) Re-organising farm businesses to improve environmental outcomes - the case of native vegetation on hill country across south-eastern Australia Australasian Agribusiness Review - Vol.17 -Paper 8 ISSN 1442-6951

12. J. Dorrough, J. Moll, J. Crosthwaite (2007) Can intensification of temperate Australian livestock production systems save land for native biodiversity? Agriculture, Ecosystems and Environment 121 (2007) 222–232

13. Josh Dorrough, Claire Moxham, Vivienne Turner, Geoff Sutter (2006) Soil phosphorus and tree cover modify the effects of livestock grazing on plant species richness in Australian grassy woodland. Biological Conservation 130, 394-405

14. Josh Dorrough, Claire Moxham (2005) Eucalypt establishment in agricultural landscapes and implications for landscape-scale restoration Biological Conservation 123, 55–66

15. Richard H. Loyn, Garry Cheers and Josh Dorrough (2004) Effects of land use intensity and tree cover on vertebrate fauna on farms near Ararat, western Victoria http://www.dse.vic.gov.au/__data/assets/pdf_file/0013/100246/Effects_of_land_use_intensity.pdf

16. Victorian Dept. Sustainability and Environment (2005) Our Environment Our Future; Victoria’s Environmental Sustainability Framework. Melbourne

17. Land Water & Wool (2006) Farm businesses,wool production and biodiversity 18. Land Water & Wool (2006) How can managing hill country be more profitable? 19. Land Water & Wool (2006) Using natural regeneration to establish shelter on wool properties 20. Danielle England, Rebecca Ashley Jones, John Noonan and Jon Warren (2006) Farming for

the Future Self-Assessment Tool. Department of Agriculture and Food, Western Australia 21. Western South Coast Leakage calculator (water leaking past the root zone of plants.

DAFWA. 22. Dorrough, J., C. Moxham, J. Crosthwaite and J. Moll (2005) Vegetation management in

temperate livestock production landscapes. Unpublished report to Land & Water Australia and Land Water & Wool. Department of Sustainability and Environment, Heidelberg.


References ABARE (2001), Outlook 2001: Capturing Growth Opportunities: Volume 1 and Volume 2

Proceedings of the National Outlook Conference, Canberra 27 February – I March 2001, Canberra. Broad ranging annual review of rural commodity and policy issues.

ABARE (2003), Australian Farm Surveys Report 2002, Canberra, and other editions. Annual economic survey of broadacre agriculture.

ABARE (2006), Australian Commodity Statistics 2006, Canberra; and other editions. Covers key domestic and world macroeconomic and rural Industry statistics.

.ABARE (2006a), Australian Farm Survey Results: 2003-04 to 2005-06, March http://www.abareconomics.com/index.html, accessed 30-04-2007.

ABARE (2007), Benefits of Adjustment in Australia’s Sheep Industry, Australian Lamb 07.01, April ABARE (2007a), AGsurf, http://www.abareconomics.com/interactive/ agsurf/index.htm, accessed

30-04-2007.. (ASEC) Australian State of the Environment Committee (2001), Australia State of the Environment

2001: Independent Report to the Commonwealth Minister for Environment and Heritage, CSIRO Publishing, Melbourne.

BAE (1971), Australian Rural Production, Exports, Farm Income and Indexes of Prices Received and Paid by Farmers 1949-50 to 1970-71, Canberra, mimeo;

BAE (1974), Statistical Handbook of the Sheep and Wool Industry, Canberra, 4th Edition. BAE (1980), Historical Trends in Australian Agricultural Production, Exports, Incomes and prices

1952-53 to 1978-79, Canberra mimeo. (Brundtland Report) World Commission on Environment and Development (1987), Our Common

Future, Australian Edition, Oxford, Melbourne. Brundtland Commission, 1990. 'Our common future'. UNDP/UNEP. World Commission on

Environment and Development. Australian edition. Oxford University Press, Melbourne, 1990, p87.

Carson, R. (1993), Silent Spring, Hamish Hamilton, London. (CBCS) Commonwealth Bureau of Census and Statistics (1970), Rural Industries 1969-69 Bulletin

No. 7, Canberra. Chifley, J.B. (undated), A Rural Policy for Post-War Australia, A statement of current

Commonwealth policy in relation to Australia’s primary industries, Central Drawing Office, Maribyrnong W3.

Connolly, G. (1990), an Econometric Model of the Australian Wool Market by Grade with Applications to Policy Analysis, Agricultural Economics Bulletin No. 37, University of New England, Armidale

Council of Australian Governments (COAG), 2000. 'National Resource Management', in COAG communiqué 3, Nov, 2000; retrieved October 16th, 2005 from http://www.coag.gov.au/ meetings/031100/index.htm.

Department of Environment and Water Resources - (ESD) Steering Committee, 1992. National Strategy for Ecologically Sustainable Development. Department of Environment and Heritage; retrieved October 16th, 2005 from http://www.deh.gov.au/esd/national/nsesd/strategy/.

(ESD) Ecologically Sustainable Development Working Groups. (1991) Final Report – Agriculture. AGPS, Canberra.

Edwards, G.W. (1971), Optimum Tariff Theory and the Wool Industry. Paper presented to 15th Annual Conference of the Australian Agricultural Economics Society, University of Adelaide.

Edwards, G.W. (1994), the Economics of Restricting Exports of Wool. Paper presented to 38th Annual Conference of the Australian Agricultural Economics Society, Wellington, 8–10 February.

Haszler, H. (1994), 'Australia's wool policy debacle: who should pay? Australian Quarterly, 66(2), 85-100.

Haszler, H.,(1996), Wool International Stockpile Policy: Issues, Options and the Farm Stockpile, Occasional Paper No. 23, School of Agriculture, La Trobe University.

Haszler, H. and Hone, P. (2001), “A Spillover Paradox”, in Haszler, H. (Ed) (2001), Land Use Policy for Environmental Objectives: Contributions from Economics: Proceedings of a Workshop for Environment Managers, Economic Policy Perspectives Discussion Paper 2001:1, Melbourne, August.

Hawke, R.J.L., (1989), Our Country Our Future: Statement on the Environment, AGPS, Canberra, July.


Industry Commission (1999) a Full Repairing Lease. Inquiry into Ecologically Sustainable Land Management. Report No. 60. Commonwealth of Australia, Canberra.

(IWS) International Wool Secretariat (1997/98), Wool Facts, IWS International P/L. Meadows, D.H., Meadows, D., Randers, J. and Behrens, W.W. (1972), The Limits to Growth: A

Report to the Club of Rome’s Project on the Predicament of Mankind, Potomac Associates, Signet

NSW Farmers’ Association (1999), “Biodiversity: ‘lite’ science”, The Primary Report, 01/99. Pearce, D., Markandya, A, and Barbier, E. (1989), Blueprint for a Green Economy, Earthscan,

London. Pearce, D., Vincent, D. and McKibbin, W. (1993), Macroeconomic policy and woolgrowers, Centre

for International Economics, Canberra. Industry Commission (1998) A Full Repairing Lease: Inquiry into Ecologically Sustainable

Development, 27 January, Report No. 60 Industry Commission. SEAC (State of the Environment Advisory Council) (1996), Australia: State of the Environment

1996, CSIRO Publishing, Melbourne. Tietenberg, T. (1988), Environmental and Natural Resource Economics, 2nd Ed, Scott, Foresman,

Boston. UN (1972), Report of the United Nations Conference on the Human Environment, Stockholm, 5-16

June, UN Sales No. E.73.II.A.I4, as cited in UN 2002. UN (1992), Report of the United Nations Conference on Environment and Development, Rio de

Janeiro, 3-14 June, UN Sales No. E.93.I.8. UN (2002), World Summit on Sustainable Development, Johannesburg, 26 August – 4 September,

UN Sales No. E.03.II.A.1. Wool International (1997), Australian Wool Sale Statistics 1996-1997 Season: Analyses of Fibre Diameter, Melbourne (and other issues);


Glossary of terms From Samuelson and Nordhaus and Douglas et al. Complements Goods which “go together” such as left and right

shoes. There are complements in supply as well as demand.

Consumer equilibrium A situation in which a consumer has allocated his or her income in a way that maximises his or her wellbeing.

Demand schedule (curve) A schedule or curve showing the quantity of a good that an individual consumer (individual demand curve) or consumers in aggregate (market demand curve) would buy at each price, holding other things constant.

Externality An effect of either consumption or production which is not taken into account by the consumer or producer because it is not reflected in the prices they pay but which influences the wellbeing or costs of other consumers or producers.

Firm An entity that hires or buys factors of production and organises them to produce and sell goods and services.

Income The flow of earnings received by an individual. Market Any arrangement that facilitates buying and

selling (trading) of goods, services, factors of production or future commitment.

Negative externality An unpriced outcome of production or consumption – that is an externality – that represents a cost to others.

Opportunity cost The best alternative forgone. Positive externality An unpriced outcome of production or

consumption – that is an externality –that represents a benefit to other producers or consumers.

Profit In economics defined as the difference between total sales revenue and the full opportunity cost of all the resources involved in producing the goods. In accountancy, profit is the difference between total revenue and costs “property” chargeable against the goods sold. The distinction between economic and accounting profit lies in the difference in the valuation of costs.

Public good A product or service that is non-excludable and non-rival in consumption.

Private good A product or service that is excludable and rival in consumption.

Substitutes Goods which “compete” with each other as do tea and coffee or gloves and mittens. There are substitutes in supply as well as demand.

Supply schedule (curve) A schedule or curve showing the quantity of a good that an individual firm (individual supply curve) or firms in aggregate (market supply curve) would produce at each price, holding other things constant.

5. managing for economic and resource sustainability€¦ · three pillars of the...

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