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June 2013

The Deputy Premier of NSW recently announced planned changes to the Native Vegetation Law and the Threatened Species Act . These pieces of legislation have frustrated farmers for many years, (here is a story from few years back when a farmer went on a hunger strike up on a tree), so there is no wonder that they are happy with this proposal. There is also no wonder that environmentalists are fervently opposing any changes to these laws.

Overly tight native veg and threatened species legislation can impose unnecessary burden and significant costs to farm businesses. On the other hand, relaxing these laws completely would take us back to the dark age of indiscriminate land clearing for farming purposes. So, the question is how to strike the right balance?

Unfortunately, there are no good and ready answers to that question. In theory, we should be able to determine the optimal level of native veg and species protection by looking at the cost to farmers, and benefits to the community at large. The difficulties there exist on both side of the equation: farmers are likely to overstate their costs; and it is notoriously difficult to value community preferences for such things as native veg and threatened species. So, we do not have a good empirical grasp of the size of costs and benefits, which prevents us from setting optimal level of protection.

There are additional problems with the distribution of costs and benefits. Under the existing arrangements, costs are born exclusively by farmers and benefits are supposed to be enjoyed by the wider community, both present and future. It is this distributional inequity that makes farmers so mad.

And so, perhaps the right approach is not to change the level of native veg protection, but to find some way to compensate farmers for the services that they are providing to the community by maintaining native veg on their properties. Otherwise, we are going to go in circles from too stringent to too lax native veg regulation, and back again to too stringent, in accordance to the political cycle. Rather than being close to right most of the time, we will be grossly wrong all of the time.