Environmental Economics Essay
The Great Barrier Reef is the world’s largest coral reef area, extending beyond the northeastern coast of Australia, over 2,000 km (1,250 miles) long, 16 to 160 km (10 to 100 miles) from the shore, and consisting of thousands of separated reefs. It can even be seen from space and is the largest coral reef system and living structure on earth (Sarah 2002). The asset value of the Great Barrier Reef on economic, social and icon is about $56 billion. More than 64000 jobs are supported by the Great Barrier Reef and about $6.4 billion can be contributed to the Australian economy (John et al. 2017). On the other hand, the health of the Great Barrier Reef is threated by different environmental issues which include climate change, pollution, crown-of-thorns starfish and fishing (Harriott 2002). For ensuring the long-term survival of the Great Barrier Reef, policy mechanisms are required to manage the environmental issues. This study is to analyse the environmental externalities on the effects of agricultural pollution on the Great Barrier Reef and discuss relevant policy mechanisms which are available to internalise the externalities. Also, this report would argue that stronger regulations can be more effective than a voluntary approach to pollution abatement to manage the issues.
One of the serious effects of agricultural pollution on the Great Barrier Reef is decreasing the quality of marine water. The most significant reason of the issue is a terrestrial runoff. According to strong scientific evidence, cane farming has been one of the key sources of increased quantities of nutrients and pesticides entering the Great Barrier Reef lagoon (Qld Gov 2017). Because of sugarcane farming on the land, the reef is seriously treated by pesticides, nitrogen and phosphorus from the production. Also, other pollution from agriculture such as excess nutrients and fine sediments keep endangering the water quality (Qld Gov 2017). This economic activity (cane farming) clearly results in an impact on environment (water quality). The water which is polluted by the agricultural industry is the external cost caused by the economic action.
Sediment run-off is another main factor which is damaging the ecological environment of the Great Barrier Reef. Grazing lands are a key source of increased qualities of sediment which are entering the river of the Great Barrier Reef (Thorburn et al. 2013). There are 70% of fine sediments are generated from human activities and the grazing lands contribute at least three quarters of fine sediments exported the Great Barrier Reef lagoon (Thorburn ; Wilkinson 2013). Sediment run-off could have bad effects on coral growth because fine sediment would block the sunlight available to corals and seagrasses and reduce oxygen and PH levels. Also, it will devastate the water quality and decrease the resilience of the reef to issues caused by tropical cyclones, ocean acidification and climate change (Qld Gov 2017). Additionally, land use in the Great Barrier Reef catchments is dominated by the pastoral industry which has the open grazing system. Unsustainably managed properties significantly cause adverse environmental (polluted water quality and declined land condition) and economic (reducing productivity) effects (Bartley et al. 2010).
When the cane farmers and ranchers decide to produce for their business, the may not consider about the agricultural pollutants which seriously threaten the health of the Great Barrier Reef. Therefore, a marginal external cost (MEC) is created by a negative externality which is pollution from the cane farming and grazing land. As Marginal Social Cost (MSC) = Marginal Private Cost (MPC) + Marginal External Cost (MEC), the marginal social cost exceeds the marginal private cost (Anderson 2013). As shown in Figure 1.1, if the production will set the level of pollutants Q that they may emit, each level of pollutants emitted causes $100 worth of water pollution on the Great Barrier Reef lagoon and the marginal social cost curve is above the marginal private cost curve by $100. The marginal external cost curve is a horizontal line by $100. As Marginal social cost separates marginal social cost and marginal private cost. The production will keep emitting the pollution until the marginal private benefit equals the marginal private cost at level of Q2. The socially optimal marginal level of pollutants Q1 equates the marginal social cost and marginal social benefit. The production will emit at Q2 level of pollutants which would bring the marginal private cost and the private marginal benefit into equilibrium at point D. The private optimal level of pollutants emitted Q1 exceeds the socially optimal level of pollutants emitted Q2 because of negative externalities from the production. Hence, limiting pollutants emitted from cane farming and grazing lands can be considered by the government as an effective way to protect water quality in the Great Barrier Reef. In other words, the production would choose the socially optimal quantity of pollutants emitted into the water if they internalized the marginal external cost.
274948175260 $ per level
A negative externality
Level of pollutants emitted
One of the current policy by the government is to suggest cane farmers to reduce nutrient run-off and pesticide used in their business by adopting practices for effective management for nutrient and pesticide application. Farmers can use the SIX EASY STEPTM methodology to match nitrogen and fertilizer application required by the crop and increase irrigation efficiency for the production (Qld Gov 2017). The use of pesticide can be reduced by managing effectively pesticide application timing, placement and application method (Qld Gov 2017). Also, the government can collect extra taxes form the farmers whose production emit pollution out of legal limits. The landholders of grazing sector can adopt improved pasture and riparian management practices which include maintenance of pasture biomass, soil condition and ground cover, wet season spelling to improve pasture condition and forage budgeting to ensure appropriate cover levels on the land (Thorburn et al 2013). According to the development of the Reef Rescue program by the Australian and Queensland governments, one of the key mechanism to achieve practice change for the actions is direct grants for the landholders (Rolfe ; Gregg 2015).
In this way, the efficient policies will make the decision makers which can be cane farmers and ranchers bear the marginal social cost of their behavior (Anderson 2013). As shown in Figure 1.2, a higher marginal private cost of P1 will bring the level of pollutants emitted to Q1 at point C which is socially efficient quantity of pollution emitted from the cane farming and grazing land.
$ per level
280034495500P1C Socially Efficient
A negative externality
Level of pollutants emitted
On the other hand, the producers can also limit the agricultural pollution by a voluntary approach. The cane famers and grazing landholders can consider taking part in industry-led voluntary BMP programs such as the Smartcane BMP and the Grazing BMP. The program can help to identify how much fertilizer, nutrient and pesticide the producers should apply to fit with in legal limits and they just need to provide some records about the pesticide and fertilizer use in the production (Qld Gov 2017). Nevertheless, the problem of the approach is that there is no effective way to verify that the producers are following the program. According to Canegrowers, the industry peak body, about 71% of all 3500 farm businesses were involved into the BMP program but had not completed that (Uibu ; FOL 2018). Most businesses are willing to maximize their profits without completing the program because the participants of the voluntary program are not physically inspected by Government compliance officers (Uibu ; FOL 2018). Therefore, although the policies by the government sometimes can be inflexible and generate huge cost, stronger regulation can be more effective than a voluntary approach to improve water quality of the Great Barrier Reef because regulation would require the businesses seriously follow the recommended management to limit the level of pollution emitted into water.
In conclusion, decreasing quality of marine water is a serious effect of agricultural pollution on the Great Barrier Reef. Terrestrial runoff is one of the most significant reasons and the key sources of pollution emitted into the water include cane farming and grazing land. The cane farmers and grazing landholders require more effective managements to limit the level of pollution emitted into the water of the Great Barrier Reef. Because it is difficult to verify that the participants are seriously following the voluntary management program without supervision of the government, stronger regulation, such as pollution tax and direct grant to the landholders, can be more effective to limit level of pollution emitted from the production and improve the water quality of the Great Barrier Reef.
Anderson, D.A 2010 “Environmental Economics and Natural Resource Management”, Chapter 3. Third Edition, Taylor and Francis, UWA library.
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P.J. Thorburn, J.C. Rolfe, S. Wilkinson, M. Silburn, J. Blake, M. Gongora, J. Windle, M. VanderGragt, C. Wegscheidl, M. Ronan, C. Carroll 2013, “The Water Quality and Economic Benefits of Agricultural Management Practices” (chapter 5), “2nd Scientific Consensus Statement on Water Quality in the Great Barrier Reef”, Queensland Government, Brisbane 2013
Queensland Government.com 2017, “Impacts of nutrient and pesticide run-off from cane farming”, available from: https://www.qld.gov.au/environment/agriculture/sustainable-farming/canefarming-impactsR. Bartley, S.N. Wilkinson, A.A. Hawdon, B.N. Abbott, D.A 2010, “Journal of Hydrology”, Post Impacts of improved grazing land management on sediment yields part 2: catchment response, received 17 September 2009, Revised 24 April 2010, Accepted 8 June 2010, available online 11 June 2010.
Rolfe, J. and Gregg, D 2015, “Factors affecting adoption of improved management practices in the pastoral industry in Great Barrier Reef catchments”, Journal of Environmental Management 157, 182-193.
Uibu, K ;FOI 2018, “Queensland Government isn’t enforcing law aimed at protecting Great Barrier Reef from fertilizer run-off, documents show”, available from: http://www.abc.net.au/news/2018-10-11/laws-not-stopping-fertilser-runoff-to-reef/10348718