An empirical examination of the gains in cost-effectiveness from the use of multiple environmental outcome conservation tenders
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The production and consumption of environmental goods and services are subject to many of the problems associated
with public goods. Due to their non-rival and non-excludable nature, incentives for individuals to invest in their production
are often absent. To address this market failure, government agencies have used a number of policy mechanisms to
procure the supply of environmental outcomes on behalf of society. Recently, conservation tenders focussing on private
land have been a favoured policy instrument used by many government agencies to purchase environmental outcomes in
the public interest. The majority of these environmental tenders have focussed on a single environmental outcome.
It is contended in this paper that multiple environmental outcomes tenders can be more cost-effective than single
outcome tenders as decisions are based on information regarding a wider set of environmental outcomes – a more
complete picture. Tenders that focus on more than one outcome capitalise on economies of scope in the production of
environmental outcomes, as well as incorporating synergies and trade-offs into decision making.
In this paper the results from a synthetic analysis of the benefits derived from running multiple-outcome tenders are
compared to single outcome tenders, to empirically estimate potential cost-effectiveness gains. The baseline policy of
running a multiple-outcome tender is compared to three alternative policy options: running a single outcome tender,
running three single outcome tenders simultaneously, and running three single outcome tenders consecutively.
Results indicate that significant cost effectiveness gains can be made by running a multiple-outcome tender compared to
the three policy alternatives. These results are analysed, and advantages and limitations of applying multiple-outcome
tenders in the field are discussed.