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Economic Evaluation of Investment in the Essential Oils and Plant Extracts R&D Program

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Economic Evaluation of Investment in the Essential Oils and Plant Extracts R&D Program OCTOBER 2013 RIRDC Publication No. 13/083 Economic Evaluation of Investment in the Essential Oils and Plant Extracts R&D Program By Peter Chudleigh, Buyani Thomy and Andrea Bath October 2013 RIRDC Publication No. 13/083 RIRDC Project No. PRJ-008807 © 2013 Rural Industries Research and Development Corporation. All rights reserved. ISBN 978-1-74254-576-9 ISSN 1440-6845 Economic Evaluation of Investment in the Essential Oil and Plant Extracts R&D Program Publication No. 13/083 Project No. PRJ-008807 The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances. While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication. The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors. The Commonwealth of Australia does not necessarily endorse the views in this publication. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to RIRDC Communications on phone 02 6271 4100. Researcher Contact Details Peter Chudleigh, Buyani Thomy and Andrea Bath Agtrans Research PO Box 385 Toowong Queensland 4066 Email: [email protected] In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form. RIRDC Contact Details Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6271 4100 Fax: 02 6271 4199 Email: [email protected] Web: http://www.rirdc.gov.au Electronically published by RIRDC in October 2013 Print-on-demand by Union Offset Printing, Canberra at www.rirdc.gov.au or phone 1300 634 313 ii Foreword The Essential Oils and Plant Extracts R&D Program supports the continued development of productive and profitable Australian essential oils and plant extracts industries. The Program is funded by voluntary contributions paid by industry participants and core funding provided by the Australian Government. The investments made by the Program follow the Five Year R&D Plan for Essential Oils and Plant Extracts 2008-2013. In May 2008 an Evaluation Framework for RIRDC was finalised. This framework, among other things, sets out a process for reviewing each of RIRDC’s programs in the final year of its five year plan. One of the two programs selected for assessment in 2012-13 was the Essential Oils and Plant Extracts Program. Up until and including 2011, a part of each specific program review was to select randomly three independent investments within a program for an impact evaluation through cost benefit analysis. The three economic analyses provided specific case studies that demonstrated the extent and distribution of benefits that have been, are being, or will be captured. Such information was valuable to not only RIRDC management, but also to the members of the industry (or industries) at which the investment has been targeted. Another purpose of the economic analyses was to contribute to a process being undertaken for the Council of Rural Research & Development Corporations (CRRDC) that aims to demonstrate through examples the outcomes and benefits that have emerged or are likely to emerge from the 15 Rural Research and Development Corporations (RDCs). Valuation of these benefits, along with identification of investment expenditure, is required in order to demonstrate the RDCs’ contribution to Australian rural industry as well as environmental and social benefits to Australia. As of early calendar year 2013, RIRDC is considering making some modifications to both its evaluation framework and its economic evaluation component. Likewise, the CRRDC evaluation process is likely to undergo some changes in calendar year 2013. Economic impact assessments are likely to maintain a strong presence in both the RIRDC and CRRDC frameworks. Impact assessments serve the main purpose of providing accountability to government and industry/community stakeholders that research funds have been managed appropriately and are producing positive impacts and benefits to Australia. The economic evaluation of investment in the Essential Oils and Plant Extracts Program undertaken in 2012-2013 differs from the previous “three random project” approach to the evaluation of RIRDC’s programs. The current evaluation process scans all of the Program projects that have been completed in the past five years, as well as some projects that may be still current. The 26 projects scanned demonstrated a wide range of predominantly economic benefits, a number of which were quantified in value terms. Total funding from all sources for all 26 projects totalled $6.2 million (present value terms) and 13 of these projects produced aggregate total benefits of $22.4 million (present value terms). The investment in the 13 projects of $3.9m produced a benefit cost ratio of 5.8 to 1. If the benefits from the 13 projects were compared to the total investment in the 26 projects, the benefit cost ratio was 3.6 to 1. iii This report is an addition to RIRDC’s diverse range of over 2000 research publications and it forms part of our Essential Oils and Plant Extracts R&D program, which aims to support the development of sustainable and profitable production systems. Most of RIRDC’s publications are available for viewing, free downloading or purchasing online at www.rirdc.gov.au. Purchases can also be made by phoning 1300 634 313 Craig Burns Managing Director Rural Industries Research and Development Corporation iv Acknowledgements Liz Barbour, Forest Products Commission, Western Australia Michael Basile, Australian Lavender Growers Association Rodney Burn, AgriSolutions Australia P/L Brian Chung, Botanical Resources Australia P/L Larry Cooper, Department of Agriculture, Fisheries and Forestry, Queensland John Doran, Canberra Peter Entwistle, North East Agricultural Services Kent Fanning, Department of Agriculture, Fisheries and Forestry, Queensland Georgina Hickey, Australian Centre for International Agricultural Research John Hood, Du Cane Kunzea Farm, Tasmania Mohan Jacob, James Cook University Glenn Jacobson, University of Tasmania Erich Lassak Elena Lazar-Baker, Department of Primary Industries, NSW Krisha Marr, Rural Industries Research and Development Corporation Hazel MacTavish-West, MacTavish P/L Sally McArthur, Swinburne University of Technology Robert McEldowney, Essential Oils of Tasmania Gary Mazzorana, Lemon myrtle tree grower Robert Menary, University of Tasmania Suzie Perry, Biosecurity Australia Alison Robb, Rural Industries Research and Development Corporation Alison Saunders, Rural Industries Research and Development Corporation Sam Smee, Essential Oils of Tasmania Robert Spooner-Hart, University of Western Sydney Ian Southwell Greg Travena, Essentially Australia v Contents Foreword ............................................................................................................................................. iii Acknowledgements ............................................................................................................................. v Executive Summary ......................................................................................................................... viii 1. Introduction ..................................................................................................................................... 1 Background to Evaluation .............................................................................................................. 1 Background to Essential Oils and Plant Extracts R&D Program ................................................... 1 2. Methods ............................................................................................................................................ 3 3. Description of Projects ................................................................................................................... 5 4. Project Investment ........................................................................................................................ 47 5. Benefits ........................................................................................................................................... 50 6. Quantification of Benefits ............................................................................................................. 55 7. Results ............................................................................................................................................ 60 8. Conclusion ....................................................................................................................................
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