FINAL REPORT Corangamite River Health Strategy - Setting Priorities for Investment using a Benefit Cost Analysis Prepared for Corangamite Catchment Management Authority 64 Dennis Street Colac Vic 3250 19 March 2009 42443891 C:\Documents and Settings\kerry_brehaut\Desktop\Cover.doc CORANGAMITE RIVER HEALTH STRATEGY - SETTING PRIORITIES FOR INVESTMENT USING A BENEFIT COST ANALYSIS Project Manager: URS Australia Pty Ltd Level 6, 1 Southbank Boulevard Lucas van Raalte Southbank Senior Economist VIC 3006 Australia Tel: 61 3 8699 7500 Project Director: Fax: 61 3 8699 7550 Neil Sturgess Associate Director Prepared for Corangamite Catchment Management Authority, 19 March 2009 4J:\JOBS\42443891\Reporting\FINAL\Corangamite River Health BCA (Final Report)-18-3.doc CORANGAMITE RIVER HEALTH STRATEGY - SETTING PRIORITIES FOR INVESTMENT USING A BENEFIT COST ANALYSIS Table of Contents Table of Contents Executive Summary............................................................................................ ES-1 ES 1 Background ............................................................................................................... ES-1 ES 2 Project Objectives..................................................................................................... ES-1 ES 3 Background to benefit cost analysis ...................................................................... ES-1 ES 3.1 Benefit cost ratios ....................................................................................... ES-1 ES 4 River works programs .............................................................................................. ES-2 ES 4.1 Aims of programs........................................................................................ ES-2 ES 4.2 Measuring benefits of programs ................................................................. ES-2 ES 5 Benefit cost analysis ................................................................................................ ES-4 ES 5.1 Procedure for BCA...................................................................................... ES-4 ES 6 BCA results................................................................................................................ ES-5 ES 6.1 Sensitivity analysis...................................................................................... ES-7 ES 7 Discussion and conclusions ................................................................................... ES-7 1 Introduction ...................................................................................................... 1 1.1 Background ..................................................................................................................... 1 1.2 Project Objectives........................................................................................................... 1 2 Background to Benefit Cost Analysis ............................................................ 2 2.1 Introduction ..................................................................................................................... 2 2.2 Benefit-cost ratios........................................................................................................... 2 2.3 Non-market benefits ....................................................................................................... 3 3 Aims and costs of river management............................................................. 4 3.1 Aims of a management program ................................................................................... 4 3.2 Costs of a management program.................................................................................. 4 4 Benefits of river works program ..................................................................... 5 4.1 Benefit valuation ............................................................................................................. 5 4.2 Estimating willingness to accept compensation......................................................... 5 5 Estimating river health benefits ...................................................................... 7 5.1 Basis for non-market values.......................................................................................... 7 5.2 Aggregating value estimates ......................................................................................... 9 5.3 Other values used in the evaluation ........................................................................... 11 5.4 Matching program outcomes with valued attributes ................................................ 12 Prepared for Corangamite Catchment Management Authority, 19 March 2009 4J:\JOBS\42443891\Reporting\FINAL\Corangamite River Health BCA (Final Report)-18-3.doc i CORANGAMITE RIVER HEALTH STRATEGY - SETTING PRIORITIES FOR INVESTMENT USING A BENEFIT COST ANALYSIS Table of Contents 6 Risk analysis................................................................................................... 13 7 Procedure for benefit cost analysis.............................................................. 14 7.1 Implementing the methodology................................................................................... 14 7.1.1 Flow chart ....................................................................................................... 14 7.1.2 Case studies ................................................................................................... 15 8 Case Study - Barwon River Reach B2 through Geelong............................. 16 8.1 Background ................................................................................................................... 16 8.2 Assets of Very High Value............................................................................................ 16 8.3 Assets at Risk and Threats to those assets............................................................... 16 8.4 Priority Threats and Assets ......................................................................................... 17 8.5 Implementation targets and project costs.................................................................. 17 8.6 Benefit-cost analysis .................................................................................................... 18 8.6.1 Healthy native vegetation ............................................................................... 19 8.6.2 The loss of species of native fish.................................................................... 20 8.6.3 The loss of species of native fauna ................................................................ 21 8.6.4 Water quality................................................................................................... 22 8.6.5 Total benefits and costs.................................................................................. 25 8.6.6 Sensitivity analysis.......................................................................................... 26 9 Benefit Cost Analysis for RHS Priority Reaches ......................................... 27 9.1 Introduction ................................................................................................................... 27 9.2 Waterway management actions................................................................................... 27 9.3 Improvements in waterway attributes......................................................................... 27 9.4 WTP/WTA multipliers.................................................................................................... 28 9.5 Population estimates .................................................................................................... 29 9.6 BCA Results................................................................................................................... 30 9.7 Sensitivity analysis ....................................................................................................... 32 9.7.1 WTA/WTP Assumption ................................................................................... 32 9.7.2 Discount rate................................................................................................... 34 9.7.3 In-catchment population ................................................................................. 36 9.7.4 Conclusions from sensitivity analysis ............................................................. 38 9.8 Discussion and conclusions........................................................................................ 38 Prepared for Corangamite Catchment Management Authority, 19 March 2009 4J:\JOBS\42443891\Reporting\FINAL\Corangamite River Health BCA (Final Report)-18-3.doc ii CORANGAMITE RIVER HEALTH STRATEGY - SETTING PRIORITIES FOR INVESTMENT USING A BENEFIT COST ANALYSIS Table of Contents 10 References...................................................................................................... 40 11 Limitations ...................................................................................................... 42 Appendices A Impacts of management on river health attributes B Net present values from benefit cost analysis C Algal blooms D Case study - Barwon Reach B1 Barwon Estuary E Case study - Barwon River Reach 4 Upstream of Inverleigh F Case study - Barwon River Reach 7 Above West Barwon Dam G Case study - Gellibrand River Reach Gellibrand Estuary Prepared for Corangamite Catchment Management Authority, 19 March 2009 4J:\JOBS\42443891\Reporting\FINAL\Corangamite River Health BCA (Final Report)-18-3.doc