Thilak Mallawaarachchi
Working across the disciplines of natural and social sciences to examine new ways to inform public policy development in natural resource management, climate adaptation and rural social change - l encompassing risk and uncertainty affecting investment. We explore integrating economic models, scientific data and social parameters through Geographic Information Systems to enhance the relevance of the context in policy analysis, to strengthen evidence-based policy. Recent/ongoing work include Farming systems characterisation for assessing competitiveness in Cambodian farming systems, and horticultural marketing policy reform in Pakistan. Climate adaptation under increasing water scarcity in both irrigated and rained systems is a key bonging theme.
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Papers by Thilak Mallawaarachchi
This study develops a modelling framework to determine the joint economic and environmental net benefits of alternative land allocation strategies, and to analyse the trade-offs between agriculture and the environment. The study integrates choice modelling and land allocation modelling to determine socially optimal land allocations for sugarcane production in Queensland. The model is applied to the Lower Herbert catchment in north Queensland using spatially disaggregated biophysical and economic data for the base year 1996.
The thesis is organised as follows. First, the regulatory framework and the institutional structure of the industry are chronologically analysed and the existing elements of regulation are identified. The resource management problem in the sugar industry is identified as one of common property management. The conflict between collective choice and private interest in the management of public goods is discussed and the role of values and choice in the determination of efficient allocations is highlighted.
Game theoretic analysis of the problem of allocating public goods reveals the need to minimise opportunities for free-riding and to encourage voluntary cooperation. Given the existence of an isolation paradox, the provision of information, in particular assessments that determine the level of pay-offs and opportunity costs, is identified as a prerequisite for voluntary collaboration and collective persuasion.
The total economic valuation framework for the assessment of choice between preservation of natural habitats and development of land for cane farming is introduced. The interdependency between area expansion and intensification of production is modelled as a behavioural response of canegrowers to an increasing demand for cane output. The model, CLAM–Herbert is a multiperiod, deterministic, non-linear programming model of the Lower Herbert catchment. It incorporates spatial and temporal interdependencies in production and their effect on allocation decisions under full information to determine how the trade-offs between area preservation and development influence efficient resource allocation.
The regional production possibilities are modelled using prices, costs and other technical information on resource attributes that determine land capability. Land is heterogeneous in suitability for cane, soil variability, elevation and current land use. The study area is grouped into 109 composite mapping units using geographic information systems (GIS) analysis tools. Land units within each group represent one of four classes – good, average, marginal, or poor – based on agricultural land suitability.
Land-augmenting technology is represented in the model by a fertiliser response function for sugarcane. The site characteristics determine the attainable yield for cane under alternative management regimes. In this way, the potential attractiveness of a parcel of land for cane varies across geographical space. Production is limited to assigned land and new assignments are permitted subject to available mill capacity. Expansion involves clearing new land, with a resultant loss of environmental amenity. The opportunity costs of converting natural areas to sugarcane are measured through a multi-attribute choice modelling survey.
The choice modelling study describes four attributes: levels of protection for two types of vegetation, regional income from cane production, and an environmental levy. The aim is to estimate the community willingness-to-pay for the protection of natural vegetation in areas suitable for cane expansion. The study examines the preservation of two land types: Lower Herbert wetlands and teatree woodlands. The area of both land types is declining at present, primarily because of expansion in the area allocated to sugar-cane production. The marginal value elicited for wetlands is $2800/ha, considerably more than the value that of using the land for agricultural production. The use of planning controls to prevent any further diversion of wetlands to agricultural production is highlighted as an optimal land management strategy. The allocation model assumed that such constraints are imposed and the wetland areas were excluded from the optimisation.
The marginal value elicited for teatree woodlands is $18/ha. At the margin, this is less than the value of land in sugar production, but comparable to the value in grazing on poor quality land. As a result, the effect of site characterisation information on the suitability of different land parcels for conversion to sugarcane is investigated in model simulations.
The optimisation model determines the socially desirable land allocation consistent with available land, site characteristics, and the opportunity costs of using that land. Production objectives for cane supply are met in two ways: intensification of the existing cane area (intensive margin) and expansion of the current cane production area (extensive margin). Decisions at the intensive margins are management decisions, such as the level of fertiliser used for a block of land. Decisions at the extensive margin are investment decisions, and involve the determination of the level of new land to come into production. Optimal investment decisions incorporate both environmental and economic characteristics of land to determine jointly the long-term profitability of land in production and conservation. The model solution is the land allocation that maximises net social returns. The objective function maximises the regional value added in cane production, cattle farming and natural area conservation.
Model simulations demonstrate that conversion of ‘marginal’ land to cane farming may be socially undesirable when environmental costs are taken into account. Inclusion of disaggregated spatial data in the analysis allowed marginal land to be defined with greater precision than previously used in land capability classifications. In addition, a more detailed analysis of environmental values would help identifying sites of above-average value within the broad category of ‘teatree woodlands’, including habitats for endangered species such as the mahogany glider.
The analysis leads to the general conclusion that, on average, expansion of the area allocated to sugarcane yields positive net social benefits, if the opportunity cost of natural teatree woodland can be measured by the stated preferences of residents of the Herbert River district. As noted, stated preferences imply that land management policies should prevent further diversions of natural wetlands.
Profitability of cane area expansion is highly responsive to change in the price of sugar, and in particular, prices similar to those that prevailed in the 1999 season would make conversion of marginal land unprofitable. The model also indicates that a finer disaggregation of land types enables greater efficiencies in land allocation. This applies to both production and conservation. In this model, however, more disaggregated values for environmental attributes were not available. Availability of such information will improve the accuracy of model results. This is particularly true for specific uses of the environment, such as unique habitats, for which the opportunity cost would be high.
This study takes a first step towards the integration of choice modelling and land allocation modelling to assist in problems of land management that involve trade-offs between economic and environmental values. The results show some of the potential benefits of this approach, but more detailed modelling of both agronomic systems and environmental values is required to guide efficient allocation decisions at grower level.
Concerns about present policies stem from the perception that existing institutional and regulatory arrangements have led to an excessive allocation of resources to sugar production and inadequate conservation of the natural environment. The analysis, indicates that while the assignment system have restricted the level of expansion, the slower rate of expansion may have resulted in net social benefits because of a slower rate of land clearing. This result was possible through the integration of natural resource values in land allocation optimisation models that had previously considered only production values.