Coal or Koalas: That is the question!

It will be interesting to see the outcome of a court hearing about the effects of a proposed coal mine on the local koala population that starts today at the Land&Environment Court.
Not surprisingly, environmentalists are pointing to the possible dangers from relocating some 260 koalas from the site of the proposed mine to another habitat. On the other hand, the mining company is pointing that providing offset areas and additional land preservation areas adequately addresses any environmental concerns.
The issue here is the environmental effectiveness of offsetting, which is an incentive based environmental policy instrument. Using the context of the example at hand, offsets effectively allow that destruction of the koala habitat for the purposes of mining be permitted, provided that similar habitat is secured elsewhere. There are examples of successful offsetting schemes, for instance, the Minnesota Wetland Banking scheme where the environmental effects of drying out wetlands can be offset by purchasing credits that are created by establishing wetlands somewhere else.
There have also been examples of successful offsetting programs involving coal mines in NSW: e.g. the salinity offsetting by the Ulan Coal Mine. This program was reviewed in a recent chapter on evaluation of salinity offsets in Australia that appeared in an edited volume.
However, there are also concerns about the effectiveness of offsetting programs, as discussed on this blog some time ago, and in a recent paper in the Journal of Regulatory Economics.
So, a pretty tough job in front of the judge at the Land&Environment Court. Let’s see what lawyers think of offsetting!

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.