Improving environmental decisions: a transaction-costs story

A multidisciplinary team of researchers made efforts to influence the design and implementation of environmental policy in Australia. A focus of these efforts was the development of the Investment Framework for Environmental Resources (INFFER). In addition, the team undertook a diversity of communication activities, training, user support, and participation in committees and enquiries. Transaction costs were relevant to these efforts in a variety of ways. Environmental managers who adopted some elements of INFFER incurred higher transaction costs than they did using traditional, simpler methods for planning and prioritising. The benefits that could be generated by bearing specific transaction costs were carefully considered, and a balance was struck between the system having simplicity (and low transaction costs) and delivering valuable environmental outcomes in the long term. Transaction costs were factored into the planning and prioritisation processed developed for INFFER. For example, public and private transaction costs are accounted for in the calculation of the Benefit: Cost Ratio for each project, and in the analysis of which type of policy mechanisms would be most suitable. The researchers’ experiences highlight the importance of transaction costs and the diverse roles that they play in the processes of developing, implementing and influencing environmental policy programs.