Monday, November 28, 2022

Opportunities for economic reform within fire management across South East Australia: John O’Donnell

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John O’Donnell

In brief

There is inadequate funding of bushfire mitigation in Australia, including prescribed burning and other fuel management measures. There are large government savings to be made through increasing expenditure on mitigation, and so reducing the costs of responding to natural disasters, including bushfires.  Savings in bushfire suppression expenditure, recovery expenditure, bureaucracy expenditure and efficiencies can be extracted, while at the same time increasing employment in mitigation and forest resilience programs.  There are opportunities for economic reform within fire management across South East Australia and this is essential considering the huge ongoing impacts of disastrous bushfires.

Discussion

Large and intense bushfires have mega social, economic and environmental impacts and can travel across landscapes over long distances, devasting communities, large areas, ecosystems and flora and fauna.

As an example they burnt over 17 million hectares during the 2019/ 20 Australian bushfires. The 2019/ 20 bushfires were also very costly, estimated by AccWeather to be $110 billion in terms of total damage and economic loss.

The estimate is based on an analysis incorporating independent methods to evaluate all direct and indirect impacts of the fires based on a variety of sources. It is noted that other estimates are lower than this; the estimated damage from the bushfires in another case was estimated at a $20 billion impact to the Australian economy. Still, the costs are huge.

There are other human, social and environmental impacts and associated financial costs associated with bushfires, currently at high risk due to high fuel loads present across landscapes. Fire fighter and community safety in bushfires is at risk and there are reduced opportunities to use techniques such as backburning to the optimum. There are huge environmental impacts of bushfires across ecosystems, biodiversity, waterways, air quality, greenhouse, heritage and other costs.

There is inadequate funding of bushfire mitigation in Australia, this includes prescribed burning and other fuel management measures.   Just 3 per cent is invested prior to an event to reduce the impact of future disasters as noted in a Deloitte Access Economics (2022) report.

There is further disaster funding detail in the Menzies Research Centre Policy Paper (2020), Strengthening Resilience: Managing natural disasters after the 2019-20 bushfire season:

“Despite this relentless commitment to inquiries, in 2014, a report released by the Productivity Commission into Natural Disaster Funding Arrangements found that government natural disaster funding arrangements had been inefficient, inequitable and unsustainable. ‘They are prone to cost shifting, ad hoc responses and short term political opportunism.’ The Productivity Commission lamented that the funding mix was disproportionately recovery-based and did not promote mitigation. It observed that the political incentives for mitigation were weak, ‘since mitigation provides public benefits that accrue over a long-time horizon,’ and that over time this would create entitlement dependency and undermines individual responsibility for natural disaster risk management.’ At that time, it said, mitigation funding amounted to only three per cent of what is spent on post-disaster recovery and recommended that the Australian Government should gradually increase the amount of annual mitigation funding it provides to state and territory governments to $200 million.”

The paper pointed out that, in Australia, “one dollar spent on mitigation can save at least two dollars in recovery costs.  Committing additional mitigation funding makes economic sense”.  

In the USA, a robust preparedness programming is essential to reducing the costs of wildland fires. USDA Forest Service asserts that for every $1.00 that is reduced in preparedness funding, there is an increase of $1.70 in suppression costs.

There are additional fire mitigation opportunities across all land tenures.  In terms of fuel reduction, a key WA fire department fuel reduction program generated more benefits per dollar invested than additional fuel reduction by the Shires and private landowners, mainly because of the large amount of land that the department could treat. They noted “it is by treating large areas of land that the treatment can reduce the chances of major or catastrophic fires occurring, which are the fires responsible for most of the damages”. (Florec and Pannell (2016) Economic assessment of bushfire risk management options in Western Australia: case studies in the Perth Hills and in the south-west of Western Australia. Report Prepared for the State Emergency Management Committee Secretariat, June)

This information emphasises the opportunities for coordinated prescribed burning programs across all land tenures to achieve economies of scale and resilient landscapes, not necessarily in single areas.

There are large government expenditure savings to be made through increasing mitigation expenditure to reducing natural disaster response costs, including bushfires. The Menzies Research Centre estimates that they could be reduced by over 50 per cent by 2050. 

This information highlights the huge importance of increasing pre disaster fire mitigation in Australia, opportunities to progress this, taking a long term view and providing budget savings.  The low funding spent on mitigation, including prescribed burning and removal of fuels/ thinning, is an issue of national importance and needs urgent attention from all governments, federal, state and local.

The USA is addressing forest fuels and resilience, particularly in western USA and at the wildland urban interface. The scale of employment and financial benefits is staggering even for the USA and should be considered for Australia:

“The investments in fuels and forest health treatments will create an estimated 300,000 to 575,000 jobs, protect property values and small businesses, and stimulate local economies. In time, as we alter the trajectory of wildfire in the West, we can bring down the Forest Service’s annual wildfire suppression costs—which averaged more than $1.9 billion per year from 2016 to 2020—and devote the funds to further restoring forest health and reducing wildfire risk in fire-adapted forests nationwide.”

Bushfire aftermath

In Australia, there are a range of other opportunities to improve the use of government funds in fire management. One opportunity area is reducing the large expenditure on large aircraft. 

In the 2019/20 NSW RFS annual report, financial details highlighted that actual total expenses were $869,534,000; grants and contributions were $929,705,000 and aircraft hire under Grants and Subsidies were $255,510,000.  Large planes/ large helicopters and associated smaller helicopters are believed to be a large component of these aircraft hire costs, although it is not clear what cost.

The best way forward is to increase funding on expanded prescribed burning programs up to 8 per cent of forested areas annually in SE Australia as well as shifting to small aircraft, helicopters and drones for aerial prescribed burning.

Another opportunity area is addressing the increasing bushfire insurance costs and optimising insurance approaches, and hopefully reducing these costs.  A 2019 USA example of an effective approach is outlined in the Insurance Information Institute’s “Fighting Wildfires with Innovation“:

“To help at-risk communities adapt to the new reality of catastrophic wildfires, insurers have been instrumental in leading resilience efforts in the following ways: Educating policyholders and communities about wildfire risks and tactics to increase resilience; Working to help create resilient communities in high-risk areas; Developing innovative insurance products and tools to help better underwrite, price and transfer wildfire risk.”

There are many fire management economic reform opportunities across the spectrum of mitigation, prevention, suppression and recovery, some of these are outlined above and a number below:

  1. Utilise drones, small planes and helicopters for prescribed burning programs with teams on the ground, these are highly cost effective in terms of reducing fuel loads, improving forest health and improving forest resilience.
  2. Reduce the amount of bushfire funding issued from the Federal government to the state fire services, when minimum prescribed burning targets/ areas are inadequate, not met by the states or small prescribed burning rates continue over long periods.
  3. Introduce federal and state government incentives and tax breaks for undertaking sound and preferably cooperative prescribed burning across landscapes and all tenures. 
  4. Implement cost effective opportunities as identified by Deloitte Access Economics (2013), “Building Our Nation’s Resilience to Natural Disasters” for the Australian Business Roundtable for Disaster Resilience and Safer Communities.  They note that building more resilient housing in high risk bushfire areas generates a Benefit to Cost Ratio (BCR) of around 1.4; improved vegetation management (around houses) a BCR of around 1.3, and undergrounding electricity wires results in a BCR of up to 3.1.
  5. Implement key recommendations of the Menzies Centre report: including “Government funding should prioritise risk reduction which will reduce the need to spend on disaster recovery; Introduction of a National Bushfire Risk Rating (NBRR) system for all bushfire-prone communities, properties and structures; Introduction of a national approach to land use and building codes; Creation of an open access information platform comprising all data required for natural hazard management and Tax reform to improve affordability and increase uptake of insurance.”
  6. Undertake economic investigations of the “lock up and leave it” approach to fire management in Australia that is contributing to high and explosive fuel loads and inaction in regards to the creation and maintenance of Australian resilient, low fuel and healthy landscapes over all forested areas.  Both issues are major factors in regards to why intense bushfires are occurring.
  7. Address opportunities to reduce insurance premiums, with governments at all levels/ communities/ businesses working with the insurance industry on ways to achieve this. 
  8. Consider incentive approaches for city, town, home and garden bushfire hardening, reducing the risks of bushfire impacts.
  9. Undertake federal and state biannual Auditor General audits of bushfire management, any suppression overfocus, prescribed burning management, prescribed burning targets, fuel loads, forest health, landscape resilience and fire fighter, community safety and financial management.  A first step would be federal audits of each state.
  10. Complete an independent Commonwealth/ all state review of the economic and social impacts, costs and missed opportunities associated with bureaucratic and regulatory bushfire requirements, rules and barriers that apply to bushfire management and prescribed burning.  This review should include avoiding the huge combined bushfire impacts on communities, individuals, fire fighters, infrastructure, forest, fauna, water quality, waterways, fish, greenhouse gas generation, air quality and heritage sites by an experienced independent fire officer, the combination of all these impacts is huge in social, economic and environmental terms.

There are major opportunities for economic reform within fire management across South East AustraliaFailure to implement the identified and critical bushfire mitigation opportunities will result in continued large and intense bushfires across landscapes, devasting large areas, communities, ecosystems and flora and fauna. Common sense decisions and management at this time can reduce costs and impacts of future bushfire disasters.

About John O’Donnell

John is a retired district forester and environmental manager for hydro-electric construction and road construction projects.   His main interests are mild maintenance burning of forests, trying to change the culture of massive fuel loads in our forests setting up large bushfires, establishing healthy and safe landscapes, fire fighter safety, as well as town and city bushfire safety.

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