Law Reform · Nature & the Reef

Improvements in economic assessment of major projects

27 April, 2017

The Queensland Government has taken a positive step forward, making the first guidelines for Economic Impact Assessment for major or coordinated projects this week. 

  • The new guidelines for Economic Impact Assessment can be found here.

Coordinated projects are typically major projects (for example the Townsville Port Expansion or the Adani Carmichael Mine and Rail project) that are complex, pose high environmental risk or are of strategic significance to the government; they are assessed by way of Environmental Impact Statement (EIS) by the Queensland Coordinator-General.

For nearly two years, EDO Qld lawyers have persistently advocated for appropriate economic impact assessment guidelines to improve the accuracy, consistency and robustness of material provided by proponents. We advocated to government and held a well-attended Economics and Environment Law Jam in 2015. Economists at The Australia Institute have assisted.

Before now, the lack of robust guidelines led to  patchy quality of economic impact assessment methodologies in EIS  and the frequent overstatement of benefits by using Input-Output Analysis (IO Analysis). IO Analysis has been long rejected by economists, including many government Treasury offices across Australia, as unsuitable for project assessment as it is certain to overstate benefits.

IO Analysis was relied on in the EIS for the Carmichael Coal Mine and Rail Project, with the proponent claiming 10,000 jobs and over 20 billion in State taxes and royalties.  These claims were tested in the Land Court by conservation  group Coast and Country, represented by EDO Qld and with the assistance of independent expert economic evidence from Dr Richard Denniss and Rod Campbell. In 2015 the Court concluded that the economic impact assessment in the EIS overstated the benefits of the mine, (i.e. not 10,000 Queensland jobs rather  1,464 net jobs pa for mine and rail Australia wide or 1,206 net Queensland jobs) based on evidence by Adani’s expert Dr Jerome Fahrer and agreed with the Australia Institute economists.

Jo Bragg, CEO of EDO Qld, says "The misleading job figures produced and quoted for major projects undergoing assessment highlighted to us the need for strong guidelines to improve economic impact assessment in Queensland. Coordinated Projects have some of the largest impacts on Queensland’s environment, community and economy- so decision-makers and the public need accurate predictions of jobs not overblown industry modelling."

Rod Campbell, economist at The Australia Institute, says "If an economic impact assessment provides inflated jobs figures, it will lead to an inaccurate assessment of the economic benefits and costs of a project. This makes it impossible for decision makers to properly weigh economic impacts against social and environmental costs. It is therefore essential that the benefits and dis-benefits of proposed projects must be accurately reported, assessed and weighed through robust economic impact assessment."

EDO Qld, with The Australia Institute advocated for Guidelines that prohibit the use of IO Analysis for coordinated projects, and mandate Cost Benefit Analysis (CBA). CBA is a much more highly respected and accepted economic impact assessment method due to its more robust and accurate representation of benefits and dis-benefits of a proposed project. NSW has mandated CBA for all mining and coal seam gas projects.

Unfortunately, the final draft of the Economic Impact Assessment Guidelines does not prohibit the use of IO Analysis and does not mandate CBA for coordinated projects. However, the final guidelines do state that CBA is preferred for all major complex projects, and that I-O modelling should not be used in isolation, along with providing minimum standards in economic assessment.

Jo Bragg says "While these Guidelines are not as strong as Queensland needs, they will assist in improving the consistency, reliability and transparency of coordinated project assessment to the benefit decision-making."