The CMD is focusing on incentives to improve Australia’s biosecurity system.
The CMD is creating an analysis of Australia’s biosecurity system with the Centre for Excellence for Biosecurity Risk Analysis (CEBRA) and the Centre for Actuarial Studies at the University of Melbourne.
Stage 1 is investigating the economic case for a more decentralized biosecurity risk management mechanism implemented via actuarially-priced biosecurity insurance premiums. If successful, it is anticipated the project could advance to a field pilot in which behavioral changes would be measured in response to changes in information and incentive settings.
The CMD collaborated with CEBRA and the Monash Experimental Research Insights Team (MERIT) to create incentives to improve the cost-effectiveness of biosecurity systems in Australia. The aim was to create these incentives without adversely affecting the likelihood of contaminated consignments entering the country.
There is scope to update the way the system operates by introducing incentive structures into regulatory processes. This project complements CEBRA’s existing risk-based regime by applying the theory of incentives and regulation (developed by Tirole – Nobel Prize 2014) and inspection game theory. These ideas can be applied to many other areas of regulation across the economy.
Stage 2: The CMD/CEBRA (Centre of Excellence for Biosecurity Risk Analysis)/Centre for Actuarial Studies are engaged in ongoing research into the role for biosecurity risk insurance as an organising model for the biosecurity sector in Australia. This research is funded by the Department of Agriculture, Fisheries and Forestry. Following phase 1 in which the economic architecture of biosecurity risk insurance was developed (paper published in Risk Analysis), Phase 2 has focused on the application of biosecurity risk insurance to biofouling (i.e., management of biosecurity threats introduced on the hull of vessels that enter Australian ports). Our research is gaining traction because: i) the biosecurity system is costly ($850m/year); ii) of an increasing number of biosecurity threats have developed; iii) it identifies a mechanism that would improve economic efficiency - through efficiently pricing biosecurity risk; and iv) it creates a sustainable funding model - risk creators e.g., importers/vessel operators, not government, fund the biosecurity system through compulsory, actuarially determined insurance premiums.