Benefit Cost Analysis of Wine Australia R&D Investments 2018-19

Abstract

To evaluate the value of Wine Australia’s R&D investments, AgEconPlus was commissioned to undertake an ex-post benefit-cost analysis of three randomly selected projects. The resulting areas of analysis were enhancing grapevine and rootstock performance, and climate adaptability, through the following projects:

  • UA 1503: Epi-breeding - Using the epigenetic memory of stress to prime Australian grapevines for a changing environment.
  • UA 1502: Using in-canopy misters to mitigate the negative effects of heatwaves on grapevines.
  • CSP 1303: Towards elite mildew resistant selections suitable for industry use.

Given the assumptions made for each evaluation, two of the three investments are expected to produce positive net benefits over 30 years from the last year of investment. The third investment (UA 1503) is expected to come close to ‘breakeven’.

Summary

Economic analyses of three research and development (R&D) projects funded by Wine Australia have been undertaken. The main purpose was to demonstrate the outcomes and benefits that have emerged or are likely to emerge from investment. This forms part of the process for the Council of Rural Research & Development Corporations (CRRDC) that aims to demonstrate the impact, effectiveness and return on investment from the Rural Research and Development Corporations. Wine Australia is funded by statutory levies paid by industry participants, with matching funding provided by the Australian Government up to 0.5 per cent of the industry's gross value of production.

Each of the three analyses provides a description of the constituent projects including objectives, outputs, activities, costs, outcomes, and benefits. Benefits are described qualitatively according to their contribution to the triple bottom line of economic, environmental and social benefits. While a range of potential benefits of each project are identified, the analysis focused on the most likely and most significant benefit stream. A number of potential benefits therefore remained unquantified and hence the estimated net benefits of some projects may be considered conservative. The analyses were undertaken for total benefits and Wine Australia benefits, including those expected in the future as a result of the investment.

Investments in two of three projects yielded positive results at a 5% discount rate and a 30 year analysis period. The third project (UA 1503) was close to ‘breakeven’ with a benefit-cost ratio of 0.98. When core analysis assumptions were subject to sensitivity testing, two projects (UA 1503 and CSP 1303) produced benefit-cost ratios less than one for ‘lower end’ assumptions

Comparisons between project results should be made with caution due to uncertainties involved with assumptions and differing frameworks for each of the analyses.

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