Design Matrix (DeMax)

Guide to Using the Design Matrix

Introduction
Economic Instruments generally aim to provide incentives that will induce a change in the behaviour of people to improve the way they use and manage environment and natural resources. However, an Economic Instrument will only create a meaningful incentive if it is correctly matched to the context that it is going to be applied in. The aim of this Design Matrix (DeMax) is to assist the process of context-instrument matching, and to support the design of the system to implement the Economic Instrument so that it has the greatest chance of being effective in providing meaningful incentives to induce the desired change in environmental management. The DeMax is applied once an Economic Instrument that best matches the local context has been selected using the Decision Support Tool1 (or an alternative selection process).

The DeMax therefore aims to inform (i) the assessment of the local potential to implement a selected Economic Instrument in a given context, (ii) key design considerations for the application of an Economic Instrument in a specific context, (iii) the evaluation of the likely impact and sustainability of the Economic Instrument in that context, and (iv) highlight potential flaws or barriers to the implementation of the selected Economic Instrument. If a solution to these flaws cannot be found (for example a modification to aspects of the Instrument, or an intervention in the local socio-political environment), then it is unlikely that the Instrument will be effective. An alternative Economic Instrument would then need to be explored or an alternative mechanism to Economic Instruments would need to be explored.

The outcome of the DeMax is therefore twofold:
• It provides an approach to evaluate the potential effectiveness and sustainability of an Economic Instrument under specific local conditions.
• It provides a process to highlight flaws or barriers to the implementation of the selected Economic Instrument in a specific local context that would need to be addressed in the design of the Instrument, or the system to implement the Instrument, if it is to be effective and sustainable.

Overview of the Design Matrix
The DeMax comprises of a series of criteria to inform the design requirements of the implementation of an Economic Instrument, and the evaluation of its likely impact and sustainability under local conditions. These criteria address two aspects of implementation, namely (i) the potential impacts of the Economic Instrument on the local context, and (ii) the influence of the local context on the effectiveness of Economic Instrument. The DeMax criteria are classified into four categories:

a) Social – Criteria relating to influence from and impacts to the socio-economy and culture of the target groups/community who would implement the management intervention, and who may derive benefit from the incentive. These criteria also consider secondary impacts to surrounding groups or communities.

b) Ecological – Criteria exploring direct and secondary impacts (positive or negative) accruing from the incentives generated by the Economic Instrument. It also addresses the potential for unintended impacts to other natural resources or interventions in the target area, or neighbouring areas.

c) Market – Criteria concerning the influence of and impacts to markets and economic opportunities, both locally and in the broader economy.

d) Governance – Criteria addressing policy and the influence of governance structures, institutional arrangements and capacity in supporting or hindering the implementation of the Instrument.

A fifth category of ‘Other Issues’ includes criteria that aim to encourage retrospective consideration of overarching issues that could inform the implementation of the Instrument, but which do not affect the overall cumulative score or recommendation from the DeMax.

Steps

Step 1 Rate each Criteria according to five statements that reflect the likelihood of the condition expressed in the criteria being met:

i. Most definitely: The condition in the criteria will definitely be met.
ii. Likely: The condition in the criteria will likely be met; however there is some level of uncertainty.
iii. Unsure: It is not possible to currently conclude whether the condition in the criteria will be met.
iv. Unlikely: The condition will probably not be met but there is some chance that it may be met.
v. Definitely Not: The condition in the criteria will definitely not be met.
vi. Not applicable: The criterion has no relevance to implementing the instrument in the local context, and is therefore not considered in the assessment.
The options for the rating statements are selected from a drop down menu for each criterion. Each statement is linked to a predetermined point allocation, which accrues towards a cumulative score once all the criteria have been rated. The language of some of the rating statements for some criteria varies slightly to ensure clarity and to avoid negative statements.

Step 2: Weight the importance of Criteria relative to the other criteria in the category by setting the degree of importance as either ‘average’, or above or below average from the drop down menu. The rating score of each criterion set in Step 1 is then increased or decreased proportionately. Criteria that are rated as ‘not applicable’ do not need to be weighted. This allows for the emphasis of some criteria relative to others to position the design of the instrument within the local context, and on the basis of the objectives of the management intervention being incentivised.

Step 3: Weight the relative importance of Categories – The relative importance of the four Categories of criteria (Social, Ecological, Market and Governance) in terms of their local significance to the design and impact of the Instrument can also be weighted. The relative importance weighting of a Category can be set using a ‘Star’ system. For example if the maximum of ‘5 stars’ is awarded for every Category, the total score for the criteria in the Category each then equally contribute 25% towards the final cumulative score in the DeMax (See Step 4). If some of the Categories are allocated fewer stars they will contribute proportionately less to the final cumulative score.

Step 4: The Cumulative Weighted Score informs the overall recommendation from the DeMax on the likely effectiveness of the chosen Economic Instrument in providing a meaningful incentive for the desired environmental intervention in a local context.

• Cumulative score of less than 35% suggests that the implementation of the instrument should not be pursued as the instrument is unlikely to match the local context and create meaningful incentives.

• Cumulative score of 36-79% suggests that implementation should proceed with caution, and attention needs to be given to likely requirements for significant modification to instrument or receiving environment to ensure the desired impact and sustainability.

• Cumulative score of 80% or more suggests that implementation can proceed with minor caution and attention to aspects of implementation design to ensure the desired impact and sustainability.

Step 5: Flag Issues - Notes describing the key design considerations that would inform how the Instrument would be implemented are recorded, and details of design or implementation issues that cannot be resolved during this planning phase are flagged (from selection in the adjacent drop down menu). Flagged issues are automatically carried over into a second worksheet in the Matrix and summarised as a list of critical design issues that need to be addressed before a final decision on the suitability and viability of the Instrument is taken. If these flagged issues cannot be addressed they may pose barriers or fatal flaws to Instrument achieving the desired incentives to change behaviour of local resource users or managers being targeted. Finally, these notes and flagged issues describing the key design considerations are analysed to inform the evaluation of potential impact and sustainability of the selected Economic Instrument.

Creative Commons License
Afromaison - Economic Instruments, Design Matrix by Fonda Lewis, Eduard Interwies, Yaniss Guigoz, Gregory Giuliani is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License. Non-digital works: This work is licensed under the Creative Commons Attribution-ShareAlike 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/deed.en_US.