In October 1999, Orissa was battered by a super cyclone that killed almost 10,000 people and caused a massive loss of livestock and property, recounts ‘Valuing the Environment: Economics for a sustainable future’ by David Glover (www.idrc.ca). “Controversy ensued over whether the impact of the cyclone had been made worse by years of destruction of mangrove forests in the area. Many argued that a healthy barrier of mangroves might have buffered the effects of the storm and minimised the damages it caused,” he continues.
Of relevance is a study by Saudamini Das, a researcher from SANDEE (South Asian Network for Development and Environmental Economics) who assessed the factors that affected the impact of the storm. She found that mangroves do provide important storm protection to people, livestock, and buildings; and that more than 90 per cent of the deaths due to the 1999 cyclone could have been avoided had the mangrove forests been intact, the author notes.
He describes how, to put an economic value on the protective role that mangroves play, Das looked at the mitigating effects of standing mangroves in the area, at government compensation payments, and at uncompensated losses, and calculated that a hectare of mangrove forest land stopped damage worth $43,000 in the district during the super cyclone.
Protection value
An insight of significance is that Das found a long-term protection value of about $8,700, when a hectare of cleared land was fetching $5,000, and thus showed that leaving mangroves as storm buffers generates more value to society than clearing them for development. “A workshop convened in Orissa to discuss her research drew 175 officials, parliamentarians, media representatives, and NGOs. Her study was distributed by the Food and Agriculture Organisation at a meeting about Cyclone Nargis, which struck Myanmar in 2008, and has been used in many other deliberations on coastal conservation issues.”
Conceding that converting some natural capital is necessitated by development, the author cautions that some conversions can be wasteful, causing us to give up more than we gain. He adds that valuation plays an important role in environmental research because, while the benefits of converting a forest or wetland to other uses can be fairly easily quantified, it is harder to know what we are giving up. “Sometimes it takes a tragedy to make us think deeply.”
People’s priorities
Looking at projects that aim at helping the poor, Glover rues that often no inputs are sought from the people affected, about what is important to them. As example, he mentions that agencies delivering water projects can be competing for aid budgets with those that deliver vaccines or mosquito nets, without finding out what importance local people give to water supply versus cholera versus malaria.
“To proceed with development projects in the absence of such information is not only ethically questionable, but inefficient. Most projects eventually come to rely on financing from local people to become self-sustaining. If the projects do not address people’s priorities, the chances of successful local financing are dim.”
Waste management
Take the case of the Philippines, where the national government passed a law requiring local municipalities to upgrade their solid waste management services and to pay the costs themselves. Working with the Tuba municipal government in Benguet province, Cory Naz and her research team wanted to know if there were any services that people in the municipality felt strongly enough about to actually pay for.
Naz used choice modelling – a technique originally developed to help private companies assess demand for new products – to present households with a variety of attributes of waste collection (e.g. frequency of removal, type of equipment used), and trade these off against prices, the author informs.
The research found that people were aware of the state of the waste management system and its negative impacts, but they had other priorities. “Even the least costly package on offer would cost more than most people would be willing to pay. This provided evidence that the municipality should aim for fairly simple improvements in service.”
Forest resources, water charges
A section titled ‘putting a price on scarcity’ reminds that when resources are under-priced or not priced at all, increasingly scarce resources can be overused and wasted. For instance, the way timber companies pay to use forests can have a profound effect on sustainable forest use, the author observes. “A well-designed pricing policy can help ensure the efficient utilisation of forest resources, a long-term sustainable harvest, and minimum ecological and environmental damage.”
In this context, he cites a 2003 study by Awang Noor Abdul Ghani and Mohd. Shahwahid Haji Othman, which showed that peninsular Malaysia’s pricing policy produced neither optimal financial returns for the government nor the best incentives for sustainable forestry practice. The study recommended that the government switch to a competitive bidding system or a fixed royalty and premium price system pegged to the hypothetical value of logging sites, one learns.
Another example is from Brazil, where José Gustavo Féres of LACEEP (Latin American and Caribbean Environmental Economics Program) looked at whether new water-pricing legislation (first implemented in March 2003 in the Paraíba do Sul River Basin) was doing anything to encourage water recycling by the country’s industrial sector.
While water charges did encourage firms to reuse water, the study discovered that firms were at times trying to evade pollution standards based on concentrations (that is, parts per million of pollutant) by diluting their waste water. Higher water charges would discourage this practice and encourage genuine pollution prevention, the book advises.
Entry fees, eco taxes
When protected areas in developing countries are under-managed because of inadequate financial resources, one solution can be to tap the tourist market, especially in national parks that have low or non-existent entry fees. A study quoted in the book is of Himayatullah Khan who found that even an entrance fee of $0.25 to Pakistan’s Margalla Hills National Park would generate annual revenue of about $140,000, equivalent to 4 per cent of the government’s environment budget!
Can environment taxes impact migration? An EEPSEA (Economy and Environment Program for Southeast Asia) study by Cao Jing may have the answers. She used a computable general equilibrium model to examine the impact of a fuel tax versus an output tax on China’s economy, with the aim of finding how the taxes would affect people’s livelihoods and welfare, and how these would, in turn, affect rural-urban migration.
A comparison of the impact of the two tax policy regimes showed that the fuel tax is more efficient in terms of reducing pollution emissions and their associated environmental and health impacts, reports Glover. “It also distorts the rural-urban migration process less than the output tax. The study thus identifies this as the preferable policy – the one with the best combination of benefits to the economy and the environment.”
Concise discussion of an inescapable subject.
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