in coastal regions and in small islands
DEFINING THE ROLE OF ENVIRONMENTAL/ ECOLOGICAL ECONOMICS
|CSI info 10|
OF THEORIES IN ENVIRONMENTAL ECONOMICS
C. Sanchez-Milani, UNESCO
environmental economic theories were reviewed particularly in terms of their
support to public decision-making and their limits and constraints.
SPECIFIC INFORMATION CONCERNING ENVIRONMENTAL PROPERTY
on the market that are exceptions;
Multiple laws governing property, e.g. who owns the water, wood, mining resources; each society offers an answer which differs according to its location.
the optimum level of the use of resources (the tragedy of the commons);
guarantee: problem of the respect of standards;
internationalization of external elements: the well-being/benefit of an
action may affect another action without there being an intervention in the
environmental economy should pinpoint external elements (both positive and
negative), evaluate their value and their effects on the society in question so
that those responsible may pay the costs of these effects.
TWO MAJOR SCHOOLS OF THOUGHT
resource economics: founded in the USA (1975), based on American
experiences, fits in with the neo-classic concept of economy, resources have
many characteristics, e.g. renewable and exhaustible resources.
economics: gives value to the environment as an instrument for its protection;
a new discipline (outside of the neo-classic economy); the idea is to build
a programme of action, e.g. the European Union’s Valuation
for Sustainable Development (VALSE) programme, the creation in 1998
of the International
Society for Environmental Ethics (ISEE) and in 1996 of the newspaper
instruments are important as they offer:
A means to come to a decision for well-being;
Tools to guarantee an equilibrium between the individual’s and the
A solution for ways to integrate irreversible actions.
ECONOMIC ANALYSIS CAN BE USEFUL FOR COASTAL MANAGEMENT: THE EU
presentation discussed the possible role of economic analysis in relation to
problems dealt with by experts present in the meeting. Examples of practices
are taken from the European Union–funded Valuation
for Sustainable Development (VALSE) project, which the author co-ordinated.
think that environmental economics deal with market and money and that both are
dangerous because they are associated with strong ideological currents.
Free-market proposals are hard to justify with conventional neo-classical
COSTS AND BENEFITS
is in one way or another concerned with identifying where benefits lie, e.g. in
the context of a programme of research, a programme of management or ways that
resources are used. Textbooks define economy as an analysis of available means
in order to decide the best uses of resources for possible objectives. The
question then arises of who decides on the best possible resource uses.
questions of resource uses involve conflict resolution. The answer over the last
hundred years or so is that economics are concerned with identifying rules for
optimal uses of resources but the distribution question belongs to politics.
This is something which any honourable, intellectually competent economist
should never say because almost all questions about choosing resource uses
cannot be solved in terms of optimal use: almost all of them involve conflict
the role of economics should be to quantify costs and benefits associated with
certain types of choices and provide some insight to the question of who
benefits, who loses, who pays the costs, what sort of costs, how to assist in
the distribution of these costs and benefits against relevant political,
cultural, institutional and social agendas. This is the fundamental agenda of
ordinary political economy.
are not in a utopian world where we believe there is a solidarity of interests
among different economic classes and social groups or institutional forces. Most
of us are working in a situation of high stress and conflict with little level
of confidence. However, it remains important to still link the analytical work
of economics trying to quantify costs and benefits with attention to
institutional and social processes of negotiation. The example of participatory approach will illustrate this point as this is
currently very popular in Europe, as it once was in the 70s in the development
participatory approach offers two technical advantages:
it helps you get better information via public participation for your scientific
analysis, i.e. the public is at the service of experts;
it uses technical skills, modelling, knowledge and communication of results to
better advise the public as to their rational behavior to help solve problems
according to what experts and models decide. This is actually the opposite way
round from (1), but it achieves the same purpose. Both approaches are, however,
one-way types of participation, i.e. co-option.
philosophy is that participation explains and spreads the knowledge of experts.
By training, economists have great difficulty with this other concept. In their
view, either the public goes along with economic rationality or they are idiots
and economists are fighting to get that common sense understood. Ecological
economics tries to break down that oversimplification and the VALSE project
gives examples of the approach based on the valuation analysis for sustainable
example of valuation of water
resources in the Canaries will illustrate this approach in a coastal context.
The problem at stake here is the quantitative and qualitative degradation of
aquifers (groundwater resources replenished by rain), i.e. the over-exploitation
of a renewable resource.
story goes like this: in the good old days when people lived in harmony with
nature (they never did, at least not in the Canaries context), they exploited
water in a more or less sustainable way. Then along came people with a more
predatory attitude who decided that they could make a profit and exploited water
faster and faster until exploitation became non-sustainable. This is partly
true, a bit too romantic, but today in the Canaries there is a real political
battle between people who express quite different moral sentiments and who are
linked to quite contrasting and conflicting economic interests. Some people have
little access to water or have to pay more for the water they get than others.
There is inefficient use of water because people pay different prices and the
price paid is not necessarily linked to the value of the use that it is being
first solution, as an orthodox
economist would put it, is to recommend the use of a transparent water market
where everybody could pay the same price and a competitive process would ensure
best use of water. The problem is that this best use of water under current
market conditions is almost certainly associated with what the environmental and
resources economics school call optimal
depletion of resources, i.e. water resources are entirely used up. This
is not a bad thing for all economic interests: it benefits experts in high-tech
solutions to water supply (e.g. the French multinationals) involved in
desalination, purification and offshore supply services. It may be partly good
for some economic interests in the Canaries, i.e. just make tourists pay a
little bit more per cubic meter of water. It is, however, very bad for
agriculture and people living in the local economy because water is very
expensive. Optimal use of water resources, therefore, cannot be solved by
appealing to simple market economics principles. To leave it to market forces is
to guarantee social problems and non-sustainability of some parts of the local
economy and evidently of the ecosystem.
second solution is that of
sustainable use. People agree on it because they can foresee short-term
benefits. But if a regime of constraints on water use were to be announced and
if people must respect collectively a limit on the total exploitation process
(to renew aquifer), agreement is jeopardized. This is because the question of sustainability
for what and for whom arises. This is another issue that the present
participants are faced with on a daily basis: sustainability of what cultural
tradition, what archaeological heritage, what ecosystem properties and for which
social class or group? This cannot be solved in terms of quantification of costs
and benefits in money terms and by asking the rhetorical question of what is the
highest benefit or what is the most advantageous use of the resource in monetary
one is left with two choices:
1: link quantification of alternative uses and for whom;
Choice 2: engage in a reconciliation process.
in the reconciliation process leads to permanent conflict: military domination
situation, war, civil breakdown or permanent stress. A participative,
deliberative or negotiating process can generate new evaluation, new meaning,
new ability of different stakeholders to accept a new compromise that they would
not otherwise have accepted.
VALSE project has demonstrated some positive results from the negotiation
approach. Here are two examples.
the case of the Wetfin study in the UK, based on contingent valuation, the project was to demonstrate that you can
use a survey technique employed by economists to obtain numbers to understand
people’s motivations. The latter may be more important for decisive support.
In parallel to that study a citizen jury process was conducted, with 12-16
people selected from the region and which were presented with different options
from different experts. Unexpectedly, the jury actually made up another option.
the case of water management in Sicily, the main difficulty was that people did
not know what their problem was. The project was based on a multi-criteria
framework which was designed as an interactive and iterative process via
institutional analysis, surveys, interviews, discussions. The experience
conveyed solutions that analytical results would not have obtained.
Surprisingly, the municipality reacted with a first priority to publicize the
alternative options for water uses, i.e. stakeholders could decide. The process
was internalized and the multi-criteria analysis put to the service of a social
process for permanent dialogue. Expert backup is still needed for internal
coherence, scientific respectability to defend reliability of figures and
information, but it is not enough.
the VALSE project, we tried to communicate this philosophy of practice, bring
attention to the high scientific quality of the analysis, use quantification
when that is possible and useful, quantify sometimes in money terms. Even so,
not all costs and benefits can be monetized
but some can be socialized.
issue is to search for compromise and understand why people abandoned a key
interest for the common good because they found it necessary or desirable to
co-exist with people even if they don’t agree with them. It is a political and
social perspective. It does not come out in economic textbooks. Orthodox market
economists wanted to pretend that this co-existence could be magically solved by
everybody acting as shoppers on the market place: buy the thing you need with
the income you get. This is too simple a formula and the compromise process must
be reworked in a political sense and the role of economic analysis must be
reinvented in those terms. Choices are not objective, there is value judgement
EVALUATION OF NATURAL RESOURCES
Portland Bight area in Jamaica is at present not managed, the bay is over fished
and the forest is over-exploited for charcoal. We take it that if the area is
managed it will be more valuable than if it is not managed.
we needed some economic analysis to evaluate its current state, and its
potential value under a managed state, so as to be able to argue the case with
government and others that good environmental and natural resources management
is better than no management.
environmental economist from the World Bank, who had carried out an environmental
valuation of coral reefs in Indonesia, was invited to Jamaica to do an evaluation
of coral reefs, mangroves and forests. The Canadian
International Development Agency (CIDA) sponsored his visit and that of
another expert from the University of Stockholm. They spent several weeks in
Jamaica but the results are not available yet. So in this presentation, the
results from the Indonesian study are used to illustrate their approach. They
did not use the contingency valuation method, i.e. how much fishers are willing
to pay to have fisheries properly managed. This was because people will give
you values but when it comes to actually paying, that is another story.
method used is a “with/without” scenario, i.e. without management this is
what the resources might be worth, with management this is what the resources
might be worth. Or since we don’t know what absolute value is, we can speak
about the additional value that would be created with management or the value
that is forgone if there is no management.
from the Indonesian paper compares the scenario regarding the impact of poison
fishing. Basically, poison fishing at present has a value of US$33,000/km2
individuals. Individuals do earn money from this destructive practice but there
is a net loss at US$40,000 to society resulting from damages to the surrounding
environment. If tourism is taken into account in the area, the net loss is
valued at US$436,000/km2. If no tourism takes place in the area the net
loss is much less. Valuation techniques cannot yet value the loss to
biodiversity. In all cases, loss by destructive practices outweighs gains.
an argument demonstrates to government that it makes sense to get rid of poison
fishing. Even though the practice brings tangible benefits to poor Indonesians,
it is causing substantial damages to the environment. This applies also to coral
mining and deforestation practices with the associated siltation of coasts.
data referring to cyanide fishing shows the advantage of replacing it with a
more sustainable fishing practice, e.g. line and hooks. Cyanide fishing earns
US$475 million/year to Indonesia. Line and hook fishing earns more, with US$688
million/year. This is a strong enough argument to move away from cyanide
fishing. Labor costs are, however, higher with the sustainable approach (US$360
million against US$241 million). So direct costs would favour the destructive
practice but indirect costs would favour the sustainable practice. Cyanide
fishing would jeopardize the tourism income of US$280 million; that is a net
loss on national accounts of about US$40 million. But with sustainable fishing
there is a net gain of US$341 million/year.
type of economic analysis should convince ministers of finance and industrial
developers of the benefits of sustainable fishing practices. So we are waiting
for the results of our own study for Jamaica and we will make them available to
RESOURCE VALUATION: A
CASE STUDY IN PAGBILAO
M. Fortes, University of the Philippines, Quezon City, Philippines
dependence on natural functions and components is most strongly reflected in
planning and decision-making processes. It is necessary to bring economic
development more in harmony with the capacity of nature to sustain the needs of
rapidly growing human populations. Over a 20-year accounting period,
1970–1989, Philippine mangrove forests decreased by an average of 5,276 ha
annually. This paper presents a method and an example of ways to assign
socio-economic and monetary values to the functions and components of mangrove
ecosystems. This mangrove valuation project compares a pristine area (Ulugan
Bay) to damaged areas elsewhere in the Philippines.
BACKGROUND TO THE PROJECT
resources are under strong competing interests between uses, i.e.
clearance/cutting for fishponds, building material, marina development; and
conservation and biodiversity.
motivation to go into mangrove resource valuation stems from three policy
the need to determine the optimal use of a mangrove area;
the formulation of proper access and pricing schemes for various current uses
that would eventually lead to the optimal pattern of use;
the forthcoming investment decisions on degraded mangrove forests and abandoned
fishponds, specifically in the form of reforestation.
on-site and off-site market and non-market values of mangrove products and
services were investigated in the Philippine Mangrove Resource Valuation Project
(PMRVP). This paper focuses only on activities undertaken at two of four bays in
the Philippines: Pagbilao Bay (Quezon Province) and Ulugan Bay (Palawan). The
PMRVP was implemented to:
investigate the soundness of raising the fish pond lease fees from PHP50 to
PHP1,000 (US$1.25 to US$25) per hectare per year;
develop a methodology for assessing various options in managing the country’s
apply various methods for valuing environmental uses of mangrove resources;
derive insights that would assist policy-makers to formulate pricing schemes for
access rights to mangrove areas in general, and the licensing schemes for
fishponds in particular;
generate information that would serve as a basis for environmental accounting of
METHODOLOGY AND STUDY RESULTS
on-site and off-site market and non-market values of products and services for
mangroves (including fisheries) were investigated. Mangrove forests in Pagbilao
Bay were studied for residual and secondary growth and, in Ulugan Bay, for both
residual and primary or old growth. On-site products and services were measured
by formal market values, i.e. growth and yield, using linear regression. Results
are given according to two forest management regimes, i.e. clear-cutting and
seed tree. Cost-benefit analyses to define best economic cutting cycles (both
clear-cutting and seed tree methods) were made using net present value.
values consist of services such as spawning and nursery grounds, and the value
of litter fall as fertilizer. Mugil
cephalus (mullet) was collected and its gut content examined to determine
the use of mangrove litter fall as food.
THE MORAL VALUE OF NATURAL AREAS
in nature is of instrumental value in advancing human interests and well-being.
Hence, we have a prima facie reason
not to destroy natural areas wantonly. But here, utility becomes the main
argument, so that becomes the argument of technocrats.
areas and their biodiversity have intrinsic value, one does not need to refer to
any other functions or values in a justifying sense, thus, it is an object of
immediate moral concern. There are many reasons for the preservation of nature
and hardly any to defend its large-scale destruction.
results indicate that the timber values of mangroves are highest for the
old-growth. On the average, fishpond operations could afford to pay the proposed
increase in annual lease fees from PHP50 (US$1.25) per ha to PHP1,000 (US$25)
per ha. The higher land rental is warranted on three counts:
should appropriate economic rent to generate the funds for public investments;
social value of coastal land resources, whether for mangroves or for other land
uses, is high under Philippine conditions of increasing lowland scarcity;
higher lease fee would encourage more efficient use of the land for aquaculture.
values exist depending on the prevalence of informal household use of mangrove
wood, fuel wood, extracts, and fishery products in the area. In places where
spawning occurs and the mangroves serve as nursery grounds, the non-market value
could be much higher.
present effort at mangrove resource valuation is far from complete. The
under-valuation of mangrove goods and services arises from the difficulty of
measuring buffer function, soil accretion, erosion control, mangrove natural
products, contribution to near-shore and offshore productivity, sanctuary for
wildlife, outdoor recreation, eco-tourism, aesthetics.
is another, perhaps more important value – the moral aspect of the resources.
This value should be considered in future valuation of natural areas and their
participants appreciated these presentations as they could see direct
application in their own contexts. It was pointed that before economic tools
could be used, the theory behind them must be known and understood and that it
would be appropriate to teach environmental economics at undergraduate level.
was agreed also that illustrative quantitative indicators were necessary,
especially multi-criteria economic and ecological indicators. However, caution
was raised as to how to accommodate “beautiful science” with basic
village/community understanding. Indeed, quantification should be used when
relevant but one should build a language to justify it.
the contingency valuation technique, the value of the environment depends on
whom you ask: millionaires would give a higher value than poor people, i.e. it
is relative to people’s income. One should not value the resource itself but
how it will increase if it is properly managed. Referring to the “Tragedy of
the Commons” the valuation approach was criticized as a potential “license
The key lies in the types of practices involved. The role of environmental economics is to help understand by providing information. There is a need to improve networking of expertise, as organising information is essential to good economics and good practice.