Environment and development in coastal regions and in small islands

THEORETICAL PRINCIPLES

REVIEW OF THEORIES IN ENVIRONMENTAL ECONOMICS
C. Sanchez-Milani, UNESCO

Various 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

• Products 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.

COMMON PROPERTY 

• Determine the optimum level of the use of resources (the tragedy of the commons);

• No guarantee: problem of the respect of standards;

• The internationalization of external elements: the well-being/benefit of an action may affect another action without there being an intervention in the market.

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 

1. Environmental 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.

2. Ecological 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 Ecological Economics.  

CONCLUSION

The instruments are important as they offer:

1. A means to come to a decision for well-being;

2. Tools to guarantee an equilibrium between the individual’s and the community’s objectives;

3. A solution for ways to integrate irreversible actions.  

HOW ECONOMIC ANALYSIS CAN BE USEFUL FOR COASTAL MANAGEMENT: THE EU VALSE PROJECT
M. O’Connor, European Society for Ecological Economics, Versailles, France

INTRODUCTION

This 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.

People 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 economic analysis. 

COSTS AND BENEFITS 

Everybody 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.

All 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 resolution.

Thus 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.

We 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 context. 

PARTICIPATORY APPROACH 

The participatory approach offers two technical advantages:

1. it helps you get better information via public participation for your scientific analysis, i.e. the public is at the service of experts;

2. 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.

Another 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 environments.

The 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.

The 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 made.

A 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.

A 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 terms.

Then one is left with two choices:

• Choice 1: link quantification of alternative uses and for whom;

• Choice 2: engage in a reconciliation process. 

Failure 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.

The VALSE project has demonstrated some positive results from the negotiation approach. Here are two examples.

In 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.

In 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.

CONCLUSION

In 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.

The 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 involved.

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PRACTICAL EXAMPLES  

ENVIRONMENTAL EVALUATION OF NATURAL RESOURCES
P. Espeut, Caribbean Coastal Area Management Foundation, Kingston, Jamaica  

The 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.

But 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.

An 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.

The 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.

Data 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 to 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.

Such 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.

Other 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.

This 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 you.  

MANGROVE RESOURCE VALUATION: A CASE STUDY IN PAGBILAO BAY AND ULUGAN BAY, PHILIPPINES
M. Fortes, University of the Philippines, Quezon City, Philippines 

INTRODUCTION

Human 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

Mangrove resources are under strong competing interests between uses, i.e. clearance/cutting for fishponds, building material, marina development; and conservation and biodiversity.

The motivation to go into mangrove resource valuation stems from three policy issues:

1. the need to determine the optimal use of a mangrove area;

2. the formulation of proper access and pricing schemes for various current uses that would eventually lead to the optimal pattern of use;

3. the forthcoming investment decisions on degraded mangrove forests and abandoned fishponds, specifically in the form of reforestation.

Both 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:

1. 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;

2. develop a methodology for assessing various options in managing the country’s mangrove resources.  

SPECIFIC OBJECTIVES 

• To apply various methods for valuing environmental uses of mangrove resources;

• To 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;

• To generate information that would serve as a basis for environmental accounting of mangrove resources.  

METHODOLOGY AND STUDY RESULTS  

Both 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.

Non-market 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 

Diversity 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.

Natural 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.  

CONCLUSION 

The 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:

• Government should appropriate economic rent to generate the funds for public investments;

• The social value of coastal land resources, whether for mangroves or for other land uses, is high under Philippine conditions of increasing lowland scarcity;

• The higher lease fee would encourage more efficient use of the land for aquaculture.

Non-market 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.

This 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.

There 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 resources. 

SUMMARY OF DISCUSSION

Several 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.

It 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.

Regarding 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 to kill”.

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.

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