Environment and Development: An Economic Approach

Transcription

1 Environment and Development: An Economic Approach

2 Economy & Environment VOLUME 6 Scientific Advisory Board Scott Barrett, London Business School, London, United Kingdom Klaus Conrad, University of Mannheim, Mannheim, Germany David James, Ecoservices Pty. Ltd., Whale Beach, New South Wales, Australia Bengt J. Kristrom, University ofumea, Sweden Raymond Prince, Congressional Budget Office, U.S. Congress, Washington DC, U.S.A. Domenico Siniscalco, EN I-Enrico Mattei, Milano, Italy / University of Torino, Italy The titles published in this series are listed at the end of this volume.

3 Environment and Development: An Economic Approach by Jan Boja The World Bank. Washington D.C.. U.S.A. Karl-Garan Maler The Beijer Institute. Stockholm School oj Economics. Stockholm. Sweden and Lena Unemo Swedish International Development Authority (SIDA). Stockholm. Sweden Springer-Science+Business Media, B.V.

4 Library of Congress Cataloging-in-Publication Data BOjo,...lan. Environment and development : an economic approach / by...lan BOjO, Karl-Goran Maler, Lena Unemo. p. cm. -- (Economy & environment ; 6) Includes bibliographical references and index. ISBN Economic development--environmental aspects. 1. Maler, Karl -Goran. II. Unemo, Lena. III. Title. IV. Series. HD75.6.B '2--dc ISBN DOI / ISBN (ebook) Printed on acid-free paper AII Rights Reserved 1992 Springer Science+Business Media Dordrecht Origina1ly published by Kluwer Academic Publishers in 1992 Softcover reprint ofthe hardcover Ist edition 1992 No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the copyright owner.

5 Foreword This book is the second edition of a text based on a report commissioned by the Swedish International Development Authority (SID A). The financial grant from SIDA which made the work possible is hereby gratefully acknowledged. There are already many books on the market about environmental economics, some of them very good. What is special about this one? We do not claim to have obtained new results, but we have our own way of presenting the subject matter. In particular, we are of the opinion that policy failures are often overlooked as an obstacle to efficient environmental management. Although the main emphasis in this book is on project level analysis, it is essential that such analyses be linked to an understanding of the (dis)incentives for environmental improvements that general economic and particular environmental policies provide. Another essential feature of the book, although this is not unique, is the links provided between theory and empirical illustrations. We hope that this will illustrate to our readers the practical usefulness, but also the difficulties, of applying economics to environmental problems. In particular we hope that the text can be of interest to decision-makers, development programme personnel, teachers and the general public interested in how economics can contribute to better environmental decision-making. In principle, this book can be read by anyone interested in the subject matter, without any formal education in economics. However, some background in microeconomic theory makes the reading easier. The second edition of the book has been extended to include a chapter on management of environmental resources and environmental policy instruments. The chapter also includes a discussion on common property resources, a subject which was only briefly dealt with in the first edition of the book. Two case studies concerning policy failures have been added to the last chapter of the book. Finally, several corrections of misprintings found in the first edition have been made. Undoubtedly some misprintings remain, and some new may have appeared. They are the responsibility of the authors. The authors share a collective responsibility for the book. The group has been chaired by Maler. The main responsibility for drafting specific chapters has been divided as follows: Boja; chapters 1,2,3 and 5, Maler; chapters 4 and 6, and Unemo; chapter 7. Unemo has also compiled a substantial portion of the literature surveyed in this book. The authors have basically typed their own chapters, but we want to thank Kerstin Niklasson and Britt Rosen for editing assistance. We also thank Lucy Loerzer, Tamara Carlin-SOderlind and Bill Harris from the PCS Unit at the Stockholm School of

6 vi FOREWORD Economics for improving our English. Ossian Ekdahl and Daniel Barr were helpful in dealing with malfunctioning computers. Stockholm School of Economics May 1992 Jan Boj6 Karl-G6ran Miller Lena Unemo

7 ENVIRONMENr AND DEVELOPMENr - AN ECONOMIC APPROACH Table of Contents I. Summary 1 2. Introduction Background Sustainable Development Disposition and Delimitations Distortions in the Economic System and the Need for Economic Analysis The "Bench-mark" Economy Market Failures Externalities Risk Markets Future Markets Income Distribution Policy Failures International Trade Policy Property Rights Definition and Enforcement Population Policy Price Policy Tax Policy Political Elites and Bureaucratic Sub-optimization Public Investment Environmental Information Summary General Equilibrium Analysis and National Accounting General Equilibrium Analysis National Income Accounting and Environmental Resources Aggregate Welfare Measures Natural Resource Accounting and Computable General Equilibrium Models 53

8 viii CONTENTS 5. Economic Analysis of Environmental Consequences Major Steps in CBA Planning Perspectives and Evaluation Criteria Income Distribution Discounting Risk and Uncertainty Valuation Approaches Valuation Using Conventional Markets Valuation of Changes in Production Replacement Cost Technique Preventive Expenditure Technique Valuation of Human Capital Valuation Using Implicit Markets The Travel-Cost Approach Land and Property Value Approach Valuation Using Artificial Markets Complementary and Other Methods Criticism agains CBA Management of Environmental Resources and Environmental Policy Introduction Common Property Resources Air and Water Pollution Introduction Criteria for the Choice of Policy Instruments An Evaluation of Policy Instruments Cost Efficiency Dynamic Efficiency Monitoring and Other Practical Aspects International Economic Problems Introduction Upstream-Downstream Resources International Commons The Acid Rain Game A Long Run Model The Design of Agreements 119

9 CONTENTS The Montreal Protocol Climate Change and Limiting the Emissions of Carbondioxide Case Studies Agricultural Projects Soil and Water Conservation - Farm Improvement and Soil Conservation in Lesotho Soil and Water Conservation - Upland Agricultural Project in Korea Range Management - The Eppalock Catchment in Australia Agroforestry - An Afforestation Programme in Nigeria Forestry Project - Nepal Hill Forest Development Project Integrated Environmental Project - Environmental Protection in the Philippines Recreation and Forestry - Preservation of Mountain Forests - The VAIA Valley in Sweden Air Pollution Air Pollution - The South Coast Air Basin Experiment in California Valuation of Morbidity Reduction due to Pollution Abatement: Direct vs. Indirect Measurement Air Pollution and Corrosion Damage Water Pollution - Water Quality Management in Thailand Environmental Degradation and Policy Failures Deforestation in the Amazon - Regional Development Policies Deforestation in the Amazon - Fiscal and Legal Provisions Upper Watershed Degradation in Java Tropical Deforestation in Eastern Ecuador 192 Bibliography 194 Index 209 ix