Environmental Impact Assessment

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Environmental Impact Assessment

• 1. History
• 2.The Role of Environmental Impacts and Economic
  Analysis
• 3. Economic Measurements and Environmental
  Impacts
• 4. Techniques
• 5. Limitations

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History

• At the heart of the World Summit In Rio de Jeniro
  in 1992, the Rio Compact was the principle of
  Common but Differentiated Responsibility
• The concept recognises that the global
  ecocological crisis has to be resolved in an
  equitable way, through partnership, between
  developed and developing countries.
• The developed countries are to assist the
  developing countries through funding and transfer
  of technology.

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History (contd)

• Pacific Island Countries (PICs) had a strong
  presence at World Summit on Sustainable
  Development in 2002 in Johannesburg, South Africa
• At USP, we have a center that promotes education
  for Sustainable Development called Pacific
  Center for Environment Management and Sustainable
  Development

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Sustainable Develpment

• This represent the interface between
  nature,technology, economy and society with the
  key role to play in helping society resolve
  environmental issues. The main concern is the
  improvement of the quality of life through
  efficient and rational uses of natural resources.

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Justification

• Quality of life
• Decision making
• Implementation
• Planning

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The role of environmental impacts and economic
analysis

• Economic development is depended on the
  environment
• Environmental and natural resource degradation
  endangers long term development potential
• Challengeenvironmental impacts have to be
  identified and measured in monetary terms,
  predicting the natural resource and environmental
  impacts.

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Criteria

• Idenditification of significant impacts
• Urgency
• Irreversible change
• Nature of the effects of development
• Quantify all the important and significant
  changes
• the prediction of alternative future states of
  environment

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Economic Measurements of Environmental Impacts

• Neo classical welfare economics( Pigeou 1920 and
  Hicks 1939)
• Societal welfare is the sum of the individual
  welfare
• Individual welfare can be measured
• Individual maximize their welfare by choosing
  that combination of goods and services that
  yields the largest sum of the total utility

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Contd

• Utility and welfare can be obtained from goods
  and services even if they are provided free or at
  minimum cost
• The difference between the amount paid for a good
  and services and the total utility enjoyed is
  called cosumer surplus

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Practical applications

• Start with the most obvious, most easily valued
  environmental impacts
• Identify benefits and costs a benefit foregone
  is a cost just as cost avoided is a benefit
• the economic analysis should be done with and
  without the project framework
• All assumptions should be stated
• When market prices could not be used directly use
  surrogate market techniques

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Measurement and Valuation Technique

• Generally Applicable
• 1. Those that use the market value of directly
  related goods and services
• Changes in productivity approaches
• Loss of earnings approach
• Opportunity cost approach
• 2.Those that use the value of direct expenditures
• Cost effectiveness analysis
• Preventive expenditures

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Potentially applicable

• 1. Those that use surrogate-market values
• Property value approach
• Other land value approach
• Wage differential approach
• Travel cost approach
• Marketed goods as environmental surrogates

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Potentially applicable(contd)

• 2. Those that use the magnitude of potential
  expenditures
• Replacement costs
• Relocation costs
• Shadow-project approach

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Changes in Productivity Approach

• Direct extension of traditional benefit-cost
  analysis
• Physical changes in production are valued using
  market prices for inputs and outputs.
• Productivity effects due to the project have to
  be identified
• Productivity effects be monitored and measured in
• a with or without project context

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Opportunity cost approach

• Based on the concept that the opportunity cost of
  unpriced or unmarketed uses of resources(eg
  preserving land for national parks instead of
  cutting the trees for timber) can be estimated by
  using the foregone income from other uses of the
  same resources as proxy. As such the approach
  measures what has to be given up for the sake of
  preservation it does the benefits of land
  preserved for other(often unpriced) uses. The

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Opportunity cost approach(contd)

• The opportunity cost approach is therefore a
  measure of the cost of preservation this
  information is in turn used to evaluate the
  options available to a decision maker.
• In many cases the cost of preservation has been
  found to be low and has resulted in decisions to
  conserve or preserve

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Cost Effectiveness Analysis

• Alternative Cost to Install EmissionL
• (millions) (PPM)
• A 50 98
• B 15 135
• C 25 105
• Note
• Target No more than 100 ppm

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Surrogate Market Prices

• Possible to estimate an implicit value for an
  environmental good by means of price paid for
  another marketed goods.
• Surrogate market techniques offer approaches that
  use an observable market price to value an
  unmarketed environmental impact.

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Property Value Approach

• Consumers will reveal their attitude to a bundle
  of attributes by their willingness to pay for a
  piece of property
• Value reflect very large range of attributes,
  only some of which are physical.
• The property value approach is designed to
  control for certain variables in order to
  estimate a value for another, frequently unpriced
  environmental variable

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Limits of Economic Measurement on Environmental
Impacts

• Income Distribution
• Discount Rate
• Intergenerational Equity
• Uncertainity and Irreversibility
• Institutional Bias
• Value of Human Life
• Increamentalism
• Aesthetic Value

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Limits

• Although the approach and techniques advocated
  are well founded theoretically, there are series
  of issues which suggest limitations to the
  economic measurement of sustainability and
  environmental effects.

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Income Distribution

• Economic efficiency does not mean neutrality with
  respect to income distribution.
• Traditional economic analysis does not question
  the existing income distribution and that which
  would prevail following the implementation of an
  efficient project
• Under the assumptions of the BCA, a society will
  be economically efficient in its use of resources
  when net momentary social benefits are maximised.

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Discount Rate

• Choice of the dicount rate will have a major
  influence on the project analysis
• A high discount rate will favour projects with
  immediate net benefits over those projects which
  the benefits are not realized for a long time.
• A low discount rate will have a less restrictive
  effects on projects with long term net benefits.

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Intergenerational Equity

• Control of endowments is in the possestion of the
  present generation.
• By specifying the social discount rate, the
  present generation influence the endowments of
  the future generation.
• This is specially true in the case of
  irreversible decisions such as those that entail
  the destruction of unique natural environments.

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Uncertainty and Irreversibility

• If substantial damage costs occurring in the
  distant future were known with complete
  certainty, use of even low discount rate could
  lead to almost total disregard for such
  consequences and could favour development plans
  that generate more immediate economic
  benefits.e.g. dam,mining
• Since the natural land cannot be replaced at a
  reasonable cost, the project will diminish the
  fixed supply.

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Institutional Bias

• Existing Institutions exert great influence on
  the market opportunities available to
  individuals, and as a result the existing
  institutional structure also influence market
  prices. BCA based on market prices, therefore,
  may be biased by the current institutional
  structure.

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Value of human life

• Project that will directly save lives, or
  alternatively take lives cannot be evaluated in
  the same manner, the ethical questions involved
  transcend economic analysis.

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Incrementalism

• Denote problems which arise from making a
  decision on an individual projects basis without
  consideration of the cumulative impacts of number
  of projects.
• E.g. removal of few hectares of rainforest or
  coral reefs

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Aesthetic value

• Many development projects not only entail
  modification of natural habitat and landscapes,
  but also produce various man-made visual impacts.
• This loses in aesthetic value are difficult to
  quantify and monetize because of their dependence
  on value judgements.