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ENHANCING THE USE OF ECONOMIC TOOLS IN MANAGING NATURAL RESOURCES & THE ENVIRONMENT

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ENHANCING THE USE OF ECONOMIC TOOLS IN MANAGING NATURAL RESOURCES & THE ENVIRONMENT By Dr. El-Sayeda I. Moustafa Professor of Economics & Chairperson of the Economic ... – PowerPoint PPT presentation

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Title: ENHANCING THE USE OF ECONOMIC TOOLS IN MANAGING NATURAL RESOURCES & THE ENVIRONMENT


1
ENHANCING THE USE OF ECONOMIC TOOLS IN MANAGING
NATURAL RESOURCES THE ENVIRONMENT
  • By
  • Dr. El-Sayeda I. Moustafa
  • Professor of Economics
  • Chairperson of the Economic department
  • University of Alexandria - Egypt

2
  • Introduction
  • Natural resources (NR) and the environment are
    part of any economys assets and are considered a
    very essential factor of production.
  • (NR) the environment are vital productive
    assets, just like physical capital (machines,
    buildings, roads, computers, etc.) and human
    resources.
  • Efficient Management of the (NR) wealth presents
    a real challenge along with other sources of
    challenge- for any sustainable development
    strategy.

  • 2

3
  • Questions such as
  • How much of the (NR) stock to exploit? (The rate
    of use)
  • For what use? (Resource allocation among users)
  • When? (Present uses vs. future uses)
  • How? (Choice of exploitation technology)
  • At what value? (market prices, other charges,
    non-market valuation,.. etc).
  • occupy the core of the field of the Economics
    of the Natural Resources the Environment

  • 3

4
  • The economics of (NR) the environment has
    became a very busy and growing field of studying
    on the international arena during the past few
    decades.
  • The interactions of the NR base, the
    environment and the production in any
    economic system is currently treated as a
    fundamental component of any effective plan for
    sustainable development.
  • In Egypt, unfortunately, many aspects of such
    studies are still absent, lacking, or inadequate.
  • 4

5
  • The second half of the 20th century has witnessed
    rising concerns regarding how to achieve
    efficient use of the natural and environmental
    resources.
  • Meanwhile, there was a wide recognition that the
    existing practice in the market place may
    inadequately conserves these resources. Many of
    the resources are subject to either overuse and
    /or misuse by all groups of beneficiaries
    (consumers, producers and governments).
  • 5

6
  • Efficient use of a renewable natural resource
    implies a pattern of use that
  • maintains the flow of the services (amenities,
    reefs, ) and products (agricultural products,
    fish, timber, ) generated by the resource, and
  • Maximize the value of its benefits.
  • Whereas, the efficient use of a depletable
    natural resource involves the idea of
    distributing its finite stock over many periods
    of time to benefit the current and future
    generations , as well.
  • 6

7
  • An efficient use of a resource is achieved when
    it has an economic value equivalent to its
    marginal productivity (or marginal benefit).
  • This simply implies that we must have (or create)
    and employ the real economic values of the (NR)
    and the environment when it comes to design their
    allocation plans and conservation policies. These
    real values must become an integrated part of our
    economic system.
  • 7

8
  • The Significant Absent Role of
  • Market Prices
  • Many consider the market price of a (NR) as the
    best measure for its true economic value.
  • WHY? Because
  • It reflects the value of the marginal
    benefits to the USER of the resource.
  • It accounts for the marginal cost of
    provision to the SUPPLIER of the resource.
  • 8

9
Unfortunately, this is not always the case with
many types of (NR) and the environment.
WHY?!9
10
  • One major feature of the use of many natural
    resources is that its market values if exists-
    do not reflect or capture all the benefits and or
    the costs of using the resource. Hence, the
    existing market price will be distorted and will
    tend to give wrong signals to producers and
    consumers by over-use or over-production of the
    resource .
  • This is a case of a failure of market mechanism
    in achieving efficiency of resources allocation
    and use.
  • 10

11
  • Market failure may occur due to any or all of the
    following reasons
  • The lack of / or weak property rights.
  • The public goods and /or the common property
    characteristics.
  • The existence of externalities, and
  • The type of the market structure (being
    monopolistic, for instance).
  • 11

12
  • Correcting for market failure could be done by
  • The use of economic incentives,
  • The use of command control mechanisms (it is
    not efficient), or
  • The use of voluntary agreements, such as
    Hedonic prices approach, and / or
  • Correction of the property rights institutions.
  • 12

13
  • Correction through market solutions economic
    incentives requires to
  • Quantify the effect of the distortion and give it
    a () value. This could be accomplished by the
    use of certain tools known as Valuation
    techniques.
  • Internalize that estimated value in the price of
    the natural resource through the use of various
    economic tools such as

  • 13

14
  • Taxes (such as carbon taxes).
  • Selling Licenses.
  • Trading permits (such as pollution permits).
  • Transferable quota system (to prevent the free
    access problem, in fishing, for instance).
  • Special charges (such as emission fees).
  • Subsidies (to improve technology of production or
    internalize a positive externality) .
  • 14

15
  • Each one of those economic tools has its own
    advantages and disadvantages with respect to
    aspects covering
  • Effectiveness in achieving sustainability or
    curbing environmental degradation.
  • Facility to cope with dynamic changes.
  • Being an adequate source of revenues to the
    government or as a source of finance for required
    investments.
  • Cost of its administration and enforcement.
  • Its effect on the poor and equity issues.
  • Information needed for its application.
  • 15

16
  • Evaluation of Non-Traded
  • (NR) Environmental Services
  • Some of the (NR) and the environmental goods and
    services are not handled through the market
    mechanism. If it is left out of the market place,
    it will have no market prices.
  • In such cases economist face a problem of how to
    place a monetary value on effects that are
    non-marketable (biodiversity or intrinsic values,
    for instance).
  • Such problems are solved by non-market valuation
    methods using specially designed surveys to
    reveal willingness to pay.
  • 16

17
  • Non-Market Economic Valuation
  • The objective of attaching monetary values to a
    (NR) or its services is to make them comparable
    with other goods in the economy to enable us to
    formulate plans, design policies and make
    decisions for its protection and conservation.
  • Valuation should include both
  • All Benefits associated with using or
    conserving the resource (direct, indirect, option
    and existence benefits), and
  • All types of costs incurred by the degradation
    or the depletion of the resource.
  • 17

18
  • Different valuation problems require different
    valuation techniques.
  • Non-market valuation methods can be broadly
    classified into two categories
  • Stated preference models that relies on using
    surveys to infer the value that people place on
    the (NR).
  • Contingent Valuation Method (CVM), is the
    most common model to estimate respondents
    willingness to pay (WTP) for a specific policy
    program, or how much compensation they would be
    willing to accept (WTA) for the loss of the (NR)
    use .
  • 18

19
  • Revealed preference (RP) models, such as
  • Travel Cost Method (TCM)
  • Hedonic Pricing Method (HPM)
  • Cost (or Expenditure) Methods, and
  • Benefit Transfer Methods.
  • 19

20
  • Recommendations for
  • Capacity Building
  • What to do to enhance utilizing the market
    economic instruments and the non-market
    valuation techniques to capture and / or reveal
    the real economic values of the resources?
  • 20

21
  • Increase public awareness of the (NR) and
    environmental problems through
  • educational programs in schools,
  • NGOs efforts,
  • use of the penetrating media.
  • Mobilize private financial resources for
    investment in resources conservation.
  • Design local and national policies to provide
    economic incentives for environmental protection
    and to transmit correct price signals for the use
    of natural resources.
  • 21

22
  • Stress the need for property rights.
  • Provide adequate resources for the enforcement
    and monitoring of firm legislation.
  • Encourage technological development and search
    for substitutes as well as recycling.
  • Support the idea of creating a green accounting
    system.
  • 22

23
  • Gradually introduce the use of pricing and
    charges for basic resources.
  • Push for changing the consumption pattern of
    (NR).
  • Enhance the information system and data
    availability.
  • Reduce poverty and illiteracy that triggers
  • ignorance,
  • corruption,
  • resource misuse.
  • 23

24
  • Mobilize political will towards the change.
  • Increase the youth involvement.
  • 24
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