POLICY APPLICATIONS OF ENVIRONMENTAL VALUATION

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POLICY APPLICATIONS OF ENVIRONMENTAL VALUATION

• By
• Willard Phillips
• Workshop on Economic Valuation of Coral Reefs
• March 21st, 2006

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ORGANIZATION

• What Is Policy
• Why Is Policy Necessary
• Policy and Environmental Resources
• Environmental Services
• The Need for Resource Values
• Some Applications
• Conclusion

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What Is Policy?

• Defined as any deliberate decision taken by the
  State which causes a transfer of welfare
  (well-being) from one group in the society to
  another (Ritson, 1987).
• Usually based on some philosophy or doctrinal
  position of the state.
• Summarized by the Bergson-Samuelson Social
  Welfare Function
• Note that Legislators make policies, while
  Technicians advise on policies

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Policy- Doctrinal Positions

• Egalitarian Seeks equality in distribution of
  wealth assumes that every one has the same
  preferences
• Benthamite/Utilitarian Argues that the greatest
  happiness of the greatest number should govern
  our judgment
• Rawlsian Seeks to guarantee some minimum level
  of wealth Basic needs approach

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Policy in Practice

• The Constitution outlines broad philosophical
  framework
• Vision 2020
• CEDP Tobago -Clean, Green, Safe and Serene
• Policy given effect through national instruments
  such as
• Annual Budget
• Public Sector Investment Plan (PSIP)
• Legislative Framework (Tax laws, Public Health)

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Why Is Policy Necessary?

• Resources are finite choices have to be made!
• Environmental Resources are rapidly becoming
  scarce
• Markets may generate efficiency but not equity
• Market Failures
• - monopolies
• - public goods
• - inadequate information
• - externalities
• Government intervention (in the form of policy)
  required
• Ultimately the role of good governance is to
  promote social welfare (well-being)
• Goal is to increase total available benefits (a
  bigger pie)

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Policy and Environmental Resources

• Environmental goods are public in nature
• Subject to congestion and over-use/abuse
• Are important inputs in the production of goods
  and services (public and private)
• Benefits and liabilities from use accrue to all
  of society
• Provide important services (often unrecognized)
• Public nature requires clear policies to protect
  environmental goods in the public interest

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Environmental Services

• An absorber of waste waste sink
• Habitat for commercially important species
  (shellfish, wildlife)
• Air and water purification and ground water
  recharge
• Flood control and coastal protection
• Source of useful resources (timber, food,
  wildlife, minerals)
• For recreation and social amenities

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Using Environmental Values Some Considerations

• Need to distinguish between Use Values and
  Non-Use Values both amount to Total Economic
  Values
• Values are not only monetary (active use) may
  also be passive use (vicarious, option,
  aesthetic)
• Persons may value resources which are remote from
  them
• Values may exist across generations
  intergenerational equity
• Environmental values may change over time as
  quantity of environmental resources declines

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The Need For Environmental Values

• To ensure that choices in resource use are
  consistent with achieving maximum benefits to
  society (e.g. sand mining, vs. beach resort)
• To correct policies which may be currently
  sub-optimal
• To gauge changes in natural resource stock over
  time
• To inform the design of sustainable
  environ-mental policies
• To provide a better framework for compensation
  and penalties in the use of environmental
  resources

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ApplicationsPigeon Point Heritage Park

• Policy Question Should there be user fees? If so
  how much?
• Possibly higher non-use than use values here
  (Vicarious or Option Values)
• Knowing the annual use value is important in
  deciding access options

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ApplicationsBuccoo Reef

• Policy Question Suppose an oil tanker runs
  aground on the reef, how much compensation should
  be charged?
• Could we afford to have a tanker run aground on
  the reef? What would be the economic losses?
• How much (..relative to Education, Health Care,
  Housing, public safety..) should be invested in
  protecting the Reef Complex?
• Use Values are more important here

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ApplicationsTobago Forest Reserve

• Policy Question Should it be opened for
  development hotels, condominiums?
  (Hyatt-Regency, Sandals)
• Who should be allowed access? (Only rich, poor,
  all)
• Since this area is Tobagos main watershed, the
  Value of Eco-system Services very important for
  policy decisions

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ApplicationsTobago Flying Fish Industry

• Policy Question How much fish should be caught
  each season?
• Should the number of fishing boats be limited?
• Should technical restrictions be imposed?

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Policy Decision Criteria

• Pareto Criterion A policy decision is good if at
  least one person is better-off, and no one is
  worse off.
• Constant Proportional Shares A Policy is good if
  all are made better off to the same extent
• Maximum Value of Social Product Policy good as
  long as total benefits gained exceed total losses

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Conclusion

• Because of the public nature of environmental
  goods, they can be degraded in the absence of
  effective management and use policies. Policy
  makers have a critical role to play in the public
  interest. Ultimately policy failures will result
  in reduced well-being to society as a whole.

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Photo Credits

• http//www.simplytobago.co.uk/
• http//www.mytobago.info/diving06.php
• http//www.guardian.co.tt/archives/
• Buccoo Reef Trust

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Thank You!