An Alternative Approach to Achieving Goals in Biodiversity
Petr Sauer
University of Economics, Prague
The protection and restoration of biodiversity (of species, ecosystems or landscapes) is an important goal of present environmental policies at different levels. When discussing conditions for sustaining or restoring biodiversity, we have in mind a group of environmental indicators and the effects of environmental quality on biodiversity such as: air pollution and specific pollutants (causing the disappearance of species that are sensitive to these factors), water pollution (causing the gradual reduction of animals and plants in water streams, lakes and seas), changes in soil and subsoil (increasing erosion and loss of habitat), and exploitation of natural resources (timber production, clear-cutting, liquidation of rain forests, over-fishing, etc).
Based on an understanding of the long term harmful impacts of biodiversity reduction, conservation goals can be established through political decisions. Arguments supporting the importance of biodiversity can be based both on anthropocentric and eco-centric positions, but a precautionarity seems to be an important principle to be applied. Attempts at cost-benefit analyses appear to quantify the economic costs and benefits linked with achieving the goals of biodiversity protection and restoration.
Beside the difficulties of such economic calculations, certain concerns regarding the political economy and equity of policies supporting biodiversity should be mentioned:
- benefits from the protection or restoration of biodiversity are often held by different economic subjects from those who bear the costs;
- benefits from biodiversity protection can be enjoyed by subjects in a different place then the area where the costs are incurred (territorial dimension);
- a portion of the benefits derived from present day expenditures will be held by future generations and/or future generations will bear the damage costs in the case where present generations do not invest in biodiversity protection (time dimension).
An alternative approach to sustaining biodiversity can be discussed. The solution is designed for situations with the following conditions:
- causes of the biodiversity degradation are known;
- subjects that cause this degradation are known;
- solutions (projects) for achieving the goals in biodiversity exist;
- various stakeholders (resource users, economists and politicians, ecologists, biologists, risk assessment experts, NGOs etc.) are willing to collaborate to solve the problem;
- marginal pollution/impact control costs of the subjects are different and it is not necessary to reduce the pollution or other negative impact on the environment to zero.
In such a case, using economic tools leads to more efficient solutions than administrative decisions. This relatively new economic solution to the problem of reduction of environmental degradation is being developed at the Department of Environmental Economics at the University of Economics Prague (VSE Praha). The suggested approach is based on multiple-rounds of negotiations (bargaining) between an environmental protection authority and polluters in a given region. During successive rounds of negotiations, the authority applies and adjusts, step-by-step, the rates of economic tools of environmental policy. A set of agreements between the authority and the polluters is the result of these negotiations. Some external financial sources can be also used in the process.
The authority:
- has some information available about contributions of individual polluters to the pollution in the region;
- is unfamiliar with the full range of microeconomic parameters of pollution reduction solutions (there is an asymmetry in the information between the authority and polluters);
- uses traditional economic tools in the process of negotiation (pollution charge payments on the one side and contributions from an environmental protection fund on the other side);
- maximises various environmental effects per unit of the contribution that are offered in the process of negotiation (based on a cost-effectiveness analyses of solutions suggested by polluters; relatively sophisticated approaches can be used for this purpose; NGOs can take part in the decision making);
- can use three methods to achieve environmental goals: first, charging for the pollution; second, setting priorities for the financial support from an environmental fund; and third, the final control of the concluded agreements;
- can use various cost efficient strategies to support policies: the first strategy leads to a uniform contribution from the fund per one unit of pollution reduction; the second strategy tries to reflect different integrated environmental investments (net control costs) of individual polluters (special "market segmentation" is done in the process of negotiation in the second case).
The polluters:
- contribute to the pollution in the region;
- have a menu of technical solutions available for reducing their pollution and are able to offer some positive environmental initiatives in the public interest;
- maximise their benefits (like profit maximisation);
- keep their economic information confidential (protection of private economic data of the polluters seems to be one of important privileges of the approach);
- apply their strategies when requesting (financial) contributions from the authority in the process of negotiation.
Several laboratory economic experiments have been successfully completed. Environmental and economic data from Czech practice were used in two of them. An air pollution reduction case was presented at the Congress of Environmental and Resource Economics in Venice (June 1998). A water pollution reduction case was presented at the World Bank Workshop on the Political Economy of Water Pricing Implementation in Washington, DC (November 1998).
It is our belief that such a model could contribute to the development of voluntary approaches in environmental policy including solving the biodiversity problem. It could lead to the successful conclusion of efficient, negotiated environmental agreements in this field.
Peter Sauer graduated from the Economic University in Prague in 1978. Since 1993 he has been an Associate Professor and Head of the Department of Environmental Economics. He is active as an advisor to the Ministry of Environment of the Czech Republic and a member of the London-based NGO "Forum for the Future" and the Advisory Board for Sustainable Economic Development.
Contact address:
Doc.Ing. Petr Sauer, CSc.
Head of Department of Environmental Economics
University of Economics Prague
W. Churchilla 4, 130 67 Prague 3
Tel: --4202-24095509, Fax: --4202-24095529
E-mail: sauer@vse.cz
REC * PROGRAMS * SOFIA INITIATIVES * ECONOMIC INSTRUMENTS * GREEN BUDGET
