POLICY APPLICATIONS OF ENVIRONMENTAL VALUATION By Willard Phillips Workshop on Economic Valuation of Coral Reefs March 21st, 2006 ORGANIZATION What Is Policy Why Is Policy Necessary Policy and Environmental Resources Environmental Services The Need for Resource Values Some Applications Conclusion 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 BergsonSamuelson Social Welfare Function Note that Legislators make policies, while Technicians advise on policies 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 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) 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) 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 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 Using Environmental Values Some Considerations Need to distinguish between Use Values and NonUse 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 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 suboptimal To gauge changes in natural resource stock over time To inform the design of sustainable environmental policies To provide a better framework for compensation and penalties in the use of environmental resources Applications: Pigeon 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 Applications: Buccoo 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 Applications: Tobago Forest Reserve Policy Question: Should it be opened for development – hotels, condominiums? (HyattRegency, Sandals) Who should be allowed access? (Only rich, poor, all) Since this area is Tobago’s main watershed, the Value of Eco-system Services very important for policy decisions Applications: Tobago 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? 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 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 wellbeing to society as a whole. Photo Credits http://www.simplytobago.co.uk/ http://www.mytobago.info/diving06.php http://www.guardian.co.tt/archives/ Buccoo Reef Trust Thank You!