This document discusses approaches for setting environmental priorities and management. It explains that in situations with limited information, qualitative ranking is necessary. Economic methods like cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA) are most accurate but require valuations that are difficult. The document provides examples of applying multi-criteria analysis and expert judgment to prioritization in Nigeria. It also outlines challenges with economic valuation and benefit-cost analysis, like valuing human life and accounting for future generations.
The document discusses co-benefits of pro-climate transport policies and projects in Asia. It defines co-benefits as additional benefits beyond greenhouse gas reductions, such as reduced air pollution and associated health benefits. The document proposes a co-benefits model for the transport sector based on sustainable development. This model would integrate climate change mitigation with development goals by mapping existing institutions and policies and identifying opportunities to maximize co-benefits of transport projects and policies.
The document discusses best practices for identifying co-benefits of climate policies to improve policymaker decision making. It outlines prerequisites for establishing best practices, including measurement tools and defining characteristics. Best practices should be knowledge-based, technology-based, relevant, replicable, and sustainable. Policy approaches that promote best practices include strategic policies, integrated environment strategies programs, and definitions from organizations like the Institute for Global Environmental Strategies. Further research can improve alignment between disciplines, development goals and mitigation strategies, and policy inputs and outcomes for co-benefits.
Important conceptual concerns, economic foundations of environmental valuation, scarcity, useful approaches for different environmental problems, and cautions.
John Dixon
Methods used to place values when markets are weak or missing: non-use values, contingent valuation, hedonic pricing, issues and limitations.
Morteza Rahmatian
This document discusses various water valuation methods that can be used to support economic instruments for integrated water resource management. It outlines cost-benefit analysis and how valuation methods can measure the benefits and costs of water to inform pricing policies. Demand functions are estimated using data on water use and prices, while contingent valuation and hedonic pricing are also employed. Valuation of water as an intermediate good for agriculture and industry involves residual imputation and alternative cost approaches. The document considers the usefulness and feasibility of different valuation methods for policymaking.
Environmental valuation techniques a reviewDocumentStory
This document discusses various techniques for valuing environmental assets and services that are not traded in markets. It begins by defining environmental valuation and explaining concepts like total economic value and willingness to pay. It then describes several techniques in detail: hedonic pricing, travel cost method, contingent valuation method, production factor method, and averting behavior method. As an example, it summarizes a case study valuing the non-use benefits of maintaining a wetland in Greece using contingent valuation surveys.
Presented by Lini Wollenberg, CCAFS Theme Leader, at CG Contact Point Meeting in Bonn, 9 June 2011.
Homepage: www.ccafs.cgiar.org
Theme 3 page: http://ccafs.cgiar.org/our-work/research-themes/pro-poor-mitigation
The document discusses co-benefits of pro-climate transport policies and projects in Asia. It defines co-benefits as additional benefits beyond greenhouse gas reductions, such as reduced air pollution and associated health benefits. The document proposes a co-benefits model for the transport sector based on sustainable development. This model would integrate climate change mitigation with development goals by mapping existing institutions and policies and identifying opportunities to maximize co-benefits of transport projects and policies.
The document discusses best practices for identifying co-benefits of climate policies to improve policymaker decision making. It outlines prerequisites for establishing best practices, including measurement tools and defining characteristics. Best practices should be knowledge-based, technology-based, relevant, replicable, and sustainable. Policy approaches that promote best practices include strategic policies, integrated environment strategies programs, and definitions from organizations like the Institute for Global Environmental Strategies. Further research can improve alignment between disciplines, development goals and mitigation strategies, and policy inputs and outcomes for co-benefits.
Important conceptual concerns, economic foundations of environmental valuation, scarcity, useful approaches for different environmental problems, and cautions.
John Dixon
Methods used to place values when markets are weak or missing: non-use values, contingent valuation, hedonic pricing, issues and limitations.
Morteza Rahmatian
This document discusses various water valuation methods that can be used to support economic instruments for integrated water resource management. It outlines cost-benefit analysis and how valuation methods can measure the benefits and costs of water to inform pricing policies. Demand functions are estimated using data on water use and prices, while contingent valuation and hedonic pricing are also employed. Valuation of water as an intermediate good for agriculture and industry involves residual imputation and alternative cost approaches. The document considers the usefulness and feasibility of different valuation methods for policymaking.
Environmental valuation techniques a reviewDocumentStory
This document discusses various techniques for valuing environmental assets and services that are not traded in markets. It begins by defining environmental valuation and explaining concepts like total economic value and willingness to pay. It then describes several techniques in detail: hedonic pricing, travel cost method, contingent valuation method, production factor method, and averting behavior method. As an example, it summarizes a case study valuing the non-use benefits of maintaining a wetland in Greece using contingent valuation surveys.
Presented by Lini Wollenberg, CCAFS Theme Leader, at CG Contact Point Meeting in Bonn, 9 June 2011.
Homepage: www.ccafs.cgiar.org
Theme 3 page: http://ccafs.cgiar.org/our-work/research-themes/pro-poor-mitigation
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This document discusses environmental cost management and accounting. It covers four key learning objectives: 1) the importance of measuring environmental costs, 2) how environmental costs are assigned to products and processes, 3) the life-cycle cost assessment model, and 4) comparing activity-based and strategic-based environmental control. Environmental costs are significant and tracking them provides information on profitability and cost categories. Costs can be assigned to products using activity-based or functional-based costing. The life-cycle assessment model identifies environmental impacts at each stage of a product's life. Graphs and charts are effective ways to examine environmental activities and their effects over time.
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The document discusses global climate change and efforts to reduce greenhouse gas emissions. It provides an overview of the science behind climate change and impacts. It also describes several EPA programs designed to reduce emissions from various sectors like energy, transportation, industry, and buildings. These include partnerships with states, local governments, and businesses to cut emissions through energy efficiency, renewable energy, and other sustainable practices.
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The document provides an overview of triple bottom line reporting, including its history, definitions, frameworks, and key aspects. It discusses who issues these reports and why, focusing on sustainability accounting for environmental, social, and economic impacts. The Global Reporting Initiative framework and B-Sustainable bottom-up approach are presented as examples. Key areas covered include social, economic, and environmental performance indicators across sectors.
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Setting Priorities for Improved Environmental Management
1. GEF
Session 3
Setting Priorities for Improved
Environmental Management
John A. Dixon (johnkailua@aol.com)
The World Bank Institute
Morteza Rahmatian (mrahmatian@fullerton.edu)
California State University, Fullerton
Ashgabad, November, 2005
2. Caspian EVE 2005/UNDP and WBI Jo
GEF
Questions
• What criteria and approaches can be used in
ranking environmental problems?
• What are the advantages and limitations of
economic methods for defining priorities?
(e.g. BCA, CEA)
• What are the principles of and key lessons in
environmental priority-setting?
3. Caspian EVE 2005/UNDP and WBI Jo
GEF
Priority Setting with limited
information
• In a “first best” world all costs and benefits
can be valued and an economic efficiency
criterion used to rank actions...
• In a “second best” world all benefits cannot
be valued and a cost-effectiveness criterion
may be necessary…...
• In a “third best” situation with little information,
time or resources, qualitative ranking
approaches are the best recourse
4. Caspian EVE 2005/UNDP and WBI Jo
GEF
Priority setting and available information –a
simple example.
Given this information, what is the priority??
Impacts on
growth
Air quality medium
Water
quality
high
Waste
management
medium
Congestion high
Noise low
5. Caspian EVE 2005/UNDP and WBI Jo
GEF
Priority setting and available information –if we
add information on distribution of impacts, what is the
priority now??
PROBLEMS:
•How to compare a waste
management project with a
congestion reduction one?
•Weighting of the different
criteria depends on political
considerations
•It is possible to use experts’
opinion (Delphi technique)
•The focus on weights to
different cualitative criteria is
known as “Multi-criteria analysis”
Impacts on
growth
Distribution
al impacts
Air quality medium high
Water
quality
high high
Waste
management
medium high
Congestion high medium
Noise low high
6. Caspian EVE 2005/UNDP and WBI Jo
GEF
Priority setting and available information – with
added information on health impacts, do priorities
change now??
PROBLEMS:
•It is necessary to define the
spacial and time limits of the
analysis: financial analysis vs.
economic analysis
•Pollution can have different
impacts:
-Productivity
-Health
-Recreation
-Ecology
Impacts on
growth
Distribution
al impacts
Health
effects
Air quality medium high high
Water
quality
high high high
Waste
management
medium high medium
Congestion high medium low
Noise low high low
7. Caspian EVE 2005/UNDP and WBI Jo
GEF
An Example of Use of Expert Judgment in
Nigeria—what are the priority problems??
Problem Economic Growth Distributional
Equity
Resource Integrity
Soil Degradation High High High
Water
contamination
High High High
Deforestation High High High
Gully erosion Moderate Moderate Moderate
Fisheries loss Moderate Moderate High
Coastal erosion Moderate Moderate Moderate
Wildlife &
Biodiversity loss
Low Low High
Air pollution Low High Moderate
Water Hyacinth Moderate Low Low
8. Caspian EVE 2005/UNDP and WBI Jo
GEF
Economic methods for defining priority actions:
Cost-effectiveness analysis (CEA)
• Identifies the cheapest means of attaining a
given environmental objective, e.g. an
emissions reduction target.
• A powerful “second-best’ tool when data on
benefits are not available.
• Can only prioritize measures that mitigate the
same type of environmental impact, i.e. have
the same end-point
9. Caspian EVE 2005/UNDP and WBI Jo
GEF
Priority setting and available information – with
management cost information – what is the
priority now?
Impacts on
growth
Distributional
impacts
Health
effects
Management
costs
Air quality medium high high 1000
Water
quality
high high high 800
Waste
management
medium high medium 900
Congestion high medium low 1500
Noise low high low 1200
10. Caspian EVE 2005/UNDP and WBI Jo
GEF
Cost-effectiveness in controlling air
pollution in Mexico City
Interesting features
• Identifies measures with negative costs
(benefits) illustrating “easy-win” actions with
small budget implications.
• Assumes that the marginal benefits of
mitigating air pollutants are constant.
• Analyzing different air pollutants requires a
weighting of toxicity impacts on human health
(the end-point: combination of multiple criteria
and CEA approaches).
11. Caspian EVE 2005/UNDP and WBI Jo
GEF
Cost effectiveness in controlling Mexico City air pollution
1.2
-400
100
600
1,100
1,600
2,100
2,600
Retrofitting (natural gas and LPG)
Emission
standards
Fuel
improvements
Inspection of
passenger cars
Taxis
(replacement)
Passenger cars
Gasoline
trucks
Minibuses
Strengthened
inspection
Target
reduction
Cumulative emission reductions
(millions of weighted tons)
Inspection of high
use vehiclesa
Marginal cost of emission reduction
(dollars per ton)
Technical controls only
Controls, matched with gasoline tax
Welfare cost when tax is excluded
Note: Calculations are based on -0.8 elasticity of demand for gasoline.
a. Including taxis, light-duty trucks, and minibuses.
Source: Eskeland 1994b.
0
12. Caspian EVE 2005/UNDP and WBI Jo
GEF
The preferred form of analysis:
Benefit Cost Analysis (BCA)
• Maximizes the present discounted stream of all future
benefits and costs of the action.
• Economic efficiency criteria include:
– Net present value (NPV)
– Economic rate of return (ERR)
– Benefit-cost ratio (B/CR)
• Information requirements for a “social” or “full” BCA
are large: data on all marginal benefits and marginal
costs
• constraints include poor data, but also poor
knowledge and acceptability of non-market valuation
methods among decision-makers.
13. Caspian EVE 2005/UNDP and WBI Jo
GEF
Evaluation Criteria: all three measures use the
same inputs (benefits, costs, time, discount
rate)
• Net Present Value (NPV):
∑∑ == +
−
+
=
n
t
t
t
n
t
t
t
r
C
r
B
NPV
11 )1()1(
14. Caspian EVE 2005/UNDP and WBI Jo
GEF
ERR/ EIRR
Economic Rate of Return (or Internal Rate of Return):
r*
is the discount rate that equates the present value of
the benefits from the project to the present value of
the costs of the project. IRR = r*
∑∑ == +
=
+
n
t
t
t
n
t
t
t
r
C
r
B
1
*
1
*
)1()1(
15. Caspian EVE 2005/UNDP and WBI Jo
GEF
Benefit/ Cost Ratio (B/CR): present value of
benefits divided by present value of costs
∑
∑
=
=
+
=
+
=
n
t
t
t
n
t
t
t
r
C
C
r
B
B
1
1
)1(
)1(
16. GEF
Measurement and Analysis of Benefits and
Costs
• “Benefits” refer to the benefits associated
with additional environmental or natural
resource preservation, conservation, or
restoration.
• Likewise “costs” refer to the costs of
additional environmental or natural resource
preservation, conservation, or restoration.
17. Caspian EVE 2005/UNDP and WBI Jo
GEF
Measurement and Analysis of Benefits and
Costs (cont’d)
• Costs are usually relatively easy to
estimate in dollar terms. Examples:
– The additional cost of producing diesel
engines that comply with more stringent
particulate matter regulations.
– The additional costs and foregone
revenues associated with certified
sustainable timber harvest methods.
– The reduced commercial fishing revenues
due to more stringent fishing regulations
18. Caspian EVE 2005/UNDP and WBI Jo
GEF
Measurement and Analysis of Benefits and
Costs (cont’d)
• Benefits are more difficult to estimate in
dollar terms. Examples include:
– The improvements in human health
associated with more stringent particulate
matter regulations.
– The watershed benefits associated with
certified sustainable timber harvest
methods.
– The ecological and future gains to stocks
associated with more stringent fishing
regulations
19. Caspian EVE 2005/UNDP and WBI Jo
GEF
Measurement and Analysis of Benefits and
Costs (cont’d)
• Benefit/cost analysis usually uses
money as a measure of utility, and thus
monetizing benefits and costs is an
important aspect of such an analysis.
20. Caspian EVE 2005/UNDP and WBI Jo
GEF
Limitations of benefit/cost analysis:
Value of Human Lives: Some of the benefits of environmental
improvements include the reduced loss of human life. What are
the policy implications of placing an infinite value on a life? Of
measuring the value of a life based on earnings capacity?
Future vs. Current Generations: What discount rate is appropriate
when bringing future impacts into present discounted value? Will
future generations value things the same way we do? If not, then
how can we bring their values and preferences into policy debates
today that will affect them?
21. Caspian EVE 2005/UNDP and WBI Jo
GEF
Priority setting and available information – when
both cost and benefit information are available --the full
Benefit Cost Analysis
Impacts on
growth
Distribution
al impacts
Health
effects
Management
costs
Benefits Net Benefits
Air quality medium high high 1000 1300 300
Water
quality
high high high 800 900 100
Waste
management
medium high medium 900 1150 250
Congestion high medium low 1500 1300 (200)
Noise low high low 1200 1100 (100)
Benefit Cost Analysis
22. Caspian EVE 2005/UNDP and WBI Jo
GEF
Example: Benefit Cost Analysis of air-pollution
control in Santiago, Chile
Annualized benefits and costs of air pollution control strategy in
Santiago, Chile
(US$ millions)
Program
component Benefits Costs
Net
Benefits
Fixed sources
Gasoline vehicles
Buses
Trucks
Control strategy
27
33
37
8
105
11
14
30
4
59
16
19
7
>4
46
Source: WB, 1994
23. Caspian EVE 2005/UNDP and WBI Jo
GEF
Determining economic values to include in a
BCA: Economic Valuation Methods (again!)
• Changes in Production
– Crops, fisheries, water
– Health
– Opportunity cost
• Hedonic Approaches
– Property value
– Land values
– Wage differential
• Survey Techniques
– CVM (Contingent
Valuation Method)
• Surrogate Markets
– Travel Cost
24. Caspian EVE 2005/UNDP and WBI Jo
GEF
Selecting the appropriate valuation
technique (again)Environmental Impact
Measurable change
in production
Change in environmental
quality
Yes
Nondistorted market
prices available?
Use change-
in-
productivity
approach
Use surrogate
market
approaches,
apply shadow
prices to
changes in
production
Yes No
Habitat
Opportunity-
cost approach
Replacement
cost approach
Land value
approaches
Contingent
Valuation
Air and water
quality
No
Cost-
effectiveness
of prevention
Preventive
expenditure
Replacement/
relocation
costs
Health effects
Sickness Death
Medical
costs
Loss of
earnings
Human
capital
CEA of
prevention
Recreation
Contingent
valuation
Travel cost
Aesthetic,
Biodiversity,
Cultural,
Historical
assets
Contingen
Valuation
Contingent
Valuation
Hedonic
wage
approach
Contingent
Valuation
25. Caspian EVE 2005/UNDP and WBI Jo
GEF
Limitations of Economic
Policy Analysis
• Incremental impacts of activities
• Uncertainty (wrt the future)
• Irreversible impacts
• Preferences of future generations
• Distributional effects across social
sectors