The Importance of Economic Valuation for Sustainable Development in Tobago
The key problem driving the accelerating widespread destruction and degradation of the natural environment of Tobago, and the rest of the country, is that the importance of environmental conservation and sustainable development to socio-economic development is undervalued by our society.
There is no person who would not support the idea of preservation of our tropical forests, conservation of beautiful Buccoo Reef, or protection of the regal leatherback turtle. Unfortunately, society has limited resources to meet several objectives such as economic growth, poverty alleviation, and environmental conservation. These objectives compete for resources and may conflict with one another (e.g. economic growth may be seen to conflict with preservation of pristine natural areas).
It is essential that society find a way to reconcile these objectives and prioritize them to allocate the limited resources in the most efficient way. Otherwise, undervalued environmental objectives will continue to be crushed by other social or economic objectives that are mistakenly estimated to be more valuable to society. Environmental economics provide us with the analytical tools to do this kind of analysis. It is thus an important planning tool.
Environmental goods (e.g. food, timber, energy, recreation, and materials) for which there are economic markets can be most easily valued and are most tangible. However, the majority of environmental values are not in any existing economic market (e.g. the provision of water by watersheds, pollination of crops by birds and bees, filtering pollutants by wetlands, coastal protection by wetlands and seaside vegetation, and aesthetic values). There are economic valuation methods that have been designed to try to assign monetary values to these non-market values.
Direct valuation is the simplest method, which looks at changes in economic markets. For example, it looks at the change of productivity (e.g. change in agricultural output), or loss of earnings (e.g. negative impacts on human health), defensive or preventative expenditures, replacement costs (cost of replacing a damaged asset), or shadow pricing (cost of a project to provide lost environmental services).
A second method uses surrogate market values, which use market information indirectly. Changing property values due to environmental deterioration can indicate value. Wage differences can indicate changes in value ascribed to environmental conservation or degradation as higher wages would be necessary to attract workers to degraded areas. The cost of travel to natural areas such as parks can also be examined to indicate the value of these areas. Marketed goods can also be used as surrogates for non-marketed goods.
Willingness-to-pay is the final evaluation method used. This seeks to estimate what people are willing to pay to protect environmental asset. Contingent valuation looks at hypothetical behaviour by asking what people would be willing to pay for an environmental benefit or what they would demand as compensation for an environmental loss. Artificial markets are also used to look at real behaviour.
An added factor is the importance of environmental conservation for future generations. Thus the value of having the option of using environmental goods or services in the future can be estimated. The bequest values can be determined by estimating how many people would be willing to pay to leave them for future generations (e.g. natural habitat or biodiversity). Existence values are a third type of value, which can be calculated by estimating how many people would be willing to pay to know that they exist (e.g. endangered species).
To my knowledge, the use of economic valuation methods for non-market environmental goods and services in Trinidad and Tobago has been extremely limited. However, data from other tropical countries may be examined to indicate the type of values identified.
· In Brazil, carbon storage by forests has been estimated to be worth US $1,300/ha.
· In Indonesia, the value of mangroves in supporting agriculture, fishing, and cottage industries totals US $536 million.
· In the Philippines, the value of watershed protection for marine tourism is estimated at US $14-19 million. The value of watershed protection for fisheries is estimated at $6-8 million.
· In Costa Rica, the total value of their tropical forests (hydrological benefit, carbon sequestration, ecotourism, option for future pharmaceuticals, existence and option value) is estimated at US $102-213 per hectare per year. The net present value (at 8%) is calculated to be US $1,278-2,671 per hectare per year.
· The estimated cost of environmental damage in China is 8-10% of the GNP, for Ethiopia it is 6-9% of the GNP.
There remain several important issues for environmental economics to resolve. First is the discount rate issue, given that many environmental costs and benefits are long term this needs to be taken into account in calculations. Second is the issue of risk and uncertainty. The environment has unknown resilience and resistance and impacts on the environment are difficult to predict with reasonable certainty. Thirdly, environmental impacts are difficult to measure. Fourthly, valuation of the environment in monetary terms is difficult, special techniques are used but are not perfect. Finally, there may be distortions to the market, which undervalue the environment (such as taxes, subsidies, tariffs, fixed exchange rates, interest ceilings, and minimum wage rates).
Nevertheless, it is essential that the government utilise environmental economic valuation methods so that benefits of the natural environment to society can be assigned monetary values and fairly compared with other benefits. When this is done, we may well recognise the error of some of the choices that we are making which promote environmental degradation as an unavoidable cost of economic development. We may in fact find that alternative development approaches that promote environmental conservation are more valuable to society's socio-economic development. Further, we need to question what is the cost of environmental damage to our GNP. This revolution in society's understanding is becoming increasingly urgent as continued development choices, which destroy the natural environment, limit our future opportunities in Tobago. - Nicole Leotaud, Education Coordinator