Who pays for the greenbacks?

  • 30/04/1994

Who pays for the greenbacks? OUR attitude to the environment has been like the proverbial free lunch: no immediate costs, and free dessert in the bargain. The punishment is that someone must pay for the degradation, even though it may be diluted over a protracted period of time. The environment was perceived as a free commodity; in retrospect, the world has already paid for the ride: at the least, poor health, loss of tourist sites, flash floods, which are among the many such costs being uncovered.

Unfortunately, a balance sheet of environmental assets and products doesn't yet exist, although it is possible to arrive at plausible estimates of the costs of degradation. For instance, contractors out to make a killing chopping trees on the Garhwal hills are hardly concerned about the flash floods the massacre might cause; punishment, however, accrues to the local residents, who pay a price every monsoon through the loss of earnings and belongings.

How can such a situation be corrected? Public economics has a useful concept -- "you gets what you pays for" -- to value virtual uncodifiables like the quality of the environment. The truism is that once people suffer the consequences of environmental erosion, they pay to keep it intact.

The book under review draws together some pioneering studies on ways to incorporate slippery environmental costs and benefits for project evaluation in developing countries. The methodology is not really specific to any particular country or context. About the only conceivable difference between developing countries and developed countries is that the amount to be paid for environmental repair will differ according to the levels of affluence.

But this is only a part of the total, actual value of the environment. Air pollution, for example, has a direct, quantifiable economic impact -- expenditure on health, which will vary from country to country.

In general, the public's "willingness to pay" can be subdivided into different types of cost. The more tangible or direct-use values are in terms of consumption -- more food produced by preventing soil erosion; the indirect-use values are in terms like the reduction of environmental damage by flood control. Less tangible and more difficult to tot up are matters like the future increase in tourist traffic due to the conservation of habitat.

There are also inter-generational gains, or "bequest values", such as the assurance in some societies that progeny would be bequeathed an environmental asset, come what may. On the same lines, there is a virtually unquantifiable "existence value" -- the satisfaction from knowing that a certain endangered species is going to survive.

What is daunting is the formulation of methods by which these abstract valuations can be reflected in the marketplace.

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