Environmental economics in action Guidelines for elas Renmin University 21 October 2004 Haakon∨ enema haakon. vennemo@econ. no ecn analysiswww.econ.no
Environmental economics in action: Guidelines for EIAs Renmin University 21 October 2004 Haakon Vennemo haakon.vennemo@econ.no
What is econ and who am i? g a think-tank in Scandinavia with 100 employees g Owned and run by employees e Economics and other social science on problems of current interest e Particularly strong in environment&energy g 1/3 of activity outside Europe o i have been in China since 1995 o Environmental cost model for china o Climate and local pollution o Air quality master plan guangzhou City, Shanxi Province o Environment&Development Economics 2001, Energy Policy 2004, Journal of Cleaner Production 2004 ecn analysiswww.econ.no
2 What is ECON and who am I? A think-tank in Scandinavia with 100 employees Owned and run by employees Economics and other social science on problems of current interest Particularly strong in environment&energy 1/3 of activity outside Europe I have been in China since 1995 Environmental cost model for China Climate and local pollution Air quality master plan Guangzhou City, Shanxi Province Environment&Development Economics 2001, Energy Policy 2004, Journal of Cleaner Production 2004…
The project background g Background I: Environmental impacts sometimes ignored in economic development g Background II: Cost-benefit evaluation of o Whole project o Mitigation options/modifications o Other changes in project design (location technology) o Benefits of environmental impacts Awareness tool o Reveal imperfections in EIA reports e Background II: Current EIA-law emphasises cost benefit calculation as part of EIA-report e But how? econ analysis www
3 The project background Background I: Environmental impacts sometimes ignored in economic development Background II: Cost-benefit evaluation of Whole project Mitigation options/modifications Other changes in project design (location, technology) Benefits of environmental impacts: Awareness tool Reveal imperfections in EIA reports Background II: Current EIA-law emphasises costbenefit calculation as part of EIA-report But how?
The project e Project to demonstrate how environmental economic tools can be integrated in EIA guidelines and practice g Obstacles and good practice g Advice/ guidelines for future EIAs e Four case-studies o Air- power plant datong, Shanxi Province o Water-wastewater treatment plant o Soil waste irrigation Shijiazhuang, Hebei Province o Land use -highway construction Chongqing ecn analysis www
4 The project Project to demonstrate how environmental economic tools can be integrated in EIAguidelines and practice Obstacles and good practice Advice/guidelines for future EIAs Four case-studies: Air – power plant Datong, Shanxi Province Water – wastewater treatment plant Soil – waste irrigation Shijiazhuang, Hebei Province Land use – highway construction Chongqing
Integration from an abstract point of view Activities /sources I Stressors Environmental media Receptors Environmental cost Unit valuation Impacts ecn analysis www
5 Integration from an abstract point of view Activities/sources Stressors Environmental media Receptors Environmental cost Unit valuation Impacts
Valuation linked to description of impacts g Impacts on production activities o Industry(water o Fishery(water) o Agriculture(water, air, soil land use) o Forestry(air, soil, land use) g Impacts on materials (air g Impacts on human health o Respiratory symptoms(air) o Cancer(water, air) o Hepatitis(water)etc ecn analysiswww.econ.no
6 Valuation linked to description of impacts Impacts on production activities Industry (water) Fishery (water) Agriculture (water, air, soil, land use) Forestry (air, soil, land use) Impacts on materials (air) Impacts on human health Respiratory symptoms (air) Cancer (water, air) Hepatitis (water) etc
What are the impacts? c Impacts on biological diversity(air, soil, land use g Impacts on ecological services(soil land use) g Impacts on human welfare(air, water, land use) o Water for fishing, swimming, recreation o Visibility of air o Changes in landscape e Political valuation o distance to target o cost of abatement in other sectors e Different valuation tailored to different impacts ecn analysiswww.econ.no
7 What are the impacts? Impacts on biological diversity (air, soil, land use) Impacts on ecological services (soil, land use) Impacts on human welfare (air, water, land use) Water for fishing, swimming, recreation Visibility of air Changes in landscape Political valuation distance to target cost of abatement in other sectors Different valuation tailored to different impacts
Valuation of market impacts and health g Impacts on production activities: Market price g Material damage: Repair and replacement o Theoretical economic concept is cost of increased capital depreciation o Health: Several options o Theoretical concept is resource cost Welfare cost o Resource cost Cost of having person at hospital medicines work day loss etc o Welfare cost willingness to pay to reduce health risk (in statistical ex ante sense) o For morbidity we recommend only resource cost(for precautionary reasons econ analysis www
8 Valuation of market impacts and health Impacts on production activities: Market price Material damage: Repair and replacement Theoretical economic concept is cost of increased capital depreciation Health: Several options Theoretical concept is Resource cost + Welfare cost Resource cost = Cost of having person at hospital + medicines + work day loss etc Welfare cost = willingness to pay to reduce health risk (in statistical ex ante sense). For morbidity we recommend only Resource cost (for precautionary reasons)
Valuation of morta lity risk e Mortality risk: Several options o Market price of risk: Wage differential O Contingent valuation(ask people) Several surveys in China recently (Adjusted) human capital approach not recommended in Western countries Neither welfare cost nor resource cost ecn analysiswww.econ.no
9 Valuation of mortality risk Mortality risk: Several options Market price of risk: Wage differential Contingent valuation (ask people) – Several surveys in China recently (Adjusted) human capital approach not recommended in Western countries – Neither welfare cost nor resource cost
Other stuff g Biological diversity: Contingent valuation, expert panel valuation, political valuation g Ecological services: Same user value of services g Impacts on human welfare: Contingent valuation, political valuation ecn analysiswww.econ.no
10 Other stuff Biological diversity: Contingent valuation, expert panel valuation, political valuation Ecological services: Same + user value of services Impacts on human welfare: Contingent valuation, political valuation