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An economic analysis of environmental protection and management: An example from the Philippines

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Summary

The island of Palawan covers some 12000 km2 and is located in the southwest of the Philippines archipelago. It is a beautiful and as yet relatively unspoilt island but in recent years the social and economic pressures on its natural resources and environment have begun to mount. If present trends continue, severe environmental damage will result. In recognition of this danger, the Philippines government and the European Economic Community have commissioned the preparation of an Integrated Environmental Program (IEP) for the island, as part of an overall economic development program. Phase one of the IEP study comprised an assessment of the island's resources and present situation and the formulation of a plan for the future protection of its environment, taking due account of the need for continuing economic development.

An analysis was made of the likely economic returns from the proposed environmental protection program, using conventional benefit-cost analysis methodology. Due to the inadequate data base and the wide-ranging assumptions which had to be made, this was inevitably very approximate in nature. It was carried out in terms of the three main types of conservation activity proposed, namely land-based conservation, mangrove conservation and inshore marine conservation, and the program as a whole. The main benefits and costs were identified and, where appropriate, quantified for inclusion in the analysis.

Choice of discount rate and length of analysis period are critical factors affecting the economics of environmental protection, which essentially involves the pursuit of long-term rather than short-term gains, output in the immediate future being restricted to the level of long-term sustained yield for the benefit of future generations. Use of the high discount rates customarily applied for project analysis in countries such as the Philippines (typically, 10–15 percent) places a heavy premium on short-term gains and attributes little or no value to benefits and costs further in the future. To take account of this problem the present values of costs and benefits were calculated using low discount rates of zero and 5 percent. Though this was a necessarily crude and arbitrary method of adjustment it was considered to be a better alternative than that of following normal convention and applying the high rates of discount customarily used in the Philippines.

The analysis indicated that the various conservation activities could be expected to produce acceptable, though not spectacular, levels of economic return. Mangrove conservation would be particularly beneficial and the irrigation benefits from preserving river base flows and preventing an increase in peak floods, by means of catchment protection, would be high. The unquantifiable ecological and social benefits would also be substantial.

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References

  • Hufschmidt, M. M., and Lyman, E. L., (eds.) (1982)Economic Approaches to Natural Resource and Environmental Quality Analysis. Natural Resources and the Environment Series, Volume 5. Tycooly International Publicity Limited, Dublin.

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  • O'Riordan, T., and Turner, R. K. (1983)An Annotated Reader in Environmental Planning and Management, Urban and Regional Planning Series, Volume 30, Pergamon Press, Oxford, U.K.

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  • Further particulars relating to this paper may be found in: Hunting Technical Services Limited, in association with Sir M. MacDonald and Partners and PMDSI, Manila: PIADP Integrated Environmental Program, Final Report, October 1983.

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Christopher Finney is Chief Economist of Hunting Technical Services Limited, UK, a major consulting firm involved in planning and implementation of agricultural development overseas, and has been with the firm since 1962. He is an agricultural economist with particular interest and experience in the fields of irrigation, livestock, farm mechanisation, general agriculture and conservation. He has worked on a wide variety of projects in numerous countries in Africa, Asia and Latin America. Mr Stanley Western is a senior soil scientist and land use planner with the same company. Since joining the firm in 1960 he has undertaken a very wide range of resource assessment and planning assignments in Asia, Africa and Latin America. He was Team Leader on the Palawan Integrated Environmental Program planning study.

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Finney, C.E., Western, S. An economic analysis of environmental protection and management: An example from the Philippines. Environmentalist 6, 45–61 (1986). https://doi.org/10.1007/BF02240231

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  • DOI: https://doi.org/10.1007/BF02240231

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