The use of economics in
EIAs – some lessons
from international
experience
Oct,27 2004
Renmin University,School of Environmental Sciences
Page 2
Outline of talk
I) DFID experience
A) DFID’s approach to EIA
B) Aims
C) Some lessons learnt
II) Putting economic valuation in to
context
A) Understanding incentives as key to
identifying and measuring impacts
B) Pragmatism,economics as a tool rather than
a straightjacket
III) Strengthening the EIA process
A) The role of consultation and public
participation
B) Shift to a more forward looking and positive
approach
C) SEA and EIA
Page 3
Page 4
Aims of EIA/ SEA in DFID
interventions
? To ensure that project design satisfies
DFID goals
? To ensure that the action contributes to
meeting national goals/ policies
? To help strengthen national capacity for
sustainable development planning and
management
Page 5
Some lessons learnt
? Policies,laws and institutional arrangements in
place
? Human resources
? Financial resources
? Early initiation - Sufficient time for study,suitable
planning
? Integrated with project design
? Environmental stds and guidelines
? Ensure independence and transparency
? Thorough and rigorous
? Comprehensive and systematic
? Stakeholder involvement
? Adaptive
Page 6
II) Putting economic analysis
in to context
Page 7
Calculating environmental damages –
three important questions
1,WHERE?
? Global damages (e.g,
CO2 emissions)
? Regional damages
(e.g,air pollution)
? Local damages (i.e,
noise,soil
degradation)
2,WHAT ARE THE
DAMAGING
FACTORS?
? Technological factors
? Geophyiscal factors (e.g,
topography)
? Poverty-environment
linkages
3,WHAT ARE THE
DAMAGES?
? Health
? Production
? Ecosystems
Page 8
Understanding incentives:
a) Property rights and legal /regulatory
regime
b) Micro-macro linkages
c) Poverty-environment dynamics
Page 9
Poverty-environment
interactions
Some hypotheses on poverty and environment
(Ekbom and Bojo,1998)
? Poor people are the main victims of
environmental degradation
? Poor people are agents of environmental
degradation
? Higher per capita income increases
environmental pressure
? Incomplete property rights reinforce the vicious
poverty-environment interaction
Page 10
Economics as a tool not a
straightjacket
? Matching methods to situation and
means
? Balancing rigour and efficiency
? Relevance,credibility,cost-
effectiveness
? Inter-disciplinary
Page 11
Economics as a tool not a
straightjacket
Dealing with data limitations:
? In a,first best” world all costs and benefits can
be monetised and valued and an economic
efficiency criterion used to rank actions...
? In a,second best” world all benefits cannot be
valued and other quantitative approaches may
be considered (e.g,cost-effectiveness,proxies
etc)
? In a,third best” situation with little
information,time or resources,qualitative
assessment approaches may be the best
recourse
Page 12
III) Strengthening the EIA
process in China
? Affected public
? Interested public
? Before and during
study
? Publish EIS
? Invite and consider
comments
? To obtain public
knowledge
? To know public
concerns
? To involve in
decision
? To involve in
monitoring
A) The role of consultation and public
participation
Page 13
III) Strengthening the EIA
process in China
B) The importance of transparency
and independence
? Clear requirements for EIA content
? Ensure public access to info
? Identify factors to be taken in to account in
decision-making
? Acknowledge limitations and difficulties
? Importance of independent expertise
Page 14
III) Strengthening the EIA
process in China
C) Towards a more proactive
approach to EIA
? Identification and evaluation of
alternatives
? Integration of assessment in to planning
process
? Identify opportunities for positive
impacts on environment (move towards
sustainability assessments?)
Page 15
SEA,strengthening the EIA
process (1)
? Consideration of environmental objectives
during policy,plan and programme making
? Facilitates consultation and public
participation in evaluation of environmental
aspects of policy,plan and programme
formulation
? May render some project EIAs redundant if
impacts have been assessed adequately
? May leave examination of certain impacts to
project EIA
? Allows formulation of standard of generic
mitigation measures for later projects
? Encourages consideration of alternatives
often ignored or not feasible in project EIA
Page 16
SEA,strengthening the EIA
process (2)
? Can help determine appropriate sites for
projects subsequently subject to EIA
? Allows more effective analysis of cumulative
effects of both large and small projects
? Encourages and facilitates the consideration
of synergistic effects
? Allows more effective consideration of
ancillary or secondary effects and activities
? Facilitates consideration of long range and
delayed impacts
? Allows analysis of the impacts of policies
which may not be implemented through
project
Page 17
Page 18
Is EIA sufficient?
? Economic tools similar when applied to
higher-levels (sector or economy-wide)
? EIA framework should also be used
positively to look at opportunities for
positive impacts on environment (move
towards sustainability assessments?)
Page 19
The importance of consultation
and public participation in EIA
process
? To avoid conflict,delay,cost
? To improve project design and
implementation
Consultation with,
? Govt bodies (at different levels)
? Scientific/ technical communities
? Private sector
? NGOs
Page 20
Towards a common framework
for environmental assessment
? Shift in the emphasis from exclusive
focus on compliance and negative impact
mitigation to include a commitment to
enhance the opportunities for positive
impacts
Objectives:
Page 21
? EIA process as a constructive process of
testing and improving project design
Page 22
Why Use Cost-Effectiveness
Analysis?
? Avoids problem of monetizing benefits,
which can be controversial
? Encourages comparison of environmental
health regulations with other health
regulations
? Easier for policymakers to understand
? Need reference (cut-off) values to
determine when cost is too high
Page 23
Economics as a tool not a
straightjacket
Cost-effectiveness analysis,
? 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
Page 24
4 kinds of EIA
(i) Western national EIA systems
(ii) Multilateral and bilateral development
agencies
(iii)Developing country EIA systems
(iv)Transitional country EIA systems
EIAs – some lessons
from international
experience
Oct,27 2004
Renmin University,School of Environmental Sciences
Page 2
Outline of talk
I) DFID experience
A) DFID’s approach to EIA
B) Aims
C) Some lessons learnt
II) Putting economic valuation in to
context
A) Understanding incentives as key to
identifying and measuring impacts
B) Pragmatism,economics as a tool rather than
a straightjacket
III) Strengthening the EIA process
A) The role of consultation and public
participation
B) Shift to a more forward looking and positive
approach
C) SEA and EIA
Page 3
Page 4
Aims of EIA/ SEA in DFID
interventions
? To ensure that project design satisfies
DFID goals
? To ensure that the action contributes to
meeting national goals/ policies
? To help strengthen national capacity for
sustainable development planning and
management
Page 5
Some lessons learnt
? Policies,laws and institutional arrangements in
place
? Human resources
? Financial resources
? Early initiation - Sufficient time for study,suitable
planning
? Integrated with project design
? Environmental stds and guidelines
? Ensure independence and transparency
? Thorough and rigorous
? Comprehensive and systematic
? Stakeholder involvement
? Adaptive
Page 6
II) Putting economic analysis
in to context
Page 7
Calculating environmental damages –
three important questions
1,WHERE?
? Global damages (e.g,
CO2 emissions)
? Regional damages
(e.g,air pollution)
? Local damages (i.e,
noise,soil
degradation)
2,WHAT ARE THE
DAMAGING
FACTORS?
? Technological factors
? Geophyiscal factors (e.g,
topography)
? Poverty-environment
linkages
3,WHAT ARE THE
DAMAGES?
? Health
? Production
? Ecosystems
Page 8
Understanding incentives:
a) Property rights and legal /regulatory
regime
b) Micro-macro linkages
c) Poverty-environment dynamics
Page 9
Poverty-environment
interactions
Some hypotheses on poverty and environment
(Ekbom and Bojo,1998)
? Poor people are the main victims of
environmental degradation
? Poor people are agents of environmental
degradation
? Higher per capita income increases
environmental pressure
? Incomplete property rights reinforce the vicious
poverty-environment interaction
Page 10
Economics as a tool not a
straightjacket
? Matching methods to situation and
means
? Balancing rigour and efficiency
? Relevance,credibility,cost-
effectiveness
? Inter-disciplinary
Page 11
Economics as a tool not a
straightjacket
Dealing with data limitations:
? In a,first best” world all costs and benefits can
be monetised and valued and an economic
efficiency criterion used to rank actions...
? In a,second best” world all benefits cannot be
valued and other quantitative approaches may
be considered (e.g,cost-effectiveness,proxies
etc)
? In a,third best” situation with little
information,time or resources,qualitative
assessment approaches may be the best
recourse
Page 12
III) Strengthening the EIA
process in China
? Affected public
? Interested public
? Before and during
study
? Publish EIS
? Invite and consider
comments
? To obtain public
knowledge
? To know public
concerns
? To involve in
decision
? To involve in
monitoring
A) The role of consultation and public
participation
Page 13
III) Strengthening the EIA
process in China
B) The importance of transparency
and independence
? Clear requirements for EIA content
? Ensure public access to info
? Identify factors to be taken in to account in
decision-making
? Acknowledge limitations and difficulties
? Importance of independent expertise
Page 14
III) Strengthening the EIA
process in China
C) Towards a more proactive
approach to EIA
? Identification and evaluation of
alternatives
? Integration of assessment in to planning
process
? Identify opportunities for positive
impacts on environment (move towards
sustainability assessments?)
Page 15
SEA,strengthening the EIA
process (1)
? Consideration of environmental objectives
during policy,plan and programme making
? Facilitates consultation and public
participation in evaluation of environmental
aspects of policy,plan and programme
formulation
? May render some project EIAs redundant if
impacts have been assessed adequately
? May leave examination of certain impacts to
project EIA
? Allows formulation of standard of generic
mitigation measures for later projects
? Encourages consideration of alternatives
often ignored or not feasible in project EIA
Page 16
SEA,strengthening the EIA
process (2)
? Can help determine appropriate sites for
projects subsequently subject to EIA
? Allows more effective analysis of cumulative
effects of both large and small projects
? Encourages and facilitates the consideration
of synergistic effects
? Allows more effective consideration of
ancillary or secondary effects and activities
? Facilitates consideration of long range and
delayed impacts
? Allows analysis of the impacts of policies
which may not be implemented through
project
Page 17
Page 18
Is EIA sufficient?
? Economic tools similar when applied to
higher-levels (sector or economy-wide)
? EIA framework should also be used
positively to look at opportunities for
positive impacts on environment (move
towards sustainability assessments?)
Page 19
The importance of consultation
and public participation in EIA
process
? To avoid conflict,delay,cost
? To improve project design and
implementation
Consultation with,
? Govt bodies (at different levels)
? Scientific/ technical communities
? Private sector
? NGOs
Page 20
Towards a common framework
for environmental assessment
? Shift in the emphasis from exclusive
focus on compliance and negative impact
mitigation to include a commitment to
enhance the opportunities for positive
impacts
Objectives:
Page 21
? EIA process as a constructive process of
testing and improving project design
Page 22
Why Use Cost-Effectiveness
Analysis?
? Avoids problem of monetizing benefits,
which can be controversial
? Encourages comparison of environmental
health regulations with other health
regulations
? Easier for policymakers to understand
? Need reference (cut-off) values to
determine when cost is too high
Page 23
Economics as a tool not a
straightjacket
Cost-effectiveness analysis,
? 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
Page 24
4 kinds of EIA
(i) Western national EIA systems
(ii) Multilateral and bilateral development
agencies
(iii)Developing country EIA systems
(iv)Transitional country EIA systems
