Wednesday, June 19, 2013

“Are environmental valuation techniques fair? “– Exploration to bring in equity, justice in environmental valuation techniques

The latest released report titled “Green National Accounting Framework for India” by a committee chaired by Sir Prof. Partha Dasgupta has brought the need for measuring national wealth as a part of the national income accounting framework of countries. According to this report, traditional system of national income accounts doesnot consider the loss in GDP that can happen from natural resource degradation. This accounting framework does not include any measure of income that is embedded within environment and natural resources. Neither does the existing system of national accounts visualize deferred consumption of natural resources as an investment which can be further built into the income accounting framework. The values which are estimated for measuring national income are based on market based prices and on the implicit assumption of putting  a monetary value on environmental resources wherever they are not available.
At the backdrop of this report, there is existing literature on estimation of green GDP which are going all around. TERI also did an estimate of how much of Indian GDP is lost owing to natural resource degradation in India. In the literature dealing with natural resource valuation within India and other developing countries, a value is imposed on natural resources based on shadow pricing techniques which are thereafter included within the national income accounting measures. In order to do that a value of natural resource assets within a country is estimated. This value is calculated on the basis of different modes of shadow pricing techniques. Most of these techniques are borrowed from neoclassical principles of economics and also arise from amenity based projects that had arisen in U.S. in the 1990s. The context in which these amenity based projects and methodological principles were done in 1990s is completely different from the socioeconomic, developmental context faced by countries like India today. The format in which questions within this amenity based valuation framework are asked implicitly assumes that a natural resource can be valued by use of some proxy variables. In most cases a proxy question is being asked to put a monetary value on the natural resource or any natural asset that can include more trees, greater amount of clean water, etc.
For an illustration to the reader, a typical questionnaire in the valuation exercise will ask a question like – “how much more you are willing to pay for a certain defined extra unit of clean air, water” or “how much more you are willing to pay for a road full of forest” or “by how much do you think the price of the property will increase with cleaner environment or more trees in the neighbourhood”. After getting answers to these questions, valuation numbers are compiled through econometric estimation methods: a price number is achieved which indicates how for every extra unit of clean air, environment, water how much more consumers are willing to pay. Essentially, the danger starts from here.

Firstly, in this entire method of valuation exercise, no where an attempt is made to introduce equity considerations into the valuation methodology. It also doesnot consider the issue of right of a human being to have a clean air or water or environment nor the right to preserve certain values arising from environment.
Let us illustrate the concern through a hypothetical example.  Given the path of development and the felt need (which can be again questioned too) to bring many backward forest areas within India into mainstream developmental paradigm, certain sections of policy making fraternity might feel that roads need to be constructed to connect these backward areas to cities by cutting down of trees. Now, before government takes such a decision, valuation of these forests need to be done in order to understand whether these trees should be cut down. In many tribal areas of India, these forest areas not only mean trees, it also means the right of human beings to their old ethnic cultural values as well as to clean environment, biodiversity and ecology that has served them for generations. Gadgil and Noronha (2013)[1] (Madhav Gadgil and Ligia Noronha (2013), An Ecosystem to Save or Squander, The Hindu, May 2, 2013)in a recent article also highlights, how, many of these forests in the Western Ghats are important for preservation of wild species, biodiversity, cultural, ecological and environmental values. Therefore, a valuation exercise of these forests based on the neoclassical and amenity based principles, methodologies is not ethical from the point of view of human rights of people of many communities residing in these regions infested with biodiversity, ecological, ethnic and cultural values embedded within these forests.  
Therefore, we come to the next part of our discussion on how ethics, questions of justice, principles of equity has to be urgently brought in the methods of environmental valuation techniques to inculcate ecological and other implicit values within the process of such techniques. Ghosh (2013)[2] (Ghosh, P. (2013), Equity in Climate Change, A Suggested Approach, Economic and Political Weekly, March 23, Vol 48, Issue 12, Pgs 44 - 51) in one of his EPW article defines equity as “fairness” or an “ethical conduct”. Drawing on the same lines, within environmental valuation techniques, if ethical and the principles of justice have to come in, they have to largely apply principles of normative and meta ethics. Basically, the valuation method will need to have two components of ethics which are – normative and meta ethics. Through normative ethics, a set of criteria pertaining to equity and justice has to be developed within valuation techniques. Other component of the valuation technique will have meta ethics which will have certain logical principles that will assess, analyze, validate the criteria pertaining to equity, justice within the normative ethics component of the valuation measure. Thus, the new valuation measure will have two ethical components – normative and meta ethics. First one will develop the set of different criteria capturing equity and justice and the second one will generate logical principles and methods to analyze the first component.
Basically, through this new method, a technique of environmental valuation will move away from the neoclassical paradigm towards a justice based approach. By means of this method, an environmental natural resource will be valued more from the lense of “rightness or is it ethical or justified to maintain  or preserve a natural resource rather than putting an implicit, proxy monetary value to it and then justify it in terms of money, costs and benefits of its preservation”. A translation to this paradigm will mean that all environmental resources will be assessed from the view point of human rights to have those resources. This will also take into account of the question of equal right of all human beings to these environmental resources so that in the long term wealth of people who have access to quality environmental resources goes up. It will also mean that the total wealth of a country can also go up owing to preservation of high quality environmental resources.
Since, this will mean a shift from neoclassical methods, certain abstract principles of justice, rights will come into the normative ethics part of the valuation measures. However, they will be assessed in an objective way by means of criteria which will capture the issue of rights, ethics. Such an assessment will be done more by means of new techniques like group modeling exercise which will engage people. This group modeling exercise will involve in AHP (Analytic Hierarchy Process) methods where people will be asked questions of justice, ethics and those viewpoints will be simulated and integrated in valuing an environmental resource. Justice, ethics will become domains within the AHP exercise. Under each of these domains, further, indicators will be identified. Questions will be specifically asked to capture the view of people belonging to different sections of society on these indicators indicating the domains of justice, ethics.
Viewpoints of people under each of these domains and catering to different indicators will be duly captured, simulated in a decision making framework. This decision making framework will largely create an understanding of how does an environmental resource (say tree) stand visa vis another option (say road) after considering normative and meta ethics component of valuation after taking account of the questions of human rights and equity.
However, having made these points, it is equally important to envisage how can this methodological framework be implemented within India. At the central level, Ministry of Statistics and Programme Implementation (MOSPI) has to be the coordinating agency to implement this framework. It will have to work with the state statistical departments which will have a dedicated cell working on valuation numbers for different natural resources including this rights, equity based approach.  State nodal cells can estimate a value for particular types of natural resources and will have to report to MOSPI after every six months. State specific different estimates will have to be centralized and maintained in a central data base of MOSPI which should be available for users of this data – viz. government, academia, companies, policy makers, communities, activists and researchers. An approach like this will help in transition of the valuation approach within the country which is currently more of expost in nature (rather than exante) and is unable to stop a natural resource degradation within the country from an onslaught of development activities. 
Therefore the above shift in the methodological framework of environmental valuation will help the policy makers and an implementer to make a decision about what is the value of a particular environmental resource for human beings and communities visa vis another option (say a road). Once this is done, it will bring in a more objective view of questions of rights, justice and equity in environmental valuation methods, techniques. For a country like India, which is standing at the cross roads of questions of the development visa vis ecological/environmental conservation, it is an imperative to move towards these methods of valuation for a more informed policy making by being considerate and sensitive to  rights of people who belong to forests and other areas infested with ethnic, cultural, ecological and environmental values.

Views are personal

[1] Madhav Gadgil and Ligia Noronha (2013), An ecosystem to save, or squander, The Hindu, May 2, 2013

[2] Equity in Climate Change, A Suggested Approach, Economic & Political Weekly EPW March 23, 2013 vol xlvIiI no 12

[1] Madhav Gadgil and Ligia Noronha (2013), An ecosystem to save, or squander, The Hindu, May 2, 2013

[2] Ghosh, P (2013), Equity in Climate Change, A Suggested Approach, Economic & Political Weekly , vol xlvIiI no 12, March 23, 2013, pgs 44- 51