Applied Environmental Economics: A GIS Approach to Cost-Benefit Analysis

Applied Environmental Economics: A GIS Approach to Cost-Benefit Analysis

Applied Environmental Economics: A GIS Approach to Cost-Benefit Analysis

Applied Environmental Economics: A GIS Approach to Cost-Benefit Analysis

Synopsis

Demonstrating the power of Geographical Information Systems (GIS) applied to environmental economics problems, the authors reveal how GIS can be used to model complex real world interactions between the environment and the economy. This allows a more sophisticated evaluation of the costs and benefits of environmental policies than by conventional cost benefit techniques. Using an extended case study of a land use change problem, the authors develop an innovative methodology that has important applications to economists, environmental managers and regional planners.

Excerpt

Much of environmental change is driven by land use change. To some, the whole history of economic and social development reflects the exchange of one form of asset – 'natural' landscape – for another form of asset – man-made capital. Certainly, viewed from a global perspective, there is a one-to-one relationship between the decline of forested land and the increase in land devoted to crops and pasture. The factors giving rise to land use change are many and varied. But one of the most powerful is the comparative economic returns to 'converted' land relative to the economic returns to 'natural' land. In short, the issue is conservation versus conversion, and this is a conflict that is invariably resolved in the favour of conversion. This systematic erosion of the natural capital base is what worries environmentalists, a term I take to embrace anyone with the slightest modicum of concern about what humankind is doing to its own environment and its fellow species. Acting on that concern takes several forms, as everyone knows. Some want to lie down in front of the bulldozers, protest to their Members of Parliament, write to the newspapers, appeal to some moral principle or other. For the most part quietly, environmental economists have sought a different route. First, they observe that the bias towards conversion arises from all kinds of incentive systems, including, for example, subsidies to agriculture or monocultural forestry. Second, some of those incentive systems are far more subtle, and arise from the fact that many of the functions and services provided by natural systems have no market. At the end of the day, and like it or not, the financial balance sheet drives land conversion. It pays to convert land because the financial returns from conversion exceed those from conservation. The same bias works in reverse: existing land is not converted back to, say, woodland because some of the woodland benefits have no market.

But this is a result that derives from a perversion of economics – markets 'fail' to allocate resources properly because many of those resources have no price, even though they have potentially substantial economic value. Markets are the medium through which prices materialise. If there is no market in the carbon stored in forest . . .

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