By: Batir Wardam
It has became a common conclusion for both environmentalists and “green economists” alike that any breakthrough in commitment to environmental remediation will only be economically feasible when the evidence is conclusive that the cost of remediation is less than the cost of inaction, and that economic benefits can arise from investing in environmental management options.
It is possible to reach a situation where actions for environmental management may make more money than spending, but that requires a comprehensive paradigm shift in economic and environmental planning as well. One of the main building blocks is to measure the economic cost of environmental degradation in any given country and to assess the required investments to tackle environmental problems and turn them into opportunities.
Innovative sustainable economy methodologies have been emerging in the past few years in an attempt to bring environmental dimensions into the core of economic planning. Internalization of environmental costs in the common macroeconomic indicators package has been gaining momentum in many countries and helped in shaping more sustainable and robust economic policies that took into consideration resource use and the cost of pollution.
One of the most effective tools used by economists and environmentalists in the last few years is the Cost of Environmental Degradation (COED) analysis. The first attempt in the Arab World was facilitated by the World Bank when a package of national assessments was conducted to measure the cost of environmental degradation as a percentage of a country’s GDP.
The cost of environmental degradation can be understood as a measure of the lost welfare of a nation due to environmental degradation. Such a loss of welfare may include loss of healthy life and well-being of the population, pain and suffering from illness, absence of clean environment, economic losses of environmental services (reduced soil productivity, lower tourism revenues, etc..) and loss of environmental opportunities (reduced recreational values of ecosystems).
In the World Bank methodology, the cost of environmental degradation is expressed as a percentage of GDP to provide a sense of magnitude. It is also helpful to compare the cost of environmental degradation to GDP to assess the trend over time. If the cost of environmental degradation grows over time, it suggests that the welfare loss from environmental degradation is growing faster than the GDP.
The process of estimating the cost of environmental degradation involves placing a monetary value on the consequences of such degradation. This often implies a three step process:
1- Quantification of environmental degradation (e,g monitoring of ambient air quality, soil loss and soil quality).
2- Quantification of the consequences of degradation (e,g. negative impact on health from air pollution, changes in soil productivity, reduced natural resources base).
3- A monetary valuation of the consequences (e,g estimating the cost of ill health, soil productivity losses, reduced recreational values).
To estimate the cost of environmental degradation for various aspects of the environment, the analysis developed by the World Bank is organized into six categories: water, land, air, waste, coastal zone and global environment. For each of the categories there are separate analyses and cost estimates for health and quality of life and natural resources.
The World Bank has conducted 7 studies on Arab countries. The country with the most severe ratio of environmental is Egypt with 4.8% of GDP totaling a staggering amount of 4.280 billion US $. Both Morocco and Algeria are next with a ratio of 3.7% and 3.6% loss to GDP based on environmental degradation. Mashreq countries come next with Syria (3.5%), Lebanon (3.4%) and Jordan (205 million US $ for 3.1% of GDP). The country with the best environmental performance was Tunisia, losing only 2.1% of its GDP to environmental degradation.
Such figures provide a crucial economic estimate of the cost of unchecked environmental degradation and help policy makers to appreciate the need for integrating environmental concerns in planning to help prevent environmental losses before they turn into burdens.