Publication: Environmental Economics at the World Bank
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Published
2008
ISSN
17506816
Date
2012-03-30
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In this paper, we examine several channels through which environmental economics has affected the World Bank's development agenda. We also describe the evolution of environmental economics at the Bank. At the macro level, we examine the growing influence of resource and environmental accounting in the Bank's policy work. From the micro perspective, we consider the role of environmental valuation in project analysis, the assessment of environmental damage, and the development of innovative environmental policies based on insights from environmental economics. We also describe the influence of economic analysis on environmental resource allocation decisions in the World Bank and its affiliate, the Global Environment Facility. Throughout the paper, we document the growth, scope, and impact of the Bank's contribution to economic policy research on environmental issues.
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Publication Measuring Up : New Directions for Environmental Programs at the World Bank(World Bank, Washington, DC, 2003-07)The World Bank's new environment strategy advocates cost-effective reduction of air and water pollutants that are most harmful to human health. In addition, it addresses threats to the livelihood of over one billion people who live on fragile lands-lands that are steeply sloped, arid, or covered by natural forests. The new approach will require accurate information about environmental threats to health and livelihood, as well as an appropriate resource-allocation strategy. Drawing on recent research at the World Bank and elsewhere, this paper attempts to apply an optimal investment approach. It develops a rule for optimal cross-country resource allocation that reflects the Bank's investment policy. 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The aggregate figures suggest that it has mattered a great deal, since the Bank's total environmental lending has exceeded $US 9 billion over the past six years. In this paper the authors use newly available data to address a more precise version of the question: Across countries and themes, how well has the Bank's environmental lending and analytical and advisory activities (AAA) matched the incidence of environmental problems? For their assessment, the authors extend their previous work on local pollution and fragile lands (Buys and others 2003) to consideration of global emissions, biodiversity, water resources, and institutional development. They construct cross-country problem indicators for each environmental theme and combine them with country risk measures to estimate optimal thematic lending and AAA for each country. The authors then compare their estimates with actual lending and AAA to assess the match between environmental problems and the Bank's response. 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Some gaps may reflect activity by other donor institutions, but many others may represent problems with efficient implementation of the Bank's Environment Strategy. To promote further discussion of this issue, the authors use their optimal allocation model to develop measures of lending opportunity by environmental theme for the Bank's partner countries.Publication Air Pollution During Growth: Accounting for Governance and Vulnerability(World Bank, Washington, D.C., 2004-08)New research on urban air pollution casts doubt on the conventional view of the relationship between economic growth and environmental quality. This view holds that pollution automatically increases until societies reach middle-income status because poor countries have neither the institutional capacity nor the political commitment necessary to regulate polluters. Some policymakers and researchers have cited this model (called the "environmental Kuznets curve," or EKC) when arguing that developing countries should "grow first, clean up later." However, new evidence suggests that the EKC model is misleading because it mistakenly assumes that strong environmental governance is not possible for poor countries. As the authors show in this paper, the empirical relationship between pollution and income becomes much weaker when measures of governance are added to the analysis. Their results also suggest that previous research has underestimated the effect of geographic vulnerability (climate and terrain factors) on air quality. The authors find that weak governance and geographic vulnerability alone can account for the crisis levels of air pollution in many developing country cities. 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Thus, sustainable tourism, and its economic benefits require ensuring that the environmental resources the sector relies on, are managed responsibly by the countries of the Caribbean, the tourism/travel industry, and the visitors themselves. The study examines the links between tourism, and environment, pointing at the magnitude of environmental threats, and the role of information, at creating strong incentives, addressing environmental problems certification schemes, to allow credible advertisement of its environmental quality. Capturing tourism economic "rents" - defined as an excess return to an asset - is viewed as a policy question for governments, on how to use these rents effectively. Mechanisms to capture rents include charging user fees when accessing a particular environmental resource, however, when environmental resources are public goods, user fees do not provide a practical means of capturing generated rents, thus more general taxation schemes are required. Based on this analysis, recommendations include the establishment of corporate income taxes, and moderate tariff rates for tourism inputs, establishing taxation, to be partly, and explicitly identified for environmental, and/or resource user fees.Publication Is Environmentally-Friendly Agriculture Less Profitable for Farmers? Evidence on Integrated Pest Management in Bangladesh(World Bank, Washington, D.C., 2004-09-01)Concerns about the sustainability of conventional agriculture have prompted widespread introduction of integrated pest management (IPM), an ecologically-based approach to control of harmful insects and weeds. IPM is intended to reduce ecological and health damage from chemical pesticides by using natural parasites and predators to control pest populations. Since chemical pesticides are expensive for poor farmers, IPM offers the prospect of lower production costs and higher profitability. However, adoption of IPM may reduce profitability if it also lowers overall productivity, or induces more intensive use of other production factors. On the other hand, IPM may actually promote more productive farming by encouraging more skillful use of available resources. Data scarcity has hindered a full accounting of IPM's impact on profitability, health, and local ecosystems. Using new survey data, the authors attempt such an accounting for rice farmers in Bangladesh. They compare outcomes for farming with IPM and conventional techniques, using input-use accounting, conventional production functions, and frontier production estimation. All of their results suggest that the productivity of IPM rice farming is not significantly different from the productivity of conventional farming. Since IPM reduces pesticide costs with no countervailing loss in production, it appears to be more profitable than conventional rice farming. 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