The Asian Development Bank recently released a report on the state of Asia's environment. It concludes with an appeal for the region's governments to re-evaluate their environmental policies to avoid dire economic consequences.
The report uses terms portraying environmental degradation as"pervasive, accelerating and unabated" that could lead Asia to the brink of environmental catastrophe. Some of the specters heralding environmental degradation in Asia are: overpopulation, rapid economic growth and political inaction.
Pollution and environmental problems are portrayed as threats to growth by undermining health and wasting resources that could be used for economic development. A particularly shocking estimate is that the region has lost perhaps 90 percent of its wildlife habitats due to agricultural expansion, development of modern infrastructure and deforestation. As much as 30 percent of the region's total land area has suffered from some form of degradation, including desertification and the ravages of drought. As it is, many of the cities with the highest air pollution levels in the world are located in Asia. Measuring the levels of particulate matter in the air, 12 of the top 15 polluters are Asian cities. Despite all this gloom, the application of sensible economic theory of how markets work and why government policies often do not provides a way out of the ongoing decline in ecological well-being. A good place to start is by recognizing that much of the environmental degradation is the result of self-inflicted wounds caused by poor policies and weak institutional infrastructure. It turns out that regulatory and fiscal functions of governments are cause considerable environmental harm. Once this is recognized, the approach to dealing with "sustainable development" shifts from reining in market forces to limiting the impact of poor political governance on the environment.
Government failures arise from either weak governance or overbearing governance. These conditions contribute to inadequate enforcement of legal rights or an inability to restrain corruption, both of which can lead to abuse of the natural environment. Government intervention can also be excessive and justified on the basis of so-called good intentions.
Government policies that contribute to environmental degradation include import duties or policy interventions in markets that obstruct the adoption of cleaner technologies or encourage overuse of resources. Public-sector subsidies also create perverse incentives that can inflict damage upon the environment. For example, when subsidies keep energy prices low relative to the price of capital and labor, producers will select technologies that are energy-intensive.
Subsidies for resource use or extraction are often provided to the benefit of influential interests and distort economic incentives that disadvantage the overall community. Industrial producers should pay market prices for inputs so that prices for consumption goods reflect scarcity. Many resources are lost due to the local authority incompetence. Much water is lost from urban supply systems due to leakage and theft. Similar excessive use can arise from a lack of pricing of water resources. To stem demand for water, Indonesia and Thailand have relied upon water pricing and have reduced consumption significantly. It also provides an incentive for new investment in water utilities by private companies in order to boost supply.
Another area of great concern is the depletion and endangered status of open-access resources like fisheries or forests or the atmosphere. Most economists believe the absence of private property rights over these resources leads to excessive exploitation.
Whenever private ownership is not well defined or properly enforced, there is a tendency for a result known as "tragedy of the commons." When there is open-access, it implies that there are low usage costs for individuals. With a weak pricing or policing mechanism on usage, the overall community suffers since each of them faces an incentive to consume now before it is used up. Conversely, the strengthening of rights over resource use reduces overuse since owners will invest more in improving them while expending greater effort to exclude non-owners from using them. The most promising tools for coping with environmental problems is to use market-based incentives (MBIs). These can provide rewards for cleaner production or resolve the over-consumption associated with open-access resources.
While there is mention of MBIs in the ADB report, they should become a focal point of policy proposals. This is because MBIs can make users and abusers pay for using resources. Among the applicable areas are tradable permits or imposing charges for emission of pollutants as well as tax and tariff waivers.
Some countries in the Asia and Pacific region have developed plans for integrating values and charges on resource use and pollution. For example, the Philippines use an economic resource value model to set values on its coastal resources. In New Zealand, they have coped with over-fishing by replacing regulations with a property rights strategy using individual transferable quotas (ITQs) to assign ownership of a portion of the annual catch to fishers. These ITQs are property rights that increase the value of fisheries and encourage cooperation among owners to protect fishing areas long-term. Of course, use of MBIs will be far from perfect in application or result. It bears remembering that failures arise from the inadequacies of the bureaucracies overseeing them. Keeping these human failings in perspective will be necessary for continued support for MBIs. The principal alternative to MBIs is so-called command-and-control restrictions that set explicit quotas. When a small group of technocrats or politicians make crucial decisions, politics is just as likely to be the basis of judgments on the environment as pure science or reason. At the same time, regulations that set quotas do not use pricing mechanisms to reveal how much people would pay for resource use or to pollute. This may explain whey when command-and-control regulations were used in the past,there were losses in efficiency.
Losses in efficiency imply wastage of scarce resources that is inconsistent with conservation. In contrast, MBIs allow for the participation of all consumers and producers in the discovery process to find out what is best for all. While the ADB promotes education and the funding of schemes for environmentally friendly projects to induce Asian governments to improve environmental quality but it has neither the financial resources to encourage nor the teeth to enforce better policy.
It might be better for the ADB and other international agencies construct blueprints that address the identifiable problems of specific countries.
Christopher Lingle is Global Strategist for eConoLytics.com and author of The Rise and Decline of the Asian Century.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry