snail and hydrangea Reviewing administration-led assessment of environmental values

An environmental NGO, politicians and administrative officials had a dialogue over a public project and it went like this:

"We've been making efforts to protect this natural view for years. Now, tell us how much value do you, administrative officials, assign to the view" asked a female member of the NGO demanding an answer from the officials.

The administrative officials could only remain silent.

To assess environmental views that usually do not have any market value

It is not a new approach to assess environments and natural views that usually do not have any market value using certain indexes.

The argument was first begun when the pollution issue was becoming serious around the time between the late 1950s and the early 1960s. Back then, the point of the argument was how to internalize social costs or external diseconomies.

The debating points were developed to include issues on how to engage those negative effects and determine the appropriate criteria for public investment in order to gain healthier and more dynamic development effects, as well as to decide a better choice between disequilibrium growth (so-called big push), in which social capital is built up prior to private capital, and equilibrium growth, in which social capital and private capital are formed in almost identical tempos.

Among numerous theories on criteria for investment presented back then, some, typically one advocated by H.B. Chenery, suggested assessing external diseconomies and assigning a value to the environment based on concepts, such as opportunity costs (note 1) and shadow prices (note 2), and to use social marginal productivity (SMP) which assesses capitals and incomes from social viewpoints as criteria for investment.

A leading measures back then was cost-effectiveness analysis used for water resource development in the United States, which compared the total investment costs with the total amount of developmental effects brought about by the investment. This methodology later came to be used commonly in Japan as well, after remarkable advances of computer and statistical technologies.

Since then, various methods for measuring environmental values have been developed. These include "travel cost method", which converts transportation costs into the environmental value of a certain area, and "hedonic pricing" method, which converts land prices into the environmental value of a certain area.

Commonly used Contingent Valuation Method (CVM)

In recent years, a method called Contingent Valuation Method (CVM) has been widely accepted and efforts are made to apply the numeric value calculated by this method to cost-effectiveness analysis as a value of environment.

To implement the CVM, a questionnaire will be conducted first and then the results will be processed statistically in order to assign contingent monetary values to natural views and environments. Among the questions on the questionnaire are, "Would you pay, if asked, for conservation of the natural view (or environment)?" or "How much compensation would be proper to pay to people who continue to live in a bad environment?" (For a sample questionnaire, please refer to the "Opinion poll for citizens in Toyama regarding infrastructure project at 'Kenko to Yutori no Mori' in Kureha hill" conducted by Toyama University.)

One of the characteristics of this method is that it can measure values placed by respondents who live at a distance as well as non-use values, whether "will not" or "can not" use the environment or its ecological values.

In the process of this method becoming commonly used, there were two significant evaluations of damages to natural resources with which the U.S. National Oceanic and Atmospheric Administration (NOAA) under the Ministry of Commerce was involved.

One was the damage evaluation concerning the wide-spread oil spilt by the Exxon tanker, Valdez, when it was stranded off the coast of Alaska. Another was the damage evaluation regarding the contamination by DDT and PCB included in industrial wastes along the coast of Southern California, U.S.A. in the court decision of Montrose Chemical Corp. vs. Admiral Insurance Co., 10 Cal 4th 645 (1995), commonly known as the Montrose Case.

In both cases, the NOAA conducted the damage evaluation using CVM.

Based on these experiences, the NOAA published a "NOAA Guidelines" in 1993. The Guidelines list matters that need to be heeded when using CVM in court cases for damage compensation. The NOAA also presented its "Natural Resource Damage Assessment (NRDA)" rule in January 1994.

Japan's case: ministries for public works start creating manuals in Japan

Looking back at Japan, in June 1997, the government decided to adopt policies on "measures to promote structural reform of public finance" at the Cabinet meeting, and based on that, every ministry reviewed their public works to clarify their effects, especially the newly adopted works and those for which progress was behind schedule.

For these policies, ministries for public works, such as Ministry of Construction, Ministry of Transport and Ministry of Agriculture, Forestry and Fisheries, started creating manuals for each category of public works, a process which is still underway.

Among those manuals, some specify the use of CVM. For instance, a manual regarding beach works by the Ministry of Transport specifies using the method for views on beaches.

The Ministry of Construction also will instruct the use of CVM in their manuals for works involving values of views and environments. Also, the application of this method is under consideration, especially in the areas of beach usage, protection of beach environments, conservation of the sands, psychiatric trauma after disasters, protection of water in areas of public use, etc.

(Reference: Chapter 2, Section 5 CVM, of the report on formulation of integrated operational guidelines regarding cost-effectiveness analysis in improvement of social capital.)

As for the Ministry of Agriculture, Forestry and Fisheries, the National Research Institute of Agricultural Economics was one of the first administrative bodies to adopt CVM as a methodology to numerically assess values of rural views in Japan. Also, since FY Heisei 10 (1998), the ministry started considering the application of CVM to measure the effects on public interests in their survey following up the effects of infrastructure works for agricultural production.

In the case of the Environment Agency, CVM was introduced in the environmental white paper of FY Heisei 9 (1997). However, it does not express any particular opinions on CVM being adopted to assess values of views and environment numerically by the ministries concerned in their cost-effectiveness analysis for reviewing public works.

The implication there, I think, is that the Agency's position for the time being is that they do not link numerical evaluation of environmental values for reviewing socioeconomic projects with technical assessment of environmental impact.

Apprehension to a game in which players play the role of judge

butterfly In reality, it is practically a de facto standard to use CVM for numerical assessment of values of views and environments not only at the level of central government but also at the level of local governments, such as prefectures, cities, towns and villages.

I myself do not deny the significance and legitimacy of CVM as long as there is no other potential methods that can effectively assess values of views, environments and ecosystem numerically.

At the same time, I am aware of the fact that there has been quite a few claims pointing out the limits of CVM. It has been said that a certain length of time for verification is required to prove the propriety of the numeral values. Having said that, and given the fact that the very bodies that implement public works are quickly adopting a certain type of methodology in their manuals without waiting for its maturity, it seems to me as if the players are playing the role of judge in this game and that makes me feel kind of apprehensive.

Participation of citizens: a premise for introduction of CVM

There are some premises for acknowledging CVM as a formal method.
First of all, it is dangerous to abuse CVM in the current conditions in which citizens' participation in the administrative process is not yet established, and there are no daily opportunities for forming consensus with administrative officials, as Mr. Koichi Kuriyama points out.

Numerical assessment of the value of an environment based on a one-way and one-time-only questionnaire could only be close to the true value if interactive and repetitive feedback between residents and administration subsequently is guaranteed.

Secondly, when asking people the limit of financial burden that they would be willing to shoulder for environmental protection, the answer could differ depending on whether they take "burden" to mean the redistribution of existing taxes or contribution through a new special tax system or a new fund.

In either case, unless respondents already recognize how much public funds have been injected so far in the area of the problem and in what way, the question is asked presuming a double burden on the people.

Furthermore, whether it is a contingent or virtual plan, if the administration presents a new plan for funding that is unfeasible and the respondents turn down the very possibility of implementation of the plan, the questionnaire itself will be meaningless.

What about relationships with conventional assessments of environmental impact?

Thirdly, the question arises regarding the relationship between the above mentioned assessment of environmental values and conventional assessments of environmental impact.

As long as CVM is dependant on questionnaires, although it could reflect public opinion at the point of the survey, unfortunately it cannot be a leading index for evaluating the value at the time in many cases.

When looking at mangroves, some people would see beautiful scenery while others might see into and sense the dynamic ecosystem around it.

However, it is quite possible that even the former will raise the level of awareness as high as that of the latter through education as time goes by.

To correct these differences in awareness levels, it is necessary to conduct questionnaires separately between the general public and those who have special knowledge in the area.

Anyhow, the problem is how to compensate for the time lag in value preference.

For these reasons, it seems to be necessary to position the conventional assessment for environmental impact first and prepare a sub-system that works to educate the people and receive repetitive feedback from them.

In the future, an integrated environmental economic assessment system, which integrates assessment for effectiveness of a project and assessment of environmental impacts, should be established. The new system should become the method for looking into the possibilities of mitigation and compensating measures for environmental damage.

Importance is in sum of views to be seen and views to see

My fourth point is that although there are views to see and views to be seen and their sum should be the value of the whole view of certain extended area, public projects often fail to count the sum.

What is needed now is to set our mind to thinking that public structures themselves can be environmental assets for enhancing the value as a whole.

That means that public structure itself can be the target of assessment by CVM.

Now let us imagine a view.

Suppose we are standing at the tip of a cape looking down on a beach at the foot of the cape. If there is a distracting looking public structure constructed there, obviously, the value as a whole will be reduced.

Meanwhile, if the public structure has an exterior matching the rest of the environment, or in the structure, if there is a space for children to learn about the natural ecosystem of the cape or a relaxing space where people can enjoy the scenery of the cape through glass windows over a cup of coffee even on a rainy day, it could help ease the concentration of sightseers at the narrow point of the cape and, as a consequence, stop the destruction of the ecosystem of the cape. If that can happen, the structure might be able to contribute to slowing down the reduction in value of the cape as a whole.

Therefore, when applying CVM, it is necessary to limit the range of environment to be assessed and assign numerical values with conditions.

Most importantly, improvement of environmental minds

sweet flag What has been mentioned above is my personal opinion on administration-led numeric assessment of environment.

I would like to reiterate that I do not reject the significance of a numerical assessment using CVM.

So far, for example, the environmental values of the Fujimae tideland, Sanbanse, the Yoshino river, the Shimanto river, Kushiro moor and the Inland Sea of Seto were numerically presented to inform their values nation-wide. Also, there was an instance that underlined the importance of agriculture and rural communities to urban people by numerically presenting their values.

However, more importantly, I believe what is needed is to improve the environment-oriented minds of people in charge of designing public works.

The basic premise of applying CVM is the presence of experts who can design environmentally friendly projects.

A good prescription can be written only by good doctors.

Residents are parents of the patient -i.e. an environment facing danger. Unless there is an interactive system to realize the participation of residents into the administrative process for assessing a satisfactory value of the environment for the residents, or there is an opportunity for "informed consent", a major operation based on a wrong diagnosis will be performed on views and ecosystems.

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