Environmental Valuation & Cost-Benefit News

With poor countries much more dependent on natural resources as assets than rich countries, policy changes that affect the natural environmental – particularly at the household level – are critical to reducing poverty, according to a new report from the World Bank, Poverty and the Environment: Understanding Linkages at the Household Level.

“Poverty reduction can be seen as a three-part program.” said Warren Evans, Director of Environment, World Bank. “It involves stemming the fall of households into further poverty, enabling movements out of poverty, and ensuring that the non-poor do not become poor. Reducing vulnerability is as important as reducing poverty. There is a role for environmental management, including policy reforms, in each of these areas.”

According to the report, it is important to understand how countries rely on the environment. For example, the ratio of people to forested land is over three times higher in low-income countries compared with high income. This gives an indication of the pressure on forests, and the outcome is visible in the adjoining table. While forested lands are growing at 0.1 percent per year in high-income countries, they are shrinking at 0.5 percent per year in low-income countries. Access to ‘environmental infrastructure’ in the form of improved water and sanitation shows a similar divide. The result is that mortality rates for children under the age of five are nearly 18 times higher in low-income compared with high-income countries.

According to Kirk Hamilton, Lead Environmental Economist and one of the authors of the publication, “Looking at the distribution of health outcomes and access to environmental infrastructure across different classes within developing countries, the same general picture can be seen: wealthier households within these countries have greater access to environmental infrastructure and better health outcomes.”

Poor households have limited assets that they can use to make investments; they have fewer income-earning opportunities, are exposed to higher health risks, and are less able to cope with adverse economic and health shocks.

The report says that policy changes that affect the natural environment can have direct and indirect impacts on household welfare. These include poverty alleviation and an increase in a household’s economic welfare, as well as better nutritional and health outcomes.

According to the report, reforms with positive environmental and welfare impacts do not always originate from the environmental sector. Some reforms – such as the creation of common property rights, incentives for better management of natural resources, or creation of new markets for environmental services – pertain directly to environmental resources. In other cases, sectoral or macro policies intended to improve other aspects of the economy may also have environmental and welfare benefits – for example, strengthening of private property rights.

In particular, the last two decades have seen reforms in environmental management that put community participation and economic development as core goals. The report finds that decentralization of natural resource management is beginning to work for some communities. Benefits can be found in reforms that strengthened community rights, created stronger incentives for resource management, and developed new markets that facilitate payments for environmental services. There were also positive outcomes from reforms outside the environment sector that strengthened private property rights and increased access to services.

“Unsafe water, lack of sanitation and poor indoor air quality are major killers of children.” said Evans, “An important finding is that the extent of coverage of communities to safe water and sanitation is a significant contributor to child health. This means that targeting poor communities for access to water and sanitation can yield real benefits.”

The poor are willing to participate in a variety of resource management programs, according to the report, some of which lead to significant welfare improvements. The publication recommends continuing to make prudent investments in projects that create new incentives and strengthen property rights, as well as increasing efforts to collect good data to help monitor and evaluate environmental investments that yield benefits to poor households.

For more information, visit: www.worldbank.org/environment

http://go.worldbank.org/GNZ32LYNJ0
The World Bank www.worldbank.org
Press Release November 19, 2007