Tradeoffs and sustainable development

Case 3. Tradeoff: place more weight on the environment

When current depletion or degradation threatens to be irreversible-or when the degradation has significant and long-lasting implications⁶⁰ and having the asset may be important to the nation in the future-the environmental concerns need to be addressed today.

Forests rich in biodiversity may have little amenity value to the people in a poor country today. But as the country's per capita income rises, that value is likely to increase-making it important to have prevented irreversible losses. Since these assets often yield significant benefits to poor people in the country today, who rely heavily on it for their livelihood (food, fuel, fodder, and medicinal plants), it may be possible to address the environmental degradation and poverty reduction simultaneously through financing or cost-sharing from the larger community within the country or from abroad. Such schemes need to be appropriately designed to provide, where necessary, alternative livelihoods for the local populace.⁶¹ By avoiding irreversible degradation, these schemes can also keep the option value of the resource for the nation in the future. Such schemes are akin to economic growth in aligning the preferences of the current (poorer) population with those of future (richer) populations.

An example of such cost-sharing is Costa Rica's environmental services program. Costa Rica's forests are attractive to tourists worldwide, given the rich biodiversity there. But the rate of deforestation in the 1970s and 1980s was one of the highest in the world. To protect this asset, Costa Rica designed a very innovative scheme, the Payments for Environmental Services Program, in which those who benefit from the environmental services of the forests compensate those who bear the burden of maintaining the forests. Under the scheme, a market has been created for a variety of services, with carbon sequestration among the most successful (see box 8.5 in chapter 8).