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Correcting the overuse or underprovision of important
assets
Addressing policy failures
Many environmental stresses today are not the result of ignorance about what
policies to adopt. Indeed, 10 years ago World Development Report 1992 addressed
the complex issues of environment and development and concluded that several
doable, "win-win" policy options were available (box 2.8).
A decade later these policy recommendations remain valid, but many of them
have, at best, been adopted or implemented only partially.85
As discussed, the widespread use of subsidies remains high across the globe
(for water, energy, and food-especially in industrial countries). Damaging
races for property rights abound (individuals or companies pushing to develop
the remaining natural resources ahead of someone else: minerals, forests,
fisheries). While the world is moving toward greater trade liberalization,
trade restrictions (tariffs and non-tariff barriers) remain on precisely the
goods in which developing nations are competitive, including agricultural
products and textiles.
Box 2.8
World Development Report 1992: Development and the Environment
World Development Report 1992 identified the challenge of pursuing
development and poverty alleviation in a generation (1990-2030) that would see
world population increase by 3.7 billion, food production double, and energy
use triple. It called for actions that would mutually reinforce environmental
protection and development: provide clean air, sanitation, and clean water;
improve management of soils; and protect biodiversity. It saw great scope for
win-win interventions that would simultaneously improve the environment and
provide local economic benefits.
That report also called for improved institutions for environmental regulation,
using market-based incentive principles where possible, and made a series of
policy recommendations:
-
Win-win policies.
Eliminating subsidies for energy inputs, pesticides, fertilizer, irrigation
water, logging, and ranching (perverse subsidies); taxing urban road emissions
-
Priorities for action.
Removing perverse subsidies, strengthening property rights over common pool
resources, expanding service provision, increasing voice and participation,
carefully evaluating environmental tradeoffs with special regard for long-term
irreversible or large-scale damage, matching the government's role to its
capability
-
Policies for sustained development.
Where possible, relying on incentives rather than regulations; curbing the
influence of vested interests
-
Partnership for solutions. Partnering with high-income countries to
expand market access and to increase development assistance; partnering with
high-income countries to finance the costs of global environmental priorities,
especially those requiring the protection of natural habitats in developing
countries.
Source: Authors; Acharya
and Dixon (2002).
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If the policy recommendations of a decade ago continue to be the best route to
improving the welfare of millions of people, why have they not been
implemented? In reality, even the win-win policies have been much harder to
implement than initially thought-vested interests were much more entrenched,
and institutional development was harder to foster. The persistence of policy
failures even when society as a whole can benefit from their removal often
reflects powerful interest groups blocking the necessary reforms. Just as
participation by civil society, together with greater information disclosure
and transparency, can help in monitoring the implementation of environmental
regulations by individual companies, so too can it be an important means of
improving the accountability of the public sector (see
figure 2.5). The blocking of reforms by powerful groups represents one
of the deeper barriers to the emergence of the institutions needed to support
environmental policies.
This Report as a whole tries to show that environmental problems are, at their
root, social problems. The distribution of assets, and of the costs and
benefits of different policies, as well as the role of trust, are all critical
to the ability of societies to develop competent rules and institutions (chapter
3) to address environmental, social, and economic problems.
This chapter has discussed the importance of managing and ensuring a better
balance of assets to enhance human well-being on a sustained basis. It also
covered the externalities and coordination problems that generally lead to the
overuse or underprovision of some of society's key assets, detailing the policy
instruments and mechanisms to address these externalities. As discussed, the
nonadoption or nonimplementation of these policies reflect the fact that the
supporting institutions-with the appropriate characteristics-have not yet
emerged. Chapter 3 looks at
the characteristics of appropriate institutions, the potential barriers to
their emergence, and how these may be addressed; it focuses on catalysts that
may increase the likelihood of the timely emergence of these institutions.
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