Integrating Environmental Considerations into the Economic Decision-Making Process

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Introductory note : key issues

This website contains four volumes of background readings on integrating environmental considerations into economic policy making processes. It comprises empirical and analytical material gathered on (i) the institutional mechanisms and (ii) the types of environmental assessments used by governments for the integration of environmental concerns into economic policy-making processes in selected countries in the Asia-Pacific region. At present, development strategies in the region are heavily focused on fostering economic growth, using the private sector as the primary vehicles for undertaking the related economic activities. Such emphasis often does not pay due attention to the detrimental environmental effects of the modalities used to implement the strategy. Increasingly, the need to protect the fragile environment, and thus make economic development sustainable in the full sense of the term, is receiving the attention of policy makers. Strategies to balance environmental concerns with the promotion of economic growth are becoming a major aspect of government policies and plans, although those strategies are constrained by a combination of factors. Integration of environmental considerations into economic policy decisions requires (i) institutional framework to facilitate such integrated approach, (ii) effective communication between the environment and economic policy makers to enable for meaningful policy making, as well as (iii) effective policy tools which lead economic actors to incorporate environmental factors into determinants of their economic decision making.

Institutional mechanisms, which comprise formal rules and standards, informal norms, and the organizational structure that defines and enforces the rules, are important, and indeed crucial, because they provide government at all levels, federal, provincial and local, with instruments to frame and implement policies. The credibility, transparency and predictability of the institutional environment reduces transaction costs and defines the incentive structures in; the economy for the emergence of competitive markets. The efficacy of the institutional mechanisms and the interaction between them is dependent to a large degree on: (a) the powers and functions delegated to each agency with well-defined tasks; (b) the scope of the tasks specified; (c) the resources, both financial and human, available for executing the tasks; and (d) the degree of commitment and political will exhibited by the leadership. In the present context, given the segmented and compartmentalized structures of the governments in the region, designing institutional mechanisms which emphasize a cross-sectoral approach to the integration of environmental concerns with economic policy-making processes is, perhaps, one of the most difficult challenges facing policy makers.

The Brundtland Commission emphasized in its report that "governments must begin now to make the key national, economic and sectoral agencies directly responsible and accountable for ensuring that their policies, programmes and budgets support development that is economically and ecologically sustainable" (World Commission on Environment and Development, p. 20). Agenda 21 of the Rio Conference reiterated it even more forcefully, stating that "an adjustment or even a fundamental reshaping of decision-making, in the light of country-specific conditions, may be necessary if environment and development is to be put at the centre of economic and political decision-making" (United Nations, p. 65). It called, inter area, for ensuring the integration of economic, social and environmental considerations in decision-making at all levels, a cross-sectoral approach to planning, the adoption of integrated management systems, the strengthening of data collection, the adoption of national strategies for sustainable development, and the enhancement of training, education and research for capacity-building.

Almost all the countries in the ESCAP region have set up government institutions dealing with environment matters, many of them at the national level headed by a minister. However, an apparent major weakness of the current institutional framework is the lack of horizontal and vertical coordination, resulting in dispersed sector-specific policy orientations and concomitant difficulties in trying to harmonize diverse national, local and sectoral interests. In addition, the integration of environmental considerations into the work and mandates of various macroeconomic and sectoral ministries has been hampered by the fragmentation of concerns and responsibilities, restricted decision-making processes which often exclude local level authorities, and inadequate interagency cooperation. For example, export incentives are often devised without full consideration of the impact of increased exports on the domestic natural resource situation. Another example is the setting of pollution norms of various types on a national level, yet making local level institutions responsible for their enforcement, frequently without sufficient financial or human resources. The capacity of the various levels of government personnel to analyze and address environment-related issues also varies widely, with most local authorities having a very limited ability to make and enforce policy decisions. In addition, the various methods used for assessing the environmental problems tend to be devised and implemented in an isolated and diffused manner with negligible intra-country, or even intersectoral, exchanges of experiences.

Despite the importance accorded to sustainable development by the governments of the region, little research has been undertaken on the effectiveness of institutions and administrative structures created for that purpose in these countries. In order to fill the gap in the existing knowledge about institutional mechanisms for sustainable development, ESCAP executed a project entitled "Integrating environmental considerations into economic policy-making processes". The purpose of the project was to assist member countries in building their capacity to devise effective institutional frameworks for policy formulation and implementation for integrating environmental considerations into economic policy-making process.

The project's specific objectives of the project were:

(a) To enhance the capacity of the governments at all levels (federal, provincial and local) in their economic policy-making processes for organizing assessments of the environmental impacts of economic policies and programmes, as well as using these results to achieve effective policy formulation;

(b) To promote interaction and coordination between various government departments and agencies, and between various levels of government, in the formulation and implementation of environmentally sound and sustainable development policies and programmes; and

(c) To enrich public sector human resource capabilities in interdisciplinary analyses of economic-cum-environmental policy issues and implications, through the provision of information and the exchanges of experiences among participating countries.

The project consisted of an interrelated set of activities designed to lead to replicable and sustainable actions at the country level. The undertaking and publication of country level and cross-country research on the institutional aspects, together with intercountry exchanges of experiences in the development of good practice options on selected modalities, are integral parts of the exercise. Accordingly, two different sets of studies were commissioned for selected countries in the three subregions of South Asia, East and South-East Asia, and the Pacific island countries.

The first set of studies focuses on the existing institutional arrangements for incorporating environmental considerations into economic policy-making process. This topic has been further divided into studies at the national, provincial/local and sectoral levels. Each study includes: a review of the institutional modalities for making policy decisions and undertaking coordination between ministries/agencies and an analysis of their strengths and weaknesses; a critical analysis of the types of measures being used to integrate environmental considerations as well as the monitoring and enforcement mechanisms in terms of perceived effectiveness in achieving stated policy objectives; a review of training and information needs of government officials; and a set of recommendations for making improvements in all the above areas. In addition, each study explores the mechanisms designed to incorporate various international agreements on trade and global environmental issues within national policy paradigms.

The second set of studies analyses the effectiveness of various methods used for assessing environmental problems such as land use, soil erosion and hazard management, and the way in which those assessments are fed into policy decision-making process. Each study focuses on a major area of concern for the selected country and analyses the use of different methodologies and policies for addressing the problem, the coordination and monitoring mechanisms devised, and the capacity of the various agencies in the assessment of trade-offs between environmental concerns and economic development objectives.

Four volumes of the country studies available in this site:

Integrating environmental considerations into economic policy making processes; background readings

• Volume I: Institutional arrangements and mechanisms at national level (country studies on Fiji, Nepal, Philippines and Tonga), ST/ESCAP/1944, Sales No. E.99.II.F.42, ISBN: 92-1-119909-3
• Volume II: Institutional arrangements and mechanisms at local/provincial level (country studies on Shenyang in China, Suva in Fiji, Kuala Lumpur in Malaysia, and North West Frontier Province in Pakistan), ST/ESCAP/1960, Sales No. E.99.II.F.53, ISBN: 92-1-119920-4
• Volume III: Institutional arrangements and mechanisms at sector level (country studies on the agriculture sector in Malaysia, the mining sector in Papua New Guinea, and the tea sector in Sri Lanka), ST/ESCAP/1946, Sales No. E.99.II.F.44, ISBN: 92-1-119911-5
• Volume IV: Modalities for environmental assessments (country studies on flood loss reduction in Bangladesh, urban development and environmental protection in Shanghai, China, and fishery resources development and management in Samoa), ST/ESCAP/2003, Sales No. E.00.II.F.3, ISBN: 92-1-119948-4

This CD-ROM publication represents only a fraction of the effort put into the project. The secretariat would like to express its appreciation to all of the country consultants, including the whose papers appear here. The Government of Japan has been very generous in providing funding for the project.

Reference

Agenda 21, The United Nations Programme of Action from Rio. (United Nations publication, Sales No.E. 93.I.11, 1994)

World Commission on Environment and Development, Our common future (The Brundtland Report), (Oxford University Press, New York, 1987) (United Nations Publication, Sales No. E.93.I.11, 1944)

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