Structural adjustment and the environment: the need for an analytical methodology

Ecological Economics 27 (1998) 267 – 281

ANALYSIS

Structural adjustment and the environment: the need for an analytical methodology J.J. Kessler *, M. Van Dorp AIDEn6ironment, Ad6ice and Research for De6elopment and En6ironment, Donker Curtiusstraat 7 -523, 1051 Amsterdam, Netherlands Received 7 April 1997; received in revised form 6 October 1997; accepted 21 October 1997

Abstract This article shows how prevailing World Bank and IMF orthodoxy affects the environment in the South, and offers an analytical methodology for dealing with it. Existing studies and reviews conclude that structural adjustment programmes (SAPs) in developing countries have both negative and positive environmental impacts, and that both types of impacts show great variation. This article summarises the methodological difficulties in environmental impact assessments (EIAs) of SAPs and reports on a study on the environmental impacts of SAPs which took as the entry point of analysis, the three natural resources, soils, water and forests, contrary to other studies on this subject. The methodology developed for this study aimed at generating more specific conclusions for variable ecological regions and social groups. The methodology appears to be a useful starting point to develop practical strategic environmental assessment (SEA) tools for planning SAPs and other policies oriented at sustainable development. Such tools would be applied at the earliest possible stage of development planning, preferably before SAPs are implemented. Available SEA tools and methodologies should be reviewed, adjusted and improved to serve the purpose of identifying the crucial environmental and social issues involved, to be considered during the economic adjustment process, and to identify key sustainability indicators. It can be concluded that the methodology developed for this study has been useful to further clarify and specify environmental impacts of SAPs, and to identify relevant key issues which, in the absence of necessary data, contribute to finding relevant indicators of an efficient monitoring system. © 1998 Published by Elsevier Science B.V. All rights reserved. Keywords: Structural adjustment; Macro-economic reform; Multilateral financial institutions; World Bank; IMF; Natural resources; Environmental impact; Environmental assessment; Sustainability indicators

* Corresponding author. Tel.: +31 20 6868111; fax:+31 20 6866251; e-mail: [email protected] 0921-8009/98/$ - see front matter © 1998 Published by Elsevier Science B.V. All rights reserved. PII S0921-8009(97)00184-5

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1. Introduction Structural adjustment programmes (SAPs) are designed to reform economies to a more export-oriented and liberalised market economy while downsizing governments that have become inefficient bureaucracies. They consist of combinations of exchange-rate policies, monetary and interest, fiscal, trade, public-sector and institutional policies (Opschoor and Jongma, 1996). Initially, SAPs were solely intended to modify the structure of an economy so that it can maintain both its growth rate and the viability of its balance of payments in the medium term. Several studies and reviews have appeared on the impacts and consequences of IMF/World Bank-inspired SAPs on social issues, on the environment and on sustainable development (Abaza, 1996; Opschoor and Jongma, 1996; Engberg-Pedersen et al., 1997). One of the most recent publications is based on elaborate studies from nine adjusting countries1, coordinated by the World Wide Fund for Nature (WWF-International) (Reed, 1996). This article reports on a desk-study funded by WWF-International on the impacts of SAPs on natural resources, based on the information and data from these nine countries. The natural resources, soils, water and forests, were taken as the entry point for analysis. The methodology specifically developed for this study has an analytical character and is innovative in comparison to existing methodologies by its resources-based approach (rather than a sectoral or regional one) to assess the impacts of structural adjustment policies.

2. Review of environmental impacts of SAPs and methodologies used

2.1. En6ironmental impacts of structural adjustment Existing studies and reviews show that SAPs have both positive and negative environmental 1

In Africa: Cameroon, Mali, Tanzania and Zambia; in Latin America/Caribbean: El Salvador, Jamaica and Venezuela; in Asia: Pakistan and Vietnam.

impacts (Abaza, 1996; Opschoor and Jongma, 1996; Reed, 1996). These impacts can be briefly summarised as follows.

2.2. Positi6e impacts “

“

The removal of perverse subsidies discourages excessive and inefficient use of chemical pollutants and stimulates more efficient use of scarce natural resources; greater economic and price stability promotes sound resource management and lower marginal time preference, while a higher standard of living increases demand for better environmental quality, general efficiency and technology gains.

2.3. Negati6e impacts “

Price changes and deflationary policies increase short-term unemployment and poverty, thus encouraging over-exploitation of natural resources (e.g. encroachment on marginal lands, opening up of new forest lands and unsustainable agricultural practices); “ export promotion stimulates high-input cashcrop farming causing environmental destruction and pollution and increased export of primary resources; “ trade liberalisation boosts investments in the extractive, industrial, agricultural, forestry, tourist and transport sectors, which cause environmental damage if insufficiently controlled; “ removal of subsidies on basic commodities (food, fuel and agricultural inputs) leads to an increased burden on the poor, causing increased dependency on natural resources; “ dismantling of the environmental management and protection apparatus and institutions and the downturn of public services (due to reductions in public expenditure and institutional reforms) lead to environmental deterioration, inefficient use of natural resources, urban pollution and decline of public health. It can be concluded that economic policies and reforms may have profound impacts on the quality of environmental assets, more specifically on the capacity of the ecological system to provide

J.J. Kessler, M. Van Dorp / Ecological Economics 27 (1998) 267–281

various goods and services to human society. However, these impacts show great variation, which is due to a number of factors. 1. The variable context, both within countries and between countries studied, as regards (a) ecological factors (e.g. high or low potential areas, fragile or robust ecosystems, variable level of degradation); (b) socio-economic factors (e.g. low or high dependency on local resources, high or low pressure on resources, subsistence or commercial production systems, use of external inputs, rate of urbanisation), and (c) institutional and legislative factors (e.g. land tenure legislation, quality of social and extension services). 2. The occurrence of both direct environmental impacts (e.g. deforestation for increased revenues) and indirect impacts (e.g. changing income distribution leading to increased pressure on forest resources), which may be reinforcing or opposing each other. The indirect impacts usually involve long and complex impact chains with many uncertainties and assumptions involved. 3. Countries being variously affected by major disturbances with great environmental impacts, such as environmental shocks (drought, floods, hurricanes), economic shocks (great changes in commodity prices, e.g. oil, minerals) and social shocks (e.g. political unrest, high rate of immigration e.g. by refugees). 4. The variable time perspective involved, particularly since economic reforms were implemented (different history of SAPs and paces of implementation). 5. The variable package of SAP measures, and superimposed upon that the ‘SAP implementation gap’ (i.e. the divergence between prescribed SAP policies and their implementation, including the delay or failure of programmes intended to offset social impacts of adjustment). Due to the great variation in outcomes of the environmental impacts of SAPs, most authors are unable to draw firm conclusions, but instead refer to more or less common impacts and more or less likely scenarios or expectations. However, the net result of the available studies and reviews is that

269

of negative environmental impacts exceeding positive impacts (Abaza, 1995; Munasinghe and Cruz, 1995; Young and Bishop, 1995; Opschoor and Jongma, 1996). Policy-makers tend to disregard such conclusions as not being based on quantitative data and analysis, or being too vague to allow ‘translation’ into concrete policy measures for specific situations.

2.4. O6er6iew of assessment methodologies It may be clear that determining the environmental impacts of SAPs is not simple. Opschoor and Jongma (1996), on the basis of a review of several studies, conclude that due to the existence of various evaluation methods (before–after comparisons, actual-target comparisons, controlgroup approach, general equilibrium models), it is difficult to compare different studies. In a critical review of the recent literature and empirical evidence on the issue of adjustment operations by Young and Bishop (1995), the World Bank studies on the issue are criticised for their exclusive focus on the intended objectives of adjustment rather than actual observations, casting doubt on the conclusions reached (Young and Bishop, 1995). The nine country studies coordinated by WWF (Reed, 1996) and executed by local economic research institutes with the support of ODI and HIID2, applied a sectoral approach, taking as the basis of their studies the economic development per country and the economic measures associated with the SAPs, with case studies for certain economic sectors and future economic growth patterns (Reed, 1996). The general method that was applied can be described as pragmatic, involving the specification of a priori relationships which seem plausible to researchers, which were then tested by the use of time-series evidence, reinforced by field surveys and local professional opinion. The scarcity of reliable quantitative data limited the applicability of computable general equilibrium (CGE) modelling, which tests the possible effects on environmental resources of alter2 Overseas Development Institute, London; Harvard Institute for International Development, Cambridge, MA.

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Fig. 1. Relevance of different types of SEA in the strategic planning process, in comparison to other environmental assessment tools (Kessler, 1997).

native economic policy scenarios. A major difficulty remained the problem of isolating the impacts of adjustment to that of underlying social, economic and institutional factors. Specifications on the type of impacts on the environment were not given, nor understanding of the determining factors of possible relationships. It can be concluded that the environmental assessment methodologies have not produced sufficient understanding of the relationships between the economic policy measures (and specific interventions based upon such policies) and the resulting environmental impacts (Abaza, 1996; Opschoor and Jongma, 1996). This is mainly due to the absence of an analytical assessment methodology (e.g. to deal with the sources of variation mentioned above) and the scarcity of reliable quantitative data. During a conference on ‘Structural Adjustment and the Environment’ in the Netherlands it was concluded that most studies are not sufficiently objective. They are mainly based on qualitative assessments rather than empirical data and they focus too much on shortterm consequences (AIDEnvironment, 1997).

2.5. Strategic en6ironmental assessment Environmental impact assessment (EIA) was one of the first environmental assessment tools. EIA is basically a process of identifying, predicting, evaluating and mitigating the biophysical, social and other relevant effects of proposed projects and physical activities prior to major decisions and commitments being made (Sadler, 1996). But because of several inadequacies of

limiting the assessment to projects only, a new environmental assessment instrument has been designed, aimed at the strategic level of (sectoral) policies and programmes that set the basic framework for project identification. This is referred to as strategic impact assessment (SEA), which is a systematic process for evaluating the environmental consequences of proposed policy, plan or programme initiatives to ensure they are properly included and appropriately addressed at the earliest possible stage of decision making, on a par with economic and social considerations (Therivel et al., 1994) (Fig. 1). Abaza (1996), Kessler et al. (1996) and Reed (1996) emphasised the need to apply SEA to countries undergoing macro-economic reforms for better planning and adjustment of SAPs. SAPs have failed to take into account both environmental and social considerations in a meaningful way, while the impacts on these dimensions are profound. Restructuring economies through policy reforms should be based on an SEA that integrates criteria for the expected improvements of the economy with criteria for the sustainable use and management of natural resources, as well as criteria for equal development opportunities for all social groups. It is often suggested that declines of social and/or environmental qualities and values are acceptable negative side effects of economic reforms, and will be corrected once economic growth has reached a certain stage. However, this reasoning is not adequate for two major reasons: “ both social and environmental changes can be irreversible and long-lasting, such as the out-

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break of diseases, social conflicts, uncontrolled migrations, loss of biodiversity, disruption of stabilising environmental functions leading to topsoil loss by erosion, floods etc. (all of these events have occurred in the last decades and/or are ongoing); “ based upon the theory of a positive correlation between economic growth and environmental improvement (so-called de-linking) in Western countries (de Bruyn et al., 1995), it will take decades before most developing countries have reached the stage when the first environmental improvements can be expected.3 A recent review of SEA applications (Sadler and Verheem, 1996) shows that the majority of SEAs have been applied to sectoral plans and programmes and existing regional development plans (mainly in the sectors of energy, transport and waste management). Few, if any, have been applied for policy and plan evaluation, or as part of a comprehensive policy-making framework, before any important decisions have been made (Therivel and Partidario, 1996). Thus, the application of SEA to SAPs would be quite innovative and require methodological preparatory work.

3. Methodology of the AIDEnvironment study

3.1. Description WWF requested AIDEnvironment to review the nine country studies from an environmental perspective, with a cross-sectoral analysis of the 3 Other weaknesses of this so-called environmental Kuznets curve are: (1) de-linking observed in the 1980s (mainly due to technological improvements reducing pollution per product unit) now appears to revert back to a re-linking, due to the continuous increase of total consumption, e.g. of energy (de Bruyn et al., 1995); (2) measures taken by Western countries for environmental improvement focus on pollution control; the theory does not look into the dynamics of depletion problems prevailing in most developing countries (e.g. deforestation, soil depletion); (3) the theory does not apply to most developing countries, as these countries cannot make use of natural resources in other parts of the world, as most western countries now do (e.g. the Netherlands uses an area equal to about eight times its own surface to generate the necessary resources for continuous economic growth (IUCN, 1994)).

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impacts by SAPs on the quality of the three natural resources, soils, water and forests. The analytical framework developed by AIDEnvironment to carry out this study (Kessler et al., 1996) particularly emphasised: “ the environmental qualities of these resources and the requirements for sustainable use; “ the environmental regulation or stabilisation functions of these resources and the consequences of impacts on these functions for human society (instead of short-term productive assets only); “ the long-term consequences and thresholds or norms of environmental degradation for different human systems using these resources. One challenge was to find a way to evaluate the impacts on the multitude of environmental functions of these natural resources, and their basic values (goods and services) for human society. For that purpose, the following four parameters of the life support system (LSS) were defined: 1. producti6ity refers to the range of goods and services that can be harvested and used for human well-being (e.g. forest products, water purification); 2. stability refers to the range of natural processes that buffer, dampen, regulate and otherwise stabilise against external shocks and that provide resilience to bounce back after disturbance; 3. di6ersity concerns the availability and viability of many different products and services; 4. optionality is related to the maintenance in the long term of diversity and stability, so that often unknown or undeveloped future societal demands may be secured. The methodology consisted of the following four methodological steps (Fig. 2). Step 1: Firstly, the diversity and multiple use of each resource was captured by distinguishing different types (e.g. different types of forests: primary/secondary forest, fallow land, parkland etc.) and by specifying the different functions per formed by each type for human society per country and/or ecological zone. The resource functions (i.e. qualities) were classified as production, regulation, diversity and cultural functions. For in-

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Fig. 2. Analytical methodology used for impact assessment of SAPs on resources soils, forests and water (numbers refer to the four steps explained in the text) (Kessler et al., 1996).

J.J. Kessler, M. Van Dorp / Ecological Economics 27 (1998) 267–281

stance, primary forest contributes to produce timber and supports a high biodiversity, contrary to fallow land with shrubs. However, both play an important role in producing firewood, in protecting the soil against erosion and in maintaining soil fertility. Specifications can also be made as regards the contribution of these different functions to the four LSS parameters. While specific environmental functions contribute to the LSS parameters of productivity and stability, the parameters of diversity and optionality are guaranteed by the existence of a great variety of environmental functions mainly. The linkages between resource types, environmental functions and LSS parameters basically clarifies in a systematic way the various environmental values for human society and allows for identification of the key issues involved. Next, for each resource (type), three types of indicators were defined: state or quality indicators, pressure indicators and response indicators (based on the widely accepted OECD indicator framework; World Bank, 1995). The indicators were selected on the basis of the following criteria: whether trends were likely to have developed between 1970 and the present, whether these trends could have been influenced by SAPs and whether data were available (Table 1).4 Step 2: The current state of the environmental functions per resource and trend lines of the last 10 – 20 years were established using the selected state indicators. Such trends were then compared with the normatively established norms, standards and threshold levels for these resource functions (e.g. sustainable yield, carrying capacity, risk of species loss, degradation processes). Although such information is often not available and/or very site specific, the value of this exercise is to ascertain in general terms the distance between the ideal and the real and, even more important, the direction in which trends of environmental qualities are evolving.

4 The World Bank recently started an annual series on environmentally sustainable development indicators, also using this indicator framework.

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Table 1 Main state, pressure and response indicators used in the AIDEnvironment study Indicators for SOILS State indicators: soil water erosion (areas affected and severity); soil wind erosion (ibid.); chemical soil degradation (ibid.); desertification; soil depletion (fertiliser use, mineral balance). Pressure indicators: proportion potentially arable land; cropland area (perennial crops); agricultural GDP; area cultivated; yields; tractors per rural capita; rates of mining, industrialisation and tourism; price and use of fertilisers and agrochemical inputs; livestock stocking rates; number of cattle; occurrence of land use conflicts; agricultural extension services; social indicators (poverty, literacy levels, water supply). Response indicators: changes in urban and industrial waste-management systems; legislation and taxes; reforms in land-tenure legislation (agricultural and pastoral). Indicators for FORESTS State indicators: forest cover; forest vegetation cover per forest type; forest fragmentation, forest biomass; protected areas; endemic and threatened species; trade in wildlife. Pressure indicators: rates of forest degradation and deforestation; area of plantations; annual plantation rate; timber, non-timber product and food extraction from forests; croplands and pasturelands area; industrial and urban development; hunting and poaching; trade in endangered species; dependence of households on forest exploitation; forest product prices; forestry policy and legislation; marginal communities’ rights and legislation; forestry extension services; social indicators (see soils). Response indicators: reforms in land-tenure legislation; protected areas and level of control. Indicators for WATER State indicators: area of surface water; depth and availability of groundwater; peak flows and floods; sediment load in discharge waters and siltation; natural and landscape values; biodiversity. Pressure indicators: conversion of wetlands; deforestation rate in catchment area; soil erosion in watershed; discharge levels of chemicals and waste; rural and urban water use; fishing techniques; water management and hydropower; fertiliser and pesticide use; population density; rate of industrialisation and urbanisation; presence of sewage plants and waste treatment equipment; access to safe drinking water; functioning management institutions; effective policies; tourism. Response indicators: introduction of waste treatment and sewage plants; watershed management; development of effective policies; protection of water resource areas.

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Step 3: Given the scarcity of state indicators (and their limited reliability) and the need to predict how qualities will be evolving in the future, an analysis was made of the pressures on the resource functions, using trend lines of selected pressure and response indicators. A description of the most important resource-use systems and an analysis of the underlying key factors (social, economic, institutional and ecological) determining the intensity of such resource use was essential to understand what is driving the present and future pressures and, thus, to select the most relevant pressure indicators for each natural resource (Table 1). Step 4: At this stage, having reached a certain level of understanding of the current state and pressures on each natural resource, the impacts of SAPs were assessed following the chain of impacts: SAP measures [ pressure and response indicators [ underlying key factors present and future state of environmental functions (qualities) [ LSS parameters. This was done both quantitatively and qualitatively. The quantitative approach involved the comparison of the chronology of the indicator trend lines (with an emphasis on abrupt changes) with the chronology (trend lines) of economic and social indicators which were selected for being directly influenced by the implemented SAP measures. An overview of the occurrence of environmental, social or economic shocks, per country, indicated whether abrupt changes in trend lines could be attributed to such factors. The qualitative approach involved the use of qualitative information (e.g. of case studies) and logical reasoning on the relationships between SAP measures and underlying pressure and response indicators. The established relationships between SAPs and environmental pressures was summarised by the influences on relevant degradation processes of the three natural resources and on the quality of the four LSS parameters, with specifications, if possible, by regions and/or social groups (Table 2). The impacts on the four LSS parameters determine the present and future environmental qualities for human society, and thus whether and to what extent development is sustainable.

3.2. Example In many so-called low external-input agricultural systems, soil depletion is caused by the high costs of fertilisers, and inadequate agricultural extension and research. Underlying key factors are poverty, high dependence on local natural resources for subsistence food production, low budgets for the agricultural extension service and high costs of external inputs. The concurrence of the trend lines of declining fertiliser consumption, increasing consumer price index and implementation of SAP measures gives strong evidence for a relationship between SAP measures and (future) soil depletion. The assessment of the current status of soil qualities (step 1) allows one to ascertain when such soil depletion will be serious (i.e. how rapidly thresholds will be surpassed, affecting human society through the various LSS parameters). Ultimately, this should lead to an adapted SAP, taking account of (among others) impacts on soil quality as a long-term objective for the economic well-being of a country.

4. Results of the analysis In the following, only those results generated by this study are presented that are different from or additional to conclusions from the existing studies and reviews cited above. More details as regards the following conclusions are presented in Table 2 (Kessler et al., 1996). 1. In situations characterised by high external-input agriculture (HEIA) and in areas with high agricultural potentials SAPs have positive impacts by reducing environmental pollution. Here, the declining subsidies on agro-chemicals have led to reduced over-use of fertilisers, pesticides and machinery, and have thus increased their efficiency (without significantly affecting yield levels) and have stimulated the adoption of more environmentally sound practices such as integrated pest management (IPM) and zero-tillage. The dismantling of highly inefficient parastatals due to SAP measures (e.g. cocoa board in Cameroon) in such high potential areas has further contributed to

(7) Increased commercialisation of livestock products (8) Reduced application of appropriate management practices of land, forests and water resources

(6) Increased animal stocking rates in subsistence sector

(4) Area increase with ‘non-erosive’ crops, particularly tree crops (5) Reduced use of agro-chemical inputs

Deteriorated input–output price ratio, unfavourable marketing arrangements, removal subsidies, poor credit facilities Improved opportunities for tradeable crops, rural emigration due to deteriorated rural opportunities

(1) Area increase of food crops, particularly on ‘marginal’ soils, also around urban centers (2) Area decline of food crops due to increased yields or emigration (3) Area increase with ‘erosive’ crops, mainly annual crops

Smallholders mainly, poor extension and social services

Decline of extension services and research facilities due to budget cuts, poor credit facilities, poor land tenure security

Increased dependency on livestock products (see 1); poor rural credit and savings facilities; reduced subsidies on commercial feeds Better opportunities for tradeable livestock products (see 3)

Reduced subsidies on external inputs, deteriorated input-output price ratio, privatisation, higher transport costs

Better opportunities for tradeable crops due to devaluation, trade liberalisation, privatisation, poor extension services See under 3; good extension services, land tenure security

Underlying influences of SAP measures

Pressure trends

Mainly in remote areas with poor information supply

Commercial sector pastoralists

High potential areas mainly, irrigation sector

(b) HEIA and commercial sector with poor or moderate resource base Smallholders with poor food security, low incomes, lack of alternatives

−−

Pastoral areas in good condition (ranching)

Low potential (semi-arid) agropastoral areas

Low potential areas mainly

High potential areas, good infrastructure

(a) LEIA smallholders with poor resource base

Mainly commercial sector and relatively rich smallholders

High potential areas, good infrastructure

Uncommon, limited areas, mainly high potential areas

Smallholders and commercial agricultural sector

Mainly commercial sector and relatively rich smallholders

Widespread, low potential areas, ‘marginal’ soils, forests

Areas involved

smallholders, high land pressure, low incomes, no alternatives, unemployed civil servants

Social groups involved

−

Var

−

0

Var

Var

−−

++

−−

0

Var

−

0

−−

−−

Var

++

−−

−

0

0

++

0

0

Var

Var

0

−−

−

−

0

+

+

−−

Var

−−

Forest degradation

−−

Var

−

Var

Var

Var

−−

+

−−

Water quantity decline

−

Var

−

++

0

0

−−

+

−−

Water quality decline

−

+

+

0

0

−

+

−

+

−

Var

−

+

−

+

−

+

−

Stability

0

−

−

+

0

+

−

+

−

Diversity

Productivity

Soil polution

Soil erosion

Soil depletion

Impacts on LSS parameters

Impacts on resources

−

−

+

0

0

−

+

−

Optionality

Table 2 Predominant positive and negative trends of pressures on the environment with underlying influences of SAP measures, social groups and areas involved, impacts on resources soils, forests and water, and impacts on the four LSS parameters

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Few local experiences

Productive sectors: irrigation, forestry, wildlife

Both freshwater and marine fishing Urban areas

Smallholder and commercial sector

Better opportunities for commercialisation of fish (see 3); poor legislation and law enforcement Declining budgets for state services, no support to build up decentralised management and control capacities Government budget cuts, privatisation and market liberalisation, leading to decentralised management arrangements and prices reflecting scarcity

Areas with good infrastructure and markets

Mainly high potential areas

Forest ecosystems

Productive forests mainly

Low potential, remote areas

So far limited, in urban and irrigation sectors mainly

Limited areas, good infrastructure

Areas involved

Urban sector mainly

Smallholder and commercial sector

Better opportunities for producing tradeables by irrigation and industries using much water, no polluter pays principles

Smallholder and commercial sectors, land security, good markets

Illegal sector

Commercial sector mainly, few smallholders

Smallholders with poor food security, low incomes and lack of alternatives

People with wide resource base and options to develop alternatives

Commercial sector mainly, small scale mining by smallholders

Social groups involved Forest degradation

Water quantity decline

Water quality decline

+

0

0

−

+

0

−

0

++

−

0

0

0

0

0

0

−

0

+

0

0

−

0

0

0

0

0

0

0

−

+

0

0

−

+

−

−−

−

0

−

+

0

0

−

+

0

−−

−

+

−

+

−−

0

−

0

0

−

−

Var

−−

+

−

+

+

+

+

+

+

+

+

+

−

−

−

+

0

−

−

+

−

Stability

0

−

−

−

Var

−

−

−

+

0

Diversity

Productivity

Soil polution

Soil erosion

Soil depletion

Impacts on LSS parameters

Impacts on resources

Extracted from: Kessler et al. (1996), structural adjustment and natural resources: the LSS under pressure, AIDEnvironment, Amsterdam, Netherlands and WWF-International, Gland, Switzerland. −/−−, Indicates increasing extent of deterioration. +/++, Indicates increasing extent of improvement.

(17) Decline of maintenance of sewage plants and waste treatment (18) Improved local resource management systems

(14) Increased reforestation and community forest management (15) Increased water concentration and use in irrigation and industries productive sectors (16) Increased fishing for commercial purposes

(13) Increased hunting and trapping

(12) Increased commercial exploitation of forests

Increased dependency on forest products for energy, poor land tenure security, food security and fodders (see 1 and 5) Better opportunities for tradeable forest products (see 3); weakened environmental legislation and control For subsistence and commercial purposes (see 1 and 3); ineffective environmental legislation and law enforcement Increasing energy costs making forest products more valuable

Better opportunities for trade of mining products, poor environmental legislation and law enforcement due to budget cuts See 5; high costs of energy and external inputs, water pricing and taxation of scarce resources

(9) Increased mining (extractive sector)

(10) More efficient use of scarce water, energy, nutrients, land resources (11) Intensified forest exploitation for subsistence needs

Underlying influences of SAP measures

Pressure trends

Table 2 (continued)

0

−

−

−

+

−

0

−

0

0

Optionality

276 J.J. Kessler, M. Van Dorp / Ecological Economics 27 (1998) 267–281

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reduce pollution. However, in situations characterised by low external-input agriculture (LEIA) and in areas with low agricultural potentials the same SAP measures have negative impacts by reducing the use of external inputs (which was already very low) to levels that force farmers to increased use of soil fertility and organic matter (causing soil mining and soil depletion) or expansion of croplands (causing deforestation), as alternatives have become less attractive. 2. SAPs have stimulated the production of cash crops, which may further stimulate agricultural development through the improved feasibility of using external inputs and improved technologies and generating increased incomes, but which can also lead to uncontrolled deforestation, excessive use of pesticides, water pollution and decline of soil stability. The first (positive) development is found with cotton in southern Mali5, the second (negative) development occurs with cotton in El Salvador.6 Land tenure, agricultural extension, the diversity of the agricultural system and the value of forest functions for local communities appear to be underlying key factors. 3. In some countries, SAPs have stimulated rural emigration (through deteriorated agricultural input–output ratios and opportunities in urban areas) thus, reducing rural pressures but increasing urban pressures (e.g. aggravating urban waste pollution); in other countries SAPs have stimulated urban emigration (due to increased urban unemployment) thus, increasing rural pressures and encroachment on ‘marginal’ lands. Cultural

5 A well-documented case shows how the devaluation of the CFA franc in 1994 has led to the tripling of incomes of farmers growing cotton, while revenues have not been invested in improved soil management (Giraudy and Niang, 1996). 6 The discussion on ‘erosive’ and ‘non-erosive’ crops (Barbier, 1991) requires clarification as the agricultural practices being adopted and the ecological context determine whether the crop is grown in a sustainable way. ‘Non-erosive’ tree crops can be grown in an unsustainable way (e.g. coffee or cocoa using many pesticides).

4.

5.

6.

7.

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and social ties, living standards and the relation between rural and urban incomes and social services appear to be underlying key factors. SAPs have stimulated destocking and selling of livestock in the short term (due to devaluation and trade liberalisation) thus, reducing environmental pressures (e.g. in Mali). However, stocking and clearing of land for grazing in high potential areas has increased if land is easy to purchase, and land management regulations are not put in place or are not respected (e.g. Venezuela). Encroachment on marginal soils and expansion of croplands at the expense of forests is due to population increase in the first place, but has been accelerated due to SAPs, and has accelerated environmental degradation where fragile ecosystems are affected (e.g. mountainous areas, semi-arid lands, coastal zones, wetlands). There are some cases of increased tree planting and improved local forest management regulations being stimulated by increasing prices for fuelwood and energy sources, mainly in urban centres. However, tree-planting initiatives focus on the productive properties of trees, emphasising the use of rapidly growing tree species in monocultures, while disregarding the various regulation functions of forests (e.g. biodiversity, erosion and flood control). SAPs have accelerated the use of water resources for economic sectors such as industries, mining, tourism and irrigation, for instance by creating dams and reservoirs. This demonstrates how SAPs and economic developments are beneficial for a few (the ‘winners’) but harmful for many (the ‘losers’). The ‘losers’ are confronted with the negative side-effects of the increasing use of water resources for productive purposes, both upstream (by declining water availability and dessication) and downstream (by flooding, disturbed water balance and water pollution). Disturbed water balances will affect the life span of reservoirs and irrigation schemes.

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5. Conclusions and recommendations

5.1. Usefulness of the methodology The methodology as described is essentially an analysis of the natural resources, their values, dynamics, pressures and underlying key factors, followed by an assessment of the influences of SAP measures through linkages with underlying key factors. Defining priorities and focusing on key issues is important in every step of the methodology. The methodology could be characterised as an SEA used for an ex-post evaluation instead of ex-ante decision making (Fig. 1). The methodology has the potential to deal with most of the problems listed in Section 2, particularly when being applied at regional levels, due to its systematic and analytical approach mainly. However, difficulties to realise this potential, in other words, to apply the analytical rigour of the methodology, were: “ the shortage of reliable quantitative data, particularly long-term data sets, state indicators of environmental qualities, and data on issues related to regulation, diversity and cultural functions of natural resources; “ the absence of regional statistics, recognising that national statistics hide important regional variation and are often inadequate to understand specific dynamics; “ uncertainties as regards the ‘SAP implementation gap’ in the nine countries (Section 2); “ the short period since major SAP measures were implemented (e.g. devaluation of the CFA franc only 1 year before the study was undertaken). In spite of these difficulties, the results of this study are innovative in comparison to existing studies in the following respects. (1) Much local variation in the impacts of SAP measures on environmental qualities has been explained by better insight in the resource-use dynamics involved. For instance, impacts are strongly different for low and high external-input agricultural systems, fragile and robust ecosystems, upstream and downstream situations, situations of resource scarcity and abundance.

(2) Impacts of SAP measures on different social groups, through changed resource use and resulting changes in environmental qualities, result in a dichotomy between ‘losers’ and ‘winners’. Insight in resource-use systems and trends (using state and pressure indicators) indicates the social groups most affected (in this study: women, the landless, pastoralists and indigenous communities). The combination of the following conditions appears to have led to particularly vulnerable situations (based on indicators of social instability, conflicts between user groups and high emigration rates): (a) potentially high short-term revenues from unsustainable resource exploitation; (b) scarce alternative income opportunities and low opportunity costs; (c) poverty and high population growth; and (d) absence of long-term land security and/or management responsibilities of natural resources. (3) Insight in the dynamics and underlying key factors determining the nature and severity of environmental impacts by SAP measures revealed that most important factors to consider are: “ ecological: production potentials and fragility (stability) of ecosystems and urban environments, thresholds of irreversible change; “ social: population growth rate, poverty, land tenure security, income and employment diversification, unemployment rate; “ institutional: research and extension services, available credit supply, decentralisation policies, law enforcement capabilities and application of the polluter-pays and the precautionary principles. These factors will determine whether SAP measures such as trade liberalisation and devaluation have positive environmental impacts (by sustaining productive use) or negative impacts (by stimulating ‘grab-it-and-run’ behaviour). Insight in relations with underlying key factors is essential to identify specific accompanying or mitigating measures (for social groups and ecosystems) in case of expected negative (environmental) impacts and, more importantly, to identify and support potential win–win options in a pro-active way (several of which now occur more or less incidentally as a result of SAP measures).

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(4) Summarising the impacts on the various functions of the three natural resources, the study demonstrated, through the use of the LSS parameters, the increasing use of productive functions and the common neglect of the stability, diversity and optionality functions of the environment (Table 2). This underlines the fact that the adopted model for economic development is in most cases not sustainable, as the production functions will be gradually undermined as a result.

5.2. Strategic en6ironmental assessment In order to achieve truly sustainable development, an integration of economic adjustment, poverty alleviation and sustainable use and management of natural resources is necessary. The basic purpose of an SEA would be to review the development strategy of each country, identify the foundations of future economic and social development, identify the role of the environment and natural resources in that development strategy and design SAPs tailored to those specific conditions (Reed, 1996, based on Goodland and Tillman, 1995). Specific attention would then need to be given to the complex and multi-faceted links between structural adjustment and the environment, the environmental context and assets at stake, the social groups involved, and ways to distinguish environmental impacts of SAPs from other major disturbances. However, practical and operational tools concerning how to execute SEA in developing countries are not (yet) available. It is essential to develop SEA tools that are light in terms of expertise, technology and time period involved, to comply with criteria of participation and processorientation. Available SEA tools and methodologies should be reviewed, adjusted and improved to serve the purposes of identifying the crucial environmental and social issues involved. An SEA should be applied at the earliest possible stage of development planning, preferably ex-ante (before SAPs are implemented, in a pro-active way to identify opportunities and win – win options), possibly ex-post (during or after SAPs have been implemented), depending on the state of the ad-

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justing process. The methodology applied for this study can be considered as a basis to further develop a practical SEA approach focused at impact assessment of SAPs, and can potentially be applied at an early decision-making phase (Fig. 1). Based upon these experiences, AIDEnvironment has developed an SEA methodological framework that is currently being tried out on a limited scale (Kessler, 1997). In order to raise awareness on the key environmental issues as a basis for integrated planning, an SEA should pay specific attention to: “ fragile ecosystems, critical environmental functions (mainly those of stabilisation and regulation), biodiversity values, possible thresholds of natural resources and maximum sustainable yield levels; “ the multi-functionality of the environment, including long-term regulatory functions; “ environmental risks; “ vulnerable social groups, particularly those that depend greatly upon the use of natural resources in their immediate surroundings (and would easily be forced to an unsustainable use of the environment in case of a decline of living standards and absence of realistic alternative income options); “ basic social services supporting the maintenance of environmental functions; “ unsustainable resource-use practices or systems and insufficient legislation and/or law enforcement capabilities (e.g. priced and taxed realistically to reflect present and future values).

5.3. Case studies A more widespread commitment by multilateral institutions for protection of the environment when designing SAPs seems to be growing steadily. During an IMF seminar on ‘Macroeconomics and the Environment’ held in 1995, the World Bank emphasised the need for practical case studies in countries where environmental problems are serious, and has mapped out a 5-year action plan, including the assessment of first-order impacts of economy-wide policy reforms on the environment and the incorporation of environmental policies in SAPs (Munasinghe

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and Cruz, 1995). In the footsteps of the Bank, the IMF has also stated that conservation of natural resources has become one of its priorities, as this is a conditio sine qua non for a viable balance of payments in the longer run. The implementation of these progressive measures will take time, while structural adjustment programmes (SAPs) are being implemented at an overwhelming speed. Therefore, more urgent action is required to safeguard the environmental sustainability of adjusting countries. Given a suitable SEA methodology, case studies should be undertaken to specify the relationship between macro-economic policy measures and environment and sustainable development. Such case studies should be implemented at regional levels that constitute relatively homogeneous units in terms of socio-economic relations and ecological conditions. Recommendations should not only focus on the content of SAP policies, but also on the pace and sequencing of specific measures, in order to avoid unacceptable social and environmental impacts. In a follow-up to the WWF research programme on structural adjustment, projects in Central America and Southern Africa have started to integrate sustainability criteria into macro-economic reform.

5.4. En6ironmental monitoring In their review of the literature on adjustment policies and the environment, Young and Bishop (1995) observed the need for multi-factor analysis using a range of economic, social and environmental indicators. Such a monitoring system should be established in conjunction with the economic reform measures. It would enable policy makers to collect data for quantification and valuation of environmental changes in relation to SAP influences, to adjust certain policy reform measures, or to add mitigating or accompanying measures in case of undesirable impacts, and to work with corrections on GNP in terms of reduced environmental capital or quality (Munasinghe and Cruz, 1995; Abaza, 1996; Opschoor and Jongma, 1996). A monitoring system need not be complicated nor very time-consuming, provided the selected

indicators are targeted at relevant priorities and key issues for specific situations. The problem has generally been how to develop efficient monitoring systems with limited data sets of a few relevant indicators. The SEA methodology, by generating insight into the key underlying factors for sustainable development and relationships with environmental impacts in specific situations, will be helpful to identify key indicators to monitor SAP impacts on the environment and on society at large. This is also what the methodology used in this study has been able to clarify. Even if few reliable quantitative data were available, the methodology has allowed the identification of specific key issues (e.g. environmental functions and values) and associated indicators. These insights are useful in establishing baseline data and data sets for future impact assessment.

Acknowledgements This research has been made possible by the financial support of WWF-International. The authors acknowledge useful discussions with the participants to the Conference on Structural Adjustment and the Environment, organised by AIDEnvironment on behalf of the Dutch World Bank Working Group, Amsterdam, The Netherlands, on the 5th February, 1997. We are grateful to Ola Larsson and two anonymous referees for their useful comments on an earlier draft. The usual disclaimer applies.

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