Agriculture Reference
In-Depth Information
The need for a new approach to water valuation
Economic valuation methods such as market-based approaches, contingent valuation,
hedonic pricing and the travel-cost method help to express environmental values in
monetary terms, incorporating externalities in a total or full economic value of water
resources (FAO, 2004a). This offers a logical starting point to translate water values into
financial flows through market arrangements and to 'internalise the externalities'.
Nevertheless, the three cases have shown that in the success stories, calculations of full
economic values have not played a decisive role in the development of economic
arrangements. Several explanations for this can be found:
1.
Specific costs and benefits associated with watershed protection and water uses are
difficult to quantify and to capture in monetary terms, not only in developing countries,
but also for instance in the case of New York City and Australia. The limited accuracy
reduces the usefulness of economic valuation methods in practice.
2.
Stakeholders may value other things in addition to narrowly defined economic values
expressed in dollars, such as social stability and environmental sustainability. Of course
these values can somehow be translated into monetary values, but, apart from the
methodological constraints involved in conducting such translations, this ignores the
fact that trade-offs between such values are within the realm of politics rather than
economics (cf. Hellegers and Perry, 2004).
3.
Economic valuation is a tool for researchers and analysts and as such it is disconnected
from stakeholder processes. The pace of stakeholder negotiations may not fit the
timeframes needed for proper analytic valuation exercises, or, when external experts are
consulted by one or more stakeholders, their advice may simply be overruled by the
client, as was the case for an expert panel consulted by EPA in the New York City case
(Okun et al., 1997).
Thus, although in principle the existing methods for economic water valuation can
offer useful support for the design of economic arrangements for water resources
management, their application in practice is limited. There is a need to complement the
existing suite of economic valuation methods with an approach that is specifically
oriented towards the stakeholders and their negotiation processes that determine the
design and implementation of economic schemes. Rather than regarding valuation as an
external input, it is to be recognised as an intrinsic part of the stakeholder process -
throughout their negotiation process, stakeholders are making various choices, which
implies that they value one thing over another. Valuation should help stakeholders to gain
more insight into the values affecting their choices, so as to take them more consciously
into account when making their choices. However, these values are not always strictly
economic. This means that the established economic valuation tools and methods can be
part of a stakeholder-oriented approach, but they are not the sole focus and they are only
to be used if they can usefully contribute to clarifying values and reaching agreements
among stakeholders.
A general process for stakeholder-oriented water valuation
Stakeholder-oriented valuation approaches have been explored in several cases for
local water resources management, for instance in Tanzania (FAO, 2005), Sri Lanka and
Lao PDR (Nguyen et al., 2005a, b) and Cambodia (IUCN, 2005). A forthcoming
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