by Nattapong Tuntiwiwattanapun, Chulalongkorn University
As human centric we think that nature has value only when it provides the benefit for humans. We were not concerned about the intrinsic value of the nature such as biodiversity. Recently we frequently encounter several natural disasters; for example, big floods and serious droughts. These disasters make us think about “Do we develop in a proper way?” or “Do we miss something?” Thus, we have to change our current consciousness about nature. We must include into account the concept of sustainable development. However, many countries still have a problem related to this externality issue, especially in developing countries. Moreover, there are problems about inequity of resource allocation among human community as well. A good example is water allocation. The upper and lower basin people technically have an equal right to use the water. However, without law and regulation the upper basin people use water without consideration about lower people (externality problem). In order to solve this problem one way is to apply the economic instrument such as tax, compensation and incentive. The economic instrument can bring the externality into the account and also induce people to do better than standard. But how much has to be paid for changing people’s decision or compensate the impact?
Dr. Damien and his team created an integrated model comprised of environmental impact model and economic model for predicting how to allocate the water to several activities (irrigation, transportation, travel, hydropower and sustain the ecology). In addition, this model also enables the evaluation of the impact of water allocation activities into monetary terms. Then, we will know how much money has to be paid to farmers who suffer from the water allocation plan. Hence, the policy maker can use this model to improve the policy and economic instruments.
In conclusion, the pursuit of sustainable development has a very important component that is try to include various stakeholders as much as possible. In other words, we must consider not only the profit, but we also have to think about environmental quality and social welfare. The economic instrument is a powerful tool to bring externality into the account.