THE PRICE OF GREEN

Steps towards environmental management in Argentina.

Putting a price to nature has not always been an appealing idea, at least at first instance, among those who care about the environment. The suspicion of veiled economic interests or the alleged invaluable character of Mother Nature have been common, and not entirely misleading, arguments wielded against any attempt to convert the green into a different type of green (let´s say a greedier paper version). However, many policy makers, activists and professionals from the environmental sciences have come to understand that translating environmental assets (as economists like to call them) into money, is by no means a strategy to squeeze dollars out of the nature, but to actually protect her from possible threats. In this sense, converting your backyard or your favorite swimming hole in the mountains into monetary terms is not different in nature from campaigning for their importance for health, wellbeing and aesthetic beauty. Let´s think, for instance, of an industrial plant that spills certain pollutant into a river. We can be sure that the company that runs the plant perfectly knows the benefits from its activity and the costs that would imply the adoption of a cleaner technology, but do we know the costs borne by the society and nature due to a contaminated environment? How can a decision maker design an optimal mechanism to solve this situation without a complete picture of costs and benefits for both the company and the society? This is what in environmental economics is called the problem of internalizing environmental externalities.

Needless to say, this might be an overwhelmingly difficult task, especially when we think about the numerous costs, crosscutting effects and many other complexities that underlie any ecosystem or environmental degradation process. However, the economic science has attempted for decades to come up with reliable methodologies and analytical tools to capture both the benefits from services provided by nature and the possible costs of its degradation. Most of these methods are based on the notion that a “price” widely differs from a “value”, and that things that we have traditionally thought to be outside the scope of economics, can be in fact captured and introduced in economic reasoning. What´s the value (not the price!) of a beautiful landscape or a rare tropical micro-ecosystem?

Indeed, all these questions have been addressed by economic science, resulting in a (not so long) tradition of studies and methodologies that have been commonly performed in the academic sector. Many of these studies are frequently commissioned by public and private institutions that pursue a certain protection, investment or policy interest, but very rarely we find this type of analysis directly performed by the institutions themselves. The apparent complexity of the methodologies have made this type of analysis the perfect example of ad hoc outsourced works, but this gap between academia and institutions is about to be bridged in Argentina, thanks to a recent EU-funded initiative.

Within the framework of the Project for the Improvement of Regional Economies and Local Development, whose technical assistance is carried out by Eptisa in consortium with AENOR, ATECOR and the Technical University of Madrid (UPM), the National Institute of Industrial Technologies (INTI) has recently engaged in a capacity building activity for the adoption of this type of techniques in the formulation of their projects. The INTI is a public institution aiming at the promotion of competitiveness in the Argentinean industrial sector through the adoption of technological innovation and the optimization of production processes. Within its organization, the Environmental Department seeks the incorporation of environmental management and sustainable development into the national productive system, and with this new initiative we can comfortably assert that the INTI has given two giant steps in the direction of an effective environmental management: first, by understanding the importance of the economic valuation of the environment, and secondly by moving towards the internalization of knowledge and capabilities to perform the analysis within the organization. In a five-day introductory course, the INTI´s technical and managerial staff, as well as some members of its network of collaborators, has had the chance to approach some of the most well established techniques in economic valuation of environmental externalities. Approaches such as the “contingent valuation”, a survey based method that captures the willingness to pay for environmental quality by the general public, or the “hedonic prices”, a method that allows extracting information on the value of environmental quality from the housing market, are now tools at the disposal of the INTI for the formulation of their projects. Should they succeed in convincing the polluting industry to switch to cleaner technologies, we can be sure that economists’ efforts to come up with such tricky approaches have been worthwhile. A true tour the force these days.

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