Professor Nick Hanley, Stirling University

Professor Nick Hanley, Stirling University

OUSL Speaker Dinner

September 23 2013

A leading expert in the economics of the environment, Prof. Nick Hanley was in Luxembourg to address a European Investment Bank seminar on biodiversity and ecosystems. The eve of his main engagement – and straight from the airport! – he kindly agreed to share and discuss insights from his work with interested OUSL members over drinks and dinner in the Brasserie de Kirchberg.

Prof. Hanley was introduced by Peter Carter, Chief Environmentalist of the EIB, who pointed out that ‘natural capital’ is not a new idea: several of the original economic thinkers focused on natural capital as a scarce resource. Today, natural capital is gaining increasing recognition and is beginning to be built into national accounting systems; and the private sector is increasingly acknowledging its dependence on and impact on natural resources and the consequences for supply chain management and risk assessment. It is an opportune moment, therefore, to revisit and remember the principles developed by these earlier thinkers.

Prof Hanley spoke to the informal theme: Why has environmental economics become such a big deal? He drew this out via four recent news items:

1.  The proposal of introducing a plastic bag tax in the UK. In countries such as Ireland and China, such a tax has been associated with big decreases in plastic bag use (and associated litter problems). Discussions of this proposal centre on economic and environmental effects.

2.  The decline of pollinators. Many species of wild pollinators are declining both in diversity and abundance across Europe including the UK. Habitat loss is certainly a major factor in this, and pesticide use – in particular, certain types of pesticides – have more recently been implicated as having a range of pernicious effects on wild invertebrate fauna. Recently, concerns about and increasing evidence for the impacts of neonicotinoid pesticides culminated in a 2-year ban in the EU (despite votes against by countries including the UK). The challenge now is to use this 2-year period to analyse the environmental and economic impacts of a longer-term ban. Several long-term well-resourced studies have been launched to provide a sufficient knowledge base for further policy in the area, admist the frustrating fact that many of the relevant data are held by chemical companies and are not released on grounds of commercial sensitivity. A Pollinator Advisory Group has been formed by the UK Government to work on this subject.

3.  The re-introduction of species that have become extinct. The beaver – 15 Norwegian European beavers, to be precise – was re-introduced on a trial basis in Scotland 3 years ago, having disappeared from the region at the end of the 17th century due to hunting and habitat change. Whether to pursue and expand this policy is largely dependent on analysis of economic damages and costs versus economic benefits. In Argylshire, where the current trial is underway, there has been a notable increase in visitor numbers (despite the shy, crepuscular activity of the animals). The European Lynx is next on the list.

4.  Finally, the establishment of marine protected areas. The location of marine reserves, which need to be designated in order to meet the UK’s obligations under the Habitats and Birds Directives and the creation of the EU-wide Natura 2000 network, is dependent on the scientific analysis of elimination of trawling and other pressures; and also on analysis of economic costs associated with such steps. Safeguarding geological features is one of the benefits upon which it is difficult to put a robust price.

The conclusion that we draw from these examples is that environmental economics has become the go-to toolkit for environmental policy decision-making.

Prof Hanley’s current research relates principally to the following issues:

1. Illegal bushmeat hunting in Africa. How can hunters be persuaded not to hunt, and consumers not to buy (when bushmeat is often the cheapest option)?;
2. PES design at EU level;
3. Coastal management; marine protected areas; revision of bathing water Directive;
4. Measurement of Sustainable Development, inspired by the World Bank’s ‘Genuine Savings’ approach which aims to achieve net re-investment in natural capital. Some economic theory suggests that if this can be kept positive, over time people will become better off.

The discussion turned to the limits of environmental cost-benefit analysis. In particular, environmental CBA has difficulty dealing with low probability high-impact events (to which analysis is largely restricted to behavioural analysis, which has its problems and limitations), and impacts relating to income distribution.

Despite the value of these decision-making tools, the shift in their favour is associated with the loss of environmental protection as a point of principle. This is problematic, and definitely a topic for further discussion.