Introduction to SEA and Systems Analysis (2) – Focus:

Environment & Economics

Anders EkbomEnvironmental Economics Unit

Dept of EconomicsUniversity of Gothenburg

anders.ekbom@economics.gu.se

The EconomicSystem

Companies

Households/individuals

The State/municipalities

Banks

Subsidies, investmentsemployment

Subsidies,Investments,services

Taxes,goods,servi-ces

Loans,capital

Savings,goods

Savings

Loans,capital

Employment, goods, ser- vices

Labour

Credit, taxes

Credit,Investm.,services

Labour, taxes

The EconomicSystem

Companies

Households/individuals

The State/municipalities

Banks

Subsidies, investmentsemployment

Subsidies,investments

Taxes

Loans,capital

Savings

Savings

Loans,capital

Employment

Labour

Credit, taxes

Credit,Investm.

Labour, taxes

Natural resources,Ecosystem services

Pollution,depletion

The Ecological System

4 markets in the Economic System:

1. The Labour market

2. The Financial market

3. The Goods market

4. The Services market

1970: “Most natural resources will be finished with 15-30 years”

Are they? Why not?

Growth Copper Gold Iron Lead Mercury

Static (0%/yr)

36 yrs. 11 240 26 13

Exponent. 21 9 93 21 13

N. gas Oil Silver Tin Zink Alumin.

38 31 16 17 23 100 22 20 13 15 18 31

Economics 1. All markets interact => increasing

inter-dependence!2. Increasing integration across

scales (geographically, vertically)3. Economics: explains how

markets function/are connected (micro-, sector-, macro-level (systems-) analyses eg CGE)

Economic analysisProduction functions:

GDP = f(K,L,H,I; X)

Consumption functions:

C = f(K,L,H,I; X)

K=physical capital, L=labour, H=Human capital, I=institutions, X=other factors (innovation, technology etc.)

Prices: Supply, Demand analysis

Environmental Economics acknow-ledges links with Environment:

GDP=f(K,L,H,I,E; X) C=f(K,L,H,I,E; X)

State of Environment:E=f(GDP,C; soil, water, climate, geology etc;X)

Prices: affect E; are affected by E

When the Economic System and the

Ecological systems meet – some links &

examples

Deforestation

Irrigation in Aral SeaIrrigation in Aral Sea

Aral Sea

Fossil water

Water hyacinth, L. Victoria

Desertification,Land degradation

Eutrophication: Nitrogen

Over-fishing• 25% of commercial fisheries over-exploited

Declining catches since the

late 1980s

Fisheries collapse in Canada

CO2-emissions by country groups

CO2-emissionsper person

SEA

SEA

• What is SEA?

- Objectives

- Principles

• Strategic actions? tiering

• Different kinds (models) of SEA

• Why SEA? Advantages, disadvantages?

What is SEA?

• ”SEA is a systematic process for evaluating the env consequences of porposed policy, plan or program initiatives in order to ensure they are fully included and appropriately addressed at the earliest appropriate stage of decisionmaking on par w. economic and social considerations” (Sadler and Verheem, 1996)

SEA objectives, principles

• Improve strategic action• Promote stakeholder participation• Focus on key env/sustainability constraints• Identify the best option• Minimize neg. (env) impacts, optimize

positive impacts, compensate losses• Ensure PPP do not exceed limits (carrying

capacity, irreversible effects etc.)

Strategic actions, tiering

• Strategic actions:

- mega-projects

- programs (sector)

- plans (spatial)

- policies (sector, national, legislation)

• Tiering, across:– geographic scales– Strategic actions:

Advantages of SEA

1. Begins earlier

2. Deals with impacts that are difficult to consider at the project level

3. Promotes a better coordination of alternatives

4. Informs decisionmakers about env impacts of the proposed strategic actions

5. Facilitates public participation in decision-making

Disadvantages with SEA

1. Takes time and $

2. Still a relatively new process

3. Baselines may not be available

4. Needs to cope w. a huge range of decision-making situations (appropriate?)

5. Only one part of decision-making …

Stylized linear SEA process:

Screening Scoping

Identification Prediction

Evaluation of Impacts Mitigation Monitoring.

Steps in SEA:The Rational ”Linear” Model

Policy making as a Linear, Logical, and Rational Process

Political decision

Strategy Policy formulation

Policy implemen-tation

Monitoring and Evaluation

olicy formulation

Changes as needed formulation

Policy making is dynamic, complex

MediaMedia

ForeignForeigndonorsdonors

MilitaryMilitary

LegislatureLegislature BureaucracyBureaucracy

PoliticalPoliticalpartiesparties

MinistriesMinistriesUniversities,Universities,Research institutesResearch institutes

CivilCivilsocietysociety

Intl Intl NGOsNGOs

BusinessBusinesssectorsector

Old elitesOld elites

VestedVestedinterestsinterestsJudiciaryJudiciary

Political decision

Strategy Policy formulation

Policy implemen-tation

Monitoring and Evaluation

olicy formulation

Changes as needed formulation

SEA & different types of planning

Planning SEA Features:-Parallel-Separate-Linear- ”Down--stream”

Planning SEA Features:-Feeding prel. results-No feedback

SEA & different types of planning (2)

Planning SEA Features:-Interactive-Feedback

SEA & different types of planning (3)

Planning Features:-Integrated-”Upstream”-Focus on

-institutions-outcomes

SEA & different types of planning (4)

SEA – Different Approaches

1. “Linear” (impact-centered) SEA

2. “Non-linear” (institutions-centered) SEA

3.SEA at the Policy level (concepts and some examples)

4. Understand ”Institutions” (vs organisations)

5. Discuss Adaptive and Inclusive SEA Approaches

2. Decision-making - the Rational Model (-the linear approach, 5 steps):

1. Determine the problem

2. Establish preferences

3. List all options or alternatives

4. Gather all relevant information

5. Make a choice that max./optimizes the likelihood of achieving goals.

Mini discussion

Think of a Policy process or strategicplanning in your country (2 min.)

Discuss with neighbour (5 min.):•What were the features of the process?•How & to what extent were environm. issues addressed in the policy •How did people participate?

Policy reforms and potential environment linkages

Policy area Reform Env. benefits Env. risks Measures to

enhance env. benefits and

mitigate risks Energy Fuel price

reform, removal of subsidies.

Reduced emissions through increased production and consumption efficiency.

Removal of subsidies could lead to increased demand for fuel wood.

Property right reforms to reduce deforestation in search for fuel wood.

Agriculture Land reform. Strengthened property rights improves NRM.

Shrinking common property resources are overused by landless.

Ensure landless are considered. Enhance fertilizer, pesticide use.

Private sector development

Business climate issues, taxation and protection of property rights, privatisation.

Increased competition and use of price signals generally improve resource use efficiency.

Weak legal env. framework can lead to over-exploitation of NRs & more pollution.

Ensure adequate legal framework, monitoring and enforcement.

Policy reforms and potential environment linkages (c’ed)

Policy area Reform Env. benefits Env. risks Measures to enhance

env. benefits and mitigate risks

Tax reform Changed tax on income, assets, consumption, companies etc.

Pos. changes in households’/firms’ behavior.

Neg./adverse changes in households’/firms’ behavior.

Env fiscal reforms (tax on pollution, resources) can internalise env. costs, increase efficiency & tax incomes.

Decentralization Power to regional or local administration to increase efficiency, service delivery, accountability.

Accountable, representative local institutions can improve management of NRs.

Poor capacity to deal with env. & NR issues. Local elites exploit local NRs

Capacity-building to strengthen local and regional administration.

Trade Trade reform Increased competition => improved NR use, reduced pollution.

More monocultures, Increased fertilizer, pesticide use, pollution; pressures on forests, or wetlands etc.

Improve env. legislation to avoid pollution havens.

1. Planning at strategic levels is not linear! It’s a complex process, influenced by interest groups with conflicting interests and different agendas => look for ‘windows of opportunity’ to initiate SEA during cycles of the decision-making process.

2. Relationships between alternative options and environmental effects are often indirect => Emphasize relevance vis-à-vis stakeholders (e.g. politicians, gov. agencies, civil society etc.).

3. Strategic issues cannot be tackled by a one-off analysis;

=> Adjust SEA approach as the Policy takes shape and is implemented.

Experiences from Env. Integration

Difficult to achieve rational, linear environmental assessment in reality since:

people are limited information processors; policy-makers are not unitary/homogenous actors with clear and stable preferences (multiple actors w. multiple & conflicting goals); it is difficult or impossible to define a problem clearly at the policy level (many different views, uncertainty on env impacts!).

Experiences from Env. Integration

Env., econ & social issues linked – Integration necessary at the policy level

• Envl. Issues– Pollution– Env.-rel. disease– NR depletion– Extinction– Habitat Loss– Distorted eco-

system functions  

• Social & econ. Issues– Poor public health– Involuntary

Resettlement– Deprivation of Rights– Gender inequality– Vulnerability, conflict– Loss of Social capital,

economic values

Globalization/regionalization

Requires new solutions, increased scope (EU, MEA, WTO)

Need to move env. assessment upstream in decision process (local national, global)

Powerful policy tools beyond project level (e.g. Env Fiscal Reform)

Shift in Focus of Env. Assessment

Impact assessment

Focus on technical solutions

Stakeholder consultn

Attention to projects

Upstream analysis

Focus on policies and institutions

Stakeholder particip.

Attention to country capacity

Inst.-centered SEA - more perspectives Inst.-centered SEA - more perspectives

Policy formulation & implementation are not separate processes. Policy formulation & implementation are not separate processes.

The policy formulation process never The policy formulation process never ends; the way it unfolds depends on the ends; the way it unfolds depends on the stakeholders participating in the stakeholders participating in the processes (policy design, adoption, processes (policy design, adoption, implementation) & the actions they take.implementation) & the actions they take.

PolicyFormation

Discrete Policy

Intervention

Focus of SEA is to integrate environmental considerations in

discrete policy interventions

Focus of I-SEA is to integrate environmental considerations in policy

formation

Learning(feedback)

Learning(feedback)

Inst.-centered SEA – more Inst.-centered SEA – more perspectives (2)perspectives (2)

Inst.-centered SEA – more Inst.-centered SEA – more perspectives (3)perspectives (3)

Planning and decision-making at Planning and decision-making at policy level often characterized policy level often characterized by by ambiguityambiguity and and uncertaintyuncertainty

Ambiguity – “many ways of thinking Ambiguity – “many ways of thinking about the same circumstances or about the same circumstances or phenomena”phenomena”

5. Adaptive & Inclusive SEA 5. Adaptive & Inclusive SEA ApproachesApproaches

Adaptive Management (1)Adaptive Management (1)

No formula, key elements:

•Multiple decision points (timing!)

•Management objectives regularly revisited & revised (adjust!)

• A range of management choices (prioritize!)

Adaptive Management (2)

• Monitor & evaluate outcomes (not activities!)

• Institutionalize mechanisms for learning (social, technical, organizational)

• Create structure for broad & collaborative stakeholder participation (not one-off consultation!)

Inclusive Management (1)

Primarily oriented towards enabling action (acknowledging ambiguity & uncertainty). Features:

1) continuous iterative interactions, and 2) inclusive community participation (with wide involvement of perspectives), aimed at creating a truly collective process.

Inclusive Management (2)Features (c’ed):

3) Emphasizes importance of combining multiple perspectives in problem-solving efforts,

4) building capacity a goal, not a mean

5) Policy (planning/implem.) = opportunity to mobilize people.

Inclusive Management (3)

6) IM not about increasing the number of people who are involved in policy formulation, but to increase:

-the diversity of views represented,

-the possibility of otherwise neglected views to influence policy

Influences on Env. Priorities

• public clamor (civil society preferences)

• cultural/historical/instl./pol. factors,

• Govt agency priorities

• International agreements

• Legislation, regulation, judicial decisions

• Results of technical studies employing analytical/quantitative techniques

Adaptive and Inclusive SEA (1)

• Move from “one-time” to continuous engagement

•Integrate SEA process w. policymaking process (planning + implementation!)

• Focus on Priority Env. Issues

• Seek Equal Representation

•Less Focus on Reports, more on Outcomes

Inst.-centered SEA - Summary

• Policy-Based SEA brings in Institutions & Governance issues

• Emphasizes Priority Setting of Env. Issues • Broadest view of Stakeholder

Representation • Aims at Reinforcing Social Accountability

for Improved Environmental Governance • Stresses Learning in Environmental Policy

Making and Implementation

Inst.-centered SEA – Summary (2)

• Emphasizes the importance of Institutional Assessments

• Recommends Technical Assistance to promote Structural Learning & Capacity building for Env. Management

• Promotes Long-Term Engagement (as opposed to “one-off engagement”)

EXTRA

Policy SEAs – some examplesPolicy SEAs – some examples

1.1. Argentina & Colombia:Argentina & Colombia: SEA for Policy SEA for Policy Reform in Water and Sanitation SectorsReform in Water and Sanitation Sectors

2.2.Canada:Canada: SEA for NAFTA SEA for NAFTA

3.3.South Africa:South Africa: KwaZulu-Natal Trade and KwaZulu-Natal Trade and Industry PolicyIndustry Policy

1.1.Argentina & Colombia: SEA for Argentina & Colombia: SEA for Policy Reform in Water and Sanitation Policy Reform in Water and Sanitation

SectorsSectors

Initially, impact-centered SEA; however, Initially, impact-centered SEA; however, not feasible to identify impacts from not feasible to identify impacts from reforms that had not yet been designed!reforms that had not yet been designed!

Broadened focus, sector priorities set Broadened focus, sector priorities set based on based on Cost-of-Env-Degradation studyCost-of-Env-Degradation study, , institutional studyinstitutional study, continuous , continuous policy policy dialoguedialogue, broad , broad stakeholder involvementstakeholder involvement, , & scheme to & scheme to monitor policy outcomesmonitor policy outcomes

2. Canada: SEA for NAFTA2. Canada: SEA for NAFTA

Four-point plan:Four-point plan:

• Env. representatives appointedEnv. representatives appointed to “Intl. Trade to “Intl. Trade Advisory Committee” and to all 15 “Sectoral Advisory Advisory Committee” and to all 15 “Sectoral Advisory Groups on Intl. Trade”.Groups on Intl. Trade”.

• Trade-related env. concernsTrade-related env. concerns included in all included in all negotiation phases.negotiation phases.

• Parallel Parallel discussions on env. cooperationdiscussions on env. cooperation among among Canada, US & Mexico.Canada, US & Mexico.

• SEA was conducted by SEA was conducted by NAFTA’s Env. Review NAFTA’s Env. Review CommitteeCommittee, incl coordination among agencies., incl coordination among agencies.

3. 3. South Africa: KwaZulu-Natal Trade South Africa: KwaZulu-Natal Trade and Industry Policyand Industry Policy

Features:Features: Early start, SEA initiated before Early start, SEA initiated before policy process started; technical studies, policy process started; technical studies, stakeholder involvement, workshops, stakeholder involvement, workshops, etc.etc.

SEA commissioned by SEA commissioned by Regional Regional Economic ForumEconomic Forum (responsible for the (responsible for the KZ-KZ-

NT&IP planning process)NT&IP planning process), , legal foundationslegal foundations for doing for doing SEA by SA’s Devt Facilitation ActSEA by SA’s Devt Facilitation Act

Institutions matter!

Institutions coordinating human behaviour

SocialSocialcapitalcapital

Trad.,Trad.,informalinformal

Modern,Modern,formalformal

InstitutionsInstitutions

Organi-Organi-zationszations

RulesRules

InformalInformal FormalFormalRulesRules

TraditionsTraditionsNormsNorms

NetworksNetworksSharedSharedvaluesvalues

ReligionReligion

TrustTrustGovtGovtagenciesagencies

ConstitutionsConstitutions

LawsLaws

RegulationsRegulationsEasy to changeEasy to change

Difficult to Difficult to changechange

PolicePoliceCourtsCourts

NGOsNGOsFirmsFirms

Levels of Institutional Analysis LevelLevel Frequency (yrs.)Frequency (yrs.)

Customs, traditions, norms, Customs, traditions, norms, religionreligion

100-1000 yrs.100-1000 yrs.

Formal rules of the game: Formal rules of the game: (judiciary, bureaucracy etc)(judiciary, bureaucracy etc)

10-100 yrs.10-100 yrs.

Governance: Play of the Governance: Play of the game: game: (contracts, aligning (contracts, aligning structures)structures)

1-10 yrs.1-10 yrs.

Resource allocation and Resource allocation and employment (budget, policy)employment (budget, policy)

continouscontinous

Points of departure for I-SEA Program

• World Bank’s Environment Strategy

– Upstream environmental analytical in Bank operations

– Formulation of I-SEA approach (2005)

• OECD DAC Guidance on SEA (2006)– SEA is a family of approaches– SEA at policy level should focus on “political,

institutional and governance context underlying decision making processes”

Steps to address institutional issues in SEA

• 1: Institutional and governance assessment

• Review country environmental management and governance systems

• Review analytical capacity

• Gain access to decision-making

Steps to address institutional issues in SEA (cont’ed)

• 2: Institutional and governance strengthening

• Support increased social accountability and improved governance

• Adaptive learning - ensuring continuity in SEA processes

OECD DAC (2006)

Steps to address institutional issues in SEA (cont’ed)

• Prioritization of environmental issues in the policy agenda according to their effects on economic development and poverty alleviation.

• Ensure takeholder representation through mechanisms to particularly give those most affected by environmental degradation a voice in policy formation.

• Feedback mechanisms to enhance social accountability of decision makers.

• Systems for social learning to raise attention to changing priority environmental issues as a result of the new conditions created by development.

World Bank (2005)

Examples of I-SEA:SEA of Kenya Forest Act

First SEA in WB Pilot Program

March 2006 to

February 2007

Key Partners: Forest Reform Committee, Forest Reform Secretariat

I-SEA Pilots: Dhaka, Bangladesh

Urban Development SEA

I-SEA for Urban DevelopmentPlanning

Nov. 2006 – Sept. 2007

Key partner: Dhaka Capital Development Authority

Sierra Leone Mining Sector SEA

• Rich mineral asset

• Weak capacity

• Lack of infrastructure undermines growth potential

• Mining project under preparation

Road Network in Hubei, China

YiBA Project

SEA of Road Network Plan 2020

• Link to highway project and assesses the entire provincial planning process

• Assesses capacities of the provincial administration to address env. priority risks

• Outcome – Value Added– Env risk assessment at provincial level

– Provides framework for detailed EIA studies

– Opened inter-sector dialogue on infrastructure planning for env. sustainability

– Identifies institutional & regulatory adjustments to improve env. management of infrastructure devt.

West Africa Mineral Sector SEAWest Africa Mineral Sector SEA