APPLICABILITY OF ECONOMIC VALUE IN THE VALUATION OF DAMAGED ENVIRONMENT

245

TABLE OF CONTENTS

DECLARATION DEDICATION ACKNOWLEDGMENT TABLE OF CONTENTS LIST OF TABLES
LIST OF FIGURES ABSTRACT CHAPTER ONE INTRODUCTION
Background
An Overview of the Nigerian Situation
Trend Analysis of Environmental damageand Economic Growth in Nigeria
Environmental Conservation Initiatives in Nigeria
Statement of the Problem
Objective of the Study
Specific Research Objectives
Hypothesis
Justification of the Study CHAPTER TWO LITERATURE REVIEW
Theoretical Literature Review
Empirical Literature Review
Overview of Literature Review CHAPTER THREE METHODOLOGY
Theoretical Framework
Empirical Model
Data Types and Sources
Definition of Variables

CHAPTER FOUR , 26
EMPIRICAL RESULTS 26
Introduction 26
Empirical Findings 26
Causality Testing 27
Cointegration Analysis 28
CHAPTER FIVE 4 33 SUMMARY, CONCLUSION AND POLICY RECOMMENDATIONS 33
Summary 33
Conclusion 34
Policy Implications 34
Limitations of the Study 36
Areas for Further Research 36
REFERENCES 38 APPENDIX

CHAPTER ONE

 

 

INTRODUCTION

 

 

  • Background

 

 

The environment is one of the pillars of sustainable growth and development since it fulfills developmental needs such as increasing the asset base and their productivity and also provitling various goods and services. In addition the environment empowers women, the poor and marginalized communities thus playing a crucial role in enhancing intra- and  intergenerational equity (Bass 2006).

 

In the process of economic development, physical, natural and human capitals all contribute to overall wellbeing by supporting the production of goods and  services.  Natural  capital  provides raw materials for production and is the backbone of core sectors such as agriculture, tourism and manufacturing. Natural capital also provides various ecological services (Fisher 2002).

 

According to the Millennium Ecosystem Assessment (MEA) there are four core beneficial ecosystem services provided by natural resources. Provision of food, fiber, timber and water; regulation of climate and floods; supportive services which includes nutrient recycling and the provision of cultural services which provide aesthetics and recreational benefits (MEA 2005).

 

Therefore, in order to make development sustainable, these resources must be utilized  in  such  a way that there is enough for the present as well as the future generation.

 

Evidence from literature suggests that the relationship between economic growth and the environment is controversial. Traditional economic theory posits a trade-off between economic growth and environment (Bennett et al. 2008; Hediger 2006; Sawmill 1993 and Scherr 1999).

 

 

Since the early 1990s, however, the rapidly expanding empirical and theoretical literature on the Environmental Kuznets Curve (EKC) has tended to  suggest  that  the relationship  between economic growth and the environment could be positive and hence growth is a prerequisite for environmental improvement (Kuznets 1955). The EKC depicts the empirical pattern  that  at relatively low levels of income per capita, pollution level (and intensity) initially  increases  with rising income, then reaches a maximum and falls thereafter.

 

Panayotou (1993) and Arrow et al. (1995) argue that the implied inverted-U relationship between environmental damageand economic growth also implies that at low income levels environmental damageis attributed to subsistence activities as  well  as  plant  and  animal wastes. As agriculture and resource extraction intensifies and industrialization takes off, both resource depletion and waste generation accelerate (Rowstow 1960). According to the EKC hypothesis as a nation attains higher levels of  development  degradation  slows  down  and eventually declines with further growth in income (Kamande 2007).

 

However, De Bruyn et al. (1998) and  Vincent (1997)  argue that the  inverted  U  shape  does not  hold in the long run as it would only hold at  the  initial  stage  of  the  relationship  between  economic growth and environmental degradation. They argue that above a certain income level, there would be a new turning point when environmental damagewould increase  at  higher growth levels leading to an N shaped curve.

 

                     Statement of the Problem

 

Economic growth is partially dependant on exploitation of natural resources for the generation of economic rents. While people have to exploit the environment and natural resources to alleviate poverty and raise their standards of living, such  exploitation  is  not  without  cost.  These  costs which are the unintended outputs of natural resource exploitation may reduce the options for economic growth and development available currently and for future generations.

 

The degradation of natural resources directly affects household food  security as  it has  an  impact on food production. A decline in soil nutrients and fertility leads to decline in grain harvest while rangeland depletion results in reduction in livestock production and loss of biodiversity while the deterioration of water quality adversely affects fish stock and catch. These shortages in food production may lead to lower nutrition levels and thus affect the overall productive population composition. Environmental damage can  also  lead  to  health  related  illnesses  through prolonged exposure to toxic substances which negatively affects labour productivity through reduction in both the labour force and productive labour hours  and  thus  negatively  affecting output. Overexploitation and abuse of natural resources could not only lead to environmental damage, but also increase in food insecurity, health and nutrition challenges and could thus exacerbate the very poverty people seek to alleviate.

 

In addition, extreme environmental damage can lead to permanent loss or reduction in the  volume of natural resources which can lead to the closure  of resource dependent industries which  are core contributors to national output and this would be detrimental to the overall economy.

 

Environmental damage therefore if not addressed results in both  economic  and  social challenges that hinder the attainment of national goals and deter  economic  growth.  There  have been no exhaustive studies that have been undertaken on the Applicability Of Economic Value In The Valuation Of Damaged Environment. This study tends to break the jinx in this area of  research.

 

        Objective of the Study

 

The primary objective of this study is to determine Applicability Of Economic Value In The Valuation Of Damaged Environment

                      Specific Research Objectives

 

 

The specific objectives of the study are:

 

  1. To determine the impact of economic activities on the environment in Nigeria

 

  1. To establish whether economic value is detrimental or beneficial to the environment in
  2. Based on 1 and 2 above, recommend policy interventions for improving environmental conservation in Nigeria towards

 

 Hypothesis

 

The hypothesis of the study is that environmental damage  does  not  influence  per  capita growth. The hypothesis can be formulated as follows:

H0 = a =0: environmental damage does not influence per capita growth Hi = a =1: environmental damagein fluences per capita growth

 

 Justification of the Study

 

The interaction of the economy and the environment is  unique  in  that  the  economy  relies  and uses natural resources for the generation of economic rents through production and trade. This depletes and degrades natural resources. However, these economic activities are beneficial and provide critical benefits and services which can be invested in the physical and human capital necessary to increase  production and  conserve the environment.  This would  in turn  increase the  net wealth of the nation and the well-being of its people (Fogel, 2004).

 

In practice, however, resource-rich poor countries remain poor  and  polluted  because  these  resource rents are inefficiently captured, imprudently spent, poorly reinvested, or wasted in rent- seeking conflicts (Pearce et al. 1990; Barbier 2005).

 

At present the Nigerian government is under tremendous pressure to pursue environmental conservation and economic growth, but there  exists  no  empirical  evidence  which  shows  the nature of the relationship between environmental damageand economic growth within the perspective of the Nigerian economy. The uniqueness of this study is  that  it  situates  this  relationship within the Nigerian context and sectors thereby providing empirical  evidence  upon which macroeconomic policies can be formulated. Additionally, stakeholders in  various  sectors, and civil society organizations, will utilize the findings of this study to  understand  and  target priority factors that would enhance economic growth and environmental sustainability

______________________________________