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Using the ESAM to measure impacts of the LHWP
The above sections have demonstrated the significance of natural water (streamflows) in economic and ecological production. But most importantly, the sections have shown that economic production can modify natural water/streamflows through water abstraction and waste amenities. These activities can diminish the capacity of streamflow capacity to supply ecological goods and services, thereby affecting human wellbeing. It has also been shown that ecological resources and services are another source of income for households deriving livelihoods from them (i.e. N W and N R ). Therefore, reduction in availability of these resources will definitely reduce households’ income. This section extends the conceptual frameworks developed in this Chapter and Chapter IV and shows how the multipliers matrix change with the inclusion of ecological values in the conventional SAM. In other words, the section discusses how the ESAM can be used as a conceptual framework. The adjustments made in the ESAM have effected notable changes on the structure of the conventional SAM, and thus the accounting multiplier matrix (which is the basis for the SAM analysis) developed in Chapters IV (see Section 5.4.4 above). Because of the changes, both endogenous and exogenous incomes of the conventional SAM changed. To accommodate these changes in the analytical framework, the endogenous and exogenous matrices of the conventional SAM derived in Chapter IV and Appendix A have changed as presented in Appendix C. To analyse the impact of the exogenous change in households’ income due to the exogenous change in ecological production (resulting from change in streamflows of the rivers downstream the LHWP dams in Lesotho) on the households’ welfare and general economies of Lesotho and SA, we therefore use the following equation (see detailed derivation in appendices A and C) Where M1 is the intra-country multiplier matrix that shows multiplier effects that result from linkages wholly within each country taken separately. M2, on the other hand, is the inter-country multiplier matrix and captures all the repercussions between the accounts of one country and those of the other, but excludes all of the within country effects.
Valuation of ecological services
Valuation of ecological systems and the services they provide is premised on two distinct, but complementary valuation paradigms: anthropocentric and ecocentric paradigms. The anthropocentric valuation paradigm, also known as the utilitarian approach, has its foundation in neoclassical welfare economics. According to this approach, an ecological value is estimated from the utility humans derive from using ecological services. The paradigm is based on the principles of humans’ preference satisfaction (welfare) (MEA, 2003). It then follows that the basis for deriving measures of economic value of the environment and goods and services it provides is their effects on human welfare (Freeman, 1993). Contrarily, humans can value the environment and its services for their pure existence or intrinsic value. This form of valuation is purely premised on altruistic and ethical or ecocentric concerns not directly related to satisfaction of material human needs. This study adopts the anthropocentric approach to value measurement. This decision does not ignore the importance or validity of the intrinsic value of instream benefits but is based on the task set for this study, which is to determine welfare implications of modifying stream flows. The following section explains the economic concept of value which is adopted in this study.
The concept of economic value
The concept of economic value has its foundation in the neoclassical welfare economics. The basic premise of welfare economics is that the purpose of economic activity is to increase the well-being of individuals who make up the society. Also, that each individual is the best judge of how well-off he or she is in a given situation by revealing preferences for different trade-offs (Freeman, 1993). Therefore, the anthropocentric value derives from the economic concept of value and is determined by peoples’ willingness to make trade-offs. The anthropocentric value is easily derived in the case of marketed goods, where the willingness to make trade-offs is revealed through their market decision to pay a monetary price for the good in question. In this case, societal value of a good is measured as the total of consumers’ and produces’ surplus (for details see, for example, Pearce and Turner, 1990; Freeman , 1993; Kahn, 1998; Tietenberg, 2000; Russsel, 2001).
The Utilitarian approach to valuing ecological services uses the concept of total economic value (TEV) framework. The framework typically disaggregates TEV into two categories: use and non-use values. Figure 6.1 below provides the schematic of these categories of value as they relate to streamflow services’ values.
PART ONE: INTRODUCTION, BACKGROUND TO THE LHWP AND RELATED LITERATURE
CHAPTER I – INTRODUCTION
1.1 THE SETTING
1.2 BACKGROUND TO CASE STUDY AREA
1.3 STUDY RATIONALE
1.4 OBJECTIVES OF THE STUDY
1.5 APPROACH AND METHODS OF THE STUDY
1.6 ORGANISATION OF THE STUDY
CHAPTER II – THE ECONOMIC AND ECOLOGICAL SIGNIFICANCE OF THE LHWP
2.1 PROJECT AREA DESCRIPTION
2.2 WATER RESOURCES IN PROJECT AREAS
2.3 ECONOMIC SIGNIFICANCE OF THE PROJECT
2.4 ECOLOGICAL IMPLICATIONS OF THE PROJECT
CHAPTER III – REVIEW OF RELATED LITERATURE
3.1 INTRODUCTION
3.2 APPROACHES TO ASSESSING DIRECT OFFSTREAM IMPACTS OF IBWT
3.3 ECONOMY-WIDE MODELING APPROACHES TO IMPACT ASSESSMENT OF IBWT
3.4 APPROACHES TO ASSESSING INSTREAM IMPACTS OF IBWT
3.5 INTEGRATED ASSESSMENT OF IBWT
PART TWO: APPROACH AND METHODS OF THE STUDY
CHAPTER IV – THE SOCIAL ACCOUNTING MATRIX (SAM) ANALYTICAL FRAMEWORK
4.1 GENERAL STRUCTURE OF THE SAM
4.2 MULTI-COUNTRY SAM FRAMEWORK FOR THE LHWP
CHAPTER V- INTEGRATING ECOLOGICAL IMPACTS INTO SOCIO-ECONOMIC ACCOUNTS
5.1 INTRODUCTION
5.2 MOTIVATION FOR INTEGRATING ECOLOGICAL VALUES IN THE SAM FRAMEWORK
5.3 STREAMFLOW SERVICE VALUES ASSOCIATED WITH THE LHWP
5.4 ECONOMIC-ECOLOGICAL MODEL OF STREAMFLOW BENEFITS
CHAPTER VI – VALUING INSTREAM FLOW BENEFITS AND ASSOCIATED WELFARE IMPACTS
6.1 INTRODUCTION
6.2 VALUATION OF ECOLOGICAL SERVICES
6.3 THE CONCEPT OF ECONOMIC VALUE
6.4 TECHNIQUES FOR VALUING STREAM FLOW SERVICES
6.5 MEASURING THE VALUE OF STREAM FLOW SERVICES
6.6 THE EMPIRICAL VALUATION MODEL FOR THE STUDY AREA
PART THREE: EMPIRICAL MODEL, RESULTS AND CONCLUSIONS
CHAPTER VII – THE EMPIRICAL MULTI-COUNTRY-ESAM MODEL
7.1 INTRODUCTION
7.2 DATA NEEDS AND MULTI-COUNTRY SAM (MC-SAM) FOR THE STUDY AREA
7.3 THE MULTI-COUNTRY ESAM
CHAPTER VIII – RESULTS OF THE EMPIRICAL ANALYSIS AND POLICY SIMULATIONS
8.1 INTRODUCTION
8.2 MC-ESAM MULTIPLIER ANALYSIS
8.4 POLICY SIMULATIONS
CHAPTER IX – SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
9.1 SUMMARY
9.2 CONCLUSION
9.3 POLICY IMPLICATIONS
9.4 STUDY LIMITATIONS
9.5 RECOMMENDATIONS FOR FURTHER RESEARCH
REFERENCES
