Role of economic policies in protecting the environment: the experience of Pakistan

Pakistan Development Review, Winter, 1996 by Rashid Faruqee

Economic policies that ensure efficient allocation of resources is a necessary, but not a sufficient condition for creating appropriate environmental incentives. Environment-specific policies are also needed to correct market failures leading to environment problems. Two types of policies can be used to deal with environmental problems--command and control policies and incentive- or market-based policies. Command and control policies involve government mandating of environmental quality standards on emissions, technology type, or input use. Incentive- or market-based policies use prices to try to affect pollution and resource use. Despite the advantages of market-based approaches, Pakistan, like many other countries, mostly followed control policies. But these policies have often failed to achieve results because regulating institutions lack the financial and technical resources to implement these policies effectively.

Pakistan's brown environmental problems include industrial waste water pollution, domestic waste water pollution, motor vehicle emissions, urban and industrial air pollution, and marine and coastal zone pollution. Economic policy failures are contributing significantly to many of these problems.

Green environmental problems affect irrigated agriculture, rainfed agriculture, forests, and rangelands. In irrigated agriculture, economic policies, such as subsidies on irrigation water, have provided incentives for farmers to over use water in their production practices, thereby exacerbating the problem of waterlogging and salinity. Deforestation and rangeland degradation have resulted, in part, due to lack of property rights in communal forests and lack of incentive for local communities to participate in forest management decisions.

I. ECONOMIC POLICIES AND THE ENVIRONMENT

Like most developing countries, Pakistan faces serious environmental problems. Rapid population growth (averaged about 3 percent a year since the early 1970s) and impressive GDP growth (of about 6 percent a year) have put enormous pressure on the country's natural resource base and have significantly increased levels of pollution. Rapid expansion in industrial production and urbanisation have led to increased levels of waste water pollution, solid waste, and vehicle emissions that have resulted in serious health problems in many areas of the country.

Soil erosion and salinity have caused crop yields to decline in some areas on what were previously some of the most productive soils in Pakistan. Forests are being depleted, especially in the Northern areas, as land is cleared for livestock fodder and fuelwood. Rangelands are increasingly becoming degraded, some irreversibly, and the marine environment has been affected by industrial pollutants and increasing levels of salinity as a result of upstream irrigation. A recent study Brandon (1905) attempts to value environmental costs in Pakistan and puts the estimate of environmental damage at $1 billion to 2.1 billion per year, or 2.6 to 5.0 percent of GDP in 1992 values.

In response to environmental concerns, the government of Pakistan prepared its National Conservation Strategy (NCS) in March 1992. The NCS has been useful, especially in raising awareness of environmental problems among government institutions. Following the release of the report several institutional improvements were made, among them the establishment of an NCS implementation unit in the Environment and Urban Affairs Division (EUAD) and the creation of an Environmental Section, mandated to integrate environmental concerns in economic development planning, in the Planning Commission. The Sustainable Development Policy Institute (SDPI) was set up on the basis of NCS recommendations to provide economic and policy analysis for sustainable economic development, and most of the provinces have created environmental cells in their Planning and Development (P&D) Departments in order to screen investment projects for their effects on the environment.

Following early successes in implementing the NCS, however, progress now appears to be faltering because of several major factors. First, not enough attention has been given to government policies that provide incentives for individuals to pollute the environment and exploit natural resources in an unsustainable manner. Second, institutions set up for managing the environment, such as the EPAs, appeal to be weak and incapable of implementing an appropriate environmental strategy or coordinating the actions of donors to help protect the environment. Third, the goals set by the NCS may have been overambitious given technical, economic, and institutional constraints Pakistan faces. Fourth, the role of the private and nongovernmental (NGO) sectors has not been defined. Finally, many attributed slow progress to a lack of political commitment to sustainable environmental improvement.

Broadly speaking, there are two ways of protecting (improving) the environment--policies and regulations. Policies can be general (economy-wide) with impacts on the environment, or specific, directed policies to aimed at environmental protection. This paper assesses how economic policies (and in some cases the absence of economic policies) have affected the environment in Pakistan. This should help in assessing what policies or areas warrant special attention to improve environmental protection.