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The Founex Report - Redifining Development Goals


3.6. From the macro-level of redefinition of development goals, establishment of minimum environmental standards and formulation of environmental policies on an aggregative and sectoral basis, the developing countries need also turn to the micro-level of devising appropriate techniques for including the environmental factor in the appraisal of development projects. It is necessary to find techniques for quantifying the impact of development projects on environment, both favourable and unfavourable, so that the society can choose these projects with a fuller knowledge of their social costs and benefits. All too often the social costs of various projects have been ignored in the initial appraisal, especially when development proceeded under a regime of free enterprise, so that the society's awareness of many of the environmental disruptions resulting from these projects came at too late a stage, when the construction had already been completed. It is important that the social costs should be ascertained before undertaking development projects, so that the society can carefully choose whether these costs are still worthwhile in view of the other economic and social benefits of the project, whether some of these costs could and should be minimized in the design of the project, and whether some of the costs could and should be postponed through adoption of alternative technology.

3.7. The basic idea of social cost calculus is to make individual enterprises and units responsible to society at large. The society suffers when the individual unit does not assume all the costs which it generates. For an individual enterprise, environment is a free good which can be used and contaminated at will in the pursuit of high and quick profits or planned production quotas.

For the society as a whole, environment is a part of its real wealth and cannot be treated as a free resource. This is why the traditional cost-benefit analysis is inadequate unless it is broadened to reflect social costs and benefits. While an individual can afford to ignore these costs, the society as a whole cannot, and it has every right to insist that these costs be carefully calculated and deliberate decisions made as to who pays these costs and how much.

3.8. Some of the factors which may have to be considered in making allocation decisions are the following:

1. The quantity and quality of known and required natural resources, and the possible effects and probable date of their exhaustion;

2. The availability or possible development of alternative technologies, including their relative costs;

3. The suitability of alternative sites;

4. The existing level of air and water pollution;

5. The opportunities for waste disposal and for the recycling of raw materials;

6. The environmental impact of the project, speed of degeneration, degree of severity, possibilities of reversibility and costs of various alternatives. This is not a comprehensive list of the questions to be raised in the case of each development project but only illustrative of some of the concerns which should be formulated into specific questions whenever a development project is being appraised.