Conceptual development in the theory of externalities have opened up several policy options for their internalization including payment towards environmental services. Hence as externalities are social costs, accountability is crucial in increasing environmental awareness and for collective action through education and extension more so in developing countries. Here a modest attempt has been made to estimate externalities in water, forests and environment with field data from peninsular India to reflect on the economic perception of externalities by farmers and users of environment for the consideration of policy makers to devise institutions for payment towards environmental services. The methodology largely used here in estimation / valuation of externalities is by considering ‘with – without’ situations (including ‘before – after’ in some cases) akin to ‘project valuation’. Studies cover empirical estimation of externalities inter alia due to over extraction of groundwater , sand mining, watershed development, conservation of forests, sacred groves, cultivation of organic coffee, use of medicinal plants as alternate medicines and the annual values presented are in 2008 prices. The negative externality due to sand mining 24 € per acre, that due to distillery effluent pollution is 34 € per acre. The positive externality due to watershed program is around 51 € per acre, and that due to rehabilitation of irrigation tanks is 26 € per acre. The positive externality due to cultivation of shade coffee is 9 € per acre and that due to forest conservation 27 € per acre. The positive externality due to sacred grove conservation was 12 € per family. The impact of forest conservation on Non timber forest products was 88 € / per tribal household. The positive externality due to use of medicinal plants as alternate medicine is equal to 35 € per patient suffering from osteo-arthritis and 19 € per patient suffering from peptic-ulcer. While these estimates are not sacro sanct as the methodologies for valuation of externalities are subject to further review and improvement, they however serve as initial indicators of spillovers. And they signal possibilities for consideration of policy makers for devising alternate institutions for potential payment towards environmental services.

Issue Date:
Aug 25 2008
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
Page range:
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JEL Codes:
Externalities; Environmental services; Sustainable development
Paper presented at EAAE 2008 Congress

 Record created 2017-04-01, last modified 2017-05-27

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