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African wetlands, being very important source of natural resources, are being reclaimed and currently modified. It is all happening due to insufficient understanding of the economic values of wetlands by main decision-makers, thus, even the protection of wetlands does not seem to be an alternative in this case. Although, there have been carried out many economic wetlands valuation studies, most of them were focused on the lands in developed countries, which leaves Africa to be seriously underrepresented until the recent times.
The positive shift in this situation is that the United Nations Environment Programme (UNEP), The European Commission with the Government of Kenya aimed to announce a new partnership to assist in the restoration of part of the Mau Forest Complex; the European Union funds this partnership. This project will secure the ‘ecosystem services’ that are provided by the flows of two rivers the Nyando and the Yala.
Both of these rivers are essential in securing revenues from tea and rice production, providing drinking water, hydropower and developing tourism in the area. The total value of those Mau forest services is estimated at $1.5 billion a year (Europafrica, 2012).
The attention in this research is drawn to the restoration of the Yala River as it had a significant degradation due to unsustainable recourses use recently. The cost-benefit analysis (CBA) is conducted to analyze the questions regarding the restoration actions; moreover, benefits and costs are being estimated. This paper presents an evaluation of several economic measures that have been carried out for the restoration of the Yala River. The conclusions drawn can be used for arguments that favor the protection of valuable wetland resources and Yala River restoration in particular.
Beechie et al. (2008) talks about the need of planning process to be conducted before starting any river restoration. Thus, they delineate the next four steps to be achieved: identification of the restoration goal, selection of a “project prioritization approach” that is consistent with the goal, usage of the “watershed assessments to identify restoration actions”, and the need for prioritization of the list of actions (Beechie et al., 2008).
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The scholars are convinced that once those restoration goals are identified; there can be selected one of six general approaches in order to prioritize restoration actions: project type, single-species analysis, decision support systems, refugia, multispecies analysis, and cost effectiveness. Prioritizing by project type, refugia, or a decision support system requires quantitative information, and each approach is relatively easy to use (Beechie et al., 2008).
Any restoration goals should be set in the context of landscape and aquatic processes, which provoke species decline and habitat degradation. Human constraints on the recovery options shall be taken into the consideration as well (Frissell & Nawa, 1992; Slocombe, 1998). Beechie et al. (2008) suggest that any goal statement should identify the biological objectives, therefore, it should address the causes of degradation of the ecosystem (Parker, 1997; McElhany et al., 2000), and even more it should acknowledge social, economic, and land use constraints (Slocombe, 1998).
Cost effectiveness is the prioritization of this research. The use of cost effectiveness analysis will give funding agencies greater confidence that the restoration funds are to be spent efficiently.
Talking about our general site description of the Yala Swamp, it is a compound of swamps in the delta of the Yala River and on the northeast shore of Lake Victoria. Yala River has several outlets southerly “into Lake Victoria; it is around 5 m deep and 500 ha in area. Formerly, the River flowed through the eastern swamp (which is now being ‘reclaimed’) into Lake Kanyaboli, then it flowed into the main swamp, and finally into Lake Victoria via a small gulf. The Yala flow is now diverted directly into the main swamp, and a silt-clay dike cuts off Lake Kanyaboli, which receives its water from the surrounding catchment and through back-seepage from the swamp” (Conservation Management Plan, 2009).
A couple of meters above the level of Lake Victoria, a culvert has cut the gulf off on the lake and created Lake Sare through back-flooding (Mavuti, 1992). Generally, the water in the main channels and lakes of the swamp is well oxygenated; although, oxygen levels are low and constitutes less than 4 mg O2/litre) (Mavuti 1992). “The predominant vegetation of this site is Papyrus Cyperus papyrus, Phragmites mauritianus in shallower areas, and swamp grasses around the periphery” (Conservation Management Plan, 2009).
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Our society is constantly using a considerable amount of resources with the aim of the production of public services, and they are not traded in the market, and, thus, they are evaluated at market prices. As a result, the market mechanism does not ensure that resource use in those areas is really efficient.
Cost-benefit analyses are the methods for economic assessment of the social efficiency of public investment projects that were developed during the second half of the twentieth century. The use of cost-benefit analyses 20-30 years ago was limited due to the expensive public sector undertakings and infrastructure projects, in particular with environmental benefits excluded and social ones were included instead of. By the environment benefits, supply of resources are meant, whose continuous contribution of services is essential to human welfare (Dubgaard et al., 2002).
The purpose of cost-benefit analysis is to provide a basis for making decisions. It should contribute to ensure the most efficient use of scarce resources by society. In this type of analysis, all quantifiable project consequences are measured in the monetary units. The project is assessed in terms of the net present value of costs and benefits.
According to Dubgaard et al. (2002) a social cost-benefit analysis should incorporate market both benefits and non-market costs. Any project is considered to be socially advantageous, if the sum of discounted consequences (benefits and costs) is positive (Dubgaard et al., 2002). As the main aim of this research is to understand general economic principles in order to address environmental issues based on the application of cost-benefit analysis (CBA) and other quantitative and analytical procedures, all the numbers and figures in this project are taken hypothetically.
As we know, direct or indirect human use of the ecosystem’s services implies the considerations of economic values. The categories of those values are: 1) value as a factor of production (it can be a farm land, any fish stocks); 2) input in consumption (angling, hunting, wildlife observation and outdoor recreation); 3) ecological benefits (e.g. retaining nutrients and binding CO2); 4) option value (benefits from having the possibility of using a given resource); 5) existence value (satisfaction from knowing that species and ecosystems exist); 6) Bequest value (satisfaction from considering the interests of future generations) (Dubgaard et al., 2002).
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The total construction and other costs are already calculated as the expenses incurred the budgeted expenditures for this project period with the length of seven years. The benefits of the projects are being calculated as well; thus, the findings of our estimation based on the fact that two options were given to take into consideration. The first option is the full international financial support and the second option consists of the combined expenses that Kenyan government has to spend with given a higher percentage of EU institutional support.
Without looking at the results, one may question that if EU is supporting so many countries, why Kenyan government has to spend their own bit, even if it is, for example, only 10%. The answer for this is simple: the EU institutions want to make it as a stimulus for the grant receiver to let them demonstrate their high interest in the project implementation so they have to be able to find the ways to invest themselves as well.
The restoration of the River Yala includes the following main costs of the project: projecting, construction, surveillance and information. The benefits depicted here are as follows: pumping expenses savings, land allocation improvement, termination of farm, flood risk, nutrients, nitrogen and phosphorus, hunting, angling, tourism and recreation (Figure 1).
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In this case, the extensive construction activities and projecting costs clearly account for the greater part of the total project costs. We are taking into consideration two options on the reconstruction: ‘more’ expensive, which would include Kenian government expenditures and ‘less’ expensive, which is based only upon the EU institutions support. As we see, the simple rule is working in this case: “the more you invest, the more benefits you will have” as the second option is more beneficial. Of course, we do not talk about status quo in this case, as there were many preconditions that made Kenyan government to address to the EU institution for financial and intellectual support.
As we see, it is not surprisingly that the general result is highly dependent upon the choice of financial input as in this case, for example, the money of the Kenyan government. The project will be improved if much would be invested, especially into flood risk, tourism and recreation, as the latter along with hunting and angling allowances can bring future profit and benefits and generally improve the result. An important attention has also to be drawn to the miscellaneous part of the project as any implementation stage of the project can bring many uncertainties as well.
|Opt2 -Opt1||Option 1||Option 2|
|Total costs||500,00||876,65||1 376,65|
|Pumping expenses savings||160,00||80,80||240,80|
|Land allocation improvement||190,50||125,30||315,80|
|Termination of farm||55,00||55,40||110,40|
|Nutrients, Nitrogen, Phosphorus||116,60||33,40||150,00|
|Tourism and Recreation||125,00||120,00||245,00|
|Total benefits||946,15||511,35||1 457,50|
|Benefits minus costs||446,15||-365,30||80,85|
Figure 1. Cost-benefit analysis of the Yala River Reconstruction
As the Option 2 is more beneficial, we have tried to calculate the “scenarios” for discount rates of 3%, 5% and 7%, each within time horizons of twenty years for all our indicators (Appendix A) and for the infinite time for the land allocation improvement (Appendix B). It is not surprisingly that the result is highly dependent on the choice of discount rate. Time horizon also means a lot. A low discount rate and infinite time horizon both improve the results. Thus, we can conclude that the project will improve considerably when assuming an indefinite time horizon and applying to all of the indicators of both costs and benefits.
It is important to admit, that valuation of non-market environmental benefits are always associated with uncertainty. It is also worth mentioning that since this is a long-term project, there are also quite uncertainties concerning the price relations, although extrapolating the price relations development has not been attempted in the present analysis. Moreover, it still presumes that prices will remain unchanged over an indefinite timeframe.
Because of those uncertainties, the results of this cost-benefit analysis should not be considered as the final answer. Rather, this economic valuation and analysis shall be regarded as experiments testing the robustness of a project based on two alternative assumptions.
The benefit estimates in the present cost-benefit analysis must be considered as rather “optimistic”. Those assumptions imply that the calculated net benefits of the project must be considered a conservative estimate as well.
It is a well-known fact that environmental decisions are usually based on physical or biological analyses. They are usually supported with estimates of the social costs, created by various environmental measures.
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As a rule, such approach is considered a political short cut from a welfare economic point of view. Although, natural scientists are able to provide information on the effects of human activities on air, water, eco-systems, moreover, those scientific results do not usually show how to weigh or measure environmental benefits.
Therefore, cost-benefit analysis is the way to determine those ‘abstract’ measures into monetary figures. It helps to understand the society regarding the allocation of existing resources to the environmental field.
This research showed that the more we invest the better results we are to have. Although, it is important to remember, the natural environment is a prerequisite for human existence no matter, which developed, or developing country we take into the consideration.
We also have to remember that the absolute value of nature is also infinite. Additionally, it is important to valuate marginal changes in the quality of our nature and surrounding environment. As a matter of fact, African wetlands, because of insufficient understanding of their economic values by local key decision-makers, although, being very important source of natural resources, are being currently reclaimed. It is not all happening thus, even the protection of wetlands seems to be an alternative in this case.
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On the example of the Yala River restoration, this analysis showed that it is important to take into consideration all of the aspects starting from the preparation stage of project implementation and continuing with its application. At the same time, it is important to remember that willingness to pay is and has to be perceived as a function of socio-economic characteristics, which was clearly demonstrated by our example.