Costs of environmental degradation

Abstract

PurposeThe purpose of this paper is to provide estimates of damage cost for several areas of the environment. In particular: to estimate the cost of degradation as a percentage of gross domestic product (GDP) at the national level; to enhance local capacity in environmental economics, in particular in the valuation of environmental degradation; and to provide an input to inter‐sectoral environmental priority setting.Design/methodology/approachTo achieve the above objectives a framework was developed to estimate the cost of environmental degradation in seven countries in the region, for six categories. Estimates reflect order of magnitude and therefore represent an indication of actual damage costs. A range of estimates was provided to reflect the uncertainty of the results. Damage costs are presented in annual values (in local currencies, in US$ dollars) and as a per cent of GDP. Expressing costs as a share of GDP provides a sense of magnitude and will allow cross‐country comparison.FindingsThe damage cost of environmental degradation in Middle East and North Africa (MENA) in 2000 is estimated at US$ 9 billion per year, or 2.1‐7.4 per cent of GDP, with a mean estimate of 5.7 per cent of GDP. In addition, the damage cost to the global environment is estimated at 0.5‐1.6 of GDP, with a mean estimate of 0.9 per cent of GDP.Research limitations/implicationsOwing to data constraints, no cost estimates are provided for some impact such as: degradation associated with industrial, hazardous and hospital waste, biodiversity loss, and impact of inadequately treated wastewater, thus calculations often represent lower bound estimates.Originality/valueThis paper is a contribution in a process towards the use of environmental damage cost assessments for priority setting and as an instrument for integrating environmental consideration into economic and social development.