Microeconomic Analysis of Innovative Environmental Programs in Developing Countries

Abstract

Environmental management programs that attempt to cope with institutional weaknesses in developing countries by being less reliant on governments’ formal regulatory apparatus are becoming increasingly common. Three leading examples of such innovative programs are (1) public disclosure and voluntary programs to address industrial pollution; (2) programs that inform households about environmental health risks; and (3) payments for environmental services. Although (1) and (2) have reduced emissions of industrial pollutants and household exposure to environmental health risks in some cases, the reductions are small relative to the size of the problems. Conservation benefits from (3) have been similarly small so far. Evidence on the effectiveness of these programs is limited, both because the programs are relatively new and because there has been limited use of rigorous impact evaluation methods. Despite this weak performance record, continued experimentation with innovative programs appears to be warranted, especially if the opportunity cost is not too high in terms of redirecting resources away from formal environmental management programs and if rigorous impact evaluations are built in to determine whether and why innovative programs have worked. Future research needs to pay attention to the great heterogeneity among developing countries (i.e., successful implementation in one country is no guarantee of success elsewhere), and to the relationship of innovative programs to formal environmental management programs.