Importance of Handling Environmental Funds

 This essay presents a review of an article that presents a framework on how to handle environmental funds and how managers of such funds should use the available purchasing strategies to either maximize benefit costs or reduce cost to resource owners, consumers and environmentalists. It discusses the pertinent issues raised by the authors of the article and explains why it would be important to solve such issues and who shall benefit from such solutions. It also summarizes the findings and conclusions of the article and a personal assessment of the article.

The essay highlights another article that uses the primary article i.e. article being reviewed and concludes giving a vote of thanks to the authors of the article. Funds are a major contribution towards any environmental conservation effort. These funds are used to sponsor activities such environmental education and re-afforestation. With controversy arising how environment conservancy movements are debating on how to come up with funds and how such funds can be used fund a project that will derive the maximum benefit, there is need to develop a framework that will solve this challenge.

This essay, therefore, presents an analysis of an article that presents a framework on how to environmental funds should use the available purchasing strategies and how such strategies can be used to either maximize benefits costs to resource owners, consumers, and environmentalists.

The article was authored by Jun Jie Wu, David Zilberman, and Bruce A. Babcock and published in the Journal of Environmental Economics and Management, Volume 41, Issue 3.

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In the recent years, environmental conservation movements have moved to a sort of purchasing strategy of land and other localities that are considered endangered (Wu, Zilberman&Babcock, 2001). This approach has enabled such movements to acquire resources, both water, and land, that have a high environmental value irrespective of their unit cost- a sort of benefit cost strategy i.e. a great environmental benefit to economic cost (Wu, Zilberman& Babcock, 2001). 

This strategy has, however, affected resource owners, consumers and the environmentalists themselves. Should the environmentalists overlook the high cost incurred in purchasing such resources and focus on benefits targeting? Should resource owners put an emphasis on cost targeting and milk the environmentalist money? Should the consumers be concerned with this sort of benefit-cost strategy? It is this dilemma that Wu, Zilberman, and Babcock (2001) try to solve by developing a framework that will guide the decision-making process of these three parties i.e. environmentalists, consumers and resource owners.

Wu, Zilberman, and Babcock (2001) conclude their article by stating that it is imprudent to ignore the effect of output price of purchasing funds. They identify that a strategy that only puts an emphasis on the hugest environmental benefits may have a counterproductive aftermath and should only be used by consumers and input providers but not environmentalists. Wu, Zilberman, and Babcock (2001) advise resource owners to go for a strategy that stresses on low cost resources since this will result in the highest reduction in production and thus highest output price increase.

Wu, Zilberman, and Babcock (2001) are cited in more than 100 peer-reviewed articles including Claassen, Cattaneo, and Johansson (2008). Claassen, Cattaneo and Johansson (2008) employ the framework developed by Wu, Zilberman and Babcock (2001) to develop their cost effective method of assessing agri-environmental programs in the United States. Claassen, Cattaneo and Johansson (2008) develop a benefit-cost environmental indices to measure the effectiveness of these programs.

The article is written in a clear and concise language that aids its understandability. Wu, Zilberman, and Babcock (2001), in a systematic and statistical approach, prove how they arrive at their findings and conclusions. The mathematical derivations are clearly explained, and the graphs are superbly elaborated to enhance comprehension. It may, however, be impossible to follow how some equations are derived if the reader does not have an advanced understanding of algebra and calculus. I would, therefore, like to thank Wu, Zilberman and Babcock (2001) for the informative article. It is a very factual and detailed report, evidence of a study well done.

References

• Claassen, R., Cattaneo, A., & Johansson, R. (2008). Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice. Ecological Economics, 65(4), 737-752. http://dx.doi.org/10.1016/j.ecolecon.2007.07.032
• Wu, J., Zilberman, D., & Babcock, B. (2001). Environmental and Distributional Impacts of Conservation Targeting Strategies. Journal of Environmental Economics And Management, 41(3), 333-350. http://dx.doi.org/10.1006/jeem.2000.1146