Environmental Management, Law and Economics

The Eighth General Increase in Resources of the Inter-American Development Bank calls for the Bank's support of borrowing member country efforts to strengthen environmental legislation, establish regulations and concrete systems of incentives and sanctions aimed at promoting environmental conservation, and improve the management of institutions responsible for the environment and natural resources. It notes that everywhere in the region it will be necessary to overcome inadequacies in legislation dealing with, and weaknesses in institutions responsible for, natural resources and the environment, if the trend towards environmental degradation is to be reversed. A significant effort must therefore be made to establish efficient institutional mechanisms to address environmental matters which entail the coordination of decision-making processes and the promotion of participation processes through local public and private organizations.

The new development model of "good governance" emphasizes the role of the competitive markets, government responsibility to manage the state, including environmental protection, and the importance of civil society (private rights and individual initiative). Key attributes are pluralism, accountability, and transparency. In the area of environmental protection, the specific themes arising from the good governance model are economic incentives for environmental management, and citizen participation. This new model has potential risks for those countries in Latin America and the Caribbean or their communities that are currently ill-equipped to adapt because they lack finance, skills, technology, information or experience. These potential negative consequences require the adoption of innovative, yet practical and implementable, legal and economic instruments for environmental management, including pollution control.

In the medium term, SDS/ENV hopes to explore the related issues of policy instrument selection and public/private enforcement to provide Bank staff with a practical set of internally consistent options that can be evaluated and implemented at the project or program level.