Multi-criteria Analysis as a potential tool for evaluating nature conservation policy

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EASY-ECO Vienna Conference 200811-14 March

“Governance by Evaluation: Institutional Capacities and Learning forSustainable Development”

Multi-criteria Analysis as a potential tool for evaluatingnature conservation policy*

María-Ángeles DíezUniversity of the Basque Country (UPV/EHU)Dep. of Applied Economics I

E.U. de Relaciones LaboralesBº Sarriena s/nCampus de LeioaEuskadi - Españae-mail: [email protected]

Iker EtxanoUniversity of the Basque Country (UPV/EHU)Dep. of Applied Economics I

Fac. CC. Económicas y EmpresarialesAvda. Lehendakari Agirre 8348015 BilbaoEuskadi - Españae-mail: [email protected]

Abstract:The assessment of environmental projects has been traditionally approached by Cost-Benefit Analysis (CBA). This monetary evaluation method falls short of being aconsistent tool within an increasingly complex policy-making context. Drawbacks arerevealed regarding both methodological limits and sustainability approach faced. Thus,whether CBA is a suitable method for evaluating nature conservation policy is broughtinto question.In addition, the potentiality of Multi-criteria Analysis (MCA) as an evaluation tool forevaluating sustainability issues is argued. Unlike CBA, MCA is compatible with differentsustainability approaches. MCA is used to address multiple objectives as well asmultidimensional issues in complex policy-making context. It is also thought multi-criteria methods are generally well-fitted in conservation policy context derived from thewide range of attributes of protected areas.Lastly, the application of a particular multi-criteria evaluation method to theconservation policy in the Basque Country is explored as an attempt in the early daysof a project on the topic. It is believed that public participation, transparency andinter/multi-disciplinary approach that the Social Multi-criteria Evaluation involves areadequate features for the evaluation of this policy.

Keywords: Cost-Benefit Analysis, nature valuation, Multi-criteria Analysis, natureconservation policy evaluation, Basque Country.

(*)This is a draft in need of further work. Commentaries are welcome.



Multi-criteria Analysis as a potential tool for evaluating nature conservation policy

Authors: María-Ángeles Díez & Iker Etxano i

List of Contents:

1. Introduction............................................................................................................. 1 2. Cost-Benefit Analysis: the traditional way of assessing environmental policy ........ 1

2.1. Rationale......................................................................................................... 1 2.2. Sustainability, paradigms and CBA................................................................. 3 2.3. CBA and nature conservation policy............................................................... 5 2.4. Is the use of CBA suitable for evaluating nature conservation policy? ........... 8

3. Multi-criteria Analysis: a potential tool for evaluating sustainability issues ........... 10 3.1. Rationale....................................................................................................... 10 3.2. MCA and sustainability ................................................................................. 11 3.3. MCA application in nature conservation policy ............................................. 12

4. MCA as a tool for evaluating nature conservation policy in the Basque Country . 13 4.1. Background................................................................................................... 13 4.2. Potentiality of MCA application ..................................................................... 15

5. Concluding remarks.............................................................................................. 18 6. References ........................................................................................................... 19




Authors: María-Ángeles Díez & Iker Etxano 1

1. Introduction

Policy-making context is increasingly complex nowadays for different reasons.Constrains derived from environmental reasons have been placed in policy devisingarena. Sustainability has been assumed within this context to avoid performances thathave seriously damaged environment. In addition, public participation has become an

issue of increasing relevance in policy-decision context. It is thought that civil societyshould increasingly take part on public decisions from a wide democratic perspective.Public participation in a democratic context, then, should go beyond the soleparticipation in elections. In this way, evaluation methods which include these twoissues have increasingly been developed for the last few decades along with othersthat still remain fundamentally immovable.

On the other hand, nature conservation is one of the strategies that have beentraditionally adopted in order to preserve the environment. Conservation strategies areoften developed, among others, through the promotion of Natural Protected Areas(NPA). These sites are featured by containing a wide range of attributes, such aseconomic, social, and territorial in addition to environmental ones. All of them should be

considered in order to undertake a full-covered evaluation process. Moreover, anincreasing surface of protected areas has been recently achieved as a result ofsupporting and promoting conservation strategies. Development of the Natura 2000ecological Network all across the European Union is a good example of the relevancethat nature conservation policy is gaining nowadays.

Thus, the first part of the paper goes through a conceptual revision of Cost-BenefitAnalysis (CBA) as it is probably the main traditional method of assessingenvironmental policy. Then, whether it is a suitable method for evaluating natureconservation policy is brought into question. In the second part, main features of Multi-criteria Analysis (MCA) are described and its application to conservation policychecked. The next section explores the potentiality of a particular MCA method, theSocial Multi-criteria Evaluation (SMCE), for evaluating the forthcoming implementationof the Natura 2000 ecological network in the Basque Country. Finally, principal ideasare summarised as concluding remarks.

2. Cost-Benefit Analysis: the traditional way of assessingenvironmental policy

2.1. Rationale

The idea beyond the CBA is the comparison between gains (benefits) and losses(costs) that a particular project/policy may yield on society. In fact, costs and benefitsare defined according to the satisfaction of social preferences. Where possible, the

effects of a project are measured as the individuals affected would measure them.Thereby, individuals’ preferences accruing are measured as social preferences.However, both benefits and costs are relative as they are concerned with people’swellbeing (utility).

The CBA finds its foundation on Welfare Economics. The principle underlying thetheoretical foundation of CBA is that ‘winners’ derived from a particular project/policycan hypothetically compensate ‘losers’ and still have some gains left over. Society is,then, better off in the overall. This is known as Kaldor-Hicks compensation principle,which is consistent with Pareto improvement since existing state is indifferent tomodified for ‘losers’ (once they have been compensated) and modified state ispreferred to the existing for ‘winners’ (if they can over-compensate).

Within environmental management framework, CBA is a monetary valuation methodwhich measures changes in environmental quality. If the man-made change (project)





implies a better environmental quality, in monetary terms, it will be measured by theindividuals’ willingness to pay (WTP) for it – benefit. By contrast, if the project carriesout a worse environmental quality individual’s willingness to accept (WTA) for it mustbe tested – cost. Hence, the compensation from ‘winners’ to ‘losers’ (whether exists) ismeasured in monetary terms.

As noted CBA is designed to show whether the total benefits of a project exceed itscosts, and if it is so the project will go ahead. Particularly, benefits and costs that mayoccur over time are taken into account as Net Present Value (NPV). Both positive andnegative effects that a particular project would generate over time (in the future) mustbe considered now, when decision must be taken. The CBA decision-rule, then, is apositive NPV as Equation 1 shows:

0)1(

)(1

ft

T

t

t t

r

C B

NPV +

−

=

∑= (1)

where Bt and Ct are, respectively, benefits and costs in year t, and r is the discount

rate.If the NPV is negative the project will not be undertaken; it should be positive to acceptthe project. When only a case is assessed, decision-makers should decide about‘accept/reject’ the project depending on the NPV, which means monetary intensity isthe criterion followed (cardinality). But when several alternatives are assessed (all ofthem NPV>0) the choice should be made on the basis of the greatest NPV, andthereby an ordinal ranking among different alternatives may be devised depending onthe NPV (ordinality). Whatever the case, the CBA decision-rule only works under thecondition of ‘strong commensurability’ (Munda, 1996), i.e. it is the case that all gainsand losses underlying a given action are transformed into a single composite measure – a monetary measure as NPV.

Future accounting is a great matter of debate (and disagreement) among economists.Usually less weight to a benefit or a cost is granted in the future than now, thereby thepractice of discounting arises. Discounting is how economists take account of changingpreferences for costs and benefits over time, and hence the discount rate (r ) is a meanto reveal time preference. Referring to Equation 1, future must be discounted in orderto obtain a value at the current, which depends on society time preference (more orless favoured in respect to the future). So the longer is project time-horizon (higher t)and the greater is society’s preference for the future (higher r ), the lower will be NPV.

CBA is specifically designed to include environmental costs and benefits and it hasbeen employed in the US for evaluating policies mainly since late 1970s1. It found anextensive application after Reagan’s Executive Order 12291, in 1981, for evaluating

new regulations. In Europe a more recent legal framework, 1995 Environment Act inthe UK, envisions the employment of CBA in policy-making.

CBA has been used as evaluation tool across different environmental policy areas. Ithas been employed for assessing either environmental global effects (e.g. ozonedamage, global warming) or more locally concerning issues (e.g. water qualityimprovements, reduction of lead in gasoline, control of nitrate pollution, evaluation offorest practices code, etc.). In nature conservation policy respect, valuing habitatprotection has been a common way of performing in order to know benefits derivedfrom protection and contrast them with costs associated to conservation, as there willbe approached in section 2.3.

1 Hanley and Spash (1993) explain how the development of the CBA in the US has been.





2.2. Sustainabili ty, paradigms and CBA

Sustainable Development (SD) concept was formally approached by WorldCommission on Environment and Development (‘Brundtland Commission’) in 1987 asdevelopment that

“meets the needs of the present without compromising the ability of futuregenerations to meet their own needs”.

This ambiguous definition has lead to numerous interpretations and conflicts over thelast two decades among scientists (whether natural or social), policy-makers and civilsociety. However, there are two inherent issues derived from the above definition:intergenerational and intragenerational equity. The former bears in mind the time-line,which involves considerations above future generation’s wellbeing when SD policiesare applied at the current. By contrast, the latter leads to approach the unbalancedsocioeconomic and environmental performance between rich and poor countriesnowadays.

Focusing on an economic perspective, SD is regarded to economic growth and capital

stock. In fact, SD has been widely spread as it underpins the idea that economicgrowth must be compatible with a high standard environment quality and, thereby, notat the expense of the future generations. Economic growth is linked to productionfunctions and capital stock. The fact of accruing capital increases economy’s capacityto yield goods and services and therefore society achieves a major wellbeing.However, it must be clear that capital may be defined in different ways, namely naturalcapital (whether renewable or non-renewable) and reproducible capital, i.e. humancapital (knowledge) and human-made capital (goods employed to yield other goodsand services).

A point of matter in terms of environment is to what extent natural and reproduciblecapital are substitutes and what kind of effects this substitution (whether it is) generateson society’s wellbeing. This leads to weak and strong sustainability concepts, which aredefined in terms of degree of substitutability between natural capital and reproduciblecapital. Whereas weak sustainability requires a high degree of substitution betweenthem (e.g. roads and infrastructures may compensate the depletion of environmentalquality in social wellbeing terms), strong sustainability does not (e.g. loss of certainbiological species cannot be replaced by increasing utility derived from using thoseinfrastructures). So to what extent should be substituted natural capital by reproducibleone? Does reproducible capital generate enough wellbeing to be better off at theexpense of depleting natural capital? Strong sustainability supporters argue there is acritical threshold in natural capital through which we cannot go beyond2.

van Kooten and Bulte (2000) establish a correspondence between views ofsustainability and paradigms. Weak and strong sustainability are, respectively,

associated with neoclassical and ecological paradigms. Principles recorded by each ofthem are shown in Table 1. Within the scientific area of Economics, whereas theneoclassical paradigm (as defined in Table 1) is associated with EnvironmentalEconomics, ecological paradigm regards Ecological Economics.

Within CBA framework the degree of compensation that substitutions between naturaland reproducible capital involve is a key factor. That is, to what extent compensationprinciple can be formalised depending on the sustainability approach. When weaksustainability is adopted CBA can neatly be embedded in such a context due to weaksustainability means total substitution between natural and reproducible capital.Therefore, a trade-off between these, drawing on compensation principle, makes

2 This issue is approached more in depth by several authors (Turner et al., 1994; van Kootenand Bulte, 2000).





sense. By contrast, relying on the same reasoning, CBA should be abandoned whenreferring to strong sustainability as natural and reproducible capital trade-offs cannot becompensated, i.e. compensation principle is not operational (see Table 2).

Table 1: Neoclassical vs Ecological – views of sustainability

Neoclassical (economists) Ecological

1. Focus is on what happens at the margin, because it isat the margin that decisions are made. The scale of theeconomy relative to the resource base is irrelevant.

1. Focus is on large-scale ecosystems and possibilities forirreversibility. There are scale effects – certain “triggers”could set in motion large-scale ecosystem processes thatresult in irreversible loss in ecosystem functioning.

2. Economists employ steady-state models that assumeequilibrium.

2. Models in ecology focus on resilience and non-equilibrium dynamics.

3. The value system employed is utilitarian. 3. A value system must come from outside ecology asecology does not have its own.

4. Monetary values are used to measure and “value”changes in environmental quality.

4. Monetary valuation is generally opposed, especially asit is applied to decisions affecting threatened, large-scaleecosystems productivity.

5. Prices play an important role signalling scarcity and, asa result, encouraging substitution and technologicalinnovation. While unpredictable and difficult to measure,technological change has been shown to be a powerfulfactor in the past and will continue in that role in the future.

5. The role of prices and technological change isdownplayed. Prices do not reflect reality because of theexistence of externalities. Technological change isunpredictable and unreliable for solving future problems.

6. Discounting and present values are used. 6. Discounting is generally opposed, and the emphasis ison future generations.

7. The current generation owes the future opportunitiesequal to its own, which means maintaining a non-decliningaggregate capital stock. Adequate investment needs to bemaintained to compensate the future for the use (ordegradation) of certain resources.

7. Safeguarding the functioning of large-scale ecosystemsfigures prominently in satisfying concerns aboutintergenerational fairness. Preservation of variety ofecosystems functions (with aesthetic services featuringprominently) is what matters for the future.

8. Attempts are made to measure the well being o variousgenerations and then compare them (referred to as

teleology, implying the making of decisions for the futuregeneration).*

8. The rights of future generations trump the mereenjoyments of current generations, enjoyments that come

at the expense of future wellbeing. This is a rights-basedtheory, or deontology.*

9. The Safe Minimum Standard of conservation allowstrade-offs.

9. The Precautionary Principle permits less scope forbalancing costs and benefits.

10. Property rights of individuals feature prominently, withgovernment’s role specified as that of setting andenforcing the “rules of law”, and, where justifiable, relyingon the State to correct externalities.

10. Individualism is seen as a source of environmentaldegradation. State intervention is needed to protectecosystems.

Source: van Kooten and Bulte (2000:243)

There are two more relevant issues regarding sustainability within CBA framework thatmust be stressed. First, drawback of introducing discounting must be pointed out. If aparticular project causes a long-term damage (e.g. nuclear dumping, landfill sites,genetic diversity loss, etc.), then discounting will mean that the present value of suchdamage seems low. Namely, the higher the discount rate the less important the impactof future environmental damage will be – lowering the discount rate should not be asolution to environmental problems but only arithmetical. Moreover, discounting makesit harder to justify projects that only provide benefits in the future, e.g. long-termlandscape or environmental benefits. In the overall, it must be concluded thatdiscounting encourages current generations to consume non-renewable resourcesmore quickly to the disadvantage of future generations, which makes it alienate closeto the neoclassical paradigm.

In second term, the distributional issue linked to CBA has been emphasised (Munda,

1996). This valuation method is weak because of not being ‘fair’ in equity terms. Thehypothetical compensation that welfare economics foundation predicts does not





consider different income level groups, so benefits and costs yielded do not impactequally over society depending on income level.

Table 2: CBA and sustainability

Sustainabilitymode Management strategy Policy instruments

Pollution Control andWaste Management

RawMaterials

Policy

Conservation andAmenity

Management

Very WeakSustainability

Conventional CBA:

Correction of market andintervention failures viaefficiency pricing;

Potential Pareto criterion(hypothetical compensation);

Consumer sovereignty;

Infinite substitution

e.g. pollution taxes, elimination of subsidies, imposition ofproperty rights.

WeakSustainability

Modified CBA:

Extended application ofmonetary valuation methods;

Actual compensation,shadow projects, etc.;

Systems approach, ‘weak’version of safe minimumstandard

e.g. pollution taxes, permits, deposit-refunds, ambient targets.

StrongSustainability

Fixed Standard Approach:

Precautionary principle,primary and secondary value

of natural capital;Constant natural capital rule;

Dual self-conception, socialpreference value;

‘Strong’ version of safeminimum standard

e.g. ambient standards; conservation zoning; processtechnology-based affluent standards; permits; severance taxes;assurance bonds

Very StrongSustainability

Abandonment of CBA:

or severely constrained cost-effectiveness analysis;

Bioethics

Standards and regulation; birth licences

Source: Turner et al. (1994:60)

2.3. CBA and nature conservation policy

As first step of CBA evaluation process benefits and costs derived from the proposedproject must be identified. In regard to nature conservation policy, both benefits andcosts of a NPA are accurately explained by Dixon and Sherman (1990). There existdifferent ways to classify benefits according to criteria employed and objectivesestablished by each type of NPA. However, overall benefits associated with NPAs canbe identified as follows:

a. Environmental benefits. These are the principal benefits for which an area isprotected (watershed protection, ecological processes, biodiversity

conservation, etc.).





b. Recreation, tourism and rural development. Public use is generally one of themain objectives of NPAs. Tourism also regards rural development as it providesrevenues for local people. Protection programmes has an important socio-economic relevance to many rural areas, to the extent that they have beenincluded in rural development plans.

c. Education and research. NPAs can be appropriately used for both researchpurposes and educational activities as good environmental practices aregenerally undertaken within them.

d. Consumptive benefits. These have been traditionally yielded from agricultureand forestry (food, forage, timber, etc.). However, depending on the NPAdifferent degree of restrictions may be applied on such activities in order toprevent environmental damage.

e. Non-consumptive benefits. Unlike consumptive benefits, these are not derivedfrom direct use (e.g. aesthetic, cultural and historic values). But the mostessential of non-consumptive benefits is the ‘existence value’ (Azqueta, 2002),which also regards natural resources. One can appraise positively the mere

existence of a site independently of any direct present of future use of it.f. Future values. The protection of certain areas ensures a number of benefits

(either consumptive or non-) derived from their potential use in the future. Thisconcept has also been denominated ‘option value’ (Garrod and Willis, 1999;Azqueta, 2002) insofar as people may hold the option of using the NPA in thefuture.

Within a more formal economic approach framework all these benefits can be identifiedas either use values or non-use values to arrive at an aggregate measure of value, i.e.total economic value (Turner et al., 1994; Azqueta, 2002).

On the other hand, conservation policy must afford a number of costs as a

consequence of declaring and managing NPAs. The amount of costs highly dependson both conservation measures established and economic activities developed withinthe NPA. Following Dixon and Sherman (1990) three main types of costs can beidentified:

a. Direct costs. These costs represent direct outlays as they are directly related toestablishment and management of NPAs. They are usually afforded byGovernment and comprise different categories of costs (owning the site,facilities, staff costs, protection programme, etc.).

b. Indirect costs. They refer to adverse impacts produced by establishing NPAs,including damage to property or injury to people by wildlife. There are quitesignificant damages derived from activity and use restrictions within the NPA

(e.g. forestry), which usually requires economic compensation for local peoplein order to offset potential losses.

c. Opportunity costs. These costs represent the potential benefits that society orindividuals loss when a site is protected, rather than employing its resources toproduce or to use alternatively. Issues concerning these costs play an importantrole in a decision-making process.

Nonetheless, one of the principal concerns beyond identifying bots benefits and costsis that regarding their economic valuation. Converting both benefits and costs of a NPAinto monetary terms is not free from methodological constraints. This is basically due tothere is no market where environmental assets can be valued, and therefore a certainprice cannot be assigned to them. In fact, many environmental goods fulfil the two

conditions to be considered public goods (Garrod and Willis, 1999): non-rivalry inconsumption and non-excludability either by producers or consumers. So





environmental goods, such as air quality, visual amenity benefits, and flood protectionare public goods. Hence, such goods may produce welfare benefits but have no marketvalue, and therefore they produce non-market benefits, which bring about economicvaluation constraints.

To deal with such a valuation issue several methods have been devised drawing on

Environmental Economics. Despite limitations Contingent Valuation (CV) and TravelCost have been empirically the most employed methods, and Hedonic Pricing in a lessproportion. These methods have been to great extent used to find out NPAs’ valueregarding their recreational use (see Azqueta, 1996). However, CV has been widelyemployed in research aimed at revealing a wider range of benefits, such as non-consumptive benefits (non-use value), and therefore allocating a certain value toparticular NPAs.

The CV has been the method mainly used within a CBA process to valuate welfaregains derived from habitat protection. CV is labelled as Expressed Preference (EP)method insofar as a sample of respondents is asked about placing values onenvironmental assets but referring to a hypothetical market. Thereby, respondents are

asked what they are willing to pay for the preservation of the site. This method isappropriately embedded within the CBA theoretical foundations and welfare economicsbackground. However, problems associated with it have been highlighted by severalauthors (Hanley and Spash, 1993; Turner et al., 1994). These limitations refer basicallyto bias revealed through the application process, which may deviate from the ‘true’value. The systematic overestimation or underestimation may result from differentreasons, such as strategic bias, questionnaire design bias, cognitive biases, andhypothetical and context biases.

For the particular case of valuing benefits of biodiversity protection two main problemshave been emphasized (Hanley et al., 1995). On the one hand, preferences forbiodiversity may be lexicographic rather than utilitarian. If it is so CBA will not be anappropriate evaluation tool for biodiversity protection due to lexicographic preferencesare incompatible with Kaldor-Hicks compensation principle. On the other hand,information degree about the meaning of biodiversity that respondents have is a keyissue. The less this information is the more difficult is the employment of CV as ameans of valuating conservation benefits. Over the last few years methodologicalimprovements have been put in place to overcome some of the constraints cited, andin parallel the use of some other valuation methods has emerged (e.g. ChoiceExperiment, Valuation Workshops).

Nevertheless, a number of studies have been undertaken on the ground to grant aparticular monetary value to the analysed areas. Compilations of these studies havenbeen made as, for example, Table 3 shows. One can note the wide range of valuesthat the WTP may acquire depending on the site as well as the relevant difference

existing in each site between the minimum and the maximum WTP estimate.As last step of CBA application process the comparison of benefits and costs at thepresent value must be made. Researches undertaken across England regarding theimplementation of protection programmes in specific sites reveal that benefits exceedcosts (Garrod et al., 1994; Willis et al., 1996). Nevertheless, in most cases benefits areunder valued compared with costs. While calculating opportunity costs may depend ona wide range of factors, finding out direct costs and indirect costs of a particular siterequires less information and resources. Moreover, in most cases total benefits of aparticular NPA are higher than quantifiable benefits (Dixon and Sherman, 1990).





Table 3: Valuation of natural habitats

Author(s) (year) StudyMean WTP estimates (per

household)

Nunes (2002b,c)Protection of natural parks and wilderness areas,Portugal

$40 to $51

Wiestra (1996) Protection of ecological agricultural fields, TheNetherlands NLG 35 (single-bounded)

Richer (1995) Desert protection in California, US $101

Brouwer (1995) Protection of peat meadow land, The Netherlands NLG 28 to NLG 72

Carson et al. (1994)Protection of the Kakadu conservation zone andNational Park, Australia

$52 (minor impact scenario)

$80 (major impact scenario)

Hoevenagel (1994)Enhancing wildlife habitat in the Dutch peat meadowregion, The Netherlands

NLG 16 to NLG 46

Kealy and Turner(1993)

Preservation of the aquatic system in the Adirondackregion, US

$12 to $18

Hoehn and Loomis(1993)

Enhancing wetlands and habitat in San JoaquinValley in California, US

$96 to $184 (single program)

Diamond et al. (1993)Protection of wilderness areas in Colorado, Idaho,Montana and Wyoming, US

$29 to $66

Silberman et al. (1992) Protection of beach ecosystems, New Jersey, US $9.26 to $15.1

Bateman et al. (1992) Protection of a wetland, the Norfolk Broads, UK £4 to £12

Boyle (1990)Preservation of the Illinois Beach State NatureReserve, US

$37 to $41

Loomis (1989) Preservation of the Mono Lake, California, US $4 to $11

Smith and Desvousges(1986)

Preservation of water quality in the MonongahelaRiver Basin, US

$21 to $58 (for users)

$14 to $53 (for non-users)

Bennett (1984) Protection of the Nadgee Nature Reserve, Australia $27

Mitchell and Carson(1984)

Preservation of water quality for all rivers and lakes,US

$242

Walsh et al. (1984) Protection of wilderness areas in Colorado, US $32

Source: Nunes et al. (2003:58).

2.4. Is the use of CBA suitable for evaluating nature conservationpolicy?

As there will be detailed below the use of CBA involves several restrictions in regard tonature conservation policy. It must be clear that due to these limitations CBA cannot bequalified as an inferior method, but we should be aware of the partiality and sometimes

arbitrariness of this method (van Delft and Nijkamp, 1977). However, in contrast, it alsoentails strong points as there will be detailed as well.

Main advantages of using CBA in a general framework, and particularly within natureconservation policy evaluation context, can be synthesized as follows:

• It is a well-established method in a decision-making context, and imposesdiscipline on environmental policy-making debates.

• Environmental values are explicitly incorporated into decision-making. Sobenefit-cost trade-offs are made explicit but not left as implicit, particularly in aworld of limited resources.

• CBA relies on a well-defined economic theoretical framework. Output achieved

should be economically efficient.





• Economic valuation may be a powerful tool in order to calculate compensationschemes once environmental damage (e.g. fuel spreading, flooding, etc.) hasoccurred.

• Economic valuation is valid for calculating compensation schemes that shouldbe used to pay to those whose uses and activities across the NPA have been

restricted.• The economic criterion per se must be useful. It should be retained as another

criterion for an integrated assessment of a particular protected site where morecriteria are used to evaluate it.

By contrast, principal disadvantages of CBA can be summarised as follows:

• Problems with comparing inter-personal utility and aggregating individualpreferences into a social welfare function. Moreover, CBA neglects equityconcerns, which makes it not being consistent with fair outcomes.

• Uncertainty is implicit on different issues, such as price changes into the future,ecosystems impacts and human response to shocks.

• Critique of discounting: problems with selecting a social discount rate;preferences of future generations at risk; discounting may encourageenvironmental damage.

• CBA has clear environmental limits. The value of the environment defieseconomic measurement, such as bias revealed through the CV applicationprocess. Valuation of non-markets goods has been brought into questionbecause of different issues, such as reliability, validity and transferability(Hanley and Spash, 1993).

• As a consequence, estimates of biodiversity conservation benefits and costsare too imprecise and incomplete to be useful and, hence, the use of CBA as a

comprehensive evaluation tool is problematic in most real-world cases (Nuneset al., 2003).

• CBA assumes cardinality rather than ordinality, i.e. it takes account of themagnitude of net benefits rather than their importance, which chances toirreversible environmental damage.

However, apart from methodological or operative constraints there are a few morereasons which, in our view, discourages the extensive use of CBA. The followingdisadvantages regard the sustainability approach faced, which is placed on the basis ofour position in favour of MCA.

• The basic inherent problem to CBA is the fact that project evaluation regards

the employment of an unambiguous monetary uni-dimensional criterion due torequirement of transforming all effects into one single monetary dimension (vanDelft and Nijkamp, 1977).

• In the conservation policy framework it seems reductionist the fact of convertingall attributes concerning a NPA (environmental, territorial, biological,socioeconomic, etc.) into one single monetary dimension.

• Moreover, the use of this uni-dimensional criterion is associated with thecompensation principle, which is not compatible with strong sustainability.Furthermore, CBA supports weak sustainability position.

In fact, when a specific site is declared NPA, in principle, means habitat and species

living there will be protected ‘for ever’. Natural sites are not usually protected just for 10or 15 years, for instance, but their protection involves a long-term vision. Thisperspective is associated with strong sustainability, in terms it has been defined above,





as long as no replacement of natural capital is allowed. Under this view, then, it isreasonable to conclude that the use of an evaluation tool which is inherently regardedto such a replacement should be relegated as indisputable framework. Nonetheless,the minor positive aspects of CBA in regard to nature conservation policy-making, suchas estimate of economic compensation schemes, should be retained.

3. Multi-criteria Analysis: a potential tool for evaluating sustainabilityissues

3.1. Rationale

MCA was designed as evaluation tool in order to address multi-objective problems aswell as multidimensional issues, helping thus decision-making in a complex policy-making context. It is a valuable method when different existing alternatives can beassessed by multiple criteria; each alternative according to certain criteria. Under thisperspective, social conflicts usually arise between different social actors associatedwith each alternative. In fact, the main aim of MCA is to provide systematically

information on the nature of these conflicts – to make existing trade-offs moretransparent to a policy-maker. In these cases, when public investment projects andpolicy design are approached no optimal solution exists. By contrast, the final resultmust be a ‘compromise solution’ among the interests of the social actors involved(Munda, 2004; Russi, 2007).

It has been stated indeed that the major feature of MCA is that it operationally facesevaluation characterized by various conflicting interests (Nijkamp et al., 1990). Inaddition, a few more reasons have increased influence of multi-criteria evaluationtechniques over the last few years in public planning:

• the increasing importance of institutional and procedural decision-making overconventional ‘one-shot’ decision-taking;

• the desire in public decision to arrange feasible different alternatives from whicha solution can be chosen, instead of having a single solution dictated technicallyby an analyst; and

• the possibility of including intangible and incommensurable effects in theconventional CBA.

In regard to the latter, MCA can also be seen as a generalized and a more flexibleversion of CBA (Nunes et al., 2003) insofar as it allows the inclusion of monetaryaspects. However, in contrast to CBA, MCA mechanism does not convert all effects toone single uni-dimensional criterion. In this sense, CBA has a more narrow focus thanMCA, but the latter offers a greater flexibility than ACB as it takes account of a wide

range of criteria even if these cannot be related to monetary outcomes (particularly inthe case of externalities or intangibles) (van Delft and Nijkamp, 1977). This flexibility isindeed a main explanation for its increasing popularity among decision-makers andscientists (van Pelt et al., 1990).

MCA has its own evaluation process. Main steps that can be followed when structuringa multi-criteria decision problem are shown in Table 4. This is a standard approachfrom which each specific method within the MCA family as well as each appraisedstudy case may differ according to circumstances involved.

MCA family covers a wide range of methods. Principal methodologies within MCA aredescribed by Munda (1995). However, all of them have the possibility to consider alarge number of data, relations and objective often presented in real-world cases. By

contrast, the difficulty of a complete axiomatization of multi-criteria decision theoryappears when different conflicting evaluation criteria are taken into account. Then,





aggregation and hence mathematical problems may arise. However, methodologicalinnovations and applications of MCA to environmental issues have been recently put inplace (Getzner et al., 2005).

Table 4: Structure of a multi-criteria decision problem

1. Problem definition

2. Description of the alternatives:

2a) Continuous; 2b) Discrete

3. Definition of criteria

3a) Latent; 3b) Observable

4. Analysis of the impact of alternatives

4a) Qualitative information; 4b) Quantitative information

5. Assessment of policy priorities

5a) Qualitative; 5b) Quantitative

6. Selection of alternatives

7. Presentation of the results

7a) Numerical; 7b) Visual

Source: Nunes et al. (2003:87).

3.2. MCA and sustainabili ty

As general statement it can be declared that multi-criteria methods are generally avaluable tool to address sustainability issues. The following reasons may be given toargue that MCA may be applied accordingly to principles underpinning sustainability.First, as long as sustainability implies multidimensionality (due to the gamut ofdimensions that are generally associated with SD) it seems that a method whichemploys a multi-criteria evaluation framework is well-fitted in such a context. In fact,environmental, economic and social dimensions that are usually associated with SDseem to be well-covered by this method.

Second, CBA regards one unique unit of measurement (a monetary criterion) which isevaluated under compensation principle, and therefore it supports weak sustainabilityposition. On the contrary, MCA does not consider just only one evaluation criterion butseveral according to goals set, so no compensation principle is applied and hence itmay be much closer to strong sustainability approach. Non-compensability makes itstrong sustainability can be operative. But, both weak and strong sustainability

approaches can be applied by MCA depending on the degree of compensability(Martínez-Alier et al. 1998).

It must be pointed out that using MCA implies ‘incommensurability of values’, i.e. “theabsence of a common unit of measurement across plural values” as it has beendefined by Martínez-Alier et al. (Ibid., 280). This may lead to operational constraints.However, following these authors, incommensurability does not imply incomparability,but weak comparability. This concept takes presence since, on the one hand,comparison is feasible without resorting to a single type of value, and on the otherhand, different kind of measurement are needed to evaluate alternative options.Furthermore, weak comparability of values is seen as a basic foundation of EcologicalEconomics by these authors, which leads to state that MCA is an appropriate

assessment framework for Ecological Economics. The use of MCA within Ecological





Economics has been supported by more authors (Munda, 1995; Martínez-Alier andRoca, 2000).

In comparison to CBA, yet, the fact of being MCA more attractive than the former hasbeen emphasized (van Pelt et al., 1990). Reasons given by authors for this relybasically on two. First, MCA allows an explicit treatment of sustainability and is

adaptable to different conditions, such as inclusion of different generations in separatecriteria and qualitative information about distribution aspects. Second, mostmethodological constraints (e.g. measurements and valuation problems) that CBAoften encounters are avoided by MCA. Moreover, they state that the effects onenvironmental amenities, such as those that NPAs can provide, is one field wherescope of MCA is wider than CBA.

At this point we would like to stress the recent application to sustainability issues that aparticular method within the family of MCA has had: the Social Multi-Criteria Method(SMCE). Since employs a multi-criteria framework it can be concluded that amulti/inter-disciplinary approach is adequately implemented. However, this methodgoes beyond a set of common features belonging to multi-criteria methods. The basis

of this method has been established by Munda (2004).The main feature of SMCE refers to take into account the social dimension of theproblem at hand. So it has been put in place the concept of ‘social incommensurability’as the “existence of a multiplicity of legitimate values in society” ( Ibid., 664) whichobviously often reflects conflicts in a decision-making context. Thus, public participationis stressed to the extent to consider a necessary but not sufficient component. It allowsemploying different types of knowledge, such as that derived from experts, policy-makers and social actors. Involvement of social actors enriches the evaluation anddecision-making process as democracy and quality of scientific process are increased.

SMCE method also promotes transparency. All evaluation processes (and hence itsresults) may be influenced by ethical judgements introduced by any of the actors which

takes part. Comparing to CBA, MCA has been criticised due to great opportunities itgives to evaluator to include their own value judgements and hence subjectivity, e.g.when selecting and weighting criteria (van Pelt et al., 1990; Ciani et al., 1993). Sotransparency on the assumptions used is essential whether such problems want to beavoided.

Drawing on SMCE framework several empirical pieces of work has recently beencarried out regarding sustainability. It has been employed to assess renewable energyproduction and location (Gamboa and Munda, 2007; Russi, 2007); it has also beenused in the case of urban sustainability policies (Munda, 2006); and some sort ofsustainability measure has also been placed through this method (Munda, 2005).

3.3. MCA application in nature conservation pol icy

It seems MCA features are well-fitted to biodiversity issues as long as the latter hasbeen defined as “a compound, multifaceted concept comprising ecological, economic,geographic and social dimensions” (Nunes et al., 2003:83). According to this definitionbiodiversity term neatly embodies the wide range of attributes and functions of NPAs,which obviously regard environmental dimension but also territorial, economic andsocial dimensions as it can be inferred from section 2.3 when ‘benefits’ of NPAs weredetailed. At this point, socioeconomic impacts consequent on the establishment ofNPAs (e.g. tourism, local employment, use restrictions, compensation schemes, etc.)must be stressed insofar as social actors involved should be part of the evaluationprocess.





Following Nunes et al. (2003) different applications of MCA to biodiversity issues canbe founded. For instance, within a multi-attribute ecological framework the elaborationof a comparative biological value index including a combination of eight criteria into onesingle score is reported. Another great example is the so-called AMOEBE, a MCAvaluation tool developed in the Netherlands for the description and evaluation ofecosystems. It is concluded, then, that MCA has a great potentiality in applied researchfor biodiversity.

Practical applications on nature conservation policy have also been reported eitherfocused on the case of an ecological network (Strijker et al., 2000) or protected areas(Ciani et al., 1993; Munda, 1995). A common feature of two of them is that along withMCA have incorporated CBA.

On the one hand, Strijker et al. (2000) develop a simple MCA where the net result ofthe CBA is integrated as one of the two criteria employed – social costs ofimplementing an ecological network in The Netherlands. The other criterion is aquantitative measure of nature. Results are discussed under perspectives of bothevaluation methods. Yet, Ciani et al. (1993) evaluate different management alternatives

of a particular Natural Park. Inputs used for CBA are integrated in MCA as criteria, butthey also bring into question the results independently achieved according to MCA andCBA. It is concluded that final results, i.e. ranking of alternatives, are quite differentdepending on the evaluation method employed.

On the other hand, Munda (1995) uses economic criteria within a multi-criteriaframework (e.g. employment), but economic valuation which leads to CBA is not used.Five different possible courses of action are taken into account as alternative in view ofthe chance of flooding a particular Natural Park. Flooding would increaseenvironmental quality of wood but would decrease agricultural production. Soalternatives go from not flooding (business as usual) to partial flooding in combinationwith optimised agriculture. As a result, no optimal solution is found according to multi-criteria evaluation methods philosophy.

Apart from practical applications, a methodological perspective is developed by Faithand Walker (1996) for selecting protected areas through the use of MCA. Althoughfoundation is a trade-off between gains derived from biodiversity and costs associatedwith implementing protected area, the use of MCA is supported as it allows allocationof alternative weightings and a trade-off curve to establish preferred solutions.

Not explicitly conservation policy but regarding natural resources management the useof MCA for allocating financial resources in Australia has been reported (Hajkowicz,2007). Financial allocation of a large publicly-financed project for environmentalmanagement across different regions has been made through this method, and it islikely to be applicable in other situations.

4. MCA as a tool for evaluating nature conservation policy in the BasqueCountry

4.1. Background

Concern about nature conservation has increased in the Basque Country since the1990s. The 16/1994 Nature Conservation Act has been a key factor because it hasbeen the tool on which NPA network in the Basque Country has drawn – apart fromUrdaibai Biosphere Reserve, which has had its own legislation since the late 1980s.Moreover, the 3/1998 Environment Protection Act stresses specifically biodiversityprotection when puts in place the need of looking after it. Environmental Basque

Strategy of Sustainable Development 2002-2020 places nature conservation andbiodiversity as its third principal aim. Under this view, the Environmental Framework





Programme 2007-2010 (EFP) establishes biodiversity support as strategic goal,including 11 action lines and 9 explicit commitments. Furthermore, a NatureConservation Strategy is being developed during 2008 under EnvironmentDepartment’s leadership but in addition to the civil society participation.

However, the real challenge that the Basque Country faces in terms of nature

conservation is the implementation of Natura 2000 ecological network. By now 52Community Sites of Interest (CSI) and 6 Special Protection Zones for Birds (SPZB)have been designated, which means 147.000 Ha and 20,3% of surface of the BasqueCountry (see Figure 1). Selected sites have been designated either CSI or SPZBaccording exclusively to scientific and technical criteria of habitats and species ofCommunity interest. Namely, CSI have been declared according to Annex I (habitattypes) and Annex II (habitats of species) of Habitat Directive (92/43/EEC) and SPZBhave been designated according to specifications under Bird Directive (79/409/EEC).

In the last step of site selection process, state members have to designate CSI asSpecial Conservation Zones (SCZ) in a period of 6 years since were declared CSI bythe Commission. Thereby, both SCZ and SPZB will shape Natura 2000 Network. So

definitive implementation of Natura 2000 is the principal task for the near future in theBasque Country, for which the EFP 2007-2010 takes the commitment of designating by2010 as SCZ the 100% of the sites across the Atlantic Biogeographical Region and the30% of those included in the Mediterranean Region.

Figure 1. Natura 2000 Network in the Basque Country

Source: Dept. of Environment and Regional Planning of the Basque Government, 2008(http://www.ingurumena.ejgv.euskadi.net/r49-4975/en/contenidos/informacion/renp/en_bio/indice.html)

Bearing in mind, on the one hand, how the evolution of the conservation policy has

recently been in the Basque Country, and on the other, future directions established webelieve this is momentum to face an innovative design and development of





methodologies of evaluation. Much work must be done on designing and implementingmanagement plans for the sites declared. Participation of civil society wouldundoubtedly enrich this process, of those directly affected by Natura 2000 andotherwise. Furthermore, a significant portion of public outlay should be assigned tooffset uses and activities that will be affected by conservation legislation across thesesites. In short, we think all these issues should be assessed and considered in order toevaluate properly nature conservation policy.

4.2. Potentiality of MCA application

It is thought that the SMCE can be an appropriate tool to appraise the evaluation ofNatura 2000 in the Basque Country. In fact, we believe that main features of SMCEdescribed above fit quite well the issue of implementing the ecological network andproblems derived from it. In this sense, an ex-ante evaluation would be addressed.However, apart from the SMCE the use of some other tools among the different multi-criteria methods is not ruled out by the moment.

SMCE is carried out in six steps which have been described and developed by differentauthors (Munda, 2004; Russi, 2007). Nonetheless, we will try an adaptation of them tothe case of a chosen protected site across Natura 2000 in the Basque Country. Soassumptions will be made at this point in order to check to what extent this method canbe suitable for our case study. But these assumptions should not be made during theevaluation process of the real-world case. Steps would be as follows:

1. Definition of the problem

Different perceptions of the involved social actors on the problem must be analyzedbecause each of them perceives problems according to his or her view, which regardsown objectives, interests, knowledge, resources and role. Existing conflicts betweendifferent social actors may arise, which would reflect ‘social incommensurability’. In the

case at hand we suppose that conflicts between those who support an environmentalistposition and otherwise may arise. One should keep in mind that no optimal solutionexists in these cases, but a ‘compromise solution’ should be founded.

2. Institutional analysis

Institutional analysis, a method often used in public policy analysis, is used in order toexplore the social dimension of a problem. In our view the more relevant issue of theinstitutional analysis would be the identification of social actors.

Regarding the selected Natura 2000 site we may assume that principal social actorsare groups with interests on the site (e.g. farmers, forest industry, Local Authorities,ecologist groups, tourism association partners, etc.). However, apart from affectedactors or groups whose interests are directly affected, also civil society in general andparticular groups who can influence final decision have an institutional role.

Once social actors have been identified interactions patterns among them aredescribed, i.e. structure of the institutional network, kind of interaction, and the contextwhere such interactions take place.

To carry out all this different information sources are needed. In addition to writtensources, interviews in depth to key agents or focus groups are widely used techniques.

3. Generation of the policy options

Unlike CBA and other MCA methods, within the SMCE the generation of policy optionsis resulting from dialogue between social actors and analysts. Thus, the latter becomes

much more attractive from a social point of view. In our view, this is a major strength ofthe SMCE. Then, not only criteria and scores should be undertaken between social





actors and analysts, but also the generation of the options among which to choose, i.e.alternatives.

In the case at hand we may predict a wide range of options, from a reallyenvironmental position to a permissive position. The former would imply the creation ofa very restrictive legal framework for the selected Natura 2000 site, which would

impose restriction over uses and activities in the site, and therefore the need ofeconomic compensation schemes. By contrast, the latter would be associated with apermissive legal framework and therefore more activities would be allowed, but alsohigher environmental risks foreseen.

4. Construction of the multi-criteria impact matrix

Once policy options have been defined criteria to evaluate them must be chosen, whichderive from objectives of social actors. However, it must be kept in mind that in SMCEparticipation is used as an input in the analysis, but policy options, criteria and weightsare not derived directly from participation (Munda, 2004).

Criteria are used to assess to what extent each policy option allows to reach anobjective, and these objectives belong to different social actors. In the case at hand, forecologist groups a restrictive option would be an objective so ‘number of activities anduses restricted’ or ‘degree of restriction over activities’ may be criteria chosen.

Once criteria have been established a score is attributed to each criteria. Allinformation gathered is synthesized in a Multi-criteria Impact Matrix (Table 5). Then,among n feasible alternatives one of them would be preferred to other alternativesaccording to a particular criterion. For instance, A1 would be preferred to An if Ec1(A1) >Ec1(An) so a multi-criteria problem can be represented through the impact matrix.

Table 5: Example of a Multi-cr iteria Impact MatrixPolicy opt ions of the selected Natura

2000 siteDimensions CriteriaUnits of

measurements A1 … … An

Ec1 … Ec1(A1) … … Ec1(An)… … … … … …Economic

Ecm … Ecm(A1) … … Ec1(An)E-T1 … E-T1(A1) … … E-T1(An)… … … … …

Environmental-Territorial

E-Tp … E-Tp(A1) … … E-T1(An)Soc1 … Soc1(A1) … … Soc1(An)… … … … … …Social

Socq … Socp(A1) … … Socq(An)Source: authors drawing on Martínez-Alier et al. (1998) and Russi (2007).

In our view three principal dimensions can be identified to address this issue, i.e.economic, environmental-territorial, and social. In addition, more dimensions may beused as well as many more criteria, all of them derived from the participation process.

5. Application of the mathematical procedure and Sensitivity analysis

Aggregation and sensitivity analysis may be overlapped in an unique step althoughthey have usually been differentiated into two steps. Many multi-criteria models havebeen developed for the last few decades, but an appropriate one for this particular caseshould be chosen. Different software have been developed for this purpose as well,such as NAIADE. In any case, technical work undertaken by a multi-disciplinary groupwould be needed.

On the other hand, sensitivity analysis allows determining whether final ranking varieswhen some assumptions are changed. Weights assigned to each criterion are made by





analysts but as reflection of ethical positions argued by social actors. Sensitivityanalysis, then, play a key role in SMCE as it can show which ranking can be obtainedby any different position. Thus, transparency and public accountability are stressed. Inour case, for instance, reflection of a very environmentalist position would result ingiving a high weight to criteria within environmental-territorial dimension.

Nevertheless, evaluation process must conclude by presenting results to social actors.Furthermore, results must be discussed with social actors for which a new round ofpublic participation must be undertaken by means of meetings, workshops orinterviews. This may be considered last step, but one should note that the processitself may reveal more existing conflicts which feed a new evaluation process. This ideahas been well illustrated by Gamboa (2008) (Figure 2). In fact, the usefulness of theevaluation process must be emphasized as a mean to improve policy-making quality.

Figure 2: Representation of a SMCE process

Source: Gamboa, 2008.





5. Conclud ing remarks

Much work has been undertaken within CBA context for assessing environmentalpolicy in general and nature conservation in particular. However, drawbacks notedthrough the paper lead to assess to what extent multi-criteria methods can be moresuitable within a complex policy-making context where sustainability perspective is

considered. Thus, as we have argued it is believed that MCA is very suitable againstCBA due to both methodological reasons and an ideological position close to strongsustainability approach.

In this context, SMCE has been thought as a suitable tool for evaluating natureconservation policy in the Basque Country. SMCE is well-fitted according to the degreeof implementation of Natura 2000 at the moment as it allows to undertake an ex-ante evaluation. Moreover, features such as participation, transparency and inter/multi-disciplinarity, in addition to multi-dimensional approach inherent to any MCA makesSMCE to seem a proper method.

Nevertheless, future research must be addressed in different directions. First, inaddition to SMCE other multi-criteria methods should be carefully checked and

contrasted. It will allow determine to what extent other methods may be suitable for thepurpose pursued. Second, the hypothetical case study proposed in this paper shouldbe firstly used as a pilot case. Then, once it has been applied as a real-world case theelaboration of a common methodological framework to evaluate any of the sitesincluding Natura 2000 in the Basque Country might be addressed. Indeed, it is believedthat MCA methods have a great potentiality to reach such a challenge.





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Multi-criteria Analysis as a potential tool for evaluating nature conservation policy

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