by

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2008 AECEN Regional Forum Decentralization in En
vironmental Compliance and Enforcement in Asia


Assessing Natural Resources Damages in Asia
Economic Valuation In Environmental Impact A
ssessment
by Halimah Hassan Director, Assessment Divisio
n Ministry of Natural Resources and Environment M
alaysia
24-26 November 2008 Bali, Indonesia
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Outline Of Presentation
Introduction - Environmental Management in Malay
sia EIA Process in Malaysia Economic Valuation i
n the EIA process Way Forward in Environmental M
anagement
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• NATIONAL POLICY ON THE ENVIRONMENT
• POLICY STATEMENT
• FOR CONTINOUS ECONOMIC, SOCIAL AND CULTURAL
  PROGRESS AND ENHANCEMENT OF THE QUALITY OF LIFE
  OF MALAYSIANS, THROUGH ENVIRONMENTALLY SOUND AND
  SUSTAINABLE DEVELOPMENT
• 21
  October 2002
  

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MISSION

• To promote, ensure sustain sound environmental
  management in the process of nation building

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• FUNCTIONTo administer and enforce the
  Environmental Quality Act, 1974 (Amendments 1985,
  1996)
  
• and Section IV of the Exclusive Economic Zone
  Act, 1984

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ENVIRONMENTAL QUALITY ACT, 1974

• Prevention, abatement, control of pollution and
  enhancement of the environment in Malaysia.
  
• Restricts the discharge of wastes into the
  environment in contravention of the acceptable
  conditions.
  

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• ENVIRONMENTAL MANAGEMENT STRATEGIES
• Pollution Control and Prevention
• Sustainable Development through Conservation of
  Resources
  
• Integration of Environmental Factors in
  Development Planning
  
• Promotion of Environmental Education and
  Awareness
  
• Public Participation
• Inter-Agency and Federal-State Cooperation
• Bilateral, Regional and International
  Cooperation
  

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ENVIRONMENTAL MANAGEMENT STRATEGIES
REMEDIAL APPROACH ENFORCEMENT OF THE EQA PREVENT
IVE APPROACH LANDUSE PLANNING- ENVIRONMENTAL INP
UT TO RESOURCE REGIONAL PLANNING
EIA
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Aim and objectives of the EIA process
In the Handbook of Environmental Impact
Assessment Guidelines (first prepared in 1987, la
test edition October 2007), one reads
The aim of environmental impact assessment in
Malaysia is to assess the overall impact on the
environment of development projects proposed by
the public and private sectors (Section 1.3.2)
In order to implement this overall aim, the
Handbook lists clearly the following 5 objectives

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Aim and objectives of the EIA process
5 objectives of EIA
To examine and select the best from the project
options available To identify and incorpor
ate into the project plan appropriate abatement
and mitigating measures To predict residual e
nvironmental impacts To determine the signific
ance of the residual environmental impacts predi
cted and To identify the environmental costs a
nd benefits of the project to the community.
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Aim and objectives of the EIA process
In order to implement these objectives, the
Department of Environment has developed and put
in place a rigorous set of steps and procedures.
Legislations and guidelines were
formulated Section 34A of the EQA, 1974 E
IA Order 1987 A Handbook of EIA Guidelines Speci
fic Guidelines Guidance Documents Registration o
f EIA Consultants Checklists
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WHAT IS EIA?
EIA IS A STUDY TO IDENTIFY, PREDICT, EVALUATE AND
COMMUNICATE INFORMATION ABOUT THE IMPACTS ON THE
ENVIRONMENT OF A PROPOSED PROJECT AND TO DETAIL
OUT THE MITIGATING MEASURES PRIOR TO PROJECT
APPROVAL AND IMPLEMENTATION
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EIA PRINCIPLES AND PROCESS-Main Points

• Does the Project needs an EIA?
• What do we need to concentrate during the study?
• What does the environment look like without the
  project?
  
• What will happen if the project is built?
• If anything happens, is it important?
• What can we do about it?
• How do we make sure it gets done?
• How do we know what we predicted was correct?

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LEGAL REQUIREMENTS
SECTION 34A, ENVIRONMENTAL QUALITY ACT 1974
(Amendments 1985) ENVIRONMENTAL QUALITY (PRESCRIB
ED ACTIVITIES)(EIA) ORDER 1987
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SECTION 34A EQA AMENDMENTS 1985
1. PROVISION TO PRESCRIBE ACTIVITIES
2. SUBMIT EIA REPORT, IN ACCORDANCE TO
GUIDELINESCONTAIN AN ASSESSMENT OF THE
IMPACTPROPOSED MITIGATING MEASURES.
3. APPROVAL OF REPORT WITH/ WITHOUT CONDITIONS
AND INFORM PROJECT PROPONENT AND RELEVANT
AUTHORITY. 4. MAY NOT APPROVE WITH REASONS
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SECTION 34A EQA AMENDMENTS 1985
5. DG MAY REQUIRE MORE THAN ONE REPORTS
6. NOT TO CARRY OUT ACTIVITY UNTIL THE REPORT
HAS BEEN APPROVED. 7. POST-EIA MONITORING- S
HOULD PROVIDE PROOF THAT THE CONDITIONS ATTACHED
ARE BEING COMPLIED
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Environmental Quality (Prescribed Activities)
(Environmental Impact Assessment) Order 198719
Activities
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EIA Order 198719 Activities

• Agriculture
• Airport
• Drainage Irrigation
• Land Reclamation
• Fisheries
• Forestry
• Housing
• Industry
• Infrastructure
• Ports

• Mining
• Petroleum
• Power Generation
• Quarries
• Railways
• Transport
• Resort Recreational
• Waste Treatment Disposal
• Water Supply

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19 Prescribed Activities

• Activities are define in terms of
• Project size ( hectares, meters/km, height )
• Capacity (e.g. tons/day, MW )
• Not defined by any unit

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The EIA Process

• Project Screening
• Project Scoping
• Project Description Alternatives
• Description of Baseline
• Evaluation of Impacts
• Mitigating Measures

• Stake Holder/Public Participation
• The EIA Report
• EIA Review
• Decision Making
• Environmental Management Plan
• Monitoring and Auditing

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EIA PROCEDURE IN MALAYSIA
FOR DETAILED EIA

• TOR to be approved by DOE
• DEIA Report to be advertised and publicly
  displayed
  
• Greater public participation
• Reviewed also by independent expert panel
• No difference in scope of study between PEIA and
  DEIA, focus on critical issues, must satisfy
  Section 34A(2)
  

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Steps and procedures of the EIA process
Procedures
Section 34A (2) The report shall be in accord
ance with the guidelines prescribed by the
Director General and shall contain an assessment
of the impact such activity will have or is
likely to have on the environment and proposed
measures that shall be undertaken to prevent,
reduce or control the adverse impact on the
environment

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List of Activities Requiring Detailed EIA

• Iron and Steel Industry
• Pulp and Paper Mill
• Cement Plant
• Coal Fired power plant
• Dams for water supply and hydroelectric power
• Land reclamation
• Incineration plant (schedule and municipal solid
  waste)
  
• Municipal solid waste landfill facility
  (including municipal solid waste transfer station)

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List of Activities Requiring Detailed EIA

• Project involving land clearing where 50 of land
  area or more with slope exceeding 25 degrees
  (except quarry)
  
• Logging 500 hectares or more
• Development of tourist or recreational facilities
  on islands in surrounding waters gazetted as
  marine parks
  

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List of Activities Requiring Detailed EIA

• Construction of recovery plant (off-site) for
  lead-acid battery wastes
  
• Schedule wastes recovery or treatment facility
  generating significant amount of wastewater which
  is located upstream of public water supply
  intake
• Non-ferrous primary smelting
• Others, as required by the Director General of
  Environment
  

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ENVIRONMENTAL IMPACTS

• SOIL EROSION
• SEDIMENTATION
• SURFACE AND MARINE WATER QUALITY
• ALTERATION OF NATURAL DRAINAGE
• FLOODING
• DEGRADATION IN BIODIVERSITY

• DESTRUCTION OF ECOSYSTEMS
• PUBLIC HEALTH SOCIO-ECONOMIC
• RISK
• AESTHETIC
• AIR POLLUTION
• NOISE
• ODOUR

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EIA REPORT FORMAT

• Executive summary
• Title of Project
• Project Initiator
• Statement of Need
• Project Description
• Project Options
• Description of Existing Environment

• Potential Significant Impact
• Mitigating and Abatement Measures
• Residual Impacts
• Summary of Conclusion

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EIA and EMP- illustrated
Environmental Management Plan
Environmental Impact Assessment
Actions to be taken
What can be done
What might happen
Construction and implementation
Project planning
To be followed by Environmental Audit
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• EIA Consultant Registration Scheme Objectives
• Improve professionalism
• EIA Study to be conducted by competent person
• Assists in fast and informed decision making

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Only Registered EIA Consultants

• As of 1 October 2007, DOE will only accept EIA
  reports prepared by registered EIA consultants.
  The list of EIA Consultants can be downloaded at
  www.doe.gov.my

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Roles Responsibilities of EIA Consultant

• Brief Project Proponent on final report
• Ensure project proponent
• understands and acknowledges the report content
• agrees with mitigating measures proposed

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Accountability and Responsibility

• EIA Consultants will be accountable and
  responsible for EIA study, findings and its
  recommendations
  
• Project Proponent responsible to carry out
  mitigating measures (as proposed) and future
  monitoring and compliance auditing

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Economic Valuation in the EIA process
5 objectives of EIA
To examine and select the best from the project
options available To identify and incorpor
ate into the project plan appropriate abatement
and mitigating measures To predict residual e
nvironmental impacts To determine the signific
ance of the residual environmental impacts predi
cted and To identify the environmental costs a
nd benefits of the project to the community.
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Economic Valuation in the EIA process
Questions
Has this objective been achieved?
If the answer is mostly yes
Then Can it be further improved?
If the answer is mostly no
Then Why not? What can be done
to achieve the objective?
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Economic Valuation in the EIA process
Thirty-five (35) Detailed EIA reports were
reviewed, covering the period 1999 to 2004.
Of the 35 reports, only 2 (a waste incinerator
project and a landfill project) provided some
form of monetization of the environmental impa
cts of the project on the environment.
In almost all cases, the environmental impacts
of the project are not quantified, and therefo
re not translated into environmental costs and
benefits.
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Economic Valuation in the EIA process
Questions
Has this objective been achieved?
The answer is mostly no.
Then Why not? What can be done
to achieve the objective?
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Economic Valuation in the EIA process
To identify the environmental costs and benefits
of the project to the community.
Note
The objective refers to environmental costs and
benefits of the project It does NOT refer to
the economic cost and benefits of the project
It does NOT refer to the development costs and b
enefits of the project It does NOT refer to t
he undertaking of a cost-benefit analysis of the
project.
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Economic Valuation in the EIA process
However
Section 3.4.5 of Handbook
The evaluation of environmental and development
benefits and costs arising from a development pr
oject is made by the Review Panel following Deta
iled Assessment. The evaluation is an
essential aid to decision making by the project
approving authority. The information that the as
sessor must provide in Detailed Assessment is an
annotated list of economic costs and
benefits to community
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Economic Valuation in the EIA process
However
Chapter 12 of Handbook In this section, the
assessor should seek to quantify the
environmental and development trade offs
anticipated from the project plan. The
costbenefit approach to this evaluation is
discussed in Section 3.4.5.
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Economic Valuation in the EIA process
Hence
While the objective clearly specifies that the
focus must be on environmental costs and
benefits, the Handbook then refers to other types
of costs and benefits (development and economic).
Moreover, while the monetization of the
environmental impacts of the project into
environmental costs and benefits does not
constitute a cost-benefit analysis, the Handbook
refers to the undertaking of cost-benefit
analysis.
To this extent, the Handbook has created
confusion.
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Economic Valuation in the EIA process
What have project assessors done?
In many Detailed EIA reports, there is a
statement like this
The environmental cost and benefit analysis has
shown that most of the environmental components
are non-quantifiable.
And as a result, the environmental impacts of the
project are not quantified nor monetized.
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Economic Valuation in the EIA process
What have project assessors done?
Sometimes, there is a table like this
Summary of the non-quantifiable environmental
economic gains and losses
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Economic Valuation in the EIA process
Followed by this sort of conclusion
Since six out of the nine non-quantifiable
environmental components are gains and three
are losses, the environmental costbenefit
analysis has indicated that the proposed project
will induce positive gains to the nearby
communities.
This is not quite appropriate.
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Economic Valuation in the EIA process
Section 3.4.5 of Handbook also says
If the assessor is unable to quantify any of the
environmental or economic changes that will resu
lt from the project, the assessor
should list them as losses or gains.
The above statement gives too much flexibility to
the assessor.
Instead, Section 3.4.5 should say
The project initiator has the duty to ensure that
the assessor is capable of undertaking in an app
ropriate manner the assessment of the environmen
tal costs and benefits of the project.
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Economic Valuation in the EIA process
One of the 5 objectives
To identify the environmental costs and benefits
of the project to the community.
Outcome 1
Given DOEs functions and overall responsibility
as a custodian of environmental quality in
Malaysia, it is not DOEs task to request and
assess a costbenefit analysis of development
projects. While the creation of jobs by the pr
oject and the creation of business opportunities
are certainly of interest to the Government and
the people of Malaysia, DOEs focus is on the
environmental impacts of development projects.
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Economic Valuation in the EIA process
One of the 5 objectives
To identify the environmental costs and benefits
of the project to the community.
Outcome 2
DOE will request and focus on the economic
assessment of the environmental impacts of
development projects.
In order to implement this objective, what is
needed is an economic valuation of the
environmental impacts of the project.
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Economic Valuation in the EIA process
Three-step process
Identification of the environmental impacts
Quantification of the environmental impacts
Monetization of the environmental impacts
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Economic Valuation in the EIA process
One of the 5 objectives
To identify the environmental costs and benefits
of the project to the community.
Outcome 3
Review the EIA guidelines to provide clearer,
more comprehensive and more specific directions
pertaining to the assessment of environmental
costs and benefits of development projects.
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Economic Valuation in the EIA process
Achievements
Registered list of EIA consultants along with
field of
expertise
A new Guidelines on the Economic
Valuation of the Environmental Impacts for
Prescribed
Activities .
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Economic Valuation in the EIA process
Objectives of the Guidelines
The overall objective of these Guidelines is to
provide clear guidance as to the framework and
methodologies allowing the monetization of the
environmental impacts of the project into costs
and benefits. It aims to provide practical adv
ice to project initiators and project assessors
undertaking the economic valuation of
environmental impacts of projects.
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General Premises
The environment and the ecosystem produce goods
and services that are useful to humans i.e
. that contribute to the well-being of humans or
that are valued by humans.
2. Human actions which impact the environment and
ecosystem will then impact the flow of goods and
services produced by the environment and
ecosystem.
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General Premises
ECOSYSTEM
Structure
Projects which impact ecosystem
Processes

Change the flow of goods and services
Goods and Services
It is this change in the flow of goods and
services which we attempt to identify, quantify,
and monetize.
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The concept of total economic value
Different types of use
Environmental goods and services
Non-use
Use
and
Indirect
Direct
Existence
For others
Non-consumptive
Consumptive
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The concept of total economic value
different types of economic values
Total economic value
Non-use value
Use value

Indirect use value
Direct use value
Existence value
Bequest value


Non-consumptive direct use value
Consumptive direct use value

Among use value, we also add
Option value
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Identify, quantify, monetize
Three-step process
Identification of the environmental impacts
Task of technical experts
Quantification of the environmental impacts
Task of technical experts and economist
Monetization of the environmental impacts
Task of economist
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Identify, quantify, monetize
Two important messages
1. Transforming environmental impacts into
environmental costs and benefits is not the task
of solely the economist. It must start with
information about the nature and extent of these
environmental impacts. This is best provided by
technical experts.
2. However, the economist must be part of the EIA
team from the very beginning to ensure that the
information necessary to monetize the
environmental impacts is indeed collected and
available. If the economist comes only at the
very end, it is very likely that the necessary
information will not be collected.
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Overview of methodologies
3 groups of methodologies
Group 1 Change of productivity methodology
Group 2 Revealed preferences
These methodologies aim to provide an economic
assessment of environmental impacts by observing
actual behavior of individuals, and what this
behavior reveals about their preferences for
changes in environmental quality.
Group 3 Stated preferences
These methodologies aim to provide an economic
assessment of environmental impacts using data on
hypothetical choices made by individuals
responding to a survey and stating their
preferences.
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Overview of methodologies
Use value
Group 1 Change of productivity methodology
Direct use value
Consumptive direct use value
Non-consumptive direct use value

Group 2 (Revealed preferences) and Group 3
(Stated preferences)
Indirect use value
Non-use value
Bequest value

Group 3 (Stated preferences)
Existence value
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Overview of methodologies
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Overview of methodologies
Message
It is the nature of the environmental impact
which determines
which methodology to use.
For each type of environmental impact there is
one or two methodologies to use. The choice wi
ll often depend on data availability as well a
s time and resource constraints.
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Economic Valuation in the EIA process
Contents of the Guidelines
Part A Introduction to the Economic Valuation of
Environmental Impacts -The Concept of total Econ
omic Value -Approaching the Economic Valuation of
Environmental Impacts Part B Methodologies
for the Economic Valuation of Environmental
Impacts Change of productivity methodology Revea
led preferences methodologies Stated preferences
methodologies Benefits transfer methodology
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Economic Valuation in the EIA process
Applicability of the Guidelines
For all prescribed activities, any of the
projects expected impacts on the productivity of
land (such as agricultural productivity) and
water (such as fisheries productivity) have to be
clearly identified, quantified, and transformed
into environmental costs or benefits following
the procedures described  in the Guidelines. As
for the other environmental impacts of the
project, the precise nature and extent of the
economic valuation is to be established at the
time of the EIA scoping.
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Economic Valuation in the EIA process
DOE had organized workshops to facilitate the
introduction and the usage of the Guidelines
Training Workshop for DOE officers
Training Workshop for EIA Consultants and
Subject Consultants Introductory Workshop for G
overnment Agencies

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2008 AECEN Regional Forum Decentralization in En
vironmental Compliance and Enforcement in Asia


Assessing Natural Resources Damages in Asia
Thank you