Bio-economic modelling for NRM impact assessment

Bio-economic modelling for NRM impact assessment

Evaluating the economic and environmental impacts of natural resource management

This paper discusses the various bio-economic modelling approaches and methods which can be used for simultaneously evaluating the economic and environmental impacts of natural resource management (NRM) technologies and policies affecting natural resource use and management in rural areas in the developing countries. The paper sets out new standards for bio-economic models for poor rural economies in relation to their relevance for evaluating the impacts of technologies and policies that affect natural resource management.

The paper highlights the main advantages of using bio-economic models for NRM technology and policy impact assessment:

  • allow a consistent treatment of complex biophysical and socioeconomic variables (interdisciplinary analysis)
  • allow sequential and simultaneous interactions between biophysical and socioeconomic variables
  • may be used to assess the potential impacts of new NRM technologies and policies (ex-ante impact assessment)
  • allow controlling for disturbing variation
  • capture direct as well as indirect effects
  • can be used to carry out sensitivity analyses in relation to various types of uncertainties.

The paper also concludes that:

  • market imperfections cause land use and poverty to be non-separable and create a need to have models that simultaneously link production, investment and consumption decisions through shadow prices
  • non-separable bio-economic household models should be used when poverty affects land use due to imperfect markets for commodities that are produced (or used as inputs in production) and consumed by households. Imperfections in intertemporal markets (credit, insurance) may also have strong impacts on investment behaviour of poor people
  • economy-wide models should be used when there are important general equilibrium effects related to the NRM technologies and policies. A new generation of bioeconomic CGE models is required to capture properly the micro foundations and environmental linkages in rural economies in developing countries.

      [adapted from author]