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Towards a green economy Biome/ecosystem Coastal Mangroves


Inland wetlands Lake/rivers


Typical cost of restoration (high-cost scenario)


232,700 2,880


33,000 4,000


Estimated annual benefits from restoration (avg. cost scenario)


US$/ha 73,900 4,290


14,200 3,800


Net present value of benefits over 40 years


US$/ha 935,400 86,900


171,300 69,700


Internal rate of return


%


11% 40% 12% 27%


Table 1: Examples of the estimated costs and benefits of restoration projects in different biomes Source: Adapted from TEEB (2009a)


money in the restoration of degraded river systems and the development of policies and administrative arrangements


designed to prevent degradation of


these systems. Two examples are summarised in Box 3. Table 1 summarises the general nature of returns to investment in the restoration of ecosystems. When astute investments in the restoration of ecosystems are made, internal rates of return in excess of 10 per cent are attainable.


Investment in sanitation and drinking water supply In many developing countries, one of the biggest opportunities to expedite a transition to a green economy is to invest in the provision of water and sanitation services to the poor.


A recent estimate puts the cost of achieving the 2015 Millennium Development Goals (MDG) at US$ 142 billion per year for providing sanitation services and US$ 42 billion per year for drinking water supply to households (Hutton and Bartram 2008b). More investment is required for sanitation services than drinking water as the number of households without access to adequate sanitation services is much higher (WHO/UNICEF 2010; Tropp 2010).


Although the amount of money needed to attain the Millennium Development Goals


for water is


considerable, when spread over a number of years and divided by the number of people expected to benefit from such expenditure, the investment case is strong. In Ghana, for example, the OECD estimates that investment of US$ 7.40 per person per year over a decade would enable the country to meet its MDG target (Sanctuary and Tropp 2005). Estimates of the required per capita expenditure in Bangladesh, Cambodia, Tanzania and Uganda range from US$ 4 to US$ 7 per capita per year (UN Millennium Project 2004; Tropp 2010).


Taking a different approach, Grey (2004) has estimated the amount that each sub-Saharan country would need to spend to achieve water supply and sanitation standards now achieved in South Africa. Depending on


the country, the amount needed to be spent varied from US$ 15 to $ 70 per capita per year over the ten years from 2005 to 2015.


As shown later in this chapter, returns to investment in the provision of these services can be high. In particular, Sachs (2001) has found that the average rate of economic growth in developing countries where most of the poor have affordable access to clean water and adequate sanitation is 2.7 per cent greater than that attained in countries where these services are not well supplied.9


This observation, reinforced by background


papers prepared for this chapter (Tropp 2010; Ward et al. 2010), suggests that failure to invest adequately in the provision of affordable access to clean water and adequate sanitation acts as a barrier to development and that early investment in these areas is a necessary precondition


to progress. Grey and Sadoff (2007)


argue that a minimum amount of investment in water infrastructure is a necessary precondition to development; using a range of case studies, they identify a close association between adequate investment in infrastructure and environmental degradation.


Investing in smaller, local water-supply systems As observed by Schreiner et al. (2010), the presence of economic water scarcity should not be interpreted as a recommendation for the construction of large dams. In many cases, greater returns can be achieved from the construction of smaller storages that are built by and serve local communities. At this scale, community engagement and management of infrastructure is easier and adverse environmental impacts tend to be fewer in both urban and rural settings (Winpenny 2003).


In China’s Gansu province, for example, investment in the collection of local rainwater at a cost of US$ 12 per capita


9. Sachs (2001) estimated that the rate of growth in GDP per capita in countries where most of the poor had access to clean water and adequate sanitation services was 3.7 per cent. When these services are not available, however, he found that the average annual rate of growth in GDP per capita was 1.0 per cent.


Benefit/cost ratio


Ratio 4.4


26.4 5.4


15.5


130


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