Forests Sourcebook - HCV Resource Network

ANNEX 6.3B
TOOLS FOR RAPID ASSESSMENT OF CROSS-SECTORAL IMPACTS
This annex is based on Hamilton and Mani (2005).
Analysis of price changes
For reforms that will have a foreseeable effect on prices, it
may be possible to carry out a partial equilibrium analysis of
the effects of price changes, assuming that sufficient data
and time for analysis are available. The prices of interest will
typically be natural resource and energy prices because
these will have the most direct effect on the environment
and natural resources. Three forms of analysis are possible:
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Supply response. Will the price change affect the supply of
a good (timber, for example)? Can supply elasticities,
including cross-elasticities, be estimated? How rapid is
the supply response likely to be?
Demand response. Will the price change affect the
demand for an environmentally sensitive good? Can
demand elasticities, including cross-elasticities, be estimated
(for example, will raising natural gas prices make
coal relatively more attractive to consumers)?
von Thunen analysis. Will the price change affect the relative
price of goods in such a manner as to change the
location of economic activity? For example, will it make
conversion of forested land to agriculture more profitable?
Heuristic tools
Checklists. When time and data limitations preclude the
quantitative analysis of links between a policy-based operation
and forests, one fallback is to pose a set of questions
about the individual operation or the broader country program.
This could be on the availability of adequate analytical
underpinnings, policy and regulatory frameworks covering
the forest sector, institutional issues, and issues relating
to transparency and accountability (see Hamilton and Mani
2005). Depending on the answers to these questions, actions
might be taken in the design of the operation, or within the
country program, to enhance positive and mitigate negative
effects of the operation.
Action-effect matrices. A more structured nonquantitative
approach to analyzing effects can be achieved through
the use of action-effect matrices. Using an action-effect
matrix, a given policy reform may be analyzed according to
the likelihood of effects on the poor mediated by the environment,
forest, and natural resources, and the likelihood of
other effects on the environment (see Hamilton and Mani
2005). Based on this more structured analysis of the individual
components of a policy-based operation, it may be
possible to suggest design changes, mitigating actions, or
indicators that should be monitored over time.
Red flags
Another nonquantitative approach to reviewing and analyzing
policy-based operations is to look for “red flags”—issues
that raise the likelihood of significant effects on the environment
and natural resources. At the operational level these
include energy price reforms, natural resource price reforms,
and changes in exchange rate regimes. At the country program
level, they could include economic, political, and
resource risks; policy and institutional failures (particularly
in the resource sectors); weak regulation and implementation
capacity; and lack of monitoring and enforcement.
NOTE 6.3: IDENTIFYING THE NEED FOR ANALYSIS ON FORESTS IN DEVELOPMENT POLICY REFORMS 237