Equator Principles large group

Equator Principles large group - Equator Principles Large...

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Equator Principles Large Group Discussion Professor Doug Cerf Donald Bren Graduate School of Environmental Science and Management Environmental Risk Management (ESM 286) Winter 2008
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Fundamental question : What problems are the Equator Principles trying to solve?
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Printed on recycled paper-actually better, not printed at all How do you foster economic growth and increase the quality of life without damaging the environment, compromising the human rights of some or jeopardize cultural traditions? How do you avoid/manage risk (environmental, social and political)?
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Printed on recycled paper-actually better, not printed at all The Dilemma There has been an increase in economic development as a result of increase in large projects ($500 million or more) in recent years Large projects in developing nations where environmental policies are either in their infancy or ignored by government authorities are particularly susceptible to causing environmental or social harm (creating environmental risk)
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Printed on recycled paper-actually better, not printed at all Example Chad-Cameroon Pipeline Project Economic growth to the west coast of Africa Threatened the area’s fragile ecosystem Forced relocation of a number of the area’s indigenous people Case for next time
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Printed on recycled paper-actually better, not printed at all Equity in benefits and costs There is asymmetric distribution of the benefits and costs when environmental and/or social degradation occurs form a large project Costs accrue to the host country and local citizens Benefits accrue to the project sponsors and financers It is difficult to quantify the costs related to environmental and social degradation Sponsors may pay to minimize the environmental and social costs and risks Sponsors may benefit from “managing” the disruption
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Printed on recycled paper-actually better, not printed at all Which parties should bear the environmental and social risks? Theory: risk should be allocated to parties that best able to control the risks . Possibilities: Host government Project sponsors Lenders
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Printed on recycled paper-actually better, not printed at all Which parties are best able to control environmental and social risk? The sponsors (e.g. construction contractors) are best able to control the risk because they have the power to eliminate or remove the risk Short term risk Example: people’s livelihoods as a result of being displaced Long term risk Example: air pollution from the project facility
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Printed on recycled paper-actually better, not printed at all Sponsors motivation to mitigate the environmental and social risk They are not charged for the degradation therefore have little economic incentive to take action They are particularly concerned if the environmental damage will delay successful completion or operation of the project This is different than for firms that are “in it for the long term”
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This note was uploaded on 08/06/2008 for the course ESM 286 taught by Professor Cerf during the Winter '08 term at UCSB.

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Equator Principles large group - Equator Principles Large...

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