by Halimah Hassan Director, Assessment Division

1. 2008 AECEN Regional Forum: Decentralization in Environmental Compliance and Enforcement in Asia Assessing Natural Resources Damages in Asia Economic Valuation In Environmental Impact Assessment by Halimah Hassan Director, Assessment Division Ministry of Natural Resources and Environment Malaysia 24-26 November 2008 Bali, Indonesia

2. Outline Of Presentation • Introduction • - Environmental Management in Malaysia • EIA Process in Malaysia • Economic Valuation in the EIA process • Way Forward in Environmental Management

3. 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

5. MISSION To promote, ensure & sustain sound environmental management in the process of nation building

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

7. 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.

8. 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

9. ENVIRONMENTAL MANAGEMENT STRATEGIES REMEDIAL APPROACH • ENFORCEMENT OF THE EQA PREVENTIVE APPROACH • LANDUSE PLANNING- ENVIRONMENTAL INPUT TO RESOURCE & REGIONAL PLANNING • EIA

10. Aim and objectives of the EIA process In the Handbook of Environmental Impact Assessment Guidelines (first prepared in 1987, latest 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:

11. 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 incorporate into the project plan • appropriate abatement and mitigating measures; • To predict residual environmental impacts; • To determine the significance of the residual • environmental impacts predicted; and • To identify the environmental costs and benefits of the • project to the community.

12. 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 • EIA Order 1987 • A Handbook of EIA Guidelines • Specific Guidelines • Guidance Documents • Registration of EIA Consultants • Checklists

13. 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

14. 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?

15. LEGAL REQUIREMENTS • SECTION 34A, ENVIRONMENTAL QUALITY ACT 1974 (Amendments 1985) • ENVIRONMENTAL QUALITY (PRESCRIBED ACTIVITIES)(EIA) ORDER 1987

16. SECTION 34A EQA AMENDMENTS 1985 1. PROVISION TO PRESCRIBE ACTIVITIES 2. SUBMIT EIA REPORT, IN ACCORDANCE TO GUIDELINES…CONTAIN AN ASSESSMENT OF THE IMPACT…PROPOSED MITIGATING MEASURES…. 3. APPROVAL OF REPORT WITH/ WITHOUT CONDITIONS AND INFORM PROJECT PROPONENT AND RELEVANT AUTHORITY. 4. MAY NOT APPROVE WITH REASONS

17. 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- SHOULD PROVIDE PROOF THAT THE CONDITIONS ATTACHED ARE BEING COMPLIED

18. Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 198719 Activities

19. 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 EIA Order 198719 Activities

20. 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

21. 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 The EIA Process

22. EIA PROCEDURE Preliminary Assessment  Detailed Assessment

23. 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)

24. Steps and procedures of the EIA process Procedures Section 34A (2) “…The report shall be in accordance 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”

25. 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)

26. 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

27. 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

28. SOIL EROSION SEDIMENTATION SURFACE AND MARINE WATER QUALITY ALTERATION OF NATURAL DRAINAGE FLOODING DEGRADATION INBIODIVERSITY DESTRUCTION OF ECOSYSTEMS PUBLIC HEALTH & SOCIO-ECONOMIC RISK AESTHETIC AIR POLLUTION NOISE ODOUR ENVIRONMENTAL IMPACTS

29. 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 EIA REPORT FORMAT

30. 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

31. EIA Consultant Registration Scheme Objectives: • Improve professionalism • EIA Study to be conducted by competent person • Assists in fast and informed decision making

32. 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

33. 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

34. 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

35. Economic Valuation in the EIA process 5 objectives of EIA: • To examine and select the best from the project options • available; • To identify and incorporate into the project plan • appropriate abatement and mitigating measures; • To predict residual environmental impacts; • To determine the significance of the residual • environmental impacts predicted; and • To identify the environmental costs and benefits of the • project to the community.

36. 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?

37. 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 impacts of the project on the environment. • In almost all cases, the environmental impacts of the project • are not quantified, and therefore not translated into • environmental costs and benefits.

38. 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?

39. 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 benefits of the project; It does NOT refer to the undertaking of a cost-benefit analysis of the project.

40. 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 project is made by the Review Panel following Detailed Assessment. The evaluation is an essential aid to decision making by the project approving authority. The information that the assessor must provide in Detailed Assessment is an annotated list of economic costs and benefits to community …

41. 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 cost–benefit approach to this evaluation is discussed in Section 3.4.5.

42. 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.

43. 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.

44. 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

45. 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 cost–benefit analysis has indicated that the proposed project will induce positive gains to the nearby communities. This is not quite appropriate.

46. 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 result 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 appropriate manner the assessment of the environmental costs and benefits of the project.

47. 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 DOE’s functions and overall responsibility as a custodian of environmental quality in Malaysia, it is not DOE’s task to request and assess a cost–benefit analysis of development projects. While the creation of jobs by the project and the creation of business opportunities are certainly of interest to the Government and the people of Malaysia, DOE’s focus is on the environmental impacts of development projects.

48. 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.

49. Economic Valuation in the EIA process Three-step process: Identification of the environmental impacts Quantification of the environmental impacts Monetization of the environmental impacts

50. 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.