Irreversibility, Option Demand and Environmental Preservation

The purpose of this paper is to analyze the government’s choice on whether to preserve or to construct a hydroelectric dam when there is a willingness to pay for retaining the option to usetheenvironmentalarea.Extendingthemodelusedby Maler& Fisher(2005)toexplore the problem of choosing whether to preserve or to develop a tract of land, I show that in the context of uncertainty about future benefits, the government would choose to preserve the land when there is an option demand to refrain from using the environmental site.

Cameroon’s government has launched in June 2012, for a value of US $ 840 million, the construction of a hydroelectric dam in Memve’ele waterfalls in order to boost the electricity supply. Memvele’ele waterfalls are one of the richest biodiversity areas of the Campo-Ma’an landscape. The Campo-Ma’an is located in the southwestern corner of Cameroon bordering to the west by the Atlantic Ocean. The Campo-Ma’an features a National park containing 80 animal mammals such as forest elephants, leopards and gorillas; 302 bird species; 122 reptile species and 250 fish species. The Campo-Ma’an also contains a coastline of 65 km with attractive beaches, diverse ethnic groups with different cultural heritage and archaeological sites.

The particularity of Memve’ele waterfalls is that they are very close to the biologically part of the Campo-Ma’an National Park. The proximity of the Memve’ele hydroelectric dam with the park is then a great concern. A simulation of the zone of impact of the Memve’ele dam within a radius of 25 km shows that the park’s richest part in terms of wildlife will be seriously affected by the dam construction (World Wildlife Fund [WWF], 2008).

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(Author: Etienne Bienvenu Akono

Published by Macrothink Institute)