News
New report by Ecolarge. When the cows don’t come home – The economic impacts of losing livestock in a disaster
Jan 20th
What happens when the cows don’t come home? This report was commissioned by the World Society for the Protection of Animals and investigates the “economic impact of losing livestock in a disaster”. It covers a wide range of material relating to the role of livestock in development, the economics of disasters, the treatment of livestock in disaster recovery efforts, and case studies on particular disaster events.
The purpose of this research is to highlight the current state of the literature relevant to livestock and disasters and to suggest future research areas that would help to understand better the impacts of losing livestock in a disaster.
This review focuses in particular on low-income countries. This is because livestock are extremely important to economic development and welfare in most low-income countries. Animals represent more than food — they represent livelihoods. When people are affected by natural disaster, their animals (and thus their livelihoods) are also affected. As experts in this field have put it:
From a global perspective, one of the most pressing needs [in disaster relief] is to improve livestock relief programming with communities who rely heavily on livestock for their social and economic well-being.
Source: LEGS 2009 p2
As such, this report reviews literature that relates to livestock in economic development, and also to the way disasters impact on economies. Considerable research has focused on the role of livestock in economies, and at the economic effects of natural disasters. We review the main themes of this work in the two main parts of this report. In doing so, we hope to outline, explain and expand on the value of livestock and their role in disaster recovery, and to make this importance easier to demonstrate to a wider audience.
We begin in Section 1 by examining the role of livestock in all economies. We see that in high-income countries, livestock are mainly treated as a financial asset and one of many sources of food. This is in stark contrast to low-income countries, where livestock have a range of functions. Animals provide meat, milk and eggs; they assist with ploughing fields; they can be sold for cash and play a role in cultural identity. We see that livestock in low-income countries have direct and indirect values relating to food, agriculture, savings and cultural values. The results of Section 1 are summarised below.
|
Livestock and Food |
|
|
Direct values |
Indirect values |
| Reduced quantity of food available due to livestock death and injuries during disaster. | Increased levels of malnutrition due to reduced consumption of animal-sourced foods. |
Reduced quantity of food through reduced livestock productivity due to:
|
Effects of malnutrition on children’s physical and mental development. |
| Effects of malnutrition on worker productivity. | |
| Reduced food security due to lack of animal-sourced foods to smooth fluctuations in agricultural crops. Crop yields are also likely to be less stable following a disaster. | |
|
Livestock and Agriculture |
|
|
Direct values |
Indirect values |
| Reduced availability of draft power. | Increased reliance on purchased fuels and fertilisers. |
| Reduced availability of manure. | Increased labour requirements. |
| Reduced agricultural output. | Reduced access to other markets through transport and haulage, further exacerbating food insecurity problems. |
|
Livestock, Savings and Income |
|
|
Direct values |
Indirect values |
| Lost savings in the form of livestock. | Increased vulnerability to future disasters through loss of insurance value of different species. |
Lost income from:
|
Increased variation in income due to lost ASF sales. |
|
Livestock and cultural values |
|
|
Direct values |
Indirect values |
| Reduced ability to use livestock for cultural obligations such as dowries. | The possibility that reduced herd size may force people to abandon pastoralism, losing livelihood base and the social support structures of herding communities. |
When livestock losses occur due to a disaster, it is direct values – those that can be estimated using market prices – that are generally considered in evaluating the cost of the losses. However, such valuation rarely incorporates the indirect values of livestock, which can be more difficult to observe, but often more important than the direct financial loss incurred in a disaster.
All these factors are affected when livestock are lost in disasters. Our literature review suggests that these values are often not considered in economic and general literature. We believe that an understanding and acknowledgment of these indirect roles is crucial in understanding the role of livestock in developing economies, and in understanding why their loss in natural disasters is so damaging.
Section 2 examines disasters and the economics thereof. Again, we focus largely on low-income countries, as these countries are more exposed and vulnerable to natural disasters than their high-income counterparts, and they also recover more slowly than high-income countries. Factors that influence disaster exposure and vulnerability include:
- Levels of disaster preparedness and mitigation;
- Economic factors including savings, productivity and trade links;
- Public institutions and governance;
- Demographic factors including population density, health and literacy.
As with livestock loss, financial estimates of the cost of disasters tend to refer to direct impacts: the cost of physical damage to the factors of production (being people and animals, land and capital). Again, in addition to these direct costs, disasters also have indirect impacts. While these are often harder to estimate than direct costs, they can also be more important in understanding the full welfare impacts of disasters. Indirect impacts typically result from the damage caused to factors of production and the losses sustained until such time (if ever) that this damage can be repaired. The direct and indirect impacts of disasters are summarised below.
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Direct Impacts |
Indirect Impacts |
|
|
Labour |
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| Death, sickness and injury. | Lost wages of workers. | |
| Costs of treating the sick and injured and laying dead to rest. | Reduced productivity of workers and industries due to injuries and psychological trauma. | |
|
Capital |
||
| Damage to roads, housing, infrastructure, factories, machinery, etc. | Lost income from capital assets. Reduced productivity in capital-intensive industries. | |
| Costs to fix or replace damaged capital assets and infrastructure. | Reduced ability of governments and firms to provide services to the public. | |
|
Land |
||
| Damage to crops | Reduced food security | |
| Erosion, landslides, loss of nutrients. | Reduced agricultural productivity | |
| Costs of engineering to repair and restore land stability and soil quality | Rising food prices | |
Economists have attempted to model the costs of disasters, both direct and indirect, using regression analysis. We examine the efficacy of such modelling, and find that as it tends to be limited to macroeconomic factors, it sheds little light on regional effects – such as the loss of livestock.
In Section 3, we combine the findings of Sections 1 and 2 to help readers understand the impacts of losing livestock in disasters. The summary table of this concluding section is below.
|
Direct Impacts |
Indirect Impacts |
|
|
Labour |
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| Loss of animal-sourced foods. | Loss of food securityLoss of nutrition with short term consequences for worker productivity and long-term consequences for education, community development and worker productivity. | |
| Loss of draft power, increasing demand for human labour. | Reduced labour availability. | |
| Loss of income generating opportunities. | Loss of a productive use of labour, particularly for women, children and the elderly.Reduced income security. | |
| Loss of culturally and socially important animals. | Reduced social/cultural opportunities, such as participation in weddings, funerals, etc.Loss of social support networks. | |
|
Capital |
||
| Reduced availability of draft power leading to increased demand for machinery and fuel. | Dependence on borrowed assets, or borrowing to finance their use. Increased dependence on external inputs such as fossil fuel. | |
| Loss of savings and investment. | Loss of investment income from animals.Inability to cover sudden expenses such as medical bills and school fees.
Herd sizes may become unviable leading to relocation, loss of social status and poverty. |
|
| Loss of livestock as an input to ASF related industries. | Reduced income or substitution from dairies, markets, abattoirs, butchers, retailers and restaurants | |
|
Land |
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| Loss of draft power. | Reduced agricultural productivity, leading to reduced food security.Reduced crop residues leading to reduced livestock productivity and increased demands on other feed sources, such as communal grazing areas. Increased demands on these areas can lead to natural resource degradation. | |
| Loss of manure. | Reduced agricultural productivity, as above.Increased demand for chemical fertilisers, which may be expensive or unavailable.
Increased demand for alternative fuels, such as firewood, which can lead to degradation of forests and woodlands. |
|
Section 4 presents three case studies — the 2010 Pakistan floods, the 2010 dzud (harsh winter) in Mongolia, and cyclone Nargis, which hit Myanmar in 2008 — and discusses the direct and indirect losses of livestock in each.
Structure of the report
This report is divided into four main sections.
| Livestock in economies | To understand the impacts of losing livestock in a disaster it is necessary to understand the role livestock play in households and economies. This section looks at the livestock ownership in both high and low-income countries. |
| Natural disasters and economies | There are different definitions of disaster, different classifications and different ways of responding to them. This section also includes statistics on disaster occurrence and sources of information for disasters. This section looks at the various approaches to understanding the economic impacts of disasters, discussion of direct and indirect costs and economic modelling |
| Disaster impacts and livestock | This section summarises the economic impacts of losing livestock in a disaster referring to results in the earlier sections. |
| Case studies | Three case studies looking at disasters in Pakistan, Mongolia and Myanmar. |
China First Coal Project Economic Assessment Reviewed
Dec 20th
Finishing off a big year of looking at large, controversial coal projects, we reviewed the economic assessment of the Galilee/China First project on behalf of the landholders of the Bimblebox Nature Refuge in central Queensland. The assessment is couched in positive terms, but none of its key findings are unambiguous – impacts on labour demand and exchange rates will lead to losses in competing industries, especially manufacturing and agriculture. A claim in the executive summary of the EIS that the project will create 70,000 jobs is an error based on complete misinterpretation of the economic assessment.
The economic assessment contains no cost benefit analysis, leaving decision makers with no idea if it will have a net benefit for Queensland or Australia. Read our review here: Ecolarge Dec 2011 China First submission FINAL.0
Kevin’s Corner Coal Project Review
Dec 20th
We recently assisted Queensland’s Capricorn Conservation Council with a submission relating to the economic assessment of the Kevin’s Corner Coal project proposal. The economic assessment of the project, by consultants Economic Associates, fails to provide cost benefit analysis to evaluate if the project is in Queensland’s best interests. Given our recent exposure of $3.5 billion dollars worth of errors in similar assessment in NSW, proponents should be showing strong cost benefit analysis if local communities are to back their projects.
Furthermore, the authors used Input-Output modelling to estimate the impacts of the mine. This is inappropriate as IO models lack resource constraints and assume fixed prices, leading to the invariable overstatement of a project’s value.
Read our full report: Ecolarge 2011 Kevin’s Corner submission FINAL.0
Economists at Large Maul(es) Creek Proposal
Dec 16th
When was the last time you made a $3 billion dollar error? OK, how about a $200 million dollar error? Still no? Have you ever added up a bill and found it was $500 million out, only for the waiter to complain about your “stylised” methodology? These are just a few of the issues to come out of our review of the the Maules Creek Coal Proposal.
In September we reviewed the economic assessment of the Maules Creek project, by Gillespie Economics, on behalf of the Maules Creek Community Council. We pointed out that the net present value of the large open-cut coal project proposed for the north of NSW was overstated and that key figures didn’t add up. Our review led to ANU’s Professor Jeff Bennett being commissioned by the mine proponents to conduct another review of the assessment.
Professor Bennett agreed with us that the inclusion of profits to foreign investors in the benefits of the project was inappropriate (at least $3 billion), as was the inclusion of “social value of employment” (over $200m). These corrections meant the proponents had overstated the value of the project to the public by around 40%.
“So what? Even with a $3 billion dollar error, we’re all still going to be rich!” the proponents cried. We disagree. The main point is that when profits to foreign investors were incorporated into the proponent’s own economic assessment, the value to Australia of the large coal project was reduced by 40%. This project is 50% foreign owned. There are many similar projects proposed, such as Boggabri (NSW), Shenhua (NSW), China First (Qld), Kevin’s Corner (Qld) which are 100% foreign owned. The net present value to Australia of these projects has either not been adjusted for foreign benefits (Boggabri) or has never been calculated at all (all others mentioned).
Who should care? The public should care that the economic benefits to them are being wildly overstated, or not stated at all. Governments should care that major shortcomings of economic assessments are not being picked up by the public service. Coal companies should care that their well-paid consultants are making large errors. Minerals companies who do contribute greatly to communities should care – they have a hard enough time getting their message across to an increasingly sceptical public without overblown economic assessments making it harder.
There are plenty of other issues raised by Prof Bennett’s review and the proponent’s response to submissions and our new report which discusses the issues in detail. Read about them over the Christmas break, just be careful not to overestimate your net present value by a couple of billion when buying your pressies!
Here is the new report - Ecolarge Dec 2011 Aston response to submissions Final
Review of Grand Prix economic assessment
Nov 19th
As promised in blog posts we have reviewed the Tourism Victoria and Ernst and Young Grand Prix economic assessment. We believe the Grand Prix does not provide a net benefit and in fact reduces the welfare of Victorians. Tourism Victoria’s claim that “Hosting the Formula One Australian Grand Prix brings significant benefits to Victoria” is not based on any calculation of net present benefit.
Read the original reports here and here then find out why they’re wrong here.
Maules Creek Mine Economic Assessment Reviewed
Oct 30th
Earlier this month we reviewed the economic assessment of the proposed Maules Creek Coal Mine. Our review of the economic assessment formed part of a submission to the NSW Department of Planning by the Maules Creek Community Council.
The good news – we had some fantastic input into our review from some new Economists at Large! Thanks to Liz, Maeve and Richard for their input and to Graham, Warwick and others for their edits and suggestions.
The bad news – the economic assessment, written by Gillespie Economics, is deeply flawed and needs to be revised. It fails to demonstrate that there is economic benefit in the mine for either the local community or NSW. The main flaws of the assessment relate to inconsistent scope of analysis, calculation of external costs and mathematical errors.
Read our full review here.
One month in Lao – pictures
Oct 10th
For the last month, Rod and I have been working in Vientiane and Laksao doing an evaluation of the WWF’s Sustainable Rattan Project in Lao. I’ve been trying to post some pictures of what we’ve been up to for a while but I’ve struggled to find a good WordPress plugin to display the images. I’ve found something that is acceptable for now so to avoid further delays, check out the gallery below! We’ll post more about the project soon.
Maules Creek Community Council
Sep 8th
In January we assisted the Maules Creek Community Council with their submission on the environmental assessment of the proposed extension to the Boggabri Coal Mine in northern NSW. The NSW Department of Planning is yet to make a decision on the project due to the many queries raised, changing NSW politics and the increasingly public nature of the mining-farming debate.
In the last few weeks we made a further submission on the environmental assessment, relating to the economic assessment and the underground alternative for the mine. We highlighted:
- The consultant’s report on the underground option found it was economically viable, but did not carry out financial analysis at the request of the project proponents, Idemitsu. Our analysis based on the data in this report shows the project would have net revenue of around $1.8 billion, higher than the estimate of production benefits under the project proposal in which was $1.3 billion.
- Calculations in the summary tables of the Economic Assessment weren’t replicable from the numbers presented in the text, with a $500 million dollar difference between them.
- Problems in the economic assessment remain unresolved, notably in relation to
- Treatment of producer surplus
- Project definition and scale
- Opportunity cost
- Distribution of costs and benefits
- Inappropriate benefits transfer of social value of employment
You can read our latest submission here
The MCCC are also interested in the economic values of the nearby Leard State Forest. The forest contains several threatened ecosystems which will be affected by coal mining developments. We used data from Victoria’s BushBroker programme to estimate a replacement cost for the forest. Our estimates range between $162,000,000 and $1,500,000,000. You can download the report here.
Ecolarge news July-August 2011
Sep 8th
A lot has been happening in and out of Ecolarge HQ lately!
Economists at Large just got larger!
In July, Rod addressed the environmental economics lectures at Monash and Melbourne Universities, encouraging young, aspiring economists to get involved with some of our projects. It was great to have so many turn up to our later info sessions at our Bevan St office. Thanks to those who’ve already contributed, notably to our work with the Maules Creek Community Council. Thanks also to Dr Edwyna Harris and Professor John Freebairn for their support.
Publication
One of our directors, Simon, has recently had a Issues Paper published on Ecological Economics through the Australian Collaboration which you can read here.
Livestock in disasters
We’re working on a fascinating project with the World Society for the Protection of Animals (WSPA) and their Livestock in Disasters programme. This programme aims to improve recovery from natural disasters through livelihoods-based initiatives and improvements in animal welfare. We’re conducting a literature review of the role livestock play in developing economies and the economics of natural disasters which will be released soon.
Sustainable Rattan in Laos
Rod and Tristan will be heading to Laos in Sept-Oct to work with WWF’s sustainable rattan programme. Rattan is commonly used for furniture making and is one of the most valuable non-timber forest products in the Mekong Basin. Unsustainable harvesting practices have been threatening livelihoods and natural resources in the region. WWF’s programme works with communities, processors and retailers to make the industry more sustainable and profitable. This work will build on work Rod has done for WWF in the past, which you can read here and here.
Publish What You Pay (PWYP) Australia
In August, Economists at Large were invited to join Publish What You Pay (PWYP) Australia. PWYP is a global network of civil society organisations that is committed to promoting good governance in natural resource-rich countries, including greater transparency surrounding oil, gas and mining revenues so that citizens are able to hold companies and governments to account and benefit from their resources. PWYP Australia is a coalition of 14 organisations that support increased payment transparency in mining and minerals industries in Australia. Economists at Large are excited to be involved and we look forward to contributing to this important initiative.
The economics of the Lynas Advanced Materials Processing Plant (LAMP)
Between July and August, Economists at Large conducted some preliminary analysis of the Lynas Advanced Materials Processing Plant (LAMP) being constructed in Malaysia. There has been significant press surrounding LAMP, a development by the Australian mining company Lynas Corporation Ltd. Economists at Large decided to look into LAMP with hopes of improving the level of public awareness surrounding the economics of the project. The LAMP is a perfect example of the need for greater transparency in the minerals and mining industry and highlights the importance of the Publish What You Pay (PWYP) campaign. You can read the blog about it here.
The economics of seal watching and seal hunting in Namibia [report released]
Sep 1st
WSPA, HSI, Bont voor Dieren and Respect for Animals have just released a report carried out by Economists at Large looking at the economics of seal watching and seal hunting in Namibia.
The report examines the economics of the two seal based industries in Namibia: seal hunting and seal watching. The report aims to compare and contrast the economics of the two industries that both rely on populations of Cape fur seals along Namibia’s extensive coastline.
Seal hunting is undertaken annually in three locations; Cape Cross, Wolf Bay and Atlas Bay. The industry had an estimated landed catch value in 2008 of USD$513,000 from 58,000 pups and 5,500 adult seals slaughtered.
Seal watching is a popular tourism activity undertaken by around 10% of total tourist arrivals to Namibia – just over 100,000 people in 2008. Of the tourists undertaking seal watching, approximately 70% are international arrivals. Based on 2008 figures, the industry generated just over USD$2 million in direct tourism expenditure.
The chart below shows the industry revenue for seal hunting in Namibia:
The chart below shows the industry value chain for seal hunting in Namibia:
The chart below shows how tourism impacts on the Namibian economy:
Download the full report here.
In the media:
WSPA website
A comprehensive study on ‘The economics of seal hunting and seal watching in Namibia’ commissioned by international animal welfare organizations, including WSPA, demonstrates that seals are worth far more alive than dead.
HSI website
New economics study confirms Namibian seal watching is worth 300 percent more than seal hunting.
“Economische studie bevestigt: Zeehondentoerisme in Namibië levert 300 procent meer op dan de Zeehondenjacht.”
“Economics Report Confirms Namibian Seal Watching is Worth 300 Percent More than Seal Hunting.”




