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CHAPTER 1

1.0. Introduction

The discovery and extraction of natural resources has brought different consequences to countries that are endowed with such resources. While some of these nations have become economically strong and self sustaining, others have been drawn into serious economic hardships and conflicts. Proponents of the resource curse, project have it that the citizens of these countries rather suffer from abject poverty, environmental damages, pollutions, diseases, illiteracy and score very low on the United Nation‗s Human Development Index (UNDP, 2006).

The Niger Delta region, where Nigeria Current Large Oil and Gas resources are located, to with the Niger Delta as the unifying feature has remained a source of global interest. With openness to the Atlantic Ocean and watercourses with access to the sea and rivers such as the Benue and Niger Rivers, the Niger Delta embodies some of the major coastal upwelling sub-ecosystems of the world and is an important center of marine biodiversity and marine food production ranked among the most productive coastal and offshore waters in the world. However, pollution from domestic and industry sources, over-exploitation of Oil and Gas resources and poorly planned and managed communities and coastal developments and near-shore activities are resulting in a rapid degradation of vulnerable land, coastal and offshore habitats and shared living marine resources of the region putting the economies and health of the populace at risk. The deterioration in water and air quality (chronic and catastrophic) from land and sea-based activities (especially industrial,(flaring/power plants), agricultural, urban and domestic sewage run-off, eutrophication and gas flaring have been identified as a major Tran boundary environmental problem by communities in the region.

Mainstream economics of the neoclassical kind was not developed primarily to deal with environmental problems. When facing a new category of problems, it therefore also seems reasonable to consider alternatives to the neoclassical paradigm. The limited reversibility or irreversibility of many environmental impacts is one reason to question conventional economic reasoning, which generally assumes that everything can be traded against everything else in monetary terms. Secondly, ethical and ideological issues become accentuated in relation to environmental problems. Even if it were accepted that impacts can be traded against each other in one-dimensional, monetary terms, the price at which such trading should occur is always open to debate. The idea of correct prices for purposes of resource allocation suggested by conventional cost-benefit analysis becomes less convincing, if not absurd. Why those prices? What right does one have, as an economist, to define so-called correct prices or correct rules

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for valuing environmental impacts or other impacts in monetary (or other one-dimensional) terms? There are ethical reasons to suggest, for instance, an infinite price for irreversible degradation of the natural resource base available to future generations. And, as already indicated, irreversible impacts are the common case rather than the exception. The burning of coal, oil or natural gas is an irreversible process. Pollution of air, water and soil is often irreversible or difficult to reverse, and the same is true of land exploitation for various purposes, or interference with ecosystems.

Environmental and socio-economic issues become business issues. Thus, what is good for the economy is equal to what is good for the environment (Silverstein, 1993). At a pragmatic level, there are some obvious reasons for environmental management study. The traditional view about regulation ecology and economy sounded like ecology versus economy. Social benefits that demand strict environmental standard confronts industry‘s private costs, cost of prevention, and clean-up faced reducing of competitiveness and price increase. Fortunately, companies make a business in the real world of dynamic competition, not in the static world with many economic theories. Thus, it can be concluded that static view of ecological regulation is incorrect today. Moreover, it is not simply enough for companies to have only resources. Using resources productively is what makes for successful competitiveness today. Companies and states can improve resource productivity by providing existing products more efficiently or by making products more valuable for customers, products customers are willing to pay for (Porter, Der Linde 1995). Some researchers deem that industry‘s pollution today means inefficiency. Really, when scarp, harmful substances, or energy forms are discharged into the environment as pollution, it is sign that resources have been used incompletely, inefficiently, or ineffectively (Porter, Der Linde, 1995). However, it is so naïve to allow that most of companies existed to over look their policy into environmental compliance fast. Unfortunately, traditional ways of business dominates rooted tightly in company‘s top management conscience. Moreover, several years ago, most business hoped that the environment issues would disappear, but till date it has still not; it has only gained more important (Woolstone, 1993). Some scholars believe that technology will solve environmental problems and can replace natural capital by profit maximization in resource utilization (weak sustainability- neoclassical economics paradigm) why other believe that is only to an extent that technology can replace natural capital (strong sustainability- ecological economics paradigm). All these world trends claim from the firms to consider environmental issues in long – term perspective. How should companies be motivated into environmental friendly policy and who should determine ecological standard: government, policy makers or companies themselves? This is real tight challenge toward sustainable development.

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Since the controversial book by Meadows et al. (2004 for the update of the 1972 edition), the debate about the physical limits to growth has remained lively. If one considers the controversies between economists, one can schematically distinguish two antagonist positions. According to the first and most optimistic one (the so-called ―weak sustainability‖ position), long run economic growth is possible within a finite world thanks to substitutions between natural resources and man-made inputs and thanks to technical progress. This position is well illustrated by the contributions of Dasgupta and Heal, Solow or Stiglitz to the Review of Economic Studies symposium on the Economics of Exhaustible Resources (1974) but many other contributions followed.

The second position is much more pessimistic about the long run growth prospects in a finite world. It first relies on a critical appraisal of the representation of the production process in neoclassical growth theory: following Georgescu-Roegen (1971), ecological economists like (Cleveland and Ruth, 1997) and (Daly, 1997) consider that neoclassical growth models rely on much too optimistic assumptions about substitution possibilities between natural and man-made inputs and about how they can be affected by technological progress. They outline in particular that neoclassical growth models ignore the physical laws (the conservation laws and the second principle of thermodynamics) that govern the transformation process of matter and energy in all human activities, in particular the production of goods and services.

Therefore, a cluster analysis of both ecological and neo-classical economics paradigms is used in this project to analyze how their approach can positively influence the emission of uncontrolled air pollutants from all the existing and proposed Gas flares/ power plants in the Niger Delta region. In evaluation of our survey results, we discuss to what extent the clusters that we identified do-or not to-represent the two schools of thought of Ecological and neoclassical economics perspective, on the issues of sustainability and economic development in the Niger Delta region; how they group around these issues, how they feel about the current scientific divide, and what they expect to be future environmental and economic development of the region, though the Neoclassical economics approach is commonly practice in the region, but this paper will compare with a replacement by ecological economics approach to address these pollutions problems in the region.

1.1. Background of the Study

Niger Delta is the southernmost region of Nigeria. It is located in the South-South District of the Southern Region of Nigeria and is surrounded by small communities such as Batan, Odidi 1 and Odidi2, Escravos, Ekpan, etc. These communities within Niger Delta area are just a few kilometers apart. The inhabitants of

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these communities are predominantly fishermen. Apart from fishing, farming is another economic activity these villages are engaged in.

Due to the production of the crude oil, the communities around Niger Delta region have limited access to fishing and agricultural activities. Oil spill and carbon particles in their rivers, land and air from CO2 emissions from gas flares\power plants has made it difficult for fishing and farming activities in the area, which also affect their health and lands for other purposes. This means their major source of livelihood has been taken away from them. Meanwhile, it has not well been established as to the kind of package which would be made available for these communities not to become worse off as a result of less access to fishing activities and other socio-economic activities within their community where oil production and drilling takes place. In addition, oil production comes with huge environmental challenges especially at a time where climate change and its negative consequences have captured global attention. Unlike land, defining property rights for the use of the sea is rather difficult (Vatn, 2005, p. 261), however contends that undefined or unclear property rights may yield both large conflicts and losses. The oil production off the coast of Niger Delta has indeed created a rivalry in the use of the sea; there would be some cost if any of the agents is excluded from the use of the water resource. The oil drilling infrastructure in the Niger delta has also come under attacks from local residents who claim they have not been compensated for their loss of land and source of livelihood to the oil production. These local residents sometimes damage oil transporting pipelines and set fire to them. Other times, they have engaged the companies in warfare and on some occasions taken foreign expatriates hostage. Supporters of the local residents quote the African Charter Article #21 to back their actions. Three clauses in the charter read:

·                  All peoples shall freely dispose off their wealth and natural resources. This right shall be exercised in the exclusive interest of the people. In no case shall a people be deprived of it.

·                  In case of spoliation, the dispossessed people shall have the right to the lawful recovery of its property as well as to an adequate compensation.

·                  States parties to the present Charter shall undertake to eliminate all forms of foreign economic exploitation particularly that practiced by international monopolies so as to enable their peoples to fully benefit from the advantages derived from their national resources.

If this Charter is anything to go by, then the local communities along Niger Delta have to be compensated in a way that will not make them worse off since they have to give up their source of livelihood. One way

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could have been an agreement for the oil companies to give employment to the residents but this may not materialize since most of the residents have not had education and training in oil extraction, other ways is implementation of sustainable policies and good practice in oil industries production activities including all stake holders. This research work also examines who is responsible for this situation in a context where multinational oil companies have been operating for decades. It highlights how companies can take advantage of the weak regulatory systems that characterize many developing countries, which frequently results in the poorest people being the most vulnerable to exploitation by corporate actors. The Niger Delta people have been systematically denied access to information about how oil exploration and production will affect them, and are repeatedly denied access to justice. The Niger Delta provides a stark case study of the lack of accountability of a government to his people and of multinational company‘s almost total lack of accountability when it comes to the impact of their operations on human right and environment.

For the last twenty years, contributions to endogenous growth theory have dealt with the question of long term growth in the presence of scarce natural resources and/or pollution. But surprisingly, the vast majority of those papers (even rather recent ones) disregard the laws of physics and the ecological economists' criticisms to the neoclassical representation of the production process. For instance, (Grimaud and Rougé, 2003), (Grimaud and Rougé, 2005) and (Groth and Schou, 2007) build models in which a natural resource is one of the production factors of a Cobb–Douglas technology; (Stockey, 1998) and (Hart, 2004) propose growth models with pollution in which no material flow is explicitly modeled. Other contributions to growth theory aim at taking the ecological economists' criticisms more explicitly into account. Papers like (Bretschger, 2005), (Smulders, 1995a), (Smulders, 1995b), (Smulders, 2003), (Bretschger and Smulders, 2010) and (Pittel et al., 2006) explore the long term consequences of material balance constraints and low substitution possibilities between material and man-made inputs. In spite of the resource scarcity, they all show that under some conditions, long term growth can be sustainable thanks to research and development investments. Similarly, Akao and Managi (2007) adopt a material balance approach and put forward the sustainability conditions for long term growth in an economy with finite (but recyclable) resource, pollution and bounded assimilative capacity.

Differences between the present neoclassical and ecological econom


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