ABSTRACT
Some of these failures will have a clear impact on natural resource degradation (NRD) in LDCs. It is now acknowledged that relative prices matter; otherwise there will be a natural desire to exhaust the lowest priced resource first regardless of its true scarcity and environmental benefits. It is also clear that underpricing of, say, fuelwood and charcoal is linked with severe fuelwood depletion in some LDCs. However, in Ethiopia, fuelwood prices are very high, partly reflecting severe depletion of forest areas and partly showing the results of government policy. Rent-seeking behaviour (Krueger 1974) of the government can also encourage unsustainable natural resource use. The specific aims of this chapter are:
1 to examine some macro variables which could influence the process of NRD, like deforestation (since distortions can generate NRD, there is a case for examining the impact of price distortions, e.g. overvaluation of exchange rates and currency controls, on the use of natural resources at the macro level);
2 to analyse some economic policies to prevent NRD in LDCs; 3 to describe the determinants of demand for and supply of fuelwood in some African
countries and suggest an alternative farming system for protecting the environment in LDCs.
