The Precautionary Principle for Environmental Management: A Defensive-expenditure Application

The Precautionary Principle has emerged in response to the need for an effective method for dealing with risks and uncertainties in environmental management. In essence, the Principle requires action to prevent serious and irreversible damage even before harm can be scientifically demonstrated or economically assessed. Proponents argue that the Principle should be applied in situations where both the probability and value of irreversible damage are unknown. The lack of these particular data prevent a full cost–benefit analysis, but permit application of the Principle through the defensive-expenditure approach. How much would the community be required to pay to fund alternatives to maintain the environment and so defend existing levels of utility? Through the application of risk analysis and the stochastic dominance technique, a range of options and outcomes can be examined incorporating the using available information within a framework consistent with economic rationality. An extended risk simulation is applied to an environmental issue where there is a risk of serious and irreversible damage to the environment, namely, protection of the Barmah-Millewa forest-wetland in Australia.