cost benefit analysis in practice thierry davy representative of the french water agencies to the eu...
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COST BENEFIT ANALYSIS COST BENEFIT ANALYSIS IN PRACTICEIN PRACTICE
Thierry DavyRepresentative of the French water
agencies to the EU
Inspired from
Cost/benefit
COST BENEFIT IN PRACTICEAT RIVER BASIN SCALE
Sourc
e:
Min
istr
y o
f th
e e
nvir
onm
ent,
Québ
ec,
Canad
a
2/10
Cost/benefit
DESCRIPTION OF THE SITUATION
10-15% of the salt
withdrawn every
yearProspectivemodel shows that the impact of the
measures is not sufficient to reach the goal by 2015 (after 2027)
supplementary measures are needed
salt <250mg/l
in all the
aquifer
3/10
polluted zone
salt tips
limit of the aquifer
Description of the site aquifer intensely polluted by mining
activity: huge waste deposits of salt efficient measures already implemented:
geo-membrane on some dumps, artificial dissolution of waste with high concentration of salt ...
Aquifer
Source: BRGM & Agence de l'eau Rhin-Meuse
Cost/benefit
SUPPLEMENTARY MEASURES AND THEIR EFFECTIVENESS
Measure 1 Measure 2 Measure 3
Complete removal of salt tips
+ Construction of lines of pumping wells downstream the highly polluted areas
+ Construction of lines of pumping wells i-downstream the
highly polluted areas ii-in the centre of the
pollution plume
Effectiveness
?
Restoredsurface
(ha)
Surfaceremaining torestore (ha)
Effectiveness(% )
Businessas usual
2 600 2 200 54
Measure 1 2 800 2 000 58
Measure 2 4 520 280 94
Measure 3 4 779 21 99,5
in
2015
Ineffectiv
e
Maybe
further
investigated
if necessary
4/10
Cost/benefit
CBA LOGICAL STEPS
Define scale of assessment
Who will be affected? To what extent? Directly or not?...
Identify types of costs and benefits
Quantitative, qualitative or monetary? Present and/or future? Which appear significant?...
Choose methodologyIs it necessary to apply different methods? What resources are available for original research?...
Collect data Do we need first hand data? Can we rely on other resources?...
Assess costs and benefits
Are impacts important and properly weighted? How can different types of impacts can be presented in a way that facilitates decision-making?...
5/10
Cost/benefit
WHICH ELEMENTS MAY INFLUENCE CBA
The number of contributors/scale of analysis
the effectiveness of the measures The time frame The way of calculating the costs The discount rate The integration or not of the
environmental benefits The comparison with ability to pay
Cost/benefit
CBAIDENTIFICATION OF COSTS AND
BENEFITS Types of costs
Agriculture - corrosion damages to irrigation equipment- potential impact on quality of soil investments, operating and maintenance costs damages
Public watersupply
- mitigation of water salinity: dilution, treatments, alternative resources… investments, operating and maintenance costs
Agriculture - avoided damages. E.g. renewal of corroded pipes and pumps- more valuable crops possible. E.g. tobacco potential future benefit
Public watersupply
- no need for more mitigation measures- pure water potentially available in the future potential future benefit
Industry - pure water available for specific activity (electronics…) potential future benefit
Types of benefits
TD OD
7/10
Cost/benefit
CBA:environmental and health benefits
With a CBA you can calculate and integrate environmental and health benefits (where and when they exist)
Monetarisation of environmental benefits (contingent valuation, transportation costs, hedonic prices,…)
Monetarisation of health benefits or costs avoided (costs of lost working days, costs of deaths,….)
Cost/benefit
COST BENEFIT ANALYSISEstimated costs (M€) Measure 2
Construction of the wells 9
Operation of the wells 8,9
Connection of wells (11km) 2,5
Doubling of the canal for salmons 3
Damages to wetlands not assessed
Total estimated costs (M€) 23,4
Estimated benefits (M€)
For direct users
Agriculture : avoided damages to equipment, soil and crops due to salinisation
3,1
Public water supply : no further treatment needed, no need to investigate for alternative resources
13,9
For potential future uses
The aquifer is free of nitrates and pesticides: it may generate benefits in the future once desalinated
6,6
Total estimated benefits (M€) 23,6
NET COST (M€) -0,2
Estimated
potential benefits
equal costs
A9/10
Cost/benefit
CROSSING CBA AND ABILITY TO PAY AT LARGE SCALE
Total cost (M€)
Cost/ surface restored (k€/ ha)
Cost / household (€/ year)
Measure 2 23,4 4,9 32,5
To compare with 1995 estimates of the ability to pay:
36€/year/household817 interviews - Contingent valuation
Not
disproportionate
Goal reached in
2015 but with
some uncertainity
A10/10
34 000 households directly concerned by the
aquifer
Cost/benefit
TARGET:
reach the goal
in 2015
COST BENEFIT ANALYSIS
Estimated costs (M€) Measure 3
Construction of the wells 16,8
Operation of the wells 13,1
Connection of wells (11km) 2,5
Doubling of the canal for salmons 3
Damages to wetlands not assessed
Total estimated costs (M€) 35,4
Estimated benefits (M€)
For direct users
Agriculture : avoided damages to equipment,soil and crops due to salinisation
3,1
Public water supply : no further treatment, nomore investigation for alternative resources
13,9
For potential future uses
Aquifer free of nitrates and pesticides: it maygenerate future benefits once desalinated
6,6
Total estimated benefits (M€) 23,6
NET COST (M€) 11,8
B9/12
Cost/benefit
DISPROPORTIONATE
goal can't be reached in
2015
consider time derogation…
ARE THE COSTS DISPROPORTIONATE in 2015?
Total cost(M€)
Cost/ surfacerestored (k€/ ha)
Cost / household(€/ year)
Measure 3 35,4 7,4 86,8
To compare with virtual example of the ability to pay:
36€/year/household
B10/12
34 000 households concerned by the
aquifer (virtual example)
Cost/benefit
Simulation for
2021
COST BENEFIT ANALYSIS
Estimated costs (M€) Measure 2 Measure 3
Construction of the wells 8,4 16,8
Operation of the wells 9,2 15,1
Connection of wells (11km) 2,5 2,5
Doubling of the canal for salmons 3 3
Damages to wetlands not assessed not assessed
Total estimated costs (M€) 23,1 37,4
Estimated benefits (M€)
For direct users
Agriculture : avoided damages to equipment, soil and crops due to salinisation
1,5 1,5
Public water supply : no further treatment, no more investigation for alternative resources
7 7
For potential future uses
Aquifer free of nitrates and pesticides: it may generate future benefits once desalinated
3,3 3,3
Total estimated benefits (M€) 11,8 11,8
NET COST (M€) 11,3 25,6
B11/12
Cost/benefit
NOT DISPROPORTIONATE ANYMORE
measure 2 with time derogation
allows to reach the goal in 2021 but the
benefits are lower because they are
postponed
ARE THE COSTS DISPROPORTIONATE IN 2021?
Total cost(M€)
Cost/ surfacerestored (k€/ ha)
Cost / household(€/ year)
Measure 2 23,1 4,8 37,7
Measure 3 37,4 7,40 61,1
B12/12
To compare with virtual example of the ability to pay:
36€/year/household
34 000 households directly
concerned by the aquifer (virtual example)
Cost/benefit
TARGET
reach the goal
in 2027
COST BENEFIT ANALYSIS
Estimated costs (M€) Measure 3
Construction of the wells 16,8
Operation of the wells 12,1
Connection of wells (11km) 3,5
Doubling of the canal for salmons 4
Damages to wetlands 1,1
Total estimated costs (M€) 37,5
Estimated benefits (M€)
For direct users
Agriculture : avoided damages to equipment, soiland crops due to salinisation
3,1
Public water supply : no further treatment needed,no need to investigate for alternative resources
13,9
For potential future uses
The aquifer is free of nitrates and pesticides: it maygenerate benefits in the future once desalinated
6,6
Total estimated benefits (M€) 23,6
NET COST (M€) 13,9
C9/12
Cost/benefit
DISPROPORTIONATE
goal can't be reached in
2015
In 2027 the costs are not
far from being acceptable
ARE THE COSTS DISPROPORTIONATE in 2027 ?
Total cost(M€)
Cost/ surfacerestored (k€/ ha)
Cost / household(€/ year)
Measure 3 43,6 9,1 49
C10/12
To compare with virtual example of the ability to pay:
36€/year/household
34 000 households directly
concerned by the aquifer (virtual example)
Cost/benefit
Simulation
s
2021-2027
And after
CBA some lessons from this example
on measures 1
Type 1 measures are not costly They are not efficient to reach the
environmental objective: the good ecological status
The benefits are quite zero for the current users (household and farmers)
The benefits will not increase in the future: no improvement of the water quality
These measures 1 could have been eliminated on the basis of the cost efficiency analysis: no need of CBA to see that they are not appropriate
C11/12
Cost/benefit
CBA some lessons from this example
on measures 2
The CBA of measures 2 is balanced in 2015
The ability to pay shows that users can afford to pay for them even in 2015
If we postpone measures 2, CBA becomes negative in 2021 due to the decrease of benefits
The ability to pay shows that it is still possible to pay for them in 2021
There is still some uncertainity (even low) to evaluate if measures 2 allow to reach GES
Simulations 2021-2027And after
Cost/benefit
CBA some lessons from this example
on measures 3
Measures have a negative CBA for each date
The efficiency of the measures 3 is proved to achieve the good status
The ability to pay shows that even in 2027 the affordabilty is low
Crossing CBA with ability to pay allows to see that around 2030 we will be able to reach good status at an « acceptable price » for local actors
Cost/benefit
Thanks for your attention