COST BENEFIT ANALYSIS IN PRACTICE Thierry Davy Representative of the French water agencies to the EU...

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withdrawn every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




Damages to wetlands not assessed



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


Aquifer free of nitrates and pesticides: it maygenerate future benefits once desalinated

6,6


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


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


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


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€)



Measure 2 23,1 4,8 37,7

Measure 3 37,4 7,40 61,1

B12/12



34 000 households directly

concerned by the aquifer (virtual example)

Cost/benefit

TARGET

reach the goal

in 2027


Estimated costs (M€) Measure 3

Construction of the wells 16,8




Damages to wetlands 1,1



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


The aquifer is free of nitrates and pesticides: it maygenerate benefits in the future once desalinated

6,6


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€)



Measure 3 43,6 9,1 49

C10/12



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


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


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

COST BENEFIT ANALYSIS IN PRACTICE Thierry Davy Representative of the French water agencies to the EU...

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