Comparison of three flood-related relocation programs with probabilistic cost-benefit analyses

After the recent deepwater gas discoveries in the eastern Mediterranean countries that share the same geological offshore basin with Lebanon, Lebanon’s government estimates that there are potential natural gas reserves of around 25 trillion cubic feet, located in its offshore territory. This potential has risen hope for a future with greater energy independence and lesser urban pollution within the two main sectors power generation and transportation. In this realm, this paper presents an ex-ante evaluation of shifting transit vehicles fleet from the current practice of gasoline fuel into natural gas fuel. The evaluation is done through probabilistic cost benefit analysis (CBA). The various options and scenarios for this shift is established taking into consideration the type of natural gas fuel, type of deployment, and stages of deployment. Costs associated with each scenario are estimated and include costs of required infrastructure and refueling stations, capital cost for vehicles, natural gas (NG) converters, fuel costs, life cycle vehicle operating costs and emissions. Expected benefits include direct user savings, emissions reductions, and health benefits. Scenarios of the effects of fuel price fluctuations will be addressed within the CBA analysis using the probabilistic approach. A Monte Carlo simulation will be applied to capture the variability and sensitivity of each of the input parameters, in specific the economic parameters, the interest rate and inflation rate. Results of comparing the costs, outcomes/benefits, strengths and weaknesses of the considered options are provided for the short and long terms.

Managing infiltration and inflow into wastewater systems: Assessing social gains by using probabilistic cost-benefit analysis.

Many farmers hesitate to adopt new management strategies with actual or perceived risks and uncertainties. Especially in ornamental plant production, farmers often stick to current production strategies to avoid the risk of economically harmful plant losses, even though they may recognize the need to optimize farm management. This work focused on the economically important and little-researched production system of ornamental heather (Calluna vulgaris) to help farmers find appropriate measures to sustainably improve resource use, plant quality, and profitability despite existing risks. Probabilistic cost-benefit analysis was applied to simulate alternative disease monitoring strategies. The outcomes for more intensive visual monitoring, as well as sensor-based monitoring using hyperspectral imaging were simulated. Based on the results of the probabilistic cost-benefit analysis, the expected utility of the alternative strategies was assessed as a function of the farmer’s level of risk aversion. The analysis of expected utility indicated that heather production is generally risky. Concerning the alternative strategies, more intensive visual monitoring provides the highest utility for farmers for almost all levels of risk aversion compared to all other strategies. Results of the probabilistic cost-benefit analysis indicated that more intensive visual monitoring increases net benefits in 68% of the simulated cases. The application of sensor-based monitoring leads to negative economic outcomes in 85% of the simulated cases. This research approach is widely applicable to predict the impacts of new management strategies in precision agriculture. The methodology can be used to provide farmers in other data-scarce production systems with concrete recommendations that account for uncertainties and risks.

Estimating the benefits of effectively and proactively maintaining infrastructure with the innovative Smart Infrastructure sensor system

The recent publication of the summary for policy makers by Working Group I of the Intergovernmental Panel on Climate Change (IPCC) [1] has injected a renewed sense of urgency to address climate change. It is therefore timely to review the notion of preventing 'dangerous anthropogenic interference with the climate system' as put forward in the United Nations Framework Convention on Climate Change (UNFCCC). The article by Danny Harvey in this issue [2] offers a fresh perspective by rephrasing the concept of 'dangerous interference' as a problem of risk assessment. As Harvey points out, identification of 'dangerous interference' does not require us to know with certainty that future climate change will be dangerous—an impossible task given that our knowledge about future climate change includes uncertainty. Rather, it requires the assertion that interference would lead to a significant probability of dangerous climate change beyond some risk tolerance, and therefore would pose an unacceptable risk.

The need for sustainable transportation in Lebanon has become more critical than ever as a result of the high amount of energy required by the transport sector coupled with the large quantities of greenhouse gas emissions by this sector both of which has a direct effect on the social, economic and environmental status of Lebanese citizens. A proposed project, the bus rapid transit (BRT) project supported by the World Bank, is a major step towards achieving the sustainable transportation system. Yet, the realization of this goal is highly dependent on the effectiveness of this project. This research presents a probabilistic cost-benefit analysis (CBA) on the BRT section that spans from Tabarja to Beirut. The CBA accounts for all the costs incurred to construct and operate the system, whereas the benefits considered are savings in travel time, emissions, and crash cost. Using the probabilistic approach is adopted considering the high uncertainties that surrounds the BRT design variables. The probabilistic approach is performed using Monte Carlo Simulation where the uncertain parameter in the CBA analysis are identified and their probability distributions are constructed that can better represent the variability in these parameters. This approach has proven that modal shift is a key element to the success of the project. Finally, a financial analysis is conducted showing that an operating subsidy is needed if the fare revenues are lower than 20%, thus the prominence of modal shift and the number of BRT passengers.

Abstract: This paper discusses the challenges inherent in developing benefit-cost analysis (BCAs) of climate change. Challenges are explored from three perspectives: meeting the foundational premises for conducting BCA within the framework of welfare economics, methodological considerations that affect the application of the tools and techniques of BCA, and practical limitations that arise out of resource constraints and the nature of the question, project, or policy being evaluated. Although economic analysts frequently face – and overcome – conceptual and practical complications in developing BCAs, climate change presents difficulties beyond those posed by more conventional environmental problems. Five characteristics of the climate system and associated impacts on human and natural systems are identified that pose particular challenges to BCA of climate change, including ubiquity of impacts, intangibility, non-marginal changes, long timeframes, and uncertainty. These characteristics interact with traditional economic challenges, such as valuing non-market impact, addressing non-marginal changes, accounting for low-probability but high-impact events, and the eternal issue of appropriately discounting the future. A mapping between the characteristics of climate change and traditional economic challenges highlights the difficulties analysts are likely to encounter in conducting BCA. Despite these challenges, the paper argues that the fundamental ability of economic analysis to evaluate alternatives and tradeoffs is vital to decision making. Climate-related decisions span a wide range in terms of their scope, complexity, and depth, and for many applications of economic analyses the issues associated with climate change are tractable. In other cases it may require improved economic techniques or taking steps to ensure uncertainty is more fully addressed. Augmenting economic analysis with distribution analysis or an account of physical effects, and exploring how economic benefit and cost estimates can be incorporated into broader decision making frameworks have also been suggested. The paper concludes that there are opportunities for BCA to play a key role in informing climate change decision-making.

Public fear for environmental and health impacts or potential leakage of CO2 from geological reservoirs is among the reasons why over the past decade CCS has not yet been deployed on a large enough scale so as to meaningfully contribute to mitigate climate change. Storage of CO2 under the seabed moves this climate mitigation option away from inhabited areas and could thereby take away some of the opposition towards this technology. Given that in the event of CO2 leakage for sub-seabed CCS the ocean would function as buffer for receiving this greenhouse gas, rather than the atmosphere, offshore CCS could particularly address concerns over the climatic impacts of CO2 seepage. In this paper we point out that recent geological studies confirm that leakage for individual offshore CCS operations may be highly unlikely from a technical point of view, if storage sites are well chosen, well managed and well monitored. But we argue that on a global long-term scale, for an ensemble of thousands or millions of storage sites, leakage of CO2 could take place in certain cases and/or countries for e.g. economic, institutional, legal or safety cultural reasons. We investigated what the impact could be in terms of temperature increase and ocean acidification if leakage would nevertheless occur, and addressed the question what the relative roles could be of on- and offshore CCS if mankind desires to divert the atmospheric damages resulting from climate change. For this purpose, we constructed a top-down energy-environment-economy model, with which we performed a probabilistic cost-benefit analysis of climate change mitigation with on- and offshore CCS as specific CO2 abatement options. One of our main conclusions is that even if there is non-zero leakage for CCS activity on a global scale, there is high probability that both onshore and offshore CCS could – on economic grounds – still account for anywhere between 20% and 80% of all future CO2 abatement efforts under a broad range of CCS cost assumptions.

Some experts believe that Hong Kong will probably be subjected to more extreme weather conditions due to climate change. To better understand the potential implications of the effects of climate change on coastal structures in Hong Kong and to ascertain necessary revisions to the current design standards to minimize the risk of coastal flooding, the Civil Engineering and Development Department (CEDD) of the Hong Kong Special Administrative Region Government conducted a study to review the climate change situation in Hong Kong and its implications to coastal structures design. Projection method has been developed to project the two major climate change factors pertinent to design of coastal structures, i.e. the mean sea levels (MSLs) and extreme wind speeds, to different time windows of the 21st century based on IPCC AR5 scenarios. CEDD seriously considered investing in the future coastal structures by designing the new structures with climate change revisions as one of the adaptation measures against the climate change impact and undertook benefit—cost assessment to evaluate whether the adaptation measure is effective in coastal structures design. Three types of common coastal structures to cope with climate impact, i.e. sloping rock armor seawall, vertical blockwork seawall and piled-deck pier, were investigated. The cost-benefit analysis results demonstrated that the benefits of increased protection on new coastal structures to cope with climate change effects outweigh the additional costs incurred to construct and maintain these structures.

Valuing deaths caused by climate change in Benefit Cost Analysis (BCA) is complex and controversial, having caused disagreement and acrimony in past high-profile settings. Furthermore, it is of first order consequence to the value of the social cost of carbon (SCC). Despite this, the underlying considerations remain under-analyzed. We address this by assessing the theory behind different approaches to BCA, and by evaluating how they fare when applied to global externalities like climate change. The pure Kaldor-Hicks approach to BCA -measuring costs in market dollars unadjusted for diminishing marginal utility and valuing premature deaths in rich areas more than poor areas -relies on assumptions that are debated in domestic contexts, but, as we show, clearly do not hold in the context of climate change. We show that this approach is equivalent to defining a Negishi weighted social welfare function. Furthermore, we show that if costs are measured in purchasing power parity adjusted money -as is typical for the SCC -then the Kaldor-Hicks potential compensation criterion no longer necessarily holds. We conclude that the first-best BCA approach in the climate context is welfare weighting. This approach accounts for diminishing marginal utility using empirical estimates for the curvature of the utility function, and it better captures what a social planner naturally cares about: real net benefits and the welfare people get from those net benefits. The current U.S. practice -identical to the pure Kaldor-Hicks approach except that it gives a uniform population average value to all premature deaths -is preferred over the pure Kaldor-Hicks approach because it implicitly welfare weights premature mortality costs. However, the fully welfare weighted approach is first-best because it accounts for diminishing marginal utility across all costs, not just premature mortality risk.

Mapping Climate in the 21st Century

Everyday realities of climate change adaptation in Mozambique

Regulating the Energy Transition: FERC and Cost-Benefit Analysis

Applied Welfare Economics: Cost-Benefit Analysis for Project and Policy Evaluation presents a consistent framework for applied welfare economics and is grounded in a comprehensive theory of cost-benefit analysis, specifically focused on offering a practical approach to policy and project evaluation. After opening with a theoretical discussion of the concept of social welfare, a critical analysis of the traditional doctrine of welfare economics embodied in the Two Fundamental Theorems, and a presentation of social cost-benefit analysis, the book introduces readers to an applied framework. This includes the empirical estimation of shadow prices of goods, the social cost of labour and capital, and the assessment of risk. The book also examines real-life experiences with cost-benefit analysis, including ex-post evaluation of major projects, economic rates of return in different sectors, and a case study on privatisation. These chapters draw on first-hand research gained by the author team from years of advisory work for the European Commission and other international and national institutions. This second edition presents updated data, more international examples, and more coverage of topics such as very long run discounting effects and climate change as an intergenerational effect. It also includes more practical examples and end-of-chapter questions to aid student’s learning. Applied Welfare Economics is a valuable textbook for upper-level courses on welfare economics, cost-benefit analysis, public policy analysis and related areas.

The European Union’s (EU) main goal, as stated in the EU Green Deal, is to achieve climate neutrality by 2050, and the construction sector plays a significant role in this achievement through efforts to make infrastructure, commercial, and private projects more sustainable. For many years, Cost-Benefit Analysis (CBA) has been used to evaluate and make decisions on co-financing large infrastructure projects funded by the EU. As a result, the EU has incorporated the CBA into its cohesion policies, major initiative objectives, major sectoral policies, and common links, such as climate change and resource efficiency. However, in order to achieve ambitious European goals, the CBA has found a much broader application and is now used for the evaluation of circular economy projects, alternative materials in construction projects, in waste management and sustainable design, or to prove the efficiency of information processes or corporate governance. This paper will give an overview of the use of CBA in assessing various construction projects, as well as categorize identified benefits that were monetized in each group of projects. Finally, the general advantages and disadvantages of using CBA when evaluating and selecting projects from various construction areas will be summarized.