Why environmental and social benefits should be included in cost-benefit analysis of infrastructure?

Abstract

A gradual increase in the importance of water environment infrastructure has provided an opportunity to bring in various initiatives for the supply of sewage. Such initiatives include the dissemination of public sewage systems and the use of subcontractors in management of sewage systems. However, despite the existence of various methods to increase the rate of sewage supply, there are few studies analyzing each alternative in terms of social, economic, and environmental aspects. Therefore, we investigated investment directions for water environment infrastructure facilities related to the supply of sewage treatment systems in rural areas through cost-benefit analysis. We analyzed the economic costs and social benefits of two sewage treatment systems: installation of a public sewage treatment system and utilization of a private sewage treatment system via service contract. When we considered only economic costs and benefits, the benefit-cost ratio for the public system (0.02) was smaller than that for the private system (0.264). However, the results of the two alternatives changed when we considered the social benefits to people in urban areas from establishment of public sewage treatment systems in rural areas. To be specific, by considering the social benefits for non-rural areas, this study found that the benefit-cost ratio for the public system increased to 0.267, which was higher than the ratio for the private system. Based on these results, we propose appropriate operations and management plans for supplying sewage treatment systems to rural areas. Further, this study indicates that policymakers who conduct cost-benefit analyses of infrastructure related to water environments should consider all social, environmental, and economic factors that can alter the analysis results.