Conventional Cost-benefit Analysis Research Articles

Economics of geotechnical asset deterioration, maintenance and renewal

Transport and other infrastructure systems are supported on, adjacent to and retained by extensive systems of earthworks of varying (and increasing) age, and of variable original construction quality. These earthworks are subject to natural deterioration, which can be accelerated and complicated by the effects of climate change. The ACHILLES research program is providing improved understanding of earthworks behavior, performance and deterioration. It is also developing methods and tools to analyze and provide decision support for the construction, maintenance and renewal of earthworks, with particular emphasis on the management of existing, deteriorating assets. The work described here aims to identify the most cost-effective timing and means of extending earthworks asset lives and maintaining their safety and serviceability. Conventional cost-benefit analysis methods, of the type used for new infrastructure projects, do not directly provide the decision support needed for the maintenance and renewal of existing earthworks assets. An alternative approach is proposed and applied to a modeled example, demonstrating the potential asset management benefits of early, pre-emptive intervention, the economic attraction of deferred intervention, and the means of identifying an intermediate whole-life cost ‘sweet spot’, based on a timely assessment of intervention options. The handling of the uncertainty associated with earthworks behavior, deterioration rates and times to failure is also considered, as is the extension of the single-asset approach to the management of multiple earthworks assets.

A game theoretic decision-making approach to reduce mine closure risks throughout the mine-life cycle

ABSTRACT To align a post-mining site to the wants and needs of local communities and stakeholders, mine closure needs to consider criteria which may be difficult to value using conventional cost–benefit analysis. For example, criteria associated with the environment, socio-environmental relationships, health, and long-term sustainability. Game theory techniques are implemented to investigate how different stakeholder groups could act during mine closure planning and decision-making. Using game theory with sustainability criteria, this study proposes an innovative approach to analyze some key decisions throughout the mine life that affect closure. Non-cooperative game theory models are investigated by developing Nash equilibrium equations which are based on the change in environmental risk, economic potential, and impacts on company reputation. The modified equilibrium formulas can highlight the key sustainability criteria for multi-stakeholder closure planning and complex decision-making. The discussion explores how the developed model can assist mining stakeholders in understanding their position during the mine closure process. In all, the game theory and multiple criteria models can help structure and manage the complex closure risks throughout the mine life cycle.

Modeling the Mutual Enhancement of Regional Economy and Personal Quality of Life (QOL): A Case Study on the Mumbai–Ahmedabad High-Speed Rail Corridor in India

Among the various effects of high-speed rail (HSR), a direct benefit to users has been measured as an increase in the gross domestic product (GDP) by the conventional cost–benefit analysis (CBA), which was institutionalized in the U.K. In recent years, the importance of capturing indirect benefits to non-users has also been broadly discussed. The indirect benefits of HSR can mainly be classified into two perspectives: regional economy and personal quality of life (QOL). In this study, we modeled the mutual enhancement between those effects and analyzed the indirect benefits of the Mumbai–Ahmedabad high-speed rail (MAHSR), which is currently under construction as the first HSR in India, an emerging country with a rapidly growing economy. The indirect benefit to the regional economy along the MAHSR corridor was estimated by industry and by zone. Additionally, the indirect benefit on personal QOL by individuals’ attributes and by zone through the mutual enhancement with the regional economy was also estimated. The personal QOL tends to show greater effects in the middle cities than those in the two metropolitan areas of Mumbai and Ahmedabad. This method can evaluate interregional disparity by identifying the differences in benefits by person, according to age, income, etc., which cannot be evaluated based on a mass measure, e.g., GDP, in the conventional CBA.

Bridging CBA and MCA for evaluating green infrastructure: Proposal of a new evaluation model (MAGICA)

The evaluation of green roofs and walls has been overlooking their real contribution to the built environment. This limits the application and development of these solutions, that have the potential to improve biodiversity, resilience, and carbon footprint of cities. In addition to the difficulty in measuring some ecosystem services, conventional cost-benefit analyses have proven to be inefficient as they cannot deal with non-monetized benefits. To overcome this gap, this study develops a comprehensive decision-making tool for assessing the value of green roofs and walls. The proposed methodology combines two well-known approaches - cost-benefit analysis (CBA) and multi-criteria analysis (MCA) - giving preference to the economic rationale for project investment optimization. This new model – MAGICA (Modelling the Attractiveness of Green Infrastructure through a Combined Approach) – addresses differently monetary and non-monetary benefits for a more robust and complete consideration of all financial, economic, socio-environmental impacts of green infrastructure as well as the preferences of the investors and users. The methodology covers different scales of implementation, including new and existing built assets, and it can be easily adapted to other nature-based solutions. Despite determining an economic indicator, the model is best suited for making relative comparisons between different solutions and identifying which is most appropriate for a particular project context. A case study is applied to demonstrate the methodology, assessing 16 green roof systems for installation in a university building in Lisbon, Portugal. The analysis is based on the results of an experimental campaign and field surveys of students, professors, and staff.

The costs and benefits of environmental sustainability

The natural science in GEO-6 makes clear that a range and variety of unwelcome outcomes for humanity, with potentially very significant impacts for human health, become increasingly likely if societies maintain their current development paths. This paper assesses what is known about the likely economic implications of either current trends or the transformation to a low-carbon and resource-efficient economy in the years to 2050 for which GEO-6 calls. A key conclusion is that no conventional cost–benefit analysis for either scenario is possible. This is because the final cost of meeting various decarbonisation and resource-management pathways depends on decisions made today in changing behaviour and generating innovation. The inadequacies of conventional modelling approaches generally lead to understating the risks from unmitigated climate change and overstating the costs of a low-carbon transition, by missing out the cumulative gains from path-dependent innovation. This leads to a flawed conclusion as to how to respond to the climate emergency, namely that significant reductions in emissions are prohibitively expensive and, therefore, to be avoided until new, cost-effective technologies are developed. We argue that this is inconsistent with the evidence and counterproductive in serving to delay decarbonisation efforts, thereby increasing its costs. Understanding the processes which drive innovation, change social norms and avoid locking in to carbon- and resource-intensive technologies, infrastructure and behaviours, will help decision makers as they ponder how to respond to the increasingly stark warnings of natural scientists about the deteriorating condition of the natural environment.

Accounting for uncertainties due to high-impact low-probability events in power system development

In the long-term development of the electric power system, system operators should consider the socio-economic balance between grid investment costs and security of supply, including the risk of power supply interruptions. Cost-benefit analyses conducted for this purpose are associated with many uncertainties but have traditionally focused on the expected value of the net socio-economic benefits of risk-reducing measures. This article focuses on the large uncertainties that are associated with the possible occurrence of high-impact low-probability interruption events (HILP events). The objective is to quantify and visualize the implications of uncertainties due to HILP events in the context of power system development. More specifically, this article describes a methodology accounting for uncertainties in socio-economic cost-benefit analysis of measures for reducing the risk of HILP events. The methodology accounts for the contributions of both aleatory and epistemic uncertainties and comprises a hybrid probabilistic-possibilistic uncertainty analysis method. Applying the methodology to a real case involving a grid investment decision, it is demonstrated how it provides additional insight compared to conventional cost-benefit analyses considering expected values where uncertainties are not accounted for explicitly. It is furthermore discussed how these results can help to better inform grid development decisions.

State-of-the-art review on multi-criteria decision-making in the transport sector

Consistent decision-making requires a structured and systematic evaluation of advantages and disadvantages of different choice possibilities. For transport projects, policies or policy measures, and transport options evaluation, various multi-criteria methods have been developed and effectively applied to complement conventional cost effectiveness and cost benefit analysis. The present paper aims to present a state-of-the-art review of pertinent literature regarding multi-criteria decision-making (MCDM) in the transport sector, focusing on the basic concepts and procedure for multi-criteria decision-making in the transport sector, along with its role and evaluation parameters. A large selection of over 50 papers and publications between 1982 and 2019 have been reviewed, in order to provide an insight into the uses of MCDM methods in transport applications. Most commonly used MCDM methods techniques are identified and discussed through a wide review of pertinent literature, research and case studies, leading to interesting conclusions that provide a valuable insight into the use of multi-criteria analysis techniques in transport sector related decision-making. Based on the wide range of reviewed literature, it is concluded that MCDM methods are being applied mostly to evaluate transport options rather than transport policies or projects and the most commonly used MCDM method in transport sector problems are analytic hierarchy process (AHP). • Over 50 publications between 1982 and 2019 have been reviewed. • MCDM methods are mostly suitable for problems with a discrete set or continuous sets of options. • MCDM methods are applied mostly to evaluate transport options rather than transport policies or projects. • The most commonly used MCDM method in transport sector problems is analytic hierarchy process (AHP).

Economic Contributions of Mega-Dam Infrastructure as Perceived by Local and Displaced Communities: A Case Study of Merowe Dam, Sudan

Investigations on the socioeconomic impacts of mega-dam projects have tended to focus on conventional cost–benefit analysis, while studies exploring perceptions of local communities, who are some of the prime beneficiaries of these development initiatives, are limited. This paper aims to address this research gap through a case study of community perceptions on the socioeconomic impacts of the Merowe Dam in Sudan from the residents of upstream, downstream, and relocated locations. Data were collected primarily through surveys and interviews with residents, government officials, dam implementation authority, non-governmental organizations (NGOs) and other key informants and a series of indicators were developed for the analysis from the responses. Three inter-related areas of impact were scrutinized: (a) electricity generation; (b) development of modern agriculture; and (c) institutional infrastructure in the region. The results reveal that local communities are fully aware of both the positive and adverse socioeconomic impacts of the Merowe Dam, although these are focused more on the visible impacts closely related to their livelihood and income, such as increased food production, water shortages, electricity supply and its costs. Policy implications include investments in the new settlement areas with respect to the agricultural economy, such as irrigation improvement through electrification, promoting crop diversity, research, development, and diffusion of modern agricultural technologies. Efforts are also needed to strike a balance between provision of utilities and services, (i.e., water, electricity and other infrastructural facilities) provided by the Merowe Dam, amongst communities in relocated, upstream, and downstream locations.

Socio-Economic Assessment of Green Infrastructure for Climate Change Adaptation in the Context of Urban Drainage Planning

Green infrastructure (GI) contributes to improve urban drainage and also has other societal and environmental benefits that grey infrastructure usually does not have. Economic assessment for urban drainage planning and decision making often focuses on flood criteria. This study presents an economic assessment of GI based on a conventional cost-benefit analysis (CBA) that includes several benefits related to urban drainage (floods, combined sewer overflows and waste water treatment), environmental impacts (receiving water bodies) and additional societal and environmental benefits associated with GI (air quality improvements, aesthetic values, etc.). Benefits from flood damage reduction are monetized based on the widely used concept of Expected Annual Damage (EAD) that was calculated using a 1D/2D urban drainage model together with design storms and a damage model based on tailored flood depth–damage curves. Benefits from Combined Sewer Overflows (CSO) damage reduction were monetized using a 1D urban drainage model with continuous rainfall simulations and prices per cubic meter of spilled combined sewage water estimated from literature; other societal benefits were estimated using unit prices also estimated from literature. This economic assessment was applied to two different case studies: the Spanish cities of Barcelona and Badalona. The results are useful for decision making and also underline the relevancy of including not only flood damages in CBA of GI.

Rail bonus: An empirical study onto relative valuation of railways in Austria

The roll of railways in rural areas is a subject of wide range of discussions. Cost benefit analysis (CBA) gives us some quantitative indicators to discuss it, while social benefits estimated through CBA are currently not comprehensive. Some studies have shown the existence of the rail bonus, which leads to people's preference of rail-based transportation to bus-based transportation. Others have made attempts to quantify option values (OV) and non-user values (NUV), which has been excluded from conventional CBA. It is difficult to apply those studies to practical issues. In this paper, using the contingent valuation method (CVM), an estimation of railways' additional relative values over buses in Austria, which are comparable and applicable to other cases, is made. The results show that premium rates obtained from the survey data from residents along two Austrian regional railways are around ten percent on average, which are similar to the results of prior researches in Japan. Those premium rates are recognized not only by frequent users but also by occasional users or non-users, which means that OV and NUV greatly contribute to the rail bonus. It is also found that the rail bonus could depend on geographical conditions, to some extent.

Qualitative benefits of livestock development programmes. Evidence from the Kaonafatso ya Dikgomo (KyD) Scheme in South Africa

The objective of the study was to develop an index which circumvents the need for quantitative measures in evaluating Livestock Development Programmes (LDPs). This was done through a conceptual framework which integrates indexing and the Sustainable Livelihoods Framework (SLF) to attain qualitative benefits. The study utilised a cross-sectional survey of Kaonafatso ya Dikgomo (KyD) Scheme participants in KwaZulu-Natal, Eastern Cape and Limpopo Provinces, South Africa, as a case. Data were collected through a questionnaire. Multiple sampling methods were used to identify 164 respondents. The results showed low benefits as exhibited by an index of 0.26. The Scheme showed highest benefits through social capital, followed by human, natural, financial and physical capital, respectively. The study concluded that concentrating on income proxies through conventional cost-benefit analysis (CBA) tends to mask the qualitative benefits exhibited by livestock improvement programmes. The theoretical lessons learnt included the exhibition and possibility of measuring qualitative benefits through indexing. Recommendations include further inquiry and refining the construction of the index to circumvent its subjectivity.

The value of travel time, noise pollution, recreation and biodiversity: A social choice valuation perspective

Environmental effects of transport projects have a weak position in Cost-Benefit Analysis (CBA) which might be rooted in the valuation approach adopted in the dominant style of CBA. This conventional valuation approach has been criticized for not valuing positive and negative impacts of transport projects in relation to each other and for not valuing such impacts in a public context, but in the context of private decisions. These critiques might be circumvented through valuing transport projects in a social choice context in which overall burdens and benefits of proposed transport projects are considered together in a public context. We investigate the extent to which a social choice valuation approach produces different outcomes than a conventional valuation approach. We conducted four social choice valuation experiments in which respondents were asked to choose between alternatives for a new road, trading off travel time and three environmental impacts (noise, recreation and biodiversity). Our findings suggest that, under social choice valuation, individuals assign substantially more value to environmental impacts than travel time as compared to conventional valuation studies. Moreover, in a social choice setting, respondents assigned monetary values to impacts that are not (or only qualitatively) considered in conventional CBAs of transport projects.

Hunting white elephants on the road. A practical procedure to detect harmful projects of transport infrastructure

The white elephant concept is used to qualify public investments representing a severe misallocation of society's resources or expenditures that can be deemed to reduce the wellbeing of its future members. In the transport sector, white elephants (WEs) are particularly relevant due to the vast amount of resources involved in large-scale infrastructure projects and to their long lifecycle. In most articles on the subject, WEs are major projects showing a certain political or even economic short-term appeal but that are essentially inefficient. In this paper, the definition includes, beyond those that are inefficient, projects that are financially unsustainable and/or very unfair to future generations when properly analysed over their project lifecycle. An early identification as WEs of those efficient projects from the socioeconomic point of view that are bound to entice the failure of a main stakeholder or are unfair to future generations, facilitates reconsidering their financial structuring in order to make them acceptable and avoid the WE label.The authors propose a new approach to detect WEs that goes beyond the traditional detection through standard techniques, such as cost-benefit analysis (CBA), and involves the incorporation in decision-making of new indicators. Those of the Intergenerational Redistributive Effects Model (IREM) show the importance of the long-term impacts arising from major investment in transport infrastructure. Using the annuities of the socioeconomic CBA and financial analyses, the IREM indicators allow a look beyond the future impact of the project on society's welfare –measured through conventional CBA– and its capacity of being financed, and produce a good assessment of its intergenerational effects. In this paper, the authors present the results of applying IREM to a set of transport projects in the European Union and, with more detail, to several Spanish motorway projects with private financing. The IREM's outputs indicate that most of the projects in the sample will be fair to future generations. Some of the analysed investments could, however, be considered as WEs when applying the intergenerational perspective. IREM appears therefore to be a useful tool to avoid decision-making mistakes in major infrastructure projects.

Quantifying road-user cost savings and change in land value: a UK case study

This paper presents a study on the impacts of an inter-urban road development in the UK through a comprehensive investigation and clarification of the relationship between road-user benefits as a primary impact and changes in land values (CLVs) as a secondary impact. It seeks to offer a methodology aiming at coupling the conventional cost–benefit analysis (CBA) with aspects of economic impact analysis by avoiding double-counting of the results. The CBA model of an existing highway management tool was used to calculate road-user cost savings (RUCSs) of generated traffic, while CLVs were calculated over the same period using a statistical model newly developed for the purpose. A comparison of a 30-year time span was used to test similarities in trends of road-user benefits and CLVs. The main factors affecting the degree of similarity were found to be traffic and its prediction and, in particular, the traffic generated by the new road. It appears that over a 30-year period, a new road project has a positive effect on land values but a negative effect on RUCSs in the first years after construction. The latter increases for about 15 years and then follows a decreasing pattern in the last 10 years or so.

Performance Evaluation of Alternative Jet Fuels using a hybrid MCDA method

Abstract We design a hybrid multi-criteria decision-making analysis (MCDA)-based framework to evaluate competing alternative jet fuels (AJFs). Our analysis on AJFs is based on a wide range of criteria with different forms of data and relations and reflect stakeholders’ view and opinions. This contrast with conventional cost-benefit analysis which typically focuses on the economic benefits at the expense of environmental, technological and social aspects. Our work adds value to understand developing technologies to date, technical barriers to commercialization, other development drivers such as the availability and willingness of financial institutions to finance, businesses to invest in AJFs productions and its supply chains in the UK, policy support and regulation, and likely commercialization and scale-up potentials. By focusing on motives, attitudes and stakeholders rather than merely the technical and economic aspects of AJFs, our paper makes an important contribution to the field.

Changes in land value due to road development

One of the important rules in transportation economics is to present a cost–benefit analysis (CBA) and economic impact analysis individually, not to double-count the cost or benefits and not to add the results together. However, it is important to establish whether these analyses demonstrate similar quantifying impacts or have similar trends. In addition, it is necessary to clarify whether conventional CBA captures all quantifiable benefits. This is a complex task. The study reported in this paper focused on modelling the change in the value of land affected by an inter-urban road. Four independent variables were chosen: distance from the road, land use, land area and the time elapsed since completion of the road works. Using these variables, two models were produced to estimate the percentage change in land value (PCLV). Sensitivity analysis was used to ascertain the most accurate model for predicting the difference in PCLV. This model was tested using data from the UK. The model results were compared with historical data and the comparison demonstrated that the model is accurate at estimating predicted changes in land values.

Approaches to Measure the Wider Economic Impacts of High-Speed Rail and Experiences from Europe

The European Union introduced the concept of Trans-European transport networks in 1996 and developed it from a set of projects into a comprehensive network plan in 2013. The high-priority components of this plan (for 2050) are a core network and nine core network corridors (CNCs), which the European Union intends to implement until the year 2030. The CNCs focus on improving connectivity, including harmonizing technology and organization as well as removing border resistance. Railways, in particular high-speed railways, are at the core of the CNCs. The evaluation of CNCs through conventional cost–benefit analysis (CBA) is too narrow and could lead to a patchwork of independent projects rather than an integrated network. Therefore, the European Commission has launched several studies on extending CBA with strategic approaches including wider economic impacts and long-term impacts on the environment, climate, and regional/social equity. As there has been no convention for a standard approach until now—contrasting CBA—we discuss several possible methodologies. The conclusion favors dynamic approaches that are well calibrated on the base of empirical observations, such as macro-econometric or system dynamics models, over theoretically more challenging general equilibrium models, although the latter are still the mainstream in the economic literature.

A Negative Effect of Cost‐Reducing Public Investment: The Role of Firms’ Entry

We investigate public infrastructure investment that reduces production costs in oligopoly markets. The government decides on its public investment based on conventional cost–benefit analysis that considers the direct effect (the benefit estimated as a reduction in production costs). If the entry barriers are significant, this estimation is conservative because the positive indirect effect of the subsequent production expansion is ignored. In free‐entry markets, by contrast, the indirect effect can be negative depending on the demand and cost functions. Thus, conventional cost–benefit analysis is conservative in the presence of entry barriers, buy may be too optimistic without entry barriers.

The value of local railways: An approach using the contingent valuation method

In Japan, many local railway lines in regional areas are on the brink of closure due to accumulated deficits. Although railways are generally said to have their own option and non-use values compared with buses, conventional cost benefit analysis does not evaluate these values sufficiently because there have been few quantitative research studies into this issue. This paper, focusing on three different Japanese local railways, estimates railways’ additional value over buses using the contingent valuation method (CVM). The CVM here is to estimate not an absolute total economic value of a specific railway but a relative value of railway to replacement buses. Therefore, our survey research has the advantage that data obtained from different railways can be comparable to a certain extent. The results show that two of three cases have their own additional value over buses of around twenty percent, and the other one has additional value of around ten percent. There is no big difference in evaluation between direct users and non-users at present. Also, the survey shows that, if train frequency increases, a certain number of residents, including potential users, are willing to pay more than the current fares.

Wider economic impacts of transport infrastructure investments: Relevant or negligible?

Wider economic impacts (WEI) comprise all effects that are not assessed appropriately in conventional cost-benefit analysis (CBA). These effects are generated by market imperfections, in the view of neo-classical equilibrium theory. In real economies such imperfections are not exemptions but frequent phenomena, e.g. stemming from increasing returns to scale or scope, or structural changes of products and industrial processes. Although the existence of WEI is not in question, they are usually not considered in practical assessments of transport infrastructure investments because they can only be estimated with high uncertainty and – in industrialised countries in particular – they are assumed to be of negligible magnitude. This paper presents approaches to WEI measurement based on GDP and on welfare, analyses the feasibility for combining WEI with conventional CBA, and discusses issues related to decision-making in situations where consideration of WEI appears to be relevant.