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A WIDE RANGE OF EFFECTS

Most projects cause many benefits and costs; ideally, all of them would be given a monetary value. For example, a project to store water and allow a wetland to remain in its natural state will provide non-use benefits from the retention of the natural state. It may also provide irrigation water, change flood risks, change salinity patterns and have many other effects. Hundloe, McDonald et al. (1986) illustrate the wide range of effects from this sort of project and show how a wide range of techniques must be used to value them.

The market prices should be checked to ensure they represent true social benefits and costs following the guidelines in the Handbook of Cost-Benefit Analysis (Department of Finance 1991).

Table 6.1: Relevance of techniques to value specific environmental effects

                                                                                         

                          Resource   Pollution Recreation Natural     Work      Non-use  
                        degradation                       amenity  Environment benefits  

Technique

Market value approaches Change in productivity .. . . .. Change in income .. .. Replacement cost . . . Preventative . .. .. . expenditure Relocation cost . . .

Surrogate market approaches Travel cost .. .. Property value .. .. . . Wage differential . Proxy good . .

Simulated market                                                                         
approaches                                                                               

Contingent valuation         .                     .         .                    ..     

Trade-off game               .                     .         .                     .     

Contingent ranking           ?           ?         ?         ?          ?          ?     

Priority evaluator                                 .         .

Adapted from Izmir 1993.
.. highly relevant
. relevant
? possibly relevant

Table 6.2: Valuation of benefits

Effects 			Technique 			Notes

1. Maintenance of natural 	Contingent valuation or 	Check market validity of 
   state of wetland 		contingent rating 		values obtained

2. Increase in irrigation Change in productivity Ensure only extra benefits output are valued

3. Increase in recreation Travel cost As above

4. Increase in aesthetic (a) To nearby landholders: There may be other groups benefits change in property value who receive aesthetic (b) To recreationists: already benefits captured by travel cost

5. Improved access due to Monetary value of reduced better roads travel time and reduced repairs

After Hundloe et al. 1986.

Table 6.3: Valuation of cost

Effects 			Technique 			Notes

1. Acquire agriculture land 	Market price of land
   for storage

2. Construct dams, banks Market price of materials, etc labour and capital

3. Relocate roads which Relocation cost will be flooded

4. Short-term unpriced Preventative expenditure Effects including noise, dust effects of construction where avoidance is possible and traffic congestion

5. Annual operating and Market prices maintenance costs

6. Increased flood risk Replacement cost of assets damaged due to flood

7. Increase salinity of Change in productivity, loss If land can be restored, use farmland in output replacement cost