Environmental Engineering Reference
In-Depth Information
expert for a major World Bank dam/reservoir project in Indonesia, with assistance
of professionals from the Government's Institute of Water Resources Research.
For this purpose, an extra work session was scheduled for 4 hours on Saturday
mornings, during which the expert did the necessary explanations, but this was
“freebee” work by both the expert and the trainees.
ENVIRONMENTAL ECONOMICS AND FINANCING
Inclusion of Environmental Values in Project Economic Analysis (PEA)
Prior to use of EIA, PEAs commonly were limited to values of interest to the
Project Proponent (PrPr). The “Economic Study Area” was often considered to
exclude the
project externalities
, meaning that these are not to be considered in
the economic analysis. Examples include (1) downstream flooding damages due
to deforestation in timber logging projects, (2) flooding damages due to hydrol-
ogy changes by highway projects, (3) loss of capture fisheries due to hydrology
changes, and so on. A proper “economic study area” must include all areas that
are significantly affected by the project, with attention given to all environmental
values that are impaired (and to any gains that may occur)
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.
Another aspect of this issue is the value assigned to existing natural resources
that are utilized for economic gain, such as trees that are logged for timber. The
fair value would seem to be its replacement values (cost for regrowing)
9
.
Effect of EPMs on Project Economic and Financial Analyses
The EIA should evaluate the impact of including EPMs on the PEA (i.e., to
compare the benefit/cost and financing both with and without the EPMs). This
may be needed to offset arguments that the costs of EPMs will ruin the project
economics. These evaluations invariably show that provision of EPMs will actu-
ally increase overall benefit/cost in the project's life term, and that for some of
the amenities that may be included, the benefit/cost ratio may be much greater
than for the main project production objective.
Unfortunately, however, the DC decision makers, for political reasons, were
more interested in immediate financial gains
88
, and the use of the EPMs requires
provision of significantly more upfront financing money, which conflicts with
the immediate gains goal. This
immediate gains goal
is the primary reason
why so many DC projects do not achieve their intended objectives and are very
wasteful.
Human Greed Parameter
The
human greed parameter
has a very considerable effect on project devel-
opment. This is well explained in “Radical Birthday Thoughts” featured in the
June 28, 2003 issue of the
Economist
on the occasion of this magazine's 160
th
birthday
168
. This includes a statement by Alan Greenspan that man hasn't become
