buildings, materials and products both from the household and production sectors,
including health and productivity.
Sustainable resource use and the environmental quality are both considered as
factors of production. Fluctuations in these factors usually entail corresponding
productivity deviations and/or production costs which may, result in price changes
and output levels which can be noted and measured. The techniques are attractive
because (1) it is easy to observe and measure physical production changes (2) using
market prices evades the difficulties arising from evaluating environmental impacts
which are not marketed. However, before using market prices to assess the value of
productivity changes, it is necessary to distinguish two circumstances about the
corresponding supply and demand curves:
(i) If the commodity output increase (or decrease) is small compared to the total
commodity market, and the input change is also small compared to the market
for variable factors, a reasonable assumption is that the product and variable
factor prices will stay constant after that change in production. For most
infrastructure projects, this partial equilibrium view is realistic.
(ii) If the commodity output increase (or decrease) is sufficiently large to impact on
either or both the output prices and the factor prices. In these cases, information
is required about the shape of both demand and supply curves before suitable
modifications can be made.
Each of the following three techniques
1. changes in productivity and output value
2. loss of earnings
3. opportunity costs
uses market prices to evaluate a production change of some service or good.
8.3.1 Changes in Productivity
In this method, physical changes in production are evaluated from market prices for
inputs and outputs. If there are distortions, suitably modified market prices are used
instead. The monetary values thus obtained are then included into the infrastructure
project economic analysis.
In this method, productivity changes occurring due to the infrastructure have to be
ascertained both with the project site and off the site.
(i) Changes on site are usually the outputs for which the infrastructure was
designed and are incorporated in the project analysis.
(ii) Either beneficial or adverse changes off the site comprise all the environmental
or economic externalities which were often ignored in the past. When they are
incorporated in the analysis, these off-site impacts provide a better representation of project effects.
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8 Analysis of Environmental Impacts of Infrastructure
including health and productivity.
Sustainable resource use and the environmental quality are both considered as
factors of production. Fluctuations in these factors usually entail corresponding
productivity deviations and/or production costs which may, result in price changes
and output levels which can be noted and measured. The techniques are attractive
because (1) it is easy to observe and measure physical production changes (2) using
market prices evades the difficulties arising from evaluating environmental impacts
which are not marketed. However, before using market prices to assess the value of
productivity changes, it is necessary to distinguish two circumstances about the
corresponding supply and demand curves:
(i) If the commodity output increase (or decrease) is small compared to the total
commodity market, and the input change is also small compared to the market
for variable factors, a reasonable assumption is that the product and variable
factor prices will stay constant after that change in production. For most
infrastructure projects, this partial equilibrium view is realistic.
(ii) If the commodity output increase (or decrease) is sufficiently large to impact on
either or both the output prices and the factor prices. In these cases, information
is required about the shape of both demand and supply curves before suitable
modifications can be made.
Each of the following three techniques
1. changes in productivity and output value
2. loss of earnings
3. opportunity costs
uses market prices to evaluate a production change of some service or good.
8.3.1 Changes in Productivity
In this method, physical changes in production are evaluated from market prices for
inputs and outputs. If there are distortions, suitably modified market prices are used
instead. The monetary values thus obtained are then included into the infrastructure
project economic analysis.
In this method, productivity changes occurring due to the infrastructure have to be
ascertained both with the project site and off the site.
(i) Changes on site are usually the outputs for which the infrastructure was
designed and are incorporated in the project analysis.
(ii) Either beneficial or adverse changes off the site comprise all the environmental
or economic externalities which were often ignored in the past. When they are
incorporated in the analysis, these off-site impacts provide a better representation of project effects.
224
8 Analysis of Environmental Impacts of Infrastructure