8.7.1 Replacement Costs
During the implementation of an infrastructure project, it may happen that productive assets are damaged and need to be replaced. The replacement-cost approach
assumes that the costs of these can be determined. Such costs also represent the
benefits that would accrue if precautions or certain measures were taken to avoid the
occurrence of the damage. This is similar to the preventive expenditures method,
except that the real costs of replacement are required, in this method, rather than a
personal evaluation of potential damages.
From this perspective, this method might well appear as an “accounting procedure” to compare the cost of repairing damage if it occurs against the cost of
preventing the same damage from occurring. However, the method does not determine the benefits of environmental protection per se, it just provides an upper bound
estimate.
8.7.2 Relocation Costs
This is a variation of the above method. Imagine that a newly built factory discharges
its effluents in a river, where there is presently an intake to a water works for
domestic supply. Thus this factory would necessitate the relocation of the water
intake works, and the method would use the actual costs of relocation to assess the
associated costs and benefits of avoiding the environmental change.
It may be noted, that if further water treatment equipment is connected at the
present water intake works, rather than relocating it, the equipment cost becomes a
good example of preventive expenditure.
8.7.3 Shadow Projects
The shadow-project method was developed as a result of trying to determine the cost
of replacing the whole variety of environmental features (services, goods, etc.)
vulnerable to the infrastructure project.
If an infrastructure project results in a loss or decrease of benefits which are
difficult to evaluate, there is the possibility of providing the same benefits with a
supplementary or “shadow” project. The cost of this shadow project will give an
estimate of the lost benefits.
Adding the expenditure of the shadow project to the infrastructure project cost
gives an estimate of its true cost. This shadow project can be conceptual only, and
not really implemented to obtain at its cost. Incorporating the shadow-project costs
indicates the potential magnitude of the benefits of the new infrastructure project
before they compensate for the losses it causes.
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8 Analysis of Environmental Impacts of Infrastructure
During the implementation of an infrastructure project, it may happen that productive assets are damaged and need to be replaced. The replacement-cost approach
assumes that the costs of these can be determined. Such costs also represent the
benefits that would accrue if precautions or certain measures were taken to avoid the
occurrence of the damage. This is similar to the preventive expenditures method,
except that the real costs of replacement are required, in this method, rather than a
personal evaluation of potential damages.
From this perspective, this method might well appear as an “accounting procedure” to compare the cost of repairing damage if it occurs against the cost of
preventing the same damage from occurring. However, the method does not determine the benefits of environmental protection per se, it just provides an upper bound
estimate.
8.7.2 Relocation Costs
This is a variation of the above method. Imagine that a newly built factory discharges
its effluents in a river, where there is presently an intake to a water works for
domestic supply. Thus this factory would necessitate the relocation of the water
intake works, and the method would use the actual costs of relocation to assess the
associated costs and benefits of avoiding the environmental change.
It may be noted, that if further water treatment equipment is connected at the
present water intake works, rather than relocating it, the equipment cost becomes a
good example of preventive expenditure.
8.7.3 Shadow Projects
The shadow-project method was developed as a result of trying to determine the cost
of replacing the whole variety of environmental features (services, goods, etc.)
vulnerable to the infrastructure project.
If an infrastructure project results in a loss or decrease of benefits which are
difficult to evaluate, there is the possibility of providing the same benefits with a
supplementary or “shadow” project. The cost of this shadow project will give an
estimate of the lost benefits.
Adding the expenditure of the shadow project to the infrastructure project cost
gives an estimate of its true cost. This shadow project can be conceptual only, and
not really implemented to obtain at its cost. Incorporating the shadow-project costs
indicates the potential magnitude of the benefits of the new infrastructure project
before they compensate for the losses it causes.
232
8 Analysis of Environmental Impacts of Infrastructure