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Benefit-Cost Analysis for Water System Planning

Benefit-Cost Analysis for Water System Planning

Charles W. Howe

ISBN: 978-1-118-66565-7 March 2013 American Geophysical Union 144 Pages

O-Book

Description

Published by the American Geophysical Union as part of the Water Resources Monograph Series, Volume 2.

This is a small book on a very large topic: water resource system planning. The term water resource system as used here means a combination of structural and nonstructural measures, including rules of operation, for transforming stocks or flows of water into more useful outputs of water, water services, or water-related products. Examples of these outputs would include municipal water supply, flood control, waste disposal and water quality management, navigation, irrigation, and hydroelectric power. Both the original water inputs and the outputs are characterized by quantity, quality, time, and place.

Foreword

Preface

Acknowledgments

1. INTRODUCTION

Point of View  1

General Economic Problem: Scarcity  3

Distribution of Project Benefits and Costs Among Different Groups  6

Relevance and Irrelevance of Financing Arrangements  7

With-Without Criterion: The Basic Reference Point  8

2 . THE ACCOUNTING STANCE

3 . MULTIPLE OBJECTIVE PLANNING

Types of Benefits and Costs To Be Used in Planning  15

Objectives Other Than National Economic Efficiency   9

Procedures for Incorporating Multiple Objectives in Project Design and Selection   30

4 . MEASUREMENT OF ECONOMIC EFFICIENCY BENEFITS AND COSTS

Examples of Project Benefits and Costs  35

Measurement of Benefits and Costs Comparable in Monetary (Dollar)  Terms  42

Simulation of Market Prices  47

Concept and Measurement of Costs  50

Appropriateness of Existing Market Prices as Measures of Benefits and Costs  53

Handling of Price Changes over Time  55

Use of the Cost of the Best Alternative Project As a

Measure of Benefits  56

Issue of Secondary Benefits and Costs  59

Managerial Analysis of a Project  61

5 . COMPARISON OF BENEFITS AND COSTS OVER TIME

Determination of the Discount Rate  65

Benefit and Cost Patterns over Time  70

Handling of Risk  73

Appropriate Length of the Planning Period  79

Appendix: Impact of General Domestic Tnflation on the

Present Value of Net Benefits  80

6 . CRITERIA FOR PROJECT DESIGN AND SELECTION

Consideration of a Broad Range of Alternatives  83

Rules for Optimum Project Design  86

Rules for Optimum Selection of Projects  92

Use of Ex Post Analyses  94

Role of Pricing  95

Appendix: A Simplified Staging Problem  100

7 . CASE STUDIES

Application of Multiple Objective Planning  106

Measurement of Environmental Impacts  121

Benefits from Water Quality Improvements  126

Recreation Benefits from Water Quality Improvement  131

Management and Financing of Water Quality Programs  136

References 141