Economics of an EIA
A costs and benefit analysis of using an EIA
Kort, M. (Mando) 4085884
Abstract
An Environmental Impact Assessment is used for big projects to gain as much insight as possible on what impact on the environment this project will have. The creation of this comes with costs added to the project, but also benefits. This paper investigates whether these benefits are outweighed by economics costs and whether an EIA is economically viable for the project. The paper discusses how the costs and benefits of an EIA are defined and how they should be compared to check for the economic viability.
Table of Contents
Abstract 2
1. Introduction 4
4. Results 5
5. Conclusion/Discussion: 6
6. References: 7
1. Introduction
Since in many cases, making the EIA takes a lot of time, working hours, discussions and investigations, it could be stated that an EIA can become very costly. The extra costs of this EIA should also bring added economic value to the project, but this should also be noticeable in the project. Looking at the economic part of the project, the costs added because of the EIA should equal or be less than the benefits of an EIA and therefore be efficient.
The costs of an EIA for the developer of the project could be performing the EIA, which can also cause delays in the process. For the competent authorities the costs of running an EIA could be the management of the EIA process. They need to control the other parties involved and check the information processed by the EIA. (Oosterhuis, 2006).
Benefits of an EIA for the project developer could be a more efficient overall process due to a decrease in conflicts after the EIA is performed. Also an EIA should have given insight in environmental impacts of the project and possible ways to reduce or solve these negative impacts. Even alternatives for the project should have been considered and therefore the best possible outcome should have been chosen. For the whole society the benefits of an EIA are a more transparent view of the project causing fewer conflicts afterwards. It can also be assumed that because of the EIA a better overall environmental quality is reached. (Oosterhuis, 2006).
The aim of this paper is to analyze if the benefits of an EIA outweigh the costs and therefore making the EIA economically viable or that it makes the project more expensive. The research question of this paper becomes therefore: Is an EIA economically viable for a project?
2. Results
When answering the question whether an EIA is economically viable for a project, we need to answer a couple more questions to begin with. What are the costs of an EIA? What are the benefits of an EIA? How do you state the costs and benefits to be able to compare the two? After comparing them we should be able to answer the main question of this paper.
The costs of an EIA for the developer of the project are the performance of the EIA. This is a process which becomes more complex if the project is also more complex. Therefore a bigger project means a larger EIA which means a more costly EIA. That is why in this paper the costs of the EIA are expressed in percentages of the total cost of the project to make it more credible. Earlier research shows many different outcomes of EIA costs. This is mainly because of the different procedures and requirements of an EIA across the globe. In Spain the costs of an EIA are 2.5% with large variations. (BIO, 2006). In Greece the costs are around 1%. (Athanassopoulou, 2001). In Norway the costs are between 0.1% and 2.2%. (Njål et al, 2005). And in the Netherlands the EIA costs are usually below 1% of the project costs. (Kessel et al, 2003).
The benefits of an EIA for the project developer are a more efficient overall process due to a decrease in conflicts after the EIA is performed. This of course saves time and therefore money although it is very hard to say how much. It could save a small delay which would have been caused by a conflict, but it could also save a huge amount of money if it prevented a very late cancellation of the project due to a big conflict. (Radnai and Mondok, 2000).
An EIA gives insight in environmental impacts of the project and possible ways to improve the conditions. By researching the impacts on the environment a clear image is provided about the consequences of the project. With this clear image and possible restrictions when the impacts are too catastrophic, a good advice is taken considering the environment. Also since more environmental friendly alternatives are considered, an EIA has a positive impact on the environment and therefore are a benefit. (Oosterhuis, 2006). A better overall environmental quality is reached which is a welfare benefit for society, although it is hard to give an explicit price to this gain.
The costs of an EIA are a significant addition to the price of a project and can be stated in an amount of money easily. The benefits of an EIA are relatively vague to state explicitly but can be seen as a significant addition to the welfare outcome of a project as well. According to research, in Norway the benefits outweigh the costs in over 85% of the cases. (Njål et al, 2005). According to another research which compared numerous EIA’s across the globe, in all cases the benefits were larger than its costs. (Wood, 1999).
3. Conclusion/Discussion:
When looking at the results of other research it becomes clear that running an EIA both costs money, but also has a great benefit. The costs of an EIA are significant, but mainly just a few percentages of the total costs of the project. This implies that the benefit of an EIA also should be just a few percentages to cover the costs. The benefits are not easily expressed as en percentage of the total project costs, but some serious costs and negative environmental impact reductions can be achieved due to the EIA. This makes it recommended to invest enough in an EIA to ensure the quality of the EIA and resulting benefits. That is why developers shouldn’t try to cut costs causing the quality of the EIA to drop and the benefits to be reduced. It can be concluded that an EIA is economically viable for a highly significant part of the projects which are looked at in this paper.
Further research should be considered to test the benefits of these EIA’s. If a model is constructed to express the benefits in a clearer economic perspective, a better comparison can be made between the costs and benefits leading to a more relevant conclusion.
4. References:
Athanassopoulou, E. (2001). The Implementation of EIA in Greece.
BIO (2006): Cost and benefits of the implementation of the EIA directive in Spain.
Kessel, H. J. B. A. van, T. J. Boer, B.G.M. Roelofs en K. A. Klein Koerkamp (2003). Evaluatie m.e.r. 2003.
Njål, A, Asbjørg, N and Rolv, L. (2005). Benefit and interests use in impact assessments, Study of a selection impact assessments for Planning and Building Act.
Oosterhuis, F. (2006). Costs and benefits of the EIA Directive.
Radnai, A., and Z. Mondok. (2000). Environmental Impact Assessment Implementation in Hungary.
Wood, C. (1999). Comparative evaluation of EIA systems. Petts, J.(1999): Handbook of EIA, 2.