Cost–Benefit Analysis and Incentives in Evaluation

Cost–Benefit Analysis and Incentives in Evaluation

The Structural Funds of the European Union

Edited by Massimo Florio

This book provides an authoritative contribution to applied cost–benefit analysis (CBA) and other evaluation methods in the context of the regional policy of the European Union. Through the use of Structural Funds and other financial and regulatory mechanisms, the EU will help to promote thousands of infrastructure projects in the next decade. CBA will be a key ingredient in the investment decision process and the authors provide important insights from their international experiences in project appraisal and evaluation and point to some valuable lessons to be learnt for the future.

Chapter 1: Introduction: Multi-government Cost–Benefit Analysis, Shadow Prices and Incentives

Massimo Florio

Subjects: economics and finance, public sector economics, valuation, environment, transport, valuation


1. Introduction: multi-government cost–benefit analysis, shadow prices and incentives Massimo Florio INTRODUCTION Over the last two decades, the Structural Funds and the Cohesion Fund have co-financed through grants a very large number of projects in the Member States of the European Union. These include mainly railways, roads, ports and airports, water distribution and treatment, solid waste management, but also productive investments, science parks, museums and many others. Other sources of infrastructure finance include grants under the Trans-European Networks in transport and energy, and loans by the European Investment Bank (EIB), or by the European Bank for Reconstruction and Development (EBRD). In the coming years the EU institutions, national governments, regional managing authorities, public and private companies will all face challenging infrastructure needs. In 2007–13 the EU Funds will contribute to the infrastructure plans of 27 countries, including 12 new members (mostly former transition economies). IPA funds will assist Croatia and other accession candidates. The EU seven-year budget supporting this effort will draw from a provision of over EUR 300 billion for Cohesion policy. Table 1.1 shows the Cohesion Policy Budget, eligibility, priorities and allocations. A substantial part of the funds is going to be allocated to infrastructure projects, in regions lagging behind in the endowment of basic stock of capital compared with the rest of the EU. Moreover, there will be a leverage effect of the EU funds on public and private finance, because in many cases Brussels will contribute only part of the...