Current Issues in Project Analysis for Development

Current Issues in Project Analysis for Development

Elgar original reference

Edited by John Weiss and David Potts

This major work brings together authors with experience of both academic and operational project work to focus on issues such as the shadow exchange rate, the shadow wage, the discount rate and assessment of poverty impact and risk, as well as problems relating to specific sectors covering environmental projects, transport, education and health. There are also general chapters on the experience of semi-input–output-based estimation of shadow prices and the relevance of shadow pricing techniques to the context of developed economies in the EU. An overview by the editors sets out the evolution of the literature and highlights current issues. The general conclusion is that project analysis techniques remain relevant, albeit within a very different development context to that in which they were originally envisaged to be applied.

Chapter 8: Environmental Valuation

P.B. Anand

Subjects: development studies, development economics, economics and finance, development economics


P.B. Anand WHY DO WE NEED ENVIRONMENTAL VALUATION? The aim of this chapter is to provide an overview of issues related to environmental assessment in project appraisal. As entire books have been written on this very subject, trying to capture all of the relevant issues in the space of a single chapter is an impossible task.1 The chapter has the modest aim of providing an overview of environmental valuation in the context of cost–benefit analysis or investment appraisal of projects. It is now widely recognised that if environmental impacts are not taken into account, costs can be significantly underestimated and project decisions can be biased.2 Just as the London smog of 1952 led to air pollution control regulation, a second wave of environmental regulations emerged after major industrial disasters such as the Bhopal Gas Disaster in the Union Carbide plant in December 1984 and the Chernobyl nuclear reactor accident in April 1986, which contributed to raising public awareness of environmental risks. As a result, there is now some evidence to suggest that investors take the environmental performance of firms into account and that oil spills or other such industrial accidents do affect how a company’s stock is valued by investors (Yamaguchi, 2008; CapelleBlancard and Laguna, 2010). In fact, institutional investors such as pension funds and ethical (or socially responsible) funds have begun to exert significant influence on firms that contribute to harmful environmental impacts (Kreander et al., 2005). A survey by Standard Life (2010) indicated that when investors were...

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