Chapter 2: Environmental Cost–Benefit Analysis and Water Quality Management
Nick Hanley INTRODUCTION 1 Some of the earliest applications of cost–benefit analysis (CBA) in an environmental policy context concerned the management of water resources (Banzhaf, 2009). The desire by policy-makers, politicians, regulators and guardians of the public purse to have some sense of the efficiency with which public money was being spent on water resource management in the US led to a desire to compare the economic benefits and costs of individual projects (such as new dams). This way of thinking about the economic rationality of public spending was later extended to the UK, where the use of CBA in project appraisal in the 1970s was later extended to aspects of environmental policy analysis (DoE, 1991; Turner, 2005). Environmental CBA thinking also found its way into management strategies for public forests, with the non-market benefits of forestry increasingly being incorporated into investment analysis (Willis et al., 2003). In Europe, the main policy within which CBA is now applied to water issues is the Water Framework Directive. The Water Framework Directive is a unifying measure passed by the European Union to harmonize water resource management, and to achieve a default target of ‘Good Ecological Status’ (GES) for all surface waters in the European Union (EU). GES is defined with respect to biological, chemical and morphological criteria. River basins are the focus for management actions, and it is in the drafting of ‘River Basin Management Plans’ that CBA comes into play. National agencies must identify cost-effective programmes of measures for each...
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